Wednesday, January 16, 2008

NASCAR’s Refusal to Let Racetrack Hold Premium Event Was Not Unlawful

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

North American Stock Car Auto Racing (NASCAR), that sport's governing body and promoter, did not engage in attempted monopolization or an unlawful conspiracy with a national racetrack management company by denying an independent racetrack's applications to host a premium stock car race, the federal district court in Covington, Kentucky, has held.

The complaining racetrack, located in northern Kentucky, failed to prove a valid relevant market, an antitrust injury, or any actionable anticompetitive behavior, according to the court. Therefore, summary judgment in favor of the defendants was granted.

Proposed Relevant Markets

The complaining track's expert testimony as to two proposed relevant markets—a sanctioning market and a hosting market for a "NEXTEL Series" race—was insufficiently reliable to be admitted into evidence, the court found at the outset.

The NEXTEL Series is a set of 36 races that represents NASCAR's premier circuit. The testimony failed to include an analysis of cross-elasticity of demand under the Justice Department's "merger guidelines test," the accepted means of analyzing the interchangeability of a product and its substitutes.

The expert's own version of the test, which was produced solely for the litigation, had not been subjected to peer review and publication, was not controlled by any accepted standards, and was not shown to have enjoyed general acceptance within the scientific community. Moreover, the expert's comparison of the market for two automotive racing circuits was flawed, and he made no attempt to compare those markets with the markets for other professional sporting events in the area.

Market Not “Readily Apparent”

The exclusion of the unreliable expert testimony left the complaining racetrack with no evidence in support of its relevant market assertions, the court noted, and proof of relevant market was required for a Sherman Act claim. An argument by the racetrack that it did not need to prove the relevant markets because it had adduced "significant evidence of competitive harm" was rejected. The principle was not applicable, as the relevant market was not "readily apparent." Even if it could apply, the track's evidence of competitive harm was not significant enough to have triggered the principle.

Antitrust Injury

In addition, the racetrack did not suffer antitrust injury from the alleged conspiracy, the court ruled. Any preference that the sanctioning body showed for favoring the management company's tracks was vertical in nature, rendering the excluded independent track a "jilted distributor."

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 was per se legal, because a manufacturer had a right to select its customers and refuse to sell its goods to anyone, for reasons sufficient to itself, the court concluded.

The January 7 decision is Kentucky Speedway, LLC v. National Association of Stock Car Auto Racing, Inc., Docket No. 05-138 (WOB), Eastern District of Kentucky, 2008-1 Trade Cases ¶75,995.

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