PHILADELPHIA (Aug. 5, 2010) — The Third Circuit Court of Appeals in Philadelphia has ruled in favor of Hoosier Racing Tire Corp. in an antitrust dispute with Race Tires of America Inc. over “spec tire” rules in dirt oval track racing.
The Court of Appeals confirmed on July 23 that single-tire or “spec tire” rules in dirt oval track racing were legal under U.S. antitrust laws, and that Lakeville, Ind.-based Hoosier Tire had not violated the law in contracting to supply such tires, Hoosier Tire said in its summary of the verdict.
The court affirmed the dismissal of all claims against Hoosier and co-defendant Dirt Motor Sports. The appeal—Race Tires of America Inc. et al. v. Hoosier Racing Tire Corp., et al—was filed Oct. 9 by Race Tires of America's parent company, Indiana, Pa.-based Specialty Tires of America Inc. (STA), after the District Court for the Western District of Pennsylvania dismissed STA's anti-trust lawsuit against Hoosier a few weeks earlier.
STA argued at the time the court's opinion is “contrary to the intent of antitrust laws” and will lead to less competition in the market for racing tires and other racing equipment. STA originally had sued Hoosier in October 2007, alleging Hoosier was using its monopoly power in the dirt oval track market to eliminate competition for the sale of racing tires.
The appeals court ruled that sanctioning bodies should have the discretion to determine their own rules of the game, including specifying a single-supplier's products be used in the race, Hoosier said, and created a bright-line rule: Sanctioning bodies can legally enter exclusive contracts where they have in good faith “freely adopted their own equipment rules and then freely entered into exclusive contracts with the respective suppliers.”
Hoosier also noted that in this case, the evidence supported the sanctioning bodies' good faith belief that single-tire rules benefit racers and motorsports in general, including by promoting parity among racers, increasing safety and controlling overall costs of so-called “tire wars.”
The court explained that a clear rule was needed because sanctioning bodies have ultimately won antitrust challenges to their specification rules in the past, but only after incurring considerable legal expenses.
“Motorsports sanctioning bodies, as well as similar organizations in other sports, deserve a bright-line rule to follow so they can avoid potential antitrust liability as well as time consuming and expensive antitrust litigation…,” the court's decision states. “Contrary to the pro-competitive purposes of antitrust law, this expense may have real anti-competitive effect, especially on the smaller sanctioning bodies….”
“This ruling is a win not just for Hoosier,” Hoosier Vice President of Sales Dennis Sherman said, “but is also a win for motorsports generally. Sanctioning bodies can now choose the rules they believe will be best for their sport without the concern of having to defend an antitrust suit at every turn.”
STA declined to comment on the court's ruling at this time.