by Terry Lovell
Secondly, the introduction in 1995 of the broadcasting rules empowering the FIA to acquire the television rights of all the motor sports it authorised, which it then transferred to International Sportsworld Communicators – the regulations which had triggered, through the complaints of Wolfgang Eisele and, latterly, Patrick Peter, the Commission’s investigation. Although the FIA had greatly reduced its claim on television rights, as a result of Eisele’s legal action, the Commission claimed it had continued to abuse by claiming the rights of championship series incorporating the FIA name. While the rules on television rights introduced in 1995 were not directly applicable to Formula One, the Commission claimed that the FIA’s tactics had much the same effect on that sport: under the terms of the Concorde Agreement the FIA was able to compel participating teams to transfer to the FIA any rights they may have had in the broadcasting of Formula One, which were then transferred to Ecclestone’s Formula One Administration. There was also a separate agreement between Formula One Administration and the promoters of Grand Prix events which gave Ecclestone any broadcasting rights the promoters might have possessed. The company was also invested by the FIA with the power to determine who could or could not promote a Grand Prix.
The Commission also stated that the FIA could not claim exclusive television rights. It was one of a number of claimants, along with the organisers, the promoters, the track owners and the teams, all of whom could reasonably claim shares. ‘The Commission takes the view that the FIA’s argument based on the protection of its intellectual property rights [its organisational and regulatory activities] cannot justify the FIA’s abusive conduct in acquiring for itself other media rights which belong in the first instance to other participants.’ Claims to sole ownership of these rights were an abuse of its dominant position.
Further, the Commission alleged that, owing to the various links between the FIA and FOA, Ecclestone was in a position of dominance with regard to Formula One, especially as, under the Concorde Agreement, FOA was granted the right to draw up the Formula One calendar, a power previously exercised by the FIA. It gave Ecclestone the right to decide whether a promoter would run a Grand Prix. FOA was able to abuse its dominant position because the FIA made its approval dependent on the promoter accepting FOA’s ‘abusive terms’ (a willingness to hand over all commercial rights). Furthermore, the FIA stood to gain financially since it received a share of the value of the promoter’s broadcasting rights through its commercial arrangements with FOA.
Thirdly, the FIA had used its power to set up a rival series in order to force an event out of the market. It cited as an example the fate of Patrick Peter’s BPR series, which was stripped of its FIA authorisation to be replaced by an identical series, the FIA GT championship. The FIA’s handling of the series and its promoters/organisers, said the Commission, constituted exclusionary behaviour, which had the object or effect of eliminating a rival promoter/organiser competing with FIA championships, as, for instance, Formula One, for television time and sponsorship. ‘The BPR case is a clear example of how the FIA has used its certification/authorisation system in order to eliminate an independent international series organised and promoted by BPR, which had managed to attract a lot of interest from broadcasting and thus to sell the TV rights of its series. The BPR was developing an effective source of competition to the FIA’s championships and to their commercial exploitation by one of the vice-presidents of the FIA, Mr Ecclestone.’
The Commission’s fourth and final concern was the way in which Ecclestone had protected Formula One with three devices which effectively eliminated rival championships: the contracts between Formula One Administration and the promoters which prohibited circuits staging any motor sport that could compete with Formula One; the Concorde Agreement, negotiated by Ecclestone in October 1997 to get the teams’ support for the flotation, which locked them into ten-year contracts, rather than the usual five; and the contracts with television broadcasters which imposed a massive financial penalty of 33 to 50 per cent if they televised a motor sport event considered by FOA to be a competitive threat to Formula One.
But one of the report’s more damning allegations challenged the very enforceability of the television contracts between Ecclestone and broadcasters. ‘The Commission takes the view that as the FIA abusively acquired the broadcasting rights to international motor sports events it could not validly assign these rights to Formula One Administration and International Sportsworld Communicators. Consequently, Formula One Administration and International Sportsworld Communicators were not in a position to conclude legally enforceable contracts with broadcasters giving them all the rights which the FIA claimed to have.’
In summarising the Commission’s allegations, the report said that one of its most significant conclusions was that many of the contracts, particularly those involving broadcasters, were concluded on the basis of a situation unlawful under European Union competition law. They would need to be renegotiated, it added, if the Commission’s allegations were ultimately upheld by the European Commission.
Mosley’s response was issued on 31 January 2000, five months after the procedural deadline, owing to a delay by the European Commission in submitting all its files of evidence to the FIA – an indication, he offered, of its incompetence. But that was a mild reproach compared with the stinging criticism he saved for the FIA’s 107-page response, which was reinforced by a personal letter to Italian academic Mario Monti, a member of the European Commission since 1995, who had been appointed to succeed Karel van Miert as Commissioner for Competition following a corruption scandal in Brussels shortly after the Statement of Objections was issued. (Although van Miert and the majority of his colleagues were not in anyway implicated, it led nevertheless to the departure of Commissioners en masse.) Mosley claimed the Commission had made ‘a hopeless muddle of the facts and [is] completely confused about the regulations and general functioning of motor sport’. He insisted that the Statement of Objections was ‘hopelessly flawed’.
