FOTA was formed in 2008 when times were quite difficult in Formula 1 as the worldwide economic downturn triggered Honda's exit, BMW and Toyota were to follow soon.
The group later agreed their own 'Resource Restriction Agreement', limiting costs on their own terms. Although the agreement never made it in F1 rules, aspects of it are now, for example the limits on testing.
Cracks eventually developed in FOTA's façade. Crucially, disagreements over the Resource Restriction Agreement led to the withdrawal of Scuderia Ferrari and Red Bull Racing in late 2011, with Sauber and Toro Rosso following suit.
FOTA continued anyway, but with much weaker power. It is believed that the recent shake-up at McLaren finally put an end to FOTA.