ANALYSIS: FIA approves Andretti Global as 11th team, but what about F1?

When the FIA formally opened the process for new teams to enter the sport in February, many were intensely anticipating the arrival of a new Formula One (F1) team since the debut of Haas, who joined the sport in 2016.

Of the various bidders, the team which attracted the most interest was Andretti Formula Racing LLC (part of the wider Andretti Global racing umbrella). Led by former McLaren driver Michael Andretti, the son of 1978 Formula 1 World Champion Mario Andretti has teamed up with American car manufacturer General Motors to join the F1 grid.

The name Andretti might ring a bell, especially if you’re a fan of motorsports in general. The legendary American racing family/franchise has a long history in the American IndyCar series. Currently, it operates teams in the North American endurance racing championship (IMSA), Formula E and Extreme E.

This application came about after Andretti Autosports' previous failed attempts to buy Sauber (who is now set to be majority-owned by Audi in 2026) and amidst a hostile reception from existing F1 teams that any new entry should bring value to the pinnacle of motorsports.?

FIA approves Andretti Formula Racing application

On October 2, the FIA gave the green light for Andretti Racing to be admitted onto the F1 grid.

They were the only team out of three prospective bidders who have satisfied the stringent criteria set by the sport's regulatory body. The rejected candidates include Formula 2 outfits Hitech and Rodin Carlin as well as start-up Asian effort LKYSUNZ.

The official process of admitting a new F1 comes in three stages:

• Phase One being the initial call for applications
• Phase Two involves an evaluation of the applications submitted by prospective teams
• Phase Three involves the FIA approval and referring the successful team to Formula One Management (FOM) for commercial discussions

For context, Formula One Management (FOM, under Formula One Group) is the owner of the name and rights of F1. Their goal is to drive commercial success for this series.?

According to an official FIA document, the selection criteria used to assess the suitability of new F1 team include, among others:?

• a team's sporting and technical abilities
• a team's ability to raise and maintain funding
• the team's experience and human resources
• considerations of sustainability, EDI (Equality, Diversity, and Inclusion), and societal benefit

Following the ultimate financial collapse of the last batch of new F1 entrants in 2010, this approval is a clear intent of the FIA's commitment to ensure the continued commercial and competitive viability of any new team entering F1.?

Commercial discussions with FOM

As explained above, Andretti Global would now proceed with commercial discussions with FOM to discuss the commercial nature of their entry into the sport.

Reports suggest that existing F1 teams have not been keen about new teams entering into the sport, since it looks like they are resistant to any thought of expanding the grid beyond the existing structure. It claims that any new team would need to "add value to the championship ".?

One reason that could explain why teams aren't entirely happy with the prospect of an 11th F1 team ties in with money. Their argument? The commercial income teams would receive F1 would be further diluted, resulting in each team receiving a smaller percentage of the overall prize money.?

To address this, the teams, F1 and FIA have signed the latest Concorde Agreement in 2021, which requires new teams to pay an additional Anti-Dilution Fund of US$200 million , which is distributed to teams as a way of compensating the lost percentage that they would give up in order to accommodate the entry of a new team on the grid.

Despite this, the existing teams have contemplated raising this anti-dilution fee to as much as US$600 million , which would be part of the new Concorde Agreement that needs to be agreed from 2026 onwards. Reasons to justify this rise include an ever-increasing cost of being in F1 and the perceived value of an individual F1 team following Audi’s gradual takeover of Sauber.

Besides the upfront anti dilution fee required, there have been implications that FOM and the teams have a strong veto to any new F1 entry.?

One solution Andretti can take is to seek a performance based guarantee from FOM where Andretti gets a rebate of the anti-dilution fee in the event that they achieve certain results in their first season in F1. It, however, remains to be seen how discussions with FOM will go following the various objections that have been raised to the official FIA approval.

Can F1 say no to Andretti Racing?

Whilst it does appear that the Andretti Global outfit would have to fork out the US$200 million entry fee as currently dictated by the Concorde Agreement, there may be issues relating to anti-competitive behaviour under competition law if other hurdles come in their way.

