European Parliament puts Formula One under pressure

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An investigation into ‘anti-competitive’ behaviour in Formula 1 is set to move one step closer after the European parliament backed calls to look more closely at the sport’s practices.

F-1 is coming under mounting pressure to reform its governance and payment distribution structure – particularly in the wake of Manor Racing’s collapse –, as well as defend itself against allegations of a conflict of interest regarding its sale to Liberty Media and its UK tax arrangements.

With the European parliament producing a competition report each January and making recommendations for the European Commission, Anneliese Dodds, Labour MEP for the south east of England – who last year brought concerns to the attention of the parliament – included an amendment that ‘calls for an immediate investigation into competition concerns arising from the F-1 industry’.

With the report going up to the Commission for a vote, 467 sided in favour to 156 against and 86 abstentions. Though no investigation is mandatory, the vote does raise the pressure to do so.

At the heart of the complaint is the uneven prize money distribution which allows Mercedes, McLaren, Williams and Red Bull a greater share of the revenue based on their historical significance or their investment of the sport, while Ferrari receives the most based largely on its prestigious status.

However, with Manor Racing forced to fold last month largely because it missed out on a cut of the prize money share by finishing 11th in the constructors’ standings, the sport’s structure is facing renewed and now potentially definitive calls to reform.

Sauber and Force India have written to the European Commission previously to highlight the ‘unfair’ and ‘unlawful’ share of revenue though no formal action on the complaint has been actioned as yet.

Additionally, there is a concern F-1’s recent sale by CVC to Liberty Media could be considered a ‘conflict of interest’ after it was pointed out that that FIA stood to make a profit once it had approved the sale since it owned a 1 per cent stake thought to be worth upwards of €95 million.

Dodds also highlighted the sport is paying an effective tax rate 2 per cent tax rate to HMRC, an agreement that could have serious financial ramifications if found to be avoiding tax.

Should have investigation consider anti-competition to have indeed taken place, a fine of up to 10 per cent of the company’s annual turnover of approximately €1.53 billion.