Explained: Ferrari and the new Concorde Agreement amid economic and political factors

F1 and Ferrari have an agreement that has been discussed for many years and something will change in the near future. The top category of motorsport is an extremely complex sport, due to the heterogeneity of its stakeholders and all the parties involved, such as teams, suppliers, promoters, media, shareholders, international institutions and the economic power they embody. On more than one occasion, the governance of the category and its future have been a subject of friction among the parties involved.

The most notorious fracture occurred in the 1980s following the conflict between FOCA, the association of F1 constructors represented by Bernie Ecclestone, and FISA, the international federation of motorsports, led by Jean-Marie Balestre. In January 1981, Enzo Ferrari received representatives of FISA and FOCA in Maranello to find common ground. Two months later, at the Paris headquarters of FISA, Place de la Concorde, the eponymous agreement was signed. This pact ratified the sharing of power and the definition of governance for the category.

In summary, FISA retained responsibility for the executive missions of Formula One, leaving FOCA under Bernie Ecclestone responsible for negotiations with promoters and the commercialization of television rights. The profits made would then be distributed for the benefit of the teams. Enzo Ferrari seized the opportunity to benefit, managing to obtain two Grand Prix races in Italy, namely Imola and Monza. Since 1981, eight versions of the Concord Agreement have been signed. The last one was in 2020, valid until 2025.

F1, Economic and Political Benefits Reserved for Ferrari

The current regulatory framework was designed to ensure economic stability for the 10 teams, some of which were clearly struggling due to the Covid-19 pandemic. The teams received a 50% share of the Formula 1 profits, then a progressively smaller share relative to the turnover of the teams. One of the most controversial aspects, painfully opposed by the British teams, is the bonus granted to Scuderia Ferrari, as the team that has participated in all editions of the top category of motorsport.

A revenue independent of the position achieved in the Formula 1 constructors’ championship, which in fact means that the Maranello team almost always receives an amount equal to or greater than the world champion team. Under the current Concorde Agreement, the Maranello team receives at least 5% of Formula One’s total revenue from the Formula One Management, provided the revenue does not exceed $1.1 billion. Through a sliding scale mechanism, if Formula One’s revenue exceeds $1.1 billion, Ferrari receives an incremental percentage up to a maximum threshold of 10% if Formula One Management’s revenue exceeds $1.6 billion.

F1, Ferrari and the New Concorde Agreement Discussed in Imola

Discussions on the new Concorde Agreement have been ongoing for some time, and some points will certainly be subject to changes, including the economic bonus granted to the Maranello team. Ferrari team principal Frederic Vasseur sidestepped the issue when asked directly during the Imola weekend, but it seems certain that a more restrictive limit will be set on the percentage of revenue guaranteed to the Maranello team. Probably that 5% as a maximum cap regardless of the revenue generated by the Formula One Management. Another contentious issue will be the maximum number of competitors.

The teams and Liberty Media want to block the possibility of new entries by deliberating Formula 1 as a category with a limited number of teams. This intent will have to contend with actions taken by the United States Congress in support of Andretti and General Motors’ candidacy. On the eve of the Miami Grand Prix weekend, a group of bipartisan members of Congress asked the owner of Formula 1, namely Liberty Media, for answers regarding the exclusion of the American team as the eleventh team in the category.

In a letter to the president and chief executive officer of Liberty Media, the prominent American businessman Gregory Maffei, the 12 United States representatives expressed their concerns. The desire to transform the Concorde Agreement from an “armistice” among F1 stakeholders into a shield against external threats could become a very slippery slope for the teams and the American ownership.