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The tiff between the Professional Golf Association and the upstart LIV Tour grew more intriguing this week, with the news that the Justice Department’s investigation of potential antitrust violations has widened to include the groups that conduct the Masters and the US Open, two of the four major golf tournaments. And you don’t have to be a serious golfer — I’m certainly not! — to wonder where all of this going.
The disagreement began when LIV, which is backed by Saudi Arabia’s sovereign wealth fund, persuaded a number of top golfers, including Dustin Johnson and Phil Mickelson, to sign lucrative contracts to play in its new tournament series. A large segment of the public responded with fury, due largely to the country’s human rights record. After a bit of back and forth, the PGA suspended the players who had signed with LIV, the players responded with antitrust lawsuits, and the federal government began looking into the whole thing.
It’s not the first time that pro golf has been accused of anti-competitive practices. Back in 1938, for example, the Federal Trade Commission issued a cease-and-desist order against both PGA and the Golf Ball Manufacturers’ Association, after finding that the groups had conspired to fix the price of golf balls. And in 1991, a California federal court ruled against the PGA in an antitrust suit challenging new rules about which types of clubs players were allowed to use.
Other cases have seen the PGA prevail. Often, the ruling rests on the finding that excluded golfers were still able to compete (and earn) elsewhere — an argument the PGA is making today. Another ground for dismissing antitrust suits has been that the challenged regulations have the effect of increasing the value of professional golf to the advertisers who support it, and so providing more of it for fans. This vision is reflected, for example, in a 2002 opinion by a California federal judge who, in the course of dismissing most of an antitrust suit attacking the PGA’s Senior Tour, had this to say: “The eligibility rules provide a product that would not otherwise exist and, therefore, they further consumer welfare.”(1)
Finally, there’s the most direct precedent, the fight that erupted in the 1990s over the proposed World Golf Tour, which like LIV planned to compete with the PGA. Then, too, a federal agency began looking into rules that prevented golfers from playing both circuits — on that occasion, the inquiry came from the FTC. Although staff lawyers backed a formal investigation, the commission voted unanimously not to proceed. Lately, the PGA Tour has been trumpeting that result. A Tour representative recently told CNBC: “We went through this in 1994 and we are confident in a similar outcome.”
But to cite this distasteful precedent is hardly public relations at its finest, because the termination of the probe was a triumph mainly for political influence. The investigation was killed by pressure from Congress. A 1995 story in the Los Angeles Times quoted Timothy Finchem, then head of the PGA, on his tactics:
“We went to the Hill and we had a number of meetings where we presented our case … We encouraged a number of congressmen to write letters, and some of them did.”
Though many of the critics of the investigation were Republicans, a key role was played by Senator Ernest Hollings, a Democrat from South Carolina, who sharply criticized the FTC for “fiddle-faddling around” in an effort “to mess up this sport.” After the FTC abandoned the inquiry, Hollings became a champion of fully funding the agency’s budget request, which the G.O.P. had been threatening to cut.
Which brings us back to the current antitrust fight.
Suppose the PGA again prevails. The defectors will then face a dilemma. Even if originally tempted by LIV’s huge financial guarantees, some must surely have imagined they’d still be able to play in the PGA. If they can’t, many might re-defect.
But if the players decide to stick with LIV, it’s golf fans who could decide what happens next. If the audience for PGA telecasts falls — as a result of fewer familiar names — the tour will feel pressure from advertisers to allow the LIV golfers to play once again.
In other words, even should the PGA prevail in court, its actions will be dictated in the long run by the response of fans and pressure from advertisers.
Now suppose instead that the litigation comes out the other way, and the courts find that the ban does indeed violate antitrust law. In that event, both PGA and LIV would likely abandon efforts to keep players from entering each other’s tournaments. (Other, smaller tours outside the US might also benefit.) Where pro golfers play and when would become a matter of individual choice.
And as to whether to punish top players for taking Saudi money — well, that will also be up to the fans. Should the small but prosperous audience that watches televised golf turn out not to care, both tours will thrive and the money will roll in. But should enough the fans get angry enough to skip telecasts featuring players who moonlight for the Saudi-backed tour, advertisers will complain, revenues will fall, and the players themselves will pull out of the LIV tour.
Which will happen? Your guess is likely better than mine. But do notice one thing. No matter what the outcome, in the end the fans will decide. For those of us who believe in markets, that’s not a bad result.
More From Bloomberg Opinion:
• Saudi-Backed LIV Golf Is Nothing to Be Upset About: Tyler Cowen
• Millennials Are Saving Golf by Rebranding It: Ben Schott
• What the New ‘Saudi First’ Policy Means for Oil and Power: Javier Blas
(1) In 1973, the golfer Jane Blaylock successfully sued the Ladies Professional Golf Association on antitrust grounds after she was suspended for one year for alleged improper conduct … by a committee consisting entirely of her competitors.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Stephen L. Carter is a Bloomberg Opinion columnist. A professor of law at Yale University, he is author, most recently, of “Invisible: The Story of the Black Woman Lawyer Who Took Down America’s Most Powerful Mobster.”
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