Suspended PGA Tour members file antitrust complaint against PGA Tour

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On August 3, 2022, eleven suspended PGA Tour members filed complaints 1 in the United States District Court for the Northern District of California (the “Court”) against PGA Tour, Inc. (the “Tour”), alleging violation of federal and state of California antitrust laws and Other Suspension-Related Claims. Plaintiffs have been suspended from Tour membership due to their signing with the LIV Golf Invitational Series (“LIV Golf”), which is currently in its inaugural season. These players are Phil Mickelson, Talor Gooch, Hudson Swafford, Matt Jones, Bryson DeChambeau, Abraham Ancer, Carlos Ortiz[1]Ian Poulter, Pat Perez, Jason Kokrak and Peter Uihlein (the “Claimants”).

The complaint, filed under Mickelson vs. PGA Tour Inc., comes after months of very public debate between the Tour, LIV Golf, players and fans around the world. At the epicenter of this public debate is LIV Golf’s backer, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund. The Tour argued that LIV Golf is using its financial leverage to sign contracts of tens to hundreds of millions of dollars with top players in order to “clean up the sport” the Saudi government’s reputation for human rights abuses. man, rather than developing the sport and making a profit. Plaintiffs argue, however, that LIV Golf’s format has the potential to be the future of golf and enrich the overall fan experience by offering team and individual competitions, shorter schedules and a tee time. hunting rifle. LIV Golf and Plaintiffs further assert that LIV Golf’s new format represents an innovation in an otherwise static market, noting that each team captain holds a stake in their team, allowing players to pursue new business opportunities.

Public debate aside, the Tour indefinitely suspended seventeen players (including the Plaintiffs) once they teeed off in LIV Golf’s inaugural tournament in June 2022. As a result, each Plaintiff is currently prohibited from participate in any Tour event, the Ryder’s Cup or the President’s Cup. However, earlier this year the claimants were cleared to play in all four major golf championships, which consist of the Masters, PGA Championship, US Open and The Open Championship (often referred to as the British Open). None of the major championships have announced whether LIV Golf players will be allowed to participate in 2023 and beyond.

Professional golf departs from team-based leagues which enjoy certain antitrust exemptions (i.e. NFL, MLB and NHL). Unlike team-based leagues, the Tour is a member-based non-profit organization that works “on behalf and for the benefit of the member players” and is not the governing body of golf. Additionally, players must qualify and elect to become members of the Tour and are considered independent contractors. In this regard, Mickelson vs. PGA Tour Inc. could have a significant impact on the future of professional golf.

Plaintiffs’ Antitrust Claims

Three antitrust complaints have been filed by the plaintiffs, each claiming that the Tour is a monopolistic organizer of “elite” men’s professional golf events in the United States and alleging that the Tour’s recent actions “do not serve to nothing but to thwart competitive entry and preserve the… monopoly power of the Tour”:

Count I of the Complaint alleges that the Tour violated Section 2 of the Sherman Antitrust Act by monopolizing the market for elite golf event services. Count I is based on the plaintiffs’ assertion that the Tour has monopsony power. A monopsony is an entity that has monopolistic purchasing power for a good or service in a particular market; here, plaintiffs allege that the Tour is the sole purchaser of the services of elite golf players and maintains that status through unlawful and anti-competitive conduct. In particular, the Plaintiffs allege that two provisions of the Circuit Rules constitute an unreasonable restriction on trade. The first provision at issue is the Media Rights Regulations, which generally prevent members from participating in live or recorded golf programs not affiliated with the Tour without a waiver from the commissioner. The second provision is the Conflicting Events Policy, which prohibits members from participating in non-Tour affiliated events in the United States during the same week as a scheduled Tour event (regardless of whether the player is participating in the Tour). event) and exempts up to three international events. per season, but only if the player first requests the exemption and the commissioner grants it.2

  • Count II of the Complaint alleges that the Tour violated Section 1 of the Sherman Antitrust Act by arranging and entering into a group boycott with the European Tour and others to collectively bar LIV professional golf players from participating in events. elite golf. In support of this assertion, the plaintiffs cite numerous statements made by Tour and European Tour executives regarding their relationship with each other and their response to the competitive threat posed by LIV, although the European Tour, Augusta National and other potential participants in the Complainants’ alleged collective boycott are not currently parties to this case.

  • Count III of the Complaint effectively parallels Count II of the Complaint, but is subject to the Cartwright Act, California’s primary antitrust law. Courts often analyze claims filed under the Cartwright Act in the same context as a claim under Sherman’s Section 1, and while it is not uncommon for plaintiffs to argue under both Sherman Act and the Cartwright Act, it is not clear at this time whether the plaintiffs plan to argue that the Tour’s liability is broader (or different, in some way) under the Cartwright Act compared to to Chief II.

Plaintiffs’ Non-Antitrust Procedural Claims

Plaintiffs also bring two non-antitrust claims challenging their tour suspensions:

  • Count IV of the Complaint alleges that the Circuit Rules are a contract between the Circuit and its Members, and the Commissioner’s refusal to allow the Complainants to participate in the Circuit competition while their suspension appeals were pending (this which includes participation in the FedEx Cup Playoffs for those Complainants who qualified as one of the top 125 players in the 2021-2022 Tour season) constituted a violation of the posting process provisions of the Tour Rules.

  • Count V of the complaint sought declaratory judgment from the Court and alleged that the Tour’s procedures for imposing the plaintiffs’ suspensions violated their right to due process under California and Florida law because the plaintiffs had no opportunity to be heard and were denied any impartial manufacturer review, among other allegations related to the above allegations.

TRO procedures

Plaintiffs’ claims, combined with the FedEx Cup playoffs, held August 11-14, 2022, formed a significant part of three of Plaintiffs’ motions for a temporary restraining order. 2 (“TRO”) filed with the Northern District on August 3, 2022. The Tour filed its opposition 3 at the TRO Plaintiffs’ motion on August 8, 2022, alleging that the TRO Plaintiffs were “fabricating an emergency”. The Court held a hearing on August 9, 2022 and dismissed the TRO motion on the bench. The Court ruled 4 that the TRO plaintiffs failed to demonstrate irreparable harm because the risk of missing PGA Tour events was calculated into the compensation that the TRO plaintiffs accepted from LIV Golf. She also found that the TRO claimants had failed to demonstrate that the law and facts “clearly favored” the success of the merits of their claims at this stage of the case.

Main observations

Even though the plaintiffs lost the first legal battle, we probably haven’t heard the end of this case. Among other things, the TRO proceedings likely provided a foreshadowing of how the claimants and the Tour intend to move forward. Mickelson vs. PGA Tour Inc.. Given that 30 of the 200 players who played in the 2021-2022 Tour season are believed to have played or committed to play in LIV Golf events as of the date of this alert, this may make settlement more difficult or unlikely. In case of dispute until a final decision, Mickelson against PGA Tour Inc.. could also impact the structure of sports organizations in a similar situation, such as NASCAR, UFC and USTA, regardless of the outcome.3


FOOTNOTES

1 Since August 9, 2022, Carlos Ortiz has withdrawn from the lawsuit.

2 Interestingly, Count I renews the basis of the Federal Trade Commission’s 1994 investigation, which was ultimately abandoned.

3 The United States Department of Justice launched an investigation into the Tour’s handling of the emergence of LIV Golf in July 2022, but no updates have been reported since.

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