Beyond the Statement, he also accused the Commission at a press conference of acting improperly, alleging that its Director-General, Dr Alexander Schaub, had colluded with Patrick Peter in an attempt to force Ecclestone to surrender the television rights to the FIA World Rally Championship, which Peter would then take over. In a letter in November 1999 to rally organisers worldwide, Peter claimed, alleged Mosley, that the Directorate-General for Competition ‘had already approved his plans to take over “all the [organisers’] rights, starting with television rights”’. Mosley added that, despite official denials by Schaub’s department that there was any plan to force Ecclestone to give up the rally television rights, four weeks later he wrote to Ecclestone to suggest that if he gave up the television rights to the FIA World Rally Championship it would make the ‘problems’ concerning Formula One ‘less acute and much easier to deal with’. Mosley’s letter to Monti continued: ‘Any disinterested reader of the Statement of Objections and the FIA’s response will conclude that in the course of these proceedings, the services of the competition department have broken the laws of the EU, behaved grossly improperly and displayed incompetence amounting to abuse.’
However, Mosley was unable to produce the letter Schaub had allegedly written to Ecclestone asking him to give up the rally television rights, or the one dated November 1999 allegedly sent by Peter to rally organisers stating that Schaub had approved his plans to take over the organisers’ rights. Peter’s lawyer, Christian Lamonin, produced a copy of a two-page letter dated December 1999, which, he claimed, his client had sent to rally organisers. But it refers to managing the television rights in association with Ecclestone. It reads: ‘Our plan is to find very quickly an agreement with Mr Ecclestone in order to manage for you all your rights, starting with the TV rights.’ It was this letter that Mosley had, in fact, been referring to, but it seems that, unwittingly, he had taken it out of context. Neither did it state that the Directorate-General for Competition ‘had already approved his [Peter’s] plan
s to take over the organisers’ television rights’.
Mosley was highly critical of John Temple Lang at the press conference. By the time the Statement of Objections had been issued, the relationship between the two men, for Mosley at least, had long been strained. Mosley believed he had been ‘very much prejudiced’ towards the FIA and Ecclestone’s companies. Temple Lang, a professor in European community law at Trinity College, Dublin, and visiting senior research fellow in the Law Faculty at Oxford University, strongly refuted Mosley’s allegation. In May 2000 he was appointed Hearing Officer by Mario Monti in response to complaints from competition lawyers over many years that their clients’ arguments were neglected by Commission officials. Temple Lang argues that this was not a post to which he would have been appointed if guilty of Mosley’s charge. Further evidence of his impartiality, he added, was his decision four months later to resign on the grounds that he believed the Commission’s anti-trust department did not have the will to introduce reforms that would ensure companies were given a fairer hearing.
There was certainly a touch of irony about Temple Lang’s resignation in that it has been Mosley’s consistent claim that at the heart of the FIA’s problems with the European Commission had been an unwillingness to listen to a reasoned and cogent argument. Despite the circumstances of Temple Lang’s departure from Brussels, Mosley felt disposed to claim the credit. His criticism of him had ‘been the beginning of the end. If you talk in the legal circles in Brussels, the general consensus is that we got him fired. And I think it is quite right that he was. He was not an independent, disinterested public servant.’ Commented Temple Lang: ‘Mr Mosley’s statement is, of course, entirely untrue. My resignation from the position of Hearing Officer had nothing to do with my contacts with Mr Mosley or his colleagues.’
That the Commission had, in fact, got as far as issuing a Statement of Objections surprised those who had believed that Ecclestone, keen to remove the uncertainty hanging over the future of television revenues and its impact on his flotation plans, would do whatever was necessary to resolve by compromise his differences with the Commission. That, said a senior Morgan Stanley executive at the time of the Eurobond launch, had been ‘the way things have gone until now and I don’t expect them to be any different in the future’. Brussels-based lawyer Jean-Paul Hordies, a specialist in EU broadcasting and media rights, had believed it would be inconceivable that Ecclestone would not do all that he could to quietly resolve his differences with the Commission. ‘I cannot imagine that he would let them adopt a formal Statement of Objections,’ he said. ‘It would result in a public confrontation, which would be very messy and expensive for Mr Ecclestone, and sooner or later he would have to agree to the required modifications anyway.’
Certainly the FIA, according to Mosley, had made every effort to satisfy the European Commission’s concerns. Time and again, he said, the FIA had offered to amend rules considered by the Commission to be anti-competitive; but these offers, and proposed meetings to discuss them, were repeatedly ignored. He continued to believe that van Miert had pursued the investigation in an attempt to avenge the success of the FIA’s legal action against the European Commission over the leaking of the warning letters to the FIA, FOA and ISC in December 1997, and for prejudicial interviews he had given to the media.
‘In the absence of any other explanation for the Commission’s unusual tenacity in pursuing such a weakly presented and argued case, the FIA’s victory over the Commission … may provide some pointers. The Commission will not have welcomed being forced to apologise publicly for its wrongdoing and to pay what, by reference to past practice, is a high sum by way of costs. However, a body which is supposed to exercise a quasi-judicial function should not allow any disappointment at such an embarrassment to cloud its judgement on the substantive case. It seems probable, however, that the former Commissioner’s determination to pursue the FIA at all costs and to ignore the rules of natural justice, which was manifest in the leak and prejudicial statements, is equally manifest in the Statement of Objections.’
