Several weeks back Sportico media reporter Anthony Crupi wrote a column arguing there is little reason for golf fans to work themselves up over the emergence of LIV Golf, and to instead “pay more attention to the things we pay attention to.” Despite all the debate surrounding the challenger golf series, few people are actually tuning in.
But one facet of the LIV Golf story could have implications far beyond millionaire golfers: the class action lawsuit filed by some LIV golfers and LIV Golf against the PGA Tour. It alleges the PGA Tour has illegally banned players who signed contracts with LIV and has colluded with other golf institutions, including the DP World Tour (aka the European Tour) and the four majors, sponsors and partners to form an illegal boycott of LIV golfers. The PGA Tour has not yet filed a legal response to the complaint, but is expected to vigorously contest the LIV claims. The tour has already convinced a federal judge to reject arguments for what would have been a restraining order allowing some of the golfers to play.
“If the PGA wins, it’ll [set] a precedent that lets McDonald’s and Burger King hold down fry-guy wages,” economist Andy Schwarz (partner, OSKR) said. “Working men and women should care very much if [the unlawful restraint of trade] principle is eroded, because if the law changes in a case about rich golfers, the precedent will stand also for poor guys.”
Jeffrey Kessler (partner, Winston & Strawn) was not in a position to comment on the specific case. But he agreed “antitrust laws protect the labor markets for workers at every income level so that if employers are given greater leeway to suppress competition for high paid workers, that precedent would hurt lower wage workers as well.”
Four golfers, including Phil Mickelson, voluntarily dismissed their claims against the PGA Tour yesterday. Their participation, or lack thereof, in the class action suit does not change the merits of the plaintiffs’ antitrust argument, according to Schwarz, who is not an attorney.
JWS’ Take: The PGA has long maintained it is a membership organization and that its members, which are independent contractors, agree to abide by the tour’s bylaws and acknowledge the commissioner’s right to administer discipline for violations, including suspensions and bans.
But Schwarz said the tour exerts a level of control that makes that designation “somewhat suspect.” Tour players are supposed to be able to play in tournaments that are not in conflict with PGA stops, and yet the PGA is threatening lifetime bans on those participating in LIV events.
The collusion allegation is separate. If you abstract away from the participants involved and focus solely on the facts at hand, “this is the same issue the [dollar-a-day] Okies faced in the Dust Bowl era,” Schwarz said. LIV is alleging that one firm with market power (the PGA Tour) is telling other firms (like the organizations that put on the majors, which are not controlled by the tour) that they cannot work with certain people (the LIV golfers).
Employer cartels are illegal because they dissuade new firms—who could raise employee wages and compete against the establishment—from entering the market. They can also be effective in driving challenger brands out. “That’s bad for the economy. It’s bad for consumers. It’s bad for labor suppliers. It’s a net decrease,” Schwarz said.
At this point, these are just allegations. None of the majors has even announced decisions on whether LIV players can participate in their events.
And LIV, with its vast financial resources, does not fit the profile of your typical challenger brand. The upstart golf series is backed by Saudi Arabia’s Public Investment Fund.
It also seems likely that many potential sponsors and partners have chosen to maintain their distance from LIV because of the negative cultural implications to affiliating with the Saudi-backed tour.
Still, if LIV produces evidence of collusion at trial, it would be damning to the tour’s case. “The law is not supposed to be different if you make $20/hour or $2 million for winning a golf tournament, with respect to your right to be able to [seek] work without potential employers engaging in group boycotts, etc.,” Schwarz said.
It should be noted U.S. District Judge Beth Labson Freeman quickly struck down a request for a temporary restraining order that would have allowed the plaintiffs to participate in Tour’s FedEx Cup Playoffs. With the players making so much money in the Saudi-backed golf series, she did not agree they were facing irreparable harm.
Schwarz believes the ruling is incorrect based on antitrust law, but he acknowledged it “does not bode well for LIV’s arguments.”
It is worth noting that while PGA Tour wages are currently rising, that is at least in part a byproduct of its efforts to suppress LIV’s entry into the market. Remember, the only time pro football players ever received meaningful raises in salary prior to free agency was when rival leagues, the AFL, WFL and USFL, took runs at the NFL’s dominance. Once those threats died down, salaries plateaued.
The LIV golfers argue the collective boycott is designed to limit participation in the LIV Golf Series and ultimately force the challenger brand to fold, which leaves them with fewer professional options.
Unfortunately for the plaintiffs, the trial isn’t scheduled to take place until January of 2024. In the meantime, there’s a chance they’ll be sidelined from some of the sport’s biggest events.
It is possible by the time the case is scheduled to be adjudicated the PGA Tour and its partners will have changed their stance and allow LIV golfers to participate. They may have no choice if LIV can continue to add high-profile tour players. Just a few weeks ago, the world’s No. 2 player, Cameron Smith, joined the upstart golf series along with six other players.