Formula 1: Liberty Media’s race across the regulatory finish line

Published 31 May 2017 By: Benoît Keane

Motorsport racing line

The acquisition of the Formula One Group by Liberty Media has been approved by the Competition and Markets Authority (CMA) in the United Kingdom as well as by national competition authorities in other countries (a copy of the CMA’s decision is available here[1]). Although the deal did not meet the thresholds for an EU-wide merger review, the European Commission is being urged to conduct a separate competition inquiry. 

This article explores the reasoning of the UK competition authority for clearing the deal and assesses the likelihood of further competition investigations under the authorities’ broader enforcement powers. Specifically it looks at:

  • The nature of the deal

  • Notification of Formula One Group acquisition to the European Commission

  • The Competition and Markets Authority’s review

  • Analysis and comment, including conflict of interest concerns

  • Conclusions


The deal 

The Formula One Group is responsible for the promotion and exploitation of the rights related to the Federation d’Automobile Internationale (FIA) Formula 1 World Championship. The rights held by the FIA were transferred to Formula One Administration (FOA) run by Bernie Ecclestone in a 100-year lease agreement.[2] This arrangement enabled the FIA to counter accusations of anti-competitive bias by the European Commission which alleged in 1999 that the FIA was using its regulatory powers to block the organisation of races which competed with events promoted or organised by FIA (i.e. those events from which FIA derived a commercial benefit). The FIA case was ultimately settled in 2001.[3] 

Pursuant to the 100-year agreement, the Formula One Group was granted an exclusive license with respect to all of the commercial rights to the World Championship in exchange for a significant one-time fee of USD 313.6 million in 2001 and annual escalating regulatory fees to the FIA. This license took effect on 1 January 2011 and expires on 31 December 2110. For 2016, the Formula One Group paid the FIA an approximate USD 26.8 million in regulatory fees.[4] As part of this arrangement, the FIA retained the right to prevent any change of control over the commercial rights holder where that would materially alter the ability of the commercial rights holder to fulfil its obligations. 

Since then there have been a series of complex acquisitions and restructures of what is now the Formula One Group. At the time of its sale to Liberty Media, the Formula One Group was owned by Delta Topco, which was holding company for CVC Capital Partners (CVC), Bernie Ecclestone and other investment companies. In addition, the FIA held a 1% share in the holding company, which it acquired in 2013 from CVC on the proviso that the shares would be sold in any subsequent sale of the Formula One Group.[5] The proposed acquisition by Liberty Media would effectively give it 100% control over the Formula One Group, including the shares of the FIA (which were “dragged along” in the sale).


Notification of Formula One Group acquisition to the European Commission

The acquisition required competition approval in the United Kingdom[6], Austria, Spain and Portugal due to the size of the transaction to ensure that it did not lead to a distortion of competition. 

Unusually, the fact that the case was not notified to the European Commission gave rise to inquiries from a Member of the European Parliament, Annaliese Dodds MEP, who called upon the Commission to investigate a perceived conflict of interest in the sale of the FIA’s share in the Formula One Group.

In response, the European Commissioner for Competition, Margrethe Vestager, confirmed that the deal “did not satisfy the turnover thresholds that must be met to fall within the Commission’s jurisdiction”.[7] 

This turnover test, which is stipulated in the Merger Regulation[8], sets out the conditions under which a merger (or “concentration” in EU jargon) must be notified to the Commission for approval.[9] If this test is not satisfied then it is still possible to voluntarily request that the Commission review the transaction where a notification would be required in more than three EU Member States, as in this case. Clearly it is more efficient to have just one filing rather than many. However, there are any number of reasons for merging parties choosing a multiple filing approach instead of a voluntary request to file with the Commission in particular as national competition authorities can request a case back.[10] 

One possible reason in this case may be that the parties did not want the on-going antitrust complaint against the Formula One Group by a number of disgruntled teams to become entangled in an entirely separate merger case.[11] Whatever the reasons, the case only came before the national competition authorities and the deal was contingent upon their approval. 


The Competition and Markets Authority’s review

The role of the CMA in reviewing mergers falling within its jurisdiction is to determine whether the relevant merger situation has resulted, or may be expected to result, in a “substantial lessening of competition”.[12] The focus of the CMA is upon the impact for competition within any market or markets in the United Kingdom for goods or services. The CMA may prohibit mergers that result in a substantial lessening of competition or accept remedies that it determines addresses competition concerns.  

Turning to the Formula 1 decision in the United Kingdom,[13] the CMA examined the impact for competition both between competitors (horizontal unilateral effects) as well as for broadcasters and other downstream acquirers of the rights (vertical effects). 

In the background to its assessment, the CMA found that Liberty Media was essentially controlled by its Chairperson, Mr John Malone. The CMA found that he exercised “material influence” over Liberty Global, which owns Virgin Media amongst others. It also found that he exercised material influence over Discovery Communications, which in turn owns businesses in the media and broadcasting sectors including Eurosport. 

