Indeed, since early this year, as most know, tension has been building in the professional golf circuit over the lucrative lure of the Saudi-backed LIV Golf to golfers, including current PGA TOUR members. As described by the PGA TOUR in its opposition filed in response to the players' request for a temporary restraining order (pp. 5-6)
"LIV Golf was founded in 2021 with financial backing from the Public Investment Fund ("PIF"), the sovereign wealth fund of Saudi Arabia, which holds more than $500 billion in assets. Goldberg Decl. Ex. 43. LIV is the most recent example of "sportswashing," a strategy by the Saudi government to use sports in an effort to improve its reputation for human rights abuses and other atrocities. Id. Exs. 44, 57, 61, 81. With access to nearly unlimited funding through the PIF, LIV has been able to compete for elite players quickly and successfully and operate without consideration of profitability. Id. Exs. 65, 80. To date, PIF has committed at least $2 billion of funding to LIV, which LIV is using to pay eight- and nine-figure advances to some TOUR members, provide free tournament tickets to spectators, and fully fund all of its operational costs, including hundreds of millions of dollars in tournament purses. Id. Exs. 48, 65, 82. There is no discernible plan for how the PIF will recoup its $2 billion investment in LIV. Id. During its short existence, LIV has established itself as a competing golf tour, having already successfully recruited more than twenty PGA TOUR members, including TRO Plaintiffs. Id. Ex. 85. Far from struggling to recruit golfers, LIV's CEO stated in a televised interview with Tucker Carlson just two days before Plaintiffs filed this lawsuit that LIV is oversubscribed for golfers and that "the list gets longer, longer, longer for the players that want to" join LIV. Id. Ex. 84. It has also been reported that players joining LIV have received tens-of-millions of dollars, and in some cases hundreds-of-millions of dollars, in guaranteed payments to play for LIV. Id. Exs. 80, 83. Plaintiff Phil Mickelson reportedly received $200 million to join LIV, and other prominent TOUR members such as Plaintiff Bryson DeChambeau and Dustin Johnson have reportedly received more than $100 million each. Id. Ex. 80….
LIV's inaugural season includes eight events, five of which are in North America. Khosla Decl. ¶ 16. By its second season in 2023, LIV has announced plans to expand to fourteen events, including ten in North America, with prize money totaling $405 million."
The tension between the PGA TOUR and LIV Golf came to a head this summer, when the PGA TOUR announced that it was suspending members who had joined LIV Golf and competed in its first tournament. Those players who were suspended and the other players that simply resigned to join LIV Golf are no longer permitted to play in future PGA TOUR events. The basis for the suspensions are provisions in the PGA TOUR handbook and regulations which prohibit PGA members from playing in competing tournaments without obtaining a release from the PGA TOUR, and the handbook/regulations are clear that no conflicting events releases will be approved for tournaments in North America. Some of golf's biggest names have joined LIV Golf, most notably Phil Mickleson, Sergio Garcia, Dustin Johnson, Bryson DeChambeau, and Brooks Koepka, to name a few. Even some golfers that were elected to be on the 2022 PGA TOUR Player Advisory Council have joined LIV Golf, such as Koepka, Graeme McDowell and Paul Casey. Most recently, the winner of The Open Championship (in Scotland), Cameron Smith, just a few days after competing in the PGA TOUR Championship, announced that he had joined LIV Golf after being offered millions of dollars just to join. Indeed, it is no secret that LIV Golf (with money from the Saudi government) has upfronted payments in the hundreds of millions of dollars to players to induce them to join LIV Golf. Understandably, other golfers such as Rory McIlroy and Tiger Woods, have been staunch and vocal opponents of LIV Golf, recognizing that (to no one's surprise), LIV Golf is not about talent but about money – indeed everyone is guaranteed $120,000 just for playing a tournament (there are no cuts) and the winner gets $4 million. This tension in the golf world has resulted in the Department of Justice apparently taking a look at the PGA TOUR and investigating whether it is violating antitrust laws. In addition, two lawsuits have been filed arguing that the PGA TOUR's actions are antitrust violations.