In rejecting the Commission’s Statement of Objections, the FIA gave notice that it requested an oral hearing to challenge its conclusions, the next stage in the European Commission’s judicial process and attended by the anti-trust authorities of all EU member states. The FIA anticipated that it would run for three days, during which it proposed to call team managers, sponsors, advertisers, circuit owners, broadcasters ‘and other expert witnesses’.
The FIA also made it clear in its response that, should the oral hearing confirm the Statement of Objections, it would proceed to challenge the decision before the Court of First Instance in Luxembourg. Potentially, it was an extremely costly road to go down. If the oral hearing went against the FIA, it would be liable from that point to annual fines of up to 10 per cent of its turnover. A European Commission spokesman said at the time: ‘Theoretically, it could go on for at least a couple of years.’
While Mosley was fulminating, Ecclestone was keeping a low profile. By the end of 1999 his response to the Commission’s Statement of Objections had still to be made known. A spokeswoman said at the time that the Commission was not allowed to confirm whether or not a party had responded to a Statement of Objections, and Ecclestone’s office, through his lawyers, declined a request for clarification. But Ecclestone had, in fact, opted for an oral hearing. The date of 10 May 2000 was set aside by the European Commission for the beginning of a three-day hearing. This promised to be the scene of a revealing and highly public confrontation: the last thing that Ecclestone, unable to control the run of events and what he might be compelled to disclose, was likely to want.
Similarly unenthusiastic, although for quite different reasons, was the new Commissioner for Competition, Mario Monti. He did not want his staff and budget stretched to breaking point over the next couple of years trying to nail down a can of worms opened by his predecessor, Karel van Miert. Aware that between them Mosley and Ecclestone had the financial and political means to battle to the death, he had little political kudos to gain from the blood, sweat and tears that a protracted legal battle would inevitably bring. It was, in fact, a public hearing that none of the parties involved wanted, a consensus that led to a quiet diplomatic exchange and a far less bloody and less public process of resolution.
On 26 April, with the hearing only two weeks away, Mosley wrote to Monti with a set of ‘concrete proposals’, which the Commissioner, in his reply of 2 May, described as ‘innovative and constructive’. However, added Monti, they could not be discussed until after the hearing. It presented Mosley and Ecclestone, as had doubtless been pre-arranged, with the grounds for requesting that the oral hearing be postponed. On receiving the request Monti issued instructions to his department that ‘settlement discussions’ should take place with the FIA immediately. Over the next few weeks a series of hurried meetings took place in Brussels and London, in time for an extraordinary meeting of the FIA’s General Assembly in Paris on 28 June. What was agreed at these meetings formed the basis of a framework of action unanimously approved by its 143 worldwide delegates: that the FIA would amend the Sporting Regulations denounced in the Commission’s Statement of Objections as abuses of competition law.
Among other things, it meant, in effect, that Ecclestone’s involvement and influence would be restricted to the commercial activities of Formula One. To this end Ecclestone had already acted to remove one major obstacle to a peaceful agreement with the Commission – his ownership of International Sportsworld Communicators. Its sale, concluded in early April, had been in the spirit of the ‘innovative and constructive’ proposals laid out in Mosley’s letter to Monti. The buyer was David Richards, the chairman of Prodrive, the company which ran Subaru’s rally team, who paid an undisclosed sum described by the new owner as ‘colossal’ – believed to be £30 million.
In order that Ecclestone could protect his huge financial investment in his digital television interests beyond the expiry in 2010 of the agreement
between SLEC Holdings and the FIA, a new, stunning and ground-breaking agreement came into being, because of Mosley’s ingenuity. In late 1999 he suggested to Ecclestone that the 15-year contract be extended by no less than 100 years, until 31 December 2110. It followed an unsuccessful attempt by Mosley to persuade the World Motor Sport Council to satisfy the European Commission’s concerns by agreeing to sell to Ecclestone its ownership of the Formula One trademarks, with the World Motor Sport Council remaining solely as the regulator. Ecclestone agreed to pay the FIA $400 million in cash with a payment of a further $100 million in the event of a successful flotation. The majority of the council members voted against the proposal, believing that it would leave Ecclestone free to sideline the FIA as the regulator. ‘They didn’t really care whether it was $300 or $500 million,’ said one of Mosley’s associates. ‘They were terrified that they might lose their stewards’ armbands and all that nonsense.’
Mosley then suggested to the FIA’s lawyers the more radical solution of copying the UK property practice of selling the leasehold, but for so far into the future that it was as good as selling the freehold. As far as European competition law was concerned, Mosley believed a 100-year deal was as good as the FIA disposing of all its commercial interests, which would ensure that it could have no incentive to favour Formula One in the event of the emergence of a rival series, which was one of the Commission’s principal concerns. The lawyers were deeply sceptical, but it worked, after Mosley was able to persuade Mario Monti to give his approval to the new concept.