Why Wolff's purchase might be dangerous for Formula 1 Formula 1

Why Wolff's purchase might be dangerous for Formula 1

By Tomas Mota 28 June 2020 | 17:30


Mercedes team boss Toto Wolff has received a lot of attention in recent weeks. The current corona crisis means that various car manufacturers and Formula 1 teams are struggling and are often on the brink of collapse. Wolff immediately took advantage of the situation and started buying shares in large quantity from Aston Martin and Williams

The Mercedes team boss is doing a pretty good job: he bought 5% of the shares from the ailing Williams and is a shareholder in the car manufacturer Aston Martin with a value of 1% of all shares. He is also a major shareholder in the Mercedes team, where he owns 30% of the shares.  

As of next season, it means that Wolff is a shareholder in three out of ten teams. You might wonder if it is a responsible move by the German, not to mention the ethical aspect attached to it. Because is it morally responsible to have a share in several teams within the same sport, does this not hinder the competition?

We ask Martijn van de Hel, a lawyer specialised in competition law. "The most important question to ask is whether he has any say or control over the team's decisions. That also depends on the type of share someone has within such a company. But if Wolff has decisive influence over policies on both Williams and Aston Martin, it could of course lead to  a restriction of competition." 

Not unique but certainly not common

In the first place, it is not something new and unique to have shares in multiple teams within one sport. We have seen it before for example with Red Bull, who have several teams that play football in Europe, in the form of RB Salzburg and RB Leipzig. The City Football Group, which owns football teams such as Manchester City FC, Melbourne City FC and New York City FC, also has several football teams in different countries in their portfolio. The latter even concerns clubs on different continents. 

It is not unique within Formula 1 either, as Red Bull has two sister teams in the form of Red Bull Racing and AlphaTauri. Still, Wolff's strategy is odd, since there has never been a single legal entity that share three independent teams.

The question is whether this practice is ethical. When we ask Van De Hel, he shares that it is not so black and white. "It is of course a very special situation to begin with. I can't think of a sport where there are shareholders who control multiple teams within one sport. Formula 1 in particular is of course a very concentrated market, if you own multiple teams you can question it whether this has any underlying ethical principle at all." 

Potential restriction of competition

"In the worst case, it could be a construction in which Wolff is a "linking piece" between the three teams, a kind of conduit in which information is always shared between the three teams. This gives rise to restrictions on competition and even cartels. But given that there are three teams that all perform differently, I don't really believe in that. Perhaps his influence will make Williams and Aston Marin better. That would be good for the competition."

Still, it remains to be seen what exactly is Wolff's intrinsic motive to own shares in Aston Martin and Williams. "It can of course also just be a purely financial incentive. As an entrepreneur you always look to maximise profits. Maybe he sees potential in both teams and saw his chance to make a profit. The reasons behind it remain unclear at the moment."


Tags:

Comments

Be the first to comment!

Respond


More news