As mentioned above, certain golfers filed suit in the Northern District of California and sought to obtain a mandatory temporary restraining order that would have required the PGA TOUR to allow these players to play in the FedExCup Playoffs. These players argued that they were entitled to play because the PGA TOUR allegedly breached its regulations by not staying their suspensions and because the PGA TOUR actions were allegedly antitrust violations. In a well-written opinion, the Judge denied the motion, pointing out fundamental flaws in the arguments made by the golfers.
In order to obtain a temporary (or preliminary) restraining order, the players had to show, among other things irreparable harm and a likelihood of success on the merits of their claims. The trial court correctly recognized that the golfers could not show irreparable harm. The players argued that they would suffer irreparable harm if not allowed to participate in the FedExCup playoffs because that is golf's "Super Bowl" and they would lose the opportunity to qualify for the 2023 Majors and other tournaments, lose money, and lose reputation and goodwill. In response, the PGA TOUR argued that the players' "asserted irreparable harm boils down to either easily calculable monetary injury or speculative reputational harm—neither of which is sufficient…. As evidence that the cost of [the players'] lost opportunities are calculable, PGA TOUR points out that the players'] expert opines that golfers have calculated those costs in determining the size of upfront payments necessary to woo them to LIV Golf." (Opinion, p. 8). The court said:
"As to whether TRO Plaintiffs [the players] have adequately shown irreparable harm, the Court agrees with PGA TOUR. TRO Plaintiffs are not barred from playing professional golf against the world's top players [5 of the 10 top players in 2021 are now LIV golf players], from earning lucrative prizes in some of golf's highest-profile events, from earning sponsorships, or from building reputation, brand, and fan following in elite golf. The only thing TRO Plaintiffs are barred from is pursing these goals at PGA TOUR events. Considering the major playing and earning opportunities still open to TRO Plaintiffs as LIV Golf players, the Court finds that the suspension from PGA TOUR events is not enough to show irreparable harm.
***
The Court accepts that the FedExCup Playoffs are a major tournament of the year, and that they serve as a gateway to the Majors, future sponsorships, and career status. Further, the Court acknowledges that TRO Plaintiffs each had a reasonable opportunity to make it into the top 30 or top 75 golfers in the 2022 FedExCup Playoffs. Nonetheless, the Court finds that these facts are not sufficient to show irreparable harm. TRO Plaintiffs each knew, going into negotiations with LIV Golf, that they were virtually certain to be cut off from TOUR play. TRO Plaintiffs' own expert indicated that PGA TOUR members that have 'already elected to participate in LIV Golf events' required 'large upfront payments' at least in part because their calculus included the 'loss of opportunities to earn ranking points [and] to earn entry into the Majors.' Based on this evidence, TRO Plaintiff have not even shown that they have been harmed—let alone irreparably. It is clear that the LIV Golf contracts negotiated by the TRO Plaintiffs and consummated between the parties were based on the player's calculation of what they would be leaving behind and the amount of money they would need to compensate for those losses. TRO Plaintiffs have signed contracts that richly reward them for their talent and compensate for lost opportunity through TOUR play. In fact, the evidence shows almost without a doubt that they will be earning significantly more money with LIV Golf than they could reasonably have expected to make through TOUR play over the same time period.
Further, TRO Plaintiffs' contention that they will irreparably lose future sponsorship opportunities and career status is undermined by TRO Plaintiffs' evidence that LIV Golf offers a refreshing new 'extremely fan-friendly' business model that will lead to 'an improved broadcast output and entertainment experience' compared to the staid old golf world built by PGA TOUR. If LIV Golf is elite golf's future, what do TRO Plaintiffs care about the dust-collecting trophies of a bygone era?" (Opinion, pp. 9-10) (emphasis added) (internal citations omitted).
