On August 3, 2022, 11 professional golfers, led by Phil Mickelson, filed an antitrust complaint in the Northern District of California against the PGA Tour for the actions it took against the golfers – including suspension from PGA Tour events – for their participation in events for the new Saudi-backed LIV Golf Invitational Series (LIV Golf). It is no secret that the new LIV Golf league seeks to compete with the PGA Tour, having publicly offered nine-figure payments to players joining its tournaments.
In addition to the recently filed federal lawsuit, the PGA Tour’s reaction to competition from LIV Golf appears to be under federal investigation. The U.S. Department of Justice (DOJ) is reportedly conducting an antitrust investigation of the PGA Tour into possible anticompetitive conduct relating to efforts to keep PGA Tour players from entering LIV Golf tournaments.
The DOJ’s Antitrust Division is reported to have reached out to players’ agents and sent inquiries about the PGA Tour’s actions in recent months relating to LIV Golf and about PGA Tour bylaws governing players’ participation in other golf events. It is possible that the investigation will reach beyond players and those directly affiliated with the PGA Tour to advertisers, sponsors and other tours to determine whether there have been any antitrust violations.
In a move that it had previewed, in early June, the PGA Tour indefinitely suspended 17 players who teed off at LIV Golf’s inaugural tournament in London. The golfers are considered independent contractors. The antitrust allegations focus on whether that action can be read as a restriction of the players’ ability to freely compete in a competitor’s event and a violation of the antitrust laws.
There is ample precedent in the intersection of sports and antitrust law that may impact an eventual antitrust fight here. First, notably, professional golf does not enjoy a general exemption from the antitrust laws. In fact, in a 1957 case where the National Football League blacklisted players who played for rival leagues, the Supreme Court found that professional football was subject to antitrust laws, and expressly limited the sports exemption to baseball. See Radovich v. NFL, 352 U.S. 445 (1957). The Supreme Court in Radovich found that the affected players had stated a claim under the antitrust laws and, thus, the NFL allowed players to join rival leagues. This case will delve into whether the Radovich precedent will be applicable in the golf context.
In addition, this is not the first government probe into the PGA Tour’s practices. In 1994, the Federal Trade Commission (FTC) investigated two PGA Tour rules: one relating to players’ appearance on television and the other about playing in non-PGA Tour events without the commissioner’s express permission. Notably, the FTC dropped its investigation by 1995.
While the golfers’ suit was just filed and the scope of the DOJ’s current investigation is unknown, the DOJ has broad enforcement powers under the Sherman Antitrust Act. The DOJ could be investigating whether the PGA Tour unilaterally violated Section 2 of the Sherman Act, which makes it illegal for a monopolist to preserve its dominant market position through anticompetitive conduct. Section 2 violations are typically brought as civil cases. However, DOJ Antitrust Division leadership recently sent shockwaves through the antitrust bar and business community when it announced that the Antitrust Division is prepared to bring criminal charges in Section 2 cases. The Antitrust Division has not provided guidance on what type of conduct would constitute a criminal violation of Section 2 of the Sherman Act, but the last criminal indictment brought solely pursuant to Section 2 involved alleged actual physical destruction of a competitor’s assets. In addition, the DOJ would have to prove such criminal monopolization beyond a reasonable doubt to a jury, which it was unable to do in that case.
If, however, the DOJ investigation seeks documents and information from other market participants, such as advertisers, sponsors and other golf tours, it is possible that the DOJ is considering conspiracy claims under Section 2 of the Sherman Act – or under Section 1 of the Sherman Act, which prohibits collusive agreements among two or more parties to restrain trade (violations of Section 1 can be brought civilly or criminally). To the extent any agreements between the PGA Tour and other entities were entered into for the purposes of restraining trade, a high-stakes conspiracy investigation may be in the works.
We will be watching to see how the lawsuit and investigation develop.