(T)RACING POINT: THE ‘PINK MERCEDES’ CONTROVERSY AND THE WAY FORWARD FOR FORMULA 1
This post has been authored by Mr Akshay Purandare.
Akshay is a second-year student of the B.A. LL.B. (Hons) course at the prestigious OP Jindal Global University and a Research Intern at the JGU Centre for Sports Law, Business and Governance. He has a keen interest in sports, not only as a spectator and participant but more so in the law and administrative aspects that govern it, and is enthusiastic about researching this field.
We have earlier published a blog on the same dispute by Mr Abhijit Vadavalli from NALSAR University of Law. The Blog by Abhijit can be accessed here.
INTRODUCTION
Formula 1 (“F1”) in the past two decades has been a perfect case of big teams with big budgets dominating the scene. The budgets of top F1 Teams are almost 30 times their counterparts at IndyCar. Whereas the segment of cars within the IndyCar fraternity resembles that of the F1, the F1 Hospitality budget alone outweighs the entire IndyCar budget. This gigantic difference arises from the F1’s requirement of ‘competitors’ having to build their own cars, unlike that of the IndyCar competition. These rudimentary differences inadvertently lead to technological battles among F1’s teams to garner pole position and simultaneously infuses controversies over funding and innovation in the F1’s DNA.
On similar lines, F1 courted controversy last year before the beginning of the season. This controversy involved BWT Racing Point (“RP”) F1 Team, (Racing Point – currently known as Aston Martin Cognizant F1 Team) formerly owned by Vijay Mallya, an outfit unfamiliar with controversies. Racing Point arrived for pre-season testing in Barcelona with their car, the RP20, which was nearly identical to the 2019 Championship wining Mercedes Car, the W10 barring the pink livery. This led to RP20 being dubbed the ‘Pink Mercedes’, and several leading stakeholders questioning the legality of the RP20 by labelling it as a ‘copycat’ car.
PROTESTING THE LEGALITY OF THE RP20
The RP20 was a departure from all of the previous cars of the constructor RP. This was particularly because RP shifted from a high rake to a low rake philosophy employed only by Mercedes till then - the RP’s supplier. The relationship between the RP & Mercedes was no secret and RP was quite open about ‘following’ the Mercedes ‘design’ and ‘philosophy’. This was also evident from the fact that RP was a regular consumer of Mercedes engines and gearboxes. RP further stressed upon their use of publicly available photographs of the W10 to reverse-engineer the components for the RP20, maintaining that the design of the RP20 was completely legal. The RP20s proved nearly similar to the Mercedes at least in terms of performance as they outperformed RP’s midfield rivals in the first few races.
However, just two races into the season, RP’s midfield rival Renault Sport Formula 1 (“Renault”) lodged a protest with the FIA claiming that RP violated the Sporting Regulations of F1. The thrust of the argument was that RP copied parts of the Mercedes W10, the ‘Break Ducts’ (“BDs”) in particular, and therefore shouldn’t be allowed to compete with RP20.
The Sporting Regulations which govern the conduct of all teams and drivers in F1 states under Appendix 6 that there are certain components of a car that the team must design itself or hold the exclusive right to use, called the ‘Listed Parts’ (“LPs”), while other components, the ‘Non-Listed Parts (“Non-LPs”), can be bought from competitors to avoid huge development costs. Under the 2020 Regulations, BDs were re-classified as LPs because of their aero-dynamic influence.
THE CASE IN FRONT OF THE FIA STEWARDS
BDs were non-LPs till 2019 when they were legally purchased by RP from Mercedes, but Renault argued that the date of receipt of parts and information was irrelevant since the 2020 Regulations required BDs to be designed by the team, and the RP20 BDs were Mercedes’ intellectual property (“IP”). RP argued in defence that their labour that went behind the reverse engineering of the RP20’s parts’ counts as ‘Designing’ and deeming its designs made through knowledge acquired in 2019 as ‘violation’ would be retrospective and unfair.
The Stewards took a purposive approach to interpret the Sporting Regulations and looked at Art. 6.3 which defines the ‘Constructor’ as a “person who designs the LP’s set out in Appendix 6.” This provision, stewards said, reflects the fundamental fact that F1 is a sport that honours a combination of both human driving skills and technical innovation. So to be a legitimate constructor, the BDs needed to be designed by RP exclusively and could not have been outsourced to a competitor. The Front BDs were also used in the 2019 RP car, further incorporating it in the DNA of RP cars and making it a source for 2020 development. This early development also meant that Front BD’s were out of the ambit of Mercedes’ exclusive IP.