The court further explained, in finding no irreparable harm, that these players were not entirely locked out from playing their sport given their continued involvement with LIV Golf, and "to the extent that the case law supports irreparable harm based on a professional sports player's lost opportunity to become a 'superstar', the Court finds that there is evidence to suggest that superstar status is still available—potentially even more available—to TRO Plaintiffs in LIV Golf's 'extremely fan-friendly' league." (Opinion, p. 11)
Given the Court's decision on lack of irreparable harm, which by itself was enough to warrant a denial of the temporary restraining order, the Court nevertheless provided a "brief summary of its impressions of the merits of TRO Plaintiffs' claims at this stage." (Opinion, p. 12). As for the golfer's alleged breach of contract claim, the Court found it unlikely the claim would succeed. The players claimed that PGA TOUR violated the regulations when it did not stay the players' suspensions pending appeal. The PGA TOUR argued that the stay-of-appeal rights does not pertain to an immediate suspensions, "only for minor, intermediate, and major penalties." "The Court agree[d] with PGA TOUR as to TRO Plaintiffs' breach of contract claim. Giving proper deference to the PGA TOUR's interpretation and application of its disciplinary rules, the Court f[ound] that PGA TOUR's interpretation of the Commissioner's authority under Article VII, Section C of the PGA TOUR Regulations [wa]s not unreasonable." (Opinion, p. 13).
As for the antitrust violation claims, the Court stated that while "TRO Plaintiffs raise significant antitrust issues that are facially appealing," "PGA TOUR has responded with preliminary evidence and argument potentially exposing fundamental flaws in Plaintiffs' claims." (Opinion, p. 14). With respect to the players' claims that PGA TOUR engaged in a group boycott that is "per se" illegal under the Sherman Act, "PGA TOUR accurately points out that group boycotts are only considered to be a per se violation when they involve horizontal competitors—which TRO Plaintiffs' own expert opines PGA TOUR and the European Tour are not." (Opinion, p. 13). "While a group boycott may still be considered a violation of the Sherman Act under the rule of reason, TRO Plaintiffs' rule of reason analysis is limited to a single footnote and not alleged in the [original, not amended] Complaint." As for the claim that PGA TOUR engaged in an unlawful monopoly, "PGA TOUR argues that TRO Plaintiffs' evidence of LIV Golf's early success in entering the elite professional golf market undermines TRO Plaintiffs' contention that PGA TOUR has the power to exclude competitors from the market." (Opinion, p. 14). Indeed, as the PGA TOUR pointed out to the court (Opposition, p. 18): "In just its first year, LIV has established a tour that competes directly with the PGA TOUR, has more financial resources than the TOUR, and offers more guaranteed money to players than the TOUR. Plaintiffs' own economist states that LIV is on track to go from 0% of the market in 2021 to 20% of the market in 2023, while filling its fields with a greater percentage of elite golfers on average (24%) than the TOUR averages (16%)."
After the Court denied the plaintiff golfers' bid for a restraining order, an Amended Complaint in this action was filed on August 26, 2022, in which LIV Golf Inc. joined as a plaintiff. See, Mickelson v. PGA Tour, Inc., Northern District of California Case No. 5:22-cv-04486-BLF. The amended complaint has alleged the following claims against the PGA TOUR:
Antitrust Claims: Count 1 – unlawful monopsonization of the market for ELITE GOLF EVENT SERVICES in violation of Sherman Act section 2 (U.S.C. section 2); Count 2 – Unlawful Monopolization of the market for the PROMOTION OF ELITE PROFESSIONAL GOLF EVENTS in violation of Sherman Act section 2 (U.S.C. section 2); Count 3 – Unlawful attempted Monopolization in violation of Sherman Act section 2 (U.S.C. section 2); Count 4 – Unlawful Restrain of Trade in violation of the Sherman Act section 1 (U.S.C. section 1) [Group Boycott]; Count 5 – Unlawful Agreement to Restrain Trade in Violation of the Cartwright act (Cal. Bus. & Prof. Code sections 16720(a), 16726) [Group Boycott].
The alleged antitrust violation claims are based on allegations that (see, e.g. Amended Complaint, ¶ 322)
"The PGA Tour's exclusionary conduct has unreasonably constrained competition in the market for the promotion of elite professional golf events, including by:
The Amended Complaint further alleges that (¶¶ 331-332):
"the Tour's conduct carries a dangerous probability of destroying the competitive viability of LIV Golf. The Tour's anticompetitive conduct forced LIV Golf to change its commercial strategy for 2022. LIV Golf was forced to announce a substantially scaled-down version of its League concept by offering 8 invitationals in 2022 (the LIV Golf Invitational Series). The Tour then attacked LIV Golf's Invitational Series events. Furthermore, because of the Tour's anticompetitive conduct, LIV Golf has been unable to broadcast its events in the United States— an encumbrance that threatens its long-term viability.
