AT&T out of Nascar
Jeff Burton needs a new sponsor for the number 31 Richard Childress Racing Chevrolet, the one that had been sponsored by Cingular. NASCAR and AT&T cut a deal Friday to end their litigation over whether AT&T would be permitted to display its logos on Burton’s car. Perhaps expecting that it ultimately would lose, AT7T agreed to leave the NASCAR Cup series at the end of this season. NASCAR agreed that AT&T would be allowed to display its logos for the remainder of this season.
The controversy was created by AT&T’s purchase of Cingular, which was the sponsor of the number 31 RCR car, and had been prior to the agreement of Nextel to sponsor the Cup series. NASCAR does not allow teams to be sponsored by competitors to the series sponsor. Thus, when Winston was the sponsor, other cigarette companies were not allowed to sponsor teams.
When Nextel replaced Winston as the series sponsor, there were already teams who were sponsored by other wireless companies, including Cingular and Alltel (which sponsors the number 12 Penske Dodge driven by Ryan Newman). The agreement with Nextel stipulated that wireless companies already sponsoring a Cup team could continue to sponsor that team, but that other wireless companies would not be permitted to sponsor cars in the series.
After buying Cingular, AT&T claimed it was entitled, as the successor company to Cingular, to display its company logos on the number 31 Chevrolet. NASCAR took the position that AT&T was a new company and, consequently, barred from being a team sponsor. It initially refused to allow AT&T to display its logos, but AT&T sued and got a federal district court to issue an injunction allowing it to do so. NASCAR appealed, but was not given an immediate hearing by the appeals court. The settlement comes on the eve of the hearing by the appeals court of NASCAR’s case.
The settlement is a defeat for AT&T and a win for both NASCAR and Sprint. Though AT&T gets to run its logos for the balance of the year, the agreement to permit it to do so is more likely an effort by NASCAR to give RCR breathing room than it is a compromise with AT&T. Observers believed that the district court had committed legal error when it issued the temporary injunction and expected the Court of Appeals to vacate it, a sure sign that AT&T would lose its lawsuit. Richard Childress had publicly stated earlier this week that AT&T would not continue sponsoring the 31 car during the rest of the season if it were not permitted to display the AT&T logo, and this would have left the team sponsorless for the balance of the year.
AT&T should have known better and really tried to pull a fast one. A vastly larger company than Cingular had been, AT&T could not have become a Cup series sponsor on its own. By buying a much smaller company and then claiming it was entitled to exercise all of the rights of that smaller company, AT&T tried to make an end-run around NASCAR’s rules. If it had worked for AT&T, it could have worked for anyone, allowing any company to skirt the NASCAR rule by buying a smaller company, not necessarily even in a related industry, that is a current sponsor.
The loser in all of this is Richard Childress Racing, who now has to find a new sponsor. It likely will have no difficulty in doing so, but it shouldn’t have to. AT&T should be obliged to pick up the Cingular sponsorship tab, whether or not it gets its logos on the number 31 car. Childress was not responsible for the Cingular/AT&T merger, and is entitled to be paid. AT&T should have known when it made the merger deal that it could not be a series sponsor, even though legally it would be obligated to meet the terms of contracts into which Cingular had entered. That’s not unfair to AT&T. It had the option of not making the merger deal if it didn’t like that situation.
Jeff Burton is currently seventh in the Cup points standings and is locked-in to the Chase for the Championship. Nextel, in the meantime, has been acquired by Sprint, who will be retiring the Nextel name and assuming series sponsorship next year. They’re probably hoping Burton doesn’t win the championship.