Take FOM, for example. Despite the FIA's approval, Andretti could still be prevented from entering F1 if they cannot reach a commercial agreement with FOM.?

This could be challenged on anti-competitive grounds, as it would give the existing teams too much power to block new entrants. It also raises various issues surrounding competition law since F1 and its teams could be viewed as abusing their dominant position in preventing any new entrant in the sport.

Since most F1 teams are primarily based in Europe, European Union (EU) laws against anti-competitive behaviour could prevent the total exclusion of Andretti (specifically Articles 101 to 109 of the Treaty of the Functioning of the European Union).?

Let's not forget that the EU is already investigating a closed-shop model within the world of association football. This arose when various top European football teams like Juventus, Manchester United, and Real Madrid attempted to break away from the UEFA Champions League and form their own European Super League .?

With Liberty Media being based in the US, note that the college basketball league within the country, the National Collegiate Athletic Association, was found to be in breach of the Sherman Act of 1890 when it enforced limits on student-athlete compensation.?

As such, there are valid concerns that F1 may breach various anti competitive provisions and face several regulatory penalties.

If F1 says no, what are the potential legal issues?

If FOM refuses to admit Andretti, they could make a complaint against them to various regulators such as the EU or United Federal Trade Commission. The ground for these complaints could stem from the fact that FOM has abuse their dominant position in the market by disallowing their entry despite fulfilling all regulatory requirements from the FIA, which could lead to various sanctions and fines against the FOM.

Beyond that, Andretti could also seek a legal claim against FOM in the civil courts to obtain an injunction compelling the allowance of Andretti to enforce a commercial agreement to participate in F1. Any victory here could also result in compensatory damages being awarded to Andretti, taking into account their struggles in facing FOM.

With the increase in value of the sports since the last Concorde Agreement, it's reasonable for an increase in the anti-dilution fee to be agreed with Andretti, with any additional amount being deducted from their prize money at the end of their first year in the sport.

What does the Andretti saga mean for F1?

FOM and the existing teams are treading a fine line — they want to protect the continued commercial interest while ensuring that any act from their side does not deter futured interested parties looking for a shot at the pinnacle of motorsports.?

This closed shop model could inhibit innovation in F1, which could hurt the sport's long term growth and discredit its reputation to potential sponsors and broadcasters around the sporting world.?

At least according to the FIA, Andretti's entry has satisfied their concerns on continued sustainability and sustained competitiveness — thanks to their resources and overall expertise across a wide range of motorsports.?

If not for the might of Andretti’s motorsports pedigree across Formula E, Indycar and IMSA paired with the weight of General Motors, who else would be able to join the F1 grid in the future??

It wouldn't be a surprise to see other potential new teams with manufacturers such as Hyundai alongside the aforementioned F2 hopefuls Carlin and Hitech may take the view that F1 will never accept any new teams beyond the current 10 on the grid.?

Hence, it seems that gone would be the days where new manufacturers like Toyota would enter a new team or new independents such as Sauber joining the sport and make a long standing mark for themselves amongst the big boys.

While FOM has every right to reject Andretti Global on commercial grounds, this rejection needs to be made crystal clear on the expectations of any new team to join the grid (since the existing rules allow for a maximum of 26 cars on the grid).

Of course, there's the fans. They may develop negative sentiments about the exclusivity of F1’s existing teams that they wouldn't accept any further challenge to their domain — even when said challenger is willing to meet their ever moving goal posts.?

This highlights the disparity of F1's relevancy and attractiveness in contrast with the World Endurance Championship attracting numerous manufacturers and Formula E featuring tight wheel to wheel action amidst a push towards more electric vehicles.

We are once again at a crossroads moment in F1 history, as there may be avenues for future expansion or the current 10 outfits will be all F1 is for the foreseeable future. Personally, I hope that the FOM and teams can come to an amicable conclusion and fairly admit Andretti following a fair and balanced discussion for the good of the sport and continued long-term growth of F1.

What are your thoughts on Andretti’s entry in F1?

**

This newsletter was written by Jonathan Khoo ?and edited by?Hew Hoong Liang (Nathan) (I know: they both have similar names ??).

?? Click here to subscribe to our newsletter so you don't miss out on the latest editions!