Formula 1

European Parliament vote for F1 investigation, FIA denies conflict of interest

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World © Octane Photographic Ltd. Mercedes AMG Petronas W07 Hybrid – Nico Rosberg leads the pack off the line as Lewis Hamilton makes a poor start and drops down the order. Sunday 9th October 2016, F1 Japanese GP - Race. Suzuka Circuit, Suzuka, Japan

The European Parliament have called for an immediate investigation into Liberty Media’s purchase of Formula 1, following concerns that it may have broken European laws.

The parliament was asked to vote on “calls for an immediate investigation into competition concerns arising from the Formula 1 motorsport industry” which was flagged up in their annual Competition Report for the European Commission’s competition issues agenda. The motion was passed with 476 votes to 156 in favour.

This investigation has been born from the case originally put forward by the Sahara Force India F1 Team and the Sauber F1 Team back in 2015, which raised concerns that F1 was biased towards the top teams in terms of power and prize money allocation. It particularly made reference to the historic bonuses which the five main teams of F1’s Strategy Group, the Mercedes AMG Petronas Formula One Team, Red Bull Racing, Scuderia Ferrari, the McLaren Honda Formula 1 Team and Williams Martini Racing all receive regardless of where they finish in the championship standings.

In January, UK member of the European Parliament Anneliese Dodds submitted an amendment to the report, which is what has sparked this current interest.

Dodd’s welcomed the European Commission’s verdict.

“I’m happy that today the European Parliament backed my call for a full and immediate investigation into anti-competitive practices in Formula 1.

“A few weeks ago Manor Racing became the latest team in the southeast of England to collapse after administrators failed to find a buyer.

“Smaller teams are unfairly punished by an uncompetitive allocation of prize money that will always give the biggest teams more money, even if they finish last in every race.

“The problems in Formula 1 extend well beyond the allocation of prize money, with serious concerns being raised about an agreement with HM Revenue and Customs that allowed the sport to pay an effective 2 percent tax rate.”

Whilst the competitions commission is not legally required to do anything about such findings, the vote in favour will increase the chance of an investigation being launched.

If F1’s actions are deemed to promote anti-competitive practices, the European Commission does not have the regulatory power to block or undo the Liberty takeover, but can issue a fine of up to 10 percent of F1’s annual turnover, which last year exceeded $1.3 billion, and that could create big problems for Liberty and its investors.

Also under the microscope is the FIA’s decision to allow the Liberty Media takeover to go through. Having made $80 million from the deal due to a small shareholding in Delta Topco, the holding company of the commercial rights holder of F1, it has been questioned whether there was a conflict of interest on the FIA’s part.

However, in a statement released by the FIA today, they denied any unfair play.

“Prize money allocated in the Formula One World Championship is done so in accordance with the bilateral agreements that exist between each team and the Commercial Rights Holder (CRH). The FIA has no knowledge of these agreements.

“There is no conflict of interest on the part of the FIA with regard to its approval of the change of control of the CRH which has been approved by the World Motor Sport Council taking into consideration exclusively the terms of the existing agreements between the CRH and the FIA and the best interests of the Championship.

“As per the Agreements made in 2001 for 100 Years, the FIA could only have withheld its consent in the event that the change of control would materially alter the ability of the CRH to fulfil its obligations.

“It is obvious that the taking of control of the Formula One Group by Liberty does not create such a risk, and nobody has ever suggested a different view in this respect.”

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