However, the Rear BDs were incorporated by RP into the RP20 directly from Mercedes, by using the data and designs purchased from them in addition to publically available photographs. This meant that the source of the design was Mercedes and not RP. Both teams were present at formal meetings of F1 in 2019 where BDs were decided to be reclassified as LPs. Both teams knew this provision while developing the RP20. Hence the ‘design process’ of RP was held to be in breach of the 2020 Sporting Regulations, while the RP20 was completely legal in terms of the Technical Regulations. This allowed RP20 to continue its run on the track for the rest of the season invariably due to the ‘irrationality’ involved in requiring RP to unlearn its acquired knowledge and develop new BDs from scratch mid-season. The Team was however fined € 400,000 and further docked 15 points from the Constructors Championship.
Interestingly, the Stewards recognised the enormous costs that go into the development of F1 cars and decided that reengineering of competitors’ cars was a legal practice, not curbed by the FIA. Stewards concluded that the concerned parts could not be replicated exactly by the ‘reverse engineering method and that despite all the teams could have done the same, teams had made only selective use of this possibility.
IMPLICATIONS OF THE DECISION ON THE FUTURE OF F1
The decision of the Stewards amused the paddock as the RP20 was allowed to race for the rest of the season with only a small sanction. However, the seemingly small penalty of 15 Constructor’s points still proved decisive as RP lost 3rd place in the Championship to McLaren by a margin of 7 points, missing out on millions of dollars in additional prize money.
With new Technical Regulations in place for the 2022 season, it can be safely said that RP gamble on the copy-cat design worked well. RP received 1 pole position, 3 podium finish including a race win, and was virtually the 3rd fastest team on the grid, making it RP’s most successful year on the F1 calendar. This success cannot be simply attributed to the fact that RP20’S Rear BDs were identical to Mercedes, as they could have been termed ‘legal’ in F1’s parlance, if and only they had been a part of the RP19. Mercedes ran away with the title that year but also ended up spending over $400 million, whereas RP spent a third of that amount and was really ‘the best among the rest’.
Technical innovations in F1 have always been inspired by the top teams, but by adopting the winning philosophy to such an extent, RP opened the door for other teams in the midfield to become more competitive within their meagre budgets (Given F1 standards) by re-engineering a majority of successful designs from their suppliers at the top, albeit Red Bull for AlphaTauri and Ferrari for Haas. The Stewards decision to deem the re-engineering process ‘legal’ could have been a game-changer for the sport by restoring competitive balance in the sport.
But the possibility of restoring the competitive balance was wiped out when F1 decided to clamp down on the practice of reverse engineering. Given what F1 does with most technical innovations, F1 outlawed “reverse engineering” of a competitor’s car by including a ban on the use of 3D cameras in the 2021 Technical Regulations to scan other teams’ machinery. This ban also included a curb on striking deals to have access to another competitor’s LPs, allowing the use of only photographs available to everyone.
The enormous costs, lack of success, and unequal revenue distribution have seen many constructor teams exit the sport, further highlighting F1’s unsustainability for everyone except the big manufacturers and teams that buy from them. Even Williams, the last remaining independent team, has switched to an increased component supply from Mercedes after an ownership change. Combine this with a long-running trend of competitive imbalance, and you have worrying signs for the business of the sport not just from the perspective of teams, but also from the end of fans, who are the deriving force behind the media revenue.
The solution that the F1 Group has turned to, is the Financial Regulations (“FR”). For the first time in the sport’s history, there will be a budget cap on the amount teams can spend on car development and performance from 2021. Inspired by player salary caps in American sports leagues, FR are aimed at stopping F1’s technological arms race in the long run, forcing teams to spend strategically and bring the pack closer, while also putting an end to constantly rising costs. Coupled with these regulations is the new Concorde Agreement signed in 2020, committing all current teams to F1 till 2025. While details of the Concorde are not public, it is said to have changed the prize money distribution which unfairly benefitted big teams, meaning teams can finally look forward to the possibility of making profits with fixed budgets.
CONCLUSION
The new F1 regulations do not necessarily make the cars go faster or propel innovation, but rather slow down the big teams, and their cars, from leaving the rest behind. This can bring about increased competition and success for smaller teams if they get their strategy right. The question now is whether this helps F1 emulate the American sports leagues in more teams winning races and championships, or whether it turns out like UEFA’s FFP, where the sport may become more sustainable for teams but the success is reserved for traditional big teams with their capital advantage and smaller teams maintaining status quo in the absence of new funding.
The author can be reached for comments on his email at 19jgls-akshay.ap@jgu.edu.in
Cite as: Akshay Purandare, (T)Racing Point: The ‘Pink Mercedes’ Controversy and the Way Forward For Formula 1, Extra-Cover: The Sports Law Blog of India (22nd May 2021), Accessed at https://www.extra-cover.org/post/t-racing-point-the-pink-mercedes-controversy-and-the-way-forward-for-formula-1 [Date of Access].