Just how important NASCAR racing is to corporate sponsors is evident in the lawsuit between NASCAR and telecommunications company AT&T. It now involves potentially as much as $100,000,000. That’s right: a hundred million.
NASCAR, of course, has a series sponsor: Nextel. When it made its very lucrative deal with Nextel, both parties had to agree that communications companies already sponsoring a Cup car would be allowed to continue doing so. But, the deal between Nextel and NASCAR also provided that no communications company other than those then sponsoring a car would be allowed to do so.
At the time, Jeff Burton’s car was sponsored by Cingular, a cell phone service provider. Last year, AT&T bought Cingular and absorbed it into AT&T’s wireless services, eventually eliminating the Cingular brand.
But when they tried to put the new AT&T logos on Burton’s car, NASCAR said no.
AT&T sued NASCAR and got a judge to issue a preliminary injunction allowing the AT&T logos. The judge issued the injunction because the NASCAR contract with Cingular did not expressly prohibit changing logos should the company merge with another. NASCAR immediately appealed that ruling, though it has complied with it.
Last week-end, NASCAR responded by counterclaiming against AT&T for $100,000,000 dollars.
Meantime, Sprint, the owner of Nextel, has intervened, arguing that the value of its series sponsorship has been reduced by allowing AT&T to substitute for Cingular. Sprint estimates the value of its series sponsorship as $750,000,000: three-quarters of a billion.
The next battle between the parties is in August, when that preliminary injunction is due to be reviewed in an appeals court.
Meantime, AT&T and Childress announced today that AT&T has extended its sponsorship deal with Richard Childress Racing to 2010 and that driver Jeff Burton has also extended his contract with RCR?
So, who wins?
A businesses rights and obligations under a contract generally extend to any business that acquires the first business. But, AT&T is trying to do something here that Cingular’s contract did not allow: put a non-Cingular logo on the race car. AT&T is not the same as Cingular – it is a much bigger company with many more customers. Allowing it to get into the Nextel Cup series by buying a grandfathered smaller company defeats much of the purpose of Nextel in sponsoring the
series and NASCAR in limiting other communications sponsors to only those already in the circuit.
Though the judge initially sided with AT&T, it would not be a surprise to see his ruling reversed when the appellate court rules. Issuing preliminary injunctions proof of “substantial and irreparable harm” during the litigation if the injunction isn’t issued. It is hard to see how AT&T meets that standard.
AT&T’s own argument may be its undoing: if having its logo on one race car is so important, isn’t the importance to Nextel/Spring of excluding AT&T, a bigger competitor than Cingular, at least – if not more important?