Due to Liberty Global and Discovery’s accumulated shareholding in Formula E (an all-electric motorcar racing series approved and regulated by the FIA), the CMA considered that Mr Malone was in a potential position to materially influence Formula E. For this reason, the CMA treated these companies as being under common control for the purpose of its competitive assessment.

The CMA then assessed whether Formula E was a competitor to Formula 1 and what impact the merger would have for competition by the absence of competition between the two. 

The viewing data provided by the parties demonstrated a significant gap between the two motorsports with Formula 1 having a share of between 80 – 90% of viewing hours as compared to Formula E which had a negligible share (the non-confidential version of the CMA’s decision puts the range between 0 – 5%). The CMA also considered that broadcaster spending on Formula E to be “very small” as compared to broadcaster spending for major sports events. Indeed, no broadcaster submitted that Formula E could be considered as a substitute to Formula 1. On this basis, the CMA concluded that the

F1 Group and Formula E are not currently close competitors and provide little competitive constraint on each other in relation to the supply of promotional activities for motorsports.[14]

The CMA then considered the vertical effects of the proposed transaction given the competitive overlap between Mr Malone’s broadcast properties (e.g. Virgin Media, Eurosport) and the right to exploit FIA broadcast rights. 

In merger cases, the parties may seek to downplay the market value of their product in an effort to avoid competition concerns, and this case was no different. The parties submitted that “F1 rights are not a critical input for downstream broadcasters to be able to compete effectively in the UK” and they noted that F1 content had been dropped by UK broadcasters on three occasions over the last decade.[15] The parties also presented market data showing that Premier League football was by far the most popular regular sport with a share of supply of 10-20% compared with 5-10% for Formula 1. Other regular sports, such as Wimbledon and international cricket, obtained similar shares of supply to Formula 1.

The market research undertaken by the CMA was more circumspect. A number of broadcasters told the CMA that Formula 1 is very popular for a small group of viewers and for certain pay-TV consumers is “likely to be an important factor in their pay TV subscription decisions”.[16] However, this was relatively modest, with a previous competition by OFCOM finding just 4% of subscribers falling into this category (as compared to 27% for Premier League football). One broadcaster considered the content substitutable with other sports and even non-sports content.

The main reason why the CMA was persuaded that there was no vertical concern was because the rights had already been sold to Sky from 2019 – 2024 so the possibility to foreclose competition did not exist for some time. The CMA also accepted that Formula 1 was not “key content”. Formula 1 content, the CMA stated, “would be unlikely, on its own, to confer currently the ability to foreclose competitors in pay TV (or a subset of pay TV) even after 2024”.[17] The CMA concluded “the Parties have no ability to engage in input foreclosure in relation to the supply of TV rights for F1”.[18]

In view of the lack of any risk to competition from a horizontal or vertical perspective, the CMA authorised the acquisition of the Formula One Group to Liberty Media. This decision followed earlier approvals from the competition authorities in Spain on 30 November, in Portugal on 7 December, and in Austria on 9 December 2016. 


Analysis and comment 

As merger notifications go, the process seems to have been smooth and uncontroversial. This is not particularly surprising given Liberty Media’s limited presence in the supply of motor sport content prior to the merger. However, sport has specific characteristics that should not be lost sight of either in such reviews. Although the CMA was reassured that there is no incentive for Liberty Media to foreclose access to Formula 1 content, it is in the author’s view regrettable that the decision is not more detailed on this point as it is difficult to countenance Liberty Media granting all the rights to its own rivals. Indeed, Liberty Media’s control over sport content is the subject of a challenge to its acquisition of the Dutch cable company Ziggo that was cleared by the European Commission in 2015.[19] 

The underlying legislation refers to the determination of whether there will be a substantial lessening of competition as a “question to be decided in relation to anticipated mergers”.[20] The fact remains that Formula 1 is important content that pulls in a particular viewing audience even if it is not necessarily the main reason for an individual subscription (which is a factor that is arguably overstated in importance).  

However, the CMA’s decision has not clarified whether the CMA is convinced that Liberty Media will conduct sales for the rights post-2024 on a non-discriminatory basis or why this would not amount to a substantial lessening of competition if no such assurance has been provided. This is of particular interest because by then Liberty Media will be unfettered by any existing agreement. The CMA simply states that there will be no incentive.

Therefore, the answer provided in the CMA’s decision as to why there is no substantial lessening of competition is arguably incomplete. Of course, if Liberty Media decides to integrate some or all of the rights post-2024 within its corporate group then rival broadcasters may still have recourse to antitrust law to resolve any competition concerns.


Conflict of interest?

As a result of the sale of its share in the Formula One Group, the FIA has been alleged to have been in a “conflict of interest” when conducting its own review of the sale.[21] The Chair of the UK parliament select committee for culture media and sport, Mr Damian Collins MP, wrote to the European Commissioner for Competition urging her to investigate the matter, as did the aforementioned Member of the European Parliament.[22] However, the allegations of a conflict of interest seem to have arisen as a result of a misunderstanding both of the role and rights of the FIA in this regard. 

