Authors: Luke Hasskamp and Molly Donovan
We often write about sports and antitrust and have previously written about professional golf, and, specifically, the legal implications of a competitor golf league trying to break onto the scene:
The new league, LIV Golf, seeks to compete with the PGA Tour, as well as the European tour (known as the DP World Tour). Indeed, LIV Golf held its first event this past weekend in London, which included 48 participants. Of those, 17 players were members of the PGA Tour. Charl Schwartzel emerged as the winner of the “richest tournament in golf history,” taking home $4.75 million in prize money, which was more than he won during the last four years combined.
In response, the PGA Tour handed down harsh discipline to those 17 players who joined LIV Golf, suspending them indefinitely. The PGA Tour also promised to suspend any other players that participate in future LIV Golf events. It’s a dramatic step, and surely not the last word on the matter.
Now, let’s say you’re one of those 17 players who has been suspended, or you’re a member of the PGA Tour considering playing for LIV Golf but you’re facing such a ban. There are many things to consider, of course. But let’s focus on your legal options. Would the PGA Tour’s ban of a player that chooses to participate in a competitor’s event be lawful? Do the federal antitrust laws in the United States provide you any remedies? Potentially. Let’s take a closer look.
Section 2 of the Sherman Act – Monopolization
Federal antitrust laws make it illegal for a monopolist to preserve its dominant market position through anticompetitive conduct. Here, the PGA Tour sure looks like a monopoly. It’s the dominant actor in the professional golf market in the United States, with revenues well exceeding $1 billion per year. If you are an elite professional golfer in the United States, it’s pretty much the only place to play. (Actually, the PGA Tour, in this context, looks more like a monopsony, as it’s the dominant purchaser of labor in the professional golf market.)
But being a monopoly is not illegal by itself. Instead, there must be some anticompetitive or exclusionary conduct that harms competition in the market.
Typical examples of procompetitive conduct include lowering prices, improving quality, enhancing services, or, in the labor market, raising wages and improving benefits. Antitrust laws like these types of behavior because they enhance competition and are good for consumers. A monopoly that holds onto its dominant market position by offering the lowest prices and the best product is generally a good thing and something antitrust laws seek to encourage. Similarly, a monopsony employer that attracts and retains the best employees by paying the highest wages, offering the best benefits, and otherwise creating the most attractive work environment is the type of outcome that is perfectly acceptable from an antitrust perspective.
Anticompetitive conduct can be harder to define, but can include things like threatening customers or employees, an exclusionary boycott, bundling, tying, exclusive dealing, disparagement, sham litigation, tortious misconduct, and fraud. We’re looking for improper attempts by a monopolist to box out a competitor.
When we look at the current PGA Tour dispute and its decision to suspend players who play for LIV Golf, it seems at least arguable that the PGA Tour’s conduct is anticompetitive. They are not attempting to retain the best golfers by raising compensation, creating more opportunities, or otherwise enhancing the work environment for its players. Instead, the PGA Tour is punishing players who choose to participate in a rival’s events. The conduct appears designed to stifle a would-be competitor.
Section 1 of the Sherman Act – Agreements
Federal antitrust laws also analyze agreements by two or more parties that restrain trade in the market. And agreements between horizontal competitors are closely scrutinized under the per se standard.
Consider professional baseball’s long and storied antitrust history. Those antitrust disputes started (more than 100 years ago) because teams had collectively agreed not to sign each other’s players. Back then, baseball contracts included a “reserve clause,” which reserved a team’s right to a player in perpetuity. Thus, once a player signed with that team, he was only able to re-sign in following years with that same team (unless the team released him). All teams agreed to honor each other’s reserve clauses by agreeing to not sign another team’s players, even if his contract had expired. The reserve clause intentionally suppressed competition by, in essence, preventing free agency. It suppressed players’ salaries. With only one team competing for a player’s services, rather than a full league, teams avoided bidding wars and players had little recourse but to accept the amount offered by their team.
Here, we’d ask whether the PGA Tour has entered into any agreements (formal or otherwise) with another party that restrain trade in the market for professional golf services. There is at least some indicia of such agreements. The European tour (the DP World Tour) has hinted that it may follow the PGA Tour’s approach to dealing with members would participate in LIV Golf. This may stem from the PGA Tour’s “strategic alliance” with the DP World Tour. This sure looks like it could be a horizontal agreement between competitors. Other entities may also be considering similar agreements with the PGA Tour, including the PGA of America, which runs the PGA Championship, one of golf’s four majors, as well as the Ryder Cup, a wildly popular team competition between players from the United States and Europe. The PGA of America, a separate entity from the PGA Tour, has suggested that it is likely to not permit LIV Golf players to participate in the PGA Championship or Ryder Cup.
Of course, sometimes competitors will follow each other’s policies, prices, or practices without an agreement of any sort. That is called conscious parallelism and is not an agreement in restraint of trade because there is no agreement. We don’t know whether there is an agreement here or the European Tour is merely following the PGA Tour in a round of conscious parallelism.
A plaintiff prevailing on an antitrust claim has a right to treble damages, which is three times their actual damages, as well as attorney fees.
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