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Furthermore, the Tour's conduct has denied and will continue to deny LIV Golf access to many top players. The Tour's Regulations and unilateral and conspiratorial threats of punishment have scared off the large majority of elite players as well as the pipeline of future elite players. And for those players whom LIV Golf has been able to sign, it has had to offer supracompetitive compensation well above the levels that would prevail in a market not polluted by the Tour's anticompetitive conduct. This has forced LIV Golf into an unsustainable business model. If the Tour's anticompetitive conduct is not enjoined, LIV Golf will be unable to sustain a competitively viable tour."
LIV Golf further alleges that (¶ 178):
"LIV Golf was forced to commit to substantial up-front payments to a number of top golfers to convince the players to take on the risk of punishment from the Tour, as well as the risk of lost sponsorships and other injuries orchestrated by the Tour. These substantial payments have greatly increased LIV Golf's costs of launching its Invitational Series, and, if the Tour's conduct is not enjoined, the ongoing cash outlays significantly threaten the long-term viability of LIV Golf. Notably, however, while the increased payments have harmed LIV Golf, they also have not fully compensated the Player Plaintiffs for all of the injuries they have suffered as a result of the Tour's anticompetitive conduct, including both uncompensated monetary injury and ongoing irreparable injury in the form of lost professional playing and other opportunities that cannot be compensated through monetary relief. As such, both the Player Plaintiffs and LIV Golf have been injured and continue to suffer irreparable injury as a result of the Tour's anticompetitive conduct."
The Amended Complaint also alleges (¶ 301):
"The Tour's conduct has harmed consumers, giving them less choice, less output, and less innovation. Fans are unable to watch Player Plaintiffs in Tour events. Fans are unable to watch LIV Golf on television or other streaming services. Fans suffer from reduced output of elite professional golf events and suffer from getting fewer opportunities to watch Player Plaintiffs, Dustin Johnson, Brooks Koepka and many others whom the Tour has excommunicated from its events."
Contract-Based Claims: Count 6 – Breach of Contract – which based on allegations that the PGA TOUR breached its regulations when it did not lift the suspensions pending the players' appeals.
Tort-Based Claims: Count 7 – Tortious Interference with LIV Golf's Contractual Relationships; and Count 8—Tortious Interference with LIV Golf's Prospective Business. These claims are based on the following allegations
"LIV Golf has entered into contractual relationships with professional golfers and other third parties, such as vendors, sponsors, and broadcasters. The PGA Tour knew that LIV Golf had entered into contractual relationships with professional golfers and other third parties. The PGA Tour's unlawful actions detailed herein were intended to prevent professional golfers and other third parties from performing their contracts with LIV Golf. The professional golfers and other third parties have been unable to perform under their contracts with LIV Golf as a result of the PGA Tour's actions described herein." (¶¶ 372-375)
and
"LIV Golf has been on the verge of entering business relationships with professional golfers and other third parties, such as vendors, sponsors, and broadcasters. The PGA Tour knew that LIV Golf was contacting players and other third parties about entering into a business relationship. The PGA Tour's actions detailed herein were independently tortious as detailed herein and were intended to prevent professional golfers and other third parties from entering into a business relationship with LIV Golf. Several professional golfers and other third parties have not entered into such business relationships with LIV Golf to-date as a result of the PGA's Tours anticompetitive actions and restrictions." (¶¶ 381-384)
For now, Mickelson (and others) and LIV Golf's lawsuit against PGA TOUR remains pending. The PGA TOUR's answer to the amended complaint is due on September 23, 2022, and the Court has set a jury trial to begin on January 8, 2024. Note: Due to the high level of interest in this case, the Northern District Court of California has set up a webpage where people can visit to see the status and access documents.