It is important to recall that the Formula One Group does not actually own the rights of the FIA in the events. Instead, the FIA granted a 100-year lease for its commercial rights. In so doing, the FIA retained certain powers and rights. It has, for example, stipulated that the FIA alone has the right to draft the rules and regulations for Formula 1, a point the FIA President Mr Jean Todt reiterated recently.[23] Critically for this case, the FIA retained the right to terminate the 100 year agreement and the Formula One Group’s exclusive license upon a change of control of the commercial right holder, unless the FIA approved the transaction.[24] 

This is similar to a change in ownership clause or material change clause common in most commercial contracts that allows one party to an agreement to review the agreement in the event of a change of ownership. In the case of Formula 1, the task of reviewing the change of ownership was granted to the World Motor Sport Council. According to the FIA, this was limited to reviewing whether the new commercial rights holder, namely Liberty Media, was capable of fulfilling the obligations in the agreement. Specifically, the FIA stated:

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 [commercial rights holder] 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.[25]

If correct, the issue is not whether the FIA approves Liberty Media from a regulatory perspective but rather whether the FIA is confident that it is a capable custodian of the FIA’s rights. This is quite a different function to, for example, approving an application for a new International Series on the FIA’s international calendar where a range of regulatory issues may be of relevance. Nor was it conducting a motor sport equivalent of a “fit and proper” test as the review was limited to the specific rights owned ultimately by the FIA. Instead, as the FIA explained, the focus at the review meeting was upon the strategic plans of Liberty Media for Formula 1.[26]

For the same reason, the fact that the FIA had retained a small shareholding in the holding company which exploited the FIA’s rights does not appear to be of relevance. The FIA did not of its own initiative decide to sell the shareholding, the shares were dragged along with the sale. It is doubtful that the World Motor Sport Council would have been influenced by a short-term capitalisation of its shareholding when it clearly had a much greater interest in the long-term success of the Formula 1 tournament as the ultimate owner of the rights. Even if the share sale by CVC to the FIA had been intended to sweeten the process for any future sale, it is difficult to see any competition problem with the subsequent endorsement by the FIA of the deal. The FIA was simply taking a decision that affects its own interests.  

Of course, if the FIA discriminated against an independent organiser because of its small shareholding in the Formula One Group then this would amount to a violation of EU competition law and its clear commitment to the European Commission not to act in such a biased manner. However, that was not the issue here. The FIA simply approved a material change to its agreement with the commercial rights holder. 

Much is being made of the fact that the transfer in shareholding from CVC to the FIA somehow breaches the settlement reached with the European Commission in 2001 to resolve the investigation into the FIA’s rules. As a preliminary point, the shareholding is just 1% of shares so it is doubtful that this materially changes the settlement terms. Moreover, the settlement reached in 2001 was part of a process to obtain an exemption from EU competition law from the European Commission. This exemption system no longer exists and under the transitional arrangements put in place by Regulation 1/2003 any exemption decision granted under the old regime comes to an end upon its expiry.[27] It is quite possible that the FIA’s exemption decision is no longer valid. 

In any event, this assertion seems to be based upon a mistaken view that the Commission forced the FIA to sell its rights. It did not. The FIA entered into arm’s length agreements that the Commission recognised minimised the risk of regulatory abuse. However, if the FIA regained complete control over its rights (as is presumably possible if it does not approve a change of control) then this does not automatically mean that there would be a risk of regulatory abuse or a breach of EU competition rules. How the FIA exercised those rights would have to be assessed under the existing market conditions. There is no per se objection to an International Federation with a regulatory function from also exploiting the rights to events it organises – so long as the International Federation conducts its regulatory function in a non-discriminatory manner. 

For these reasons, it would be surprising if the European Commission would put its limited resources into investigating this matter.  



The new owners of Formula 1 will be pleased to have cruised past the regulatory chicanes with relative ease. For the FIA, it is doubtful that the deal will give rise to any further scrutiny from the European Commission. 

It is somewhat ironic that the FIA’s involvement in the sale gave rise to some controversy when in fact it is the manner in which Liberty Media intends to exercise and sell the rights in the future which is the real issue. Even if Liberty Media’s acquisition did not come under the European Commission’s scrutiny, the new owners may have to resolve any antitrust concerns arising from the competition complaint filed by teams concerning the distribution of the prize fund – with other potential complaints being a real possibility.[28] Liberty Media may yet discover that it has simply been through the qualifying session and that the real competition race is about to start. 


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Benoît Keane

Benoît Keane

Benoît Keane specialises in European sports law. Based in Brussels, he acts in cases before the European Commission and European Court of Justice as well as in cases before national courts where there is an EU law dimension. He has participated in many of the leading European sports law cases of recent years, including the competition law cases relating to financial fair play, third party ownership and sports eligibility rules. He has also appeared as a legal expert on EU law before the Court of Arbitration for Sport.