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NASCAR, ISC win antitrust lawsuit against Kentucky Speedway
By Bob Pockrass - Associate Editor
Thursday, January 10, 2008
Nearly 30 months after Kentucky Speedway’s owners filed an antitrust lawsuit against NASCAR and International Speedway Corp. in its bid to land a Cup race, U.S. District Court Judge William O. Bertelsman has ruled in favor of NASCAR and ISC.
“After careful consideration and a thorough review of the record, and granting [Kentucky] Speedway the benefit of the doubt on all reasonable inferences therefrom, the court concludes that Speedway has failed to make out its case,” Bertelsman wrote in an opinion issued Jan. 7.
Kentucky Speedway had claimed that NASCAR, a privately held company that sanctions races and is owned by the France family, conspired with ISC, a publicly traded company that owns race tracks and whose majority of stock is owned by the France family, to keep tracks such as Kentucky Speedway from getting Cup races.
NASCAR and ISC had asked the judge to rule on the case before it was scheduled to go to trial in March. NASCAR officials obviously were pleased with the ruling, which affirmed their position that they can choose where they race. Of the 36 Sprint Cup races, 19 are held at ISC tracks.
Kentucky Speedway had asked for the creation of objective factors for the awarding of Cup events and for the France family to divest itself of NASCAR and ISC, and for ISC to sell off eight of its tracks. The track also sought $200 million in damages, an amount that could have been tripled by the jury.
James France, ISC chief executive officer and NASCAR executive vice president, said, “From the beginning, we have said that the case was without legal or factual merit.
“This ruling reaffirms the validity of a business model that has significantly benefited the sport’s fans, business partners and other industry constituents for more than 50 years.”
Kentucky Speedway will appeal the decision to the Sixth Circuit Court of Appeals in Cincinnati.
“We are disappointed in the Court’s decision, both for ourselves, for the Commonwealth of Kentucky, and for all those fans who have been hurt by what we believe are NASCAR’s and ISC’s anticompetitive actions toward Kentucky Speedway,” Kentucky Speedway attorney Stanley Chesley said in a statement. “We are convinced that there are serious issues of both fact and law, and we intend to appeal.”
In his opinion, Bertelsman ruled that Kentucky Speedway was essentially a “jilted distributor.”
“A producer of a product is free under current antitrust laws to select its distributors and to refuse to deal with would-be distributors, no matter how worthy or deserving they may be,” Bertelsman wrote, later adding, “An agreement between a producer and a distributor to prevent a competitor of the distributor from expanding its business and competing with the preferred distributor is per se legal.”
ISC had spent approximately $10 million to defend against the lawsuit the last two years and expected to spend another $5 million to $6 million in 2008 if the case went to trial, according to statements made in conference calls with financial analysts. NASCAR does not have to reveal its litigation costs.
“It didn’t keep us from selling tickets and trying to build a better experience for our fans, but it was definitely, at a minimum, a distraction of management’s time,” ISC spokesman Wes Harris said.
Kentucky Speedway filed the suit in 2005. The track has hosted Craftsman Truck and NASCAR Busch (now Nationwide) series events for several years, and both series will race at the track in 2008.
“It puts an end to any question about which locations NASCAR can operate its races, just like every other sport, including the NFL, baseball and the NBA,” NASCAR spokesman Ramsey Poston said. “NASCAR can [race] where it decides best for the sport and for its fans.”
Poston said he expects those non-Cup races to continue competing at the track.
But it now looks as if Kentucky’s hopes of landing a Cup race are slim. NASCAR and ISC had settled another antitrust suit in 2004 with a shareholder from Texas Motor Speedway, a settlement that brought a second Cup race to Texas at the expense of one from North Carolina Speedway. That suit had a twist – whether NASCAR had made a promise to Texas for a Cup race – that the Kentucky lawsuit did not have.
To have an antitrust claim, Kentucky Speedway needed to prove that NASCAR has a monopoly on a certain market. To do that, the speedway’s expert, Smith College Professor Andrew Zimbalist, did not use the typical standard that if the producer or seller of a product can raise prices by 5 percent and still make money, the judge found.
Zimbalist did not apply that test, but used his own version, which did not convince the judge. Bertelsman wrote that the theory could not be admissible, in part because it had not been tested, there had been no peer review and it was done solely for the lawsuit.
The track also argued that there is “significant evidence of competitive harm” and didn’t need to prove a market, but Bertelsman wrote there was not enough evidence of that.
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