In addition to the lawsuit filed by the golfers in federal court in California, a private citizen – really, the head of Freedom Watch, a frequent pro se plaintiff who has be accused of filing frivolous lawsuits, current legal counsel to golfer Patrick Reed, and apparent flip-flopper when it comes to LIV Golf, Larry Klayman –filed a class action antitrust action in Florida state court in early July, 2022 (before the lawsuit filed in California), against the PGA TOUR, the DP World Tour and those tours' respective commissioners, alleging violations of the Florida antitrust laws. Klayman describes himself in the complaint as a "consumer of Defendant PGA TOUR's product" and alleges that he "has purchased spectator admission to three PGA Tour organized and sanctioned events hosted outside of Florida, and is committed to also purchasing spectator admission to PGA TOUR organized and sanctioned events which will be hosted in Florida" including The Players Championship, The TPC Sawgrass and The Honda Classic. (Complaint, ¶ 4). He alleges that the PGA TOUR sanctions substantially more than 90 percent of the professional golf tournaments in the United States and "thereby has monopoly power." (Complaint, ¶ 26). And "the PGA TOUR thereby has the power to maintain and increase, if not inflate, the price of spectator admission at professional golf tournaments in the United States free of competition from other golf tournament organizing and sanctioning organizations." (Complaint, ¶ 50). Finally, for all of his claims, with respect to injury and standing to assert his claims, Klayman, unlike the golfers whose claimed injury was loss of income, status, and opportunity to compete in PGA TOUR events, claims that: "Defendants concerted refusal to deal, horizontal market division, monopolization, and attempt to monopolize described [above]… have caused Plaintiff KLAYMAN and the proposed plaintiff class to suffer antitrust injury, that is, injury of the type the Florida antitrust laws are intended to prevent, by maintaining supracompetitive prices for spectator admission to PGA TOUR organized and sanctioned golf tournaments in the United States." (Complaint, ¶ 69) (emphasis added).
In addition to his complaint, Klayman also sent out discovery requests including 138 requests for production of documents, and notices of serving subpoenas on non-parties Tiger Woods and Rory McIlroy for their depositions regarding the matter.
In response, the PGA TOUR has already filed a motion to dismiss and a motion for a protective order to stay all discovery pending the resolution of the motion to dismiss. The PGA TOUR's motion to dismiss argues that Klayman lacks antitrust standing because he not a direct purchaser, that is that he has not alleged that he purchased any tickets from the PGA TOUR directly, and that he fails to allege any facts to support his conclusory assertion that the PGA TOUR's alleged conduct has caused the price of admission to increase to a supracompetitive level. The PGA TOUR also argues that Klayman fails to plead facts supporting his assertion that the PGA TOUR's alleged conduct "caused a lessening of competition in professional golf tournaments in the United States." (Motion to Dismiss, p. 2).
"In fact, that conclusory assertion is contradicted by plaintiff's factual allegations that LIV is actively competing with the TOUR in the United States by recruiting well-known, highly-ranked professional golfers and scheduling golf tournaments. Indeed, the complaint identifies ten such golfers and asserts that '[m]ore are expected to join LIV Golf tour.' Plaintiff concedes that LIV has scheduled several professional golf tournaments in 2022 and more in 2023….LIV's tournament schedule includes eight tournaments in 2022, including five in the United States, with two of those events competing directly on the same weekends with TOUR tournaments for which plaintiff allegedly purchased admission tickets. And LIV has increased its schedule for 2023 to twenty-five tournaments, including fourteen team events, many of which will take place in the United States, and eleven 'International Series' events in cooperation with the Asian Tour." (Motion to Dismiss, p. 8).
It remains to be seen what will happen with Klayman's lawsuit or LIV Golf's action against the PGA TOUR. In the end, one must remember that the antitrust laws are there to stop "unfair competition" not "competition." Generally, covenants not to compete and exclusive dealing arrangements are not per se illegal. And the antitrust laws do not require one competitor to aid another. As one court succinctly summed it up: "[c]ompetition is a ruthless process... and the antitrust laws are not balm for rivals' wounds." Tennessean Truckstop, Inc. v. NTS, Inc., 875 F.2d 86, 90 (6th Cir. 1989) (citation omitted).