Other nominees included the NFL's New England Patriots, the French Davis Cup team and the New Zealand America's Cup team, reports Efe.
The Laureus Academy decided to give the award to Mercedes on Tuesday, which has won the Formula 1 World Constructors Championship four years in a row.
Despite concluding its best season, winning La Liga, the Champions League, the UEFA Super Cup, the Spanish Super Cup and the FIFA Club World Cup, Real Madrid failed once again to win the Laureus Team of the Year award.
The Blancos were nominated previously in 2003, 2015 and 2017.
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