01/03/2017
NEWS STORY
Politician Anneliese Dodds has issued a statement confirming that the European Commission (EC) has not ruled out an investigation into the $8bn takeover of Formula One by Liberty Media as was wrongly reported earlier this week.
The threat of an investigation has been fuelled by accusations of a "severe conflict of interest" at the heart of the deal. The takeover of F1's Commercial Rights Holder (CRH) Delta Topco had to be approved by its governing body the FIA and in January it approved the sale by investment firm CVC to Liberty. However, that is only the start of the story.
In 2013 the FIA bought a 1% stake in Delta Topco from the company itself which was controlled by CVC. Although the FIA was told the stake was worth $70m it got it for the bargain-basement price of $458,197.34. The stake came with the crucial condition that it could only be cashed in when CVC sold its own shares in the company. As this required the FIA's approval it fuelled claims that the governing body had a conflict of interest when it decided to approve the sale which netted CVC $3bn for its 38.1% stake. Liberty paid the FIA $80 million for the 1% leaving it with a $79.5m profit after deducting the purchase price
Although the FIA was aware that it would receive $80m as a result of the sale going through, it insists there was no conflict of interest. According to a statement released by the FIA it was "impossible" and "inconceivable" that there could have been a conflict of interest as its decision-making body, the World Motor Sport Council, simply didn't take the financial benefit into consideration.
"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."
The statement added that "the FIA would naturally be happy to demonstrate the absence of any conflict of interest to any competent authority that may so request."
In contrast, Damian Collins, chairman of the British government's Culture, Media & Sport Committee, told ITV that the situation amounts to a "severe conflict of interest." He added that he had written to the EC asking it to investigate as has Dodds. As Pitpass has reported, a string of lawyers also joined the chorus reflecting these concerns.
They haven't fallen on deaf ears and last month the European Parliament voted to support a call for an immediate investigation into F1. It was tabled by Dodds and was part of an annual Competition Report which makes recommendations for the EC's agenda.
The Report "calls for an immediate investigation into competition concerns arising from the Formula One motorsport industry" and was approved with a majority of 467 votes in favour compared to 156 against. Although the EC is not forced to follow the recommendations in the Report Dodds now has the backing of an overwhelming majority of the European Parliament.
The FIA and Liberty are now waiting on tenterhooks to see what the EC will decide to do. Earlier this week articles wrongly claimed it had already made its mind up.
The reports were all based on a letter sent by Dodds to the EC's Competition Commissioner Margrethe Vestager. It said: "I am curious as to why the Commission was required to issue a decision on the purchase of the company Speed (owner of Formula One) by CVC Capital Partners in early 2006, but are not required to issue a decision on the 2017 sale when both sales involve a full transfer of ownership to one company."
Vestager responded to this question in a letter which said: "You ask why the acquisition of Formula One's parent company by Liberty Media was not notified to the Commission. This transaction did not satisfy the turnover thresholds that must be met to fall within the Commission's jurisdiction which I referred to in my letter of 13th October 2016. The transaction was notified instead to National Competition Authorities in several Member States, namely Austria, Spain, Portugal and the United Kingdom, all which approved it last year."
Vestager's reply explains why the EC didn't need to approve the sale but it does not give any indication of whether it will investigate the alleged conflict of interest or breach of competition law as a result of it. The two are totally separate and unrelated matters. It is perfectly possible for the EC to investigate a breach of competition law as a result of the sale of a company that it didn't need to approve and there is nothing in Vestager's letter that says this won't happen. It is far from unlikely as both Sauber and Force India have lodged a complaint with the EC about F1's prize money structure which favours the top performers. If this proceeds to an investigation then the EC will have a chance to get stuck into the alleged conflict of interest.
Nevertheless, a number of outlets including the BBC and Autosport wrongly claimed that the letter meant the EC had confirmed it won't investigate the takeover. Remarkably the BBC said "The European Commission has rejected a call from hundreds of Euro MPs to investigate the takeover of Formula 1 by Liberty Media." Far from it.
Today Dodds released a statement saying that "in the Commissioner's response, she explains that she was unable to rule on the sale of the sport because it did not meet merger thresholds. This has been widely reported as the Commission being unable to investigate any aspect of Formula One, with one outlet reporting that the letter rejected the recent vote in the European Parliament calling for an immediate investigation in competition concerns in Formula One."
Crucially Dodds adds that Vestager's reply "does not mean she cannot investigate the sale of the sport, or a possible conflict of interest from the regulator concerned."
Time will tell whether any of the media outlets responsible for the misreporting will choose to report the truth.