Racing Body’s Single-Tire Rule, Exclusive Supply Contracts Not Antitrust Violations

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

A supplier of racing tires and a motorsports sanctioning body did not violate federal antitrust law through the adoption of a so-called "single-tire rule" and entry into related exclusive supply contracts, the U.S. Court of Appeals in Philadelphia has ruled.

A federal district court decision granting summary judgment on a competing tire supplier’s claims in favor of the supplier and sanctioning body (2009-2 Trade Cases ¶76,748) was affirmed.

Single-tire rules generally require that a specific tire type and brand be used on one or more wheel positions for one or more classes of cars for a series of races or racing seasons.

Automotive racing sanctioning bodies often choose to adopt a single-tire rule, the appellate court noted, in much the same manner as they create specification ("spec") rules concerning other components of a race car, such as carburetors, mufflers, or chassis. Thus, tires are not the only equipment subject to a single source or manufacturer rule.

Coercion

The complaining tire supplier failed to demonstrate the existence of a genuine issue of material fact as to whether the defending tire supplier coerced, or otherwise improperly interfered with, the determinations of the sanctioning body and the other sanctioning bodies to adopt the single-tire rule and to enter into the exclusive supply contracts, the appellate court stated.

While coercion was not an essential element of every successful antitrust claim, it was a fundamental consideration in the present circumstances—namely, where various sports sanctioning bodies have freely adopted their own equipment rules and then freely entered into exclusive contracts with the respective suppliers, the court noted. Neither the lengthy duration of the contracts nor their renewal terms represented real evidence of coercion or interference.

Business Justifications

The sanctioning bodies presented more than sufficient pro-competitive or business justifications for their actions. The appellate court agreed with the lower court that the sanctioning bodies properly adopted the single-tire rule because they believed that such a rule created more exciting races, ensured equal access to a uniform product, led to increased safety, and lowered the costs of tires by eliminating so-called "tire wars,"—a practice in which the manufacturers constantly introduced improved products in order to push the competitors into buying new tires each race to keep on the same level as their rivals.

Antitrust Injury

The complaining supplier suffered no cognizable antitrust injury because it had the opportunity to bid on exclusive supply deals—and previously had done so with some success. In fact, the court observed, the complaining supplier’s whole challenge to the single-tire rule had a simple but serious flaw: it was the company that actually pioneered and promoted the whole idea in the first place.

Finally, the district court’s denial of the supplier’s request for leave to amend its complaint in order to add an express refusal to deal or group boycott claim was proper, the appellate court held. Given that the motion was filed sometime after the expiration of the deadline stated in the court’s own scheduling order, that it would have constituted the supplier’s fourth amendment to its pleading, and that any attempt to add a new claim would have been moot in light of the ruling on the merits of the supplier’s existing claims, the lower court’s refusal to allow further amendment did not constitute an abuse of discretion.

The decision is Race Tires America, Inc v. Hoosier Racing Tire Corp ., 2010-2 Trade Cases ¶77,111.