Can the PGA Tour Outdrive Legal Challenges if they Ban Players who Defect to the Super Golf League?

The Emergence of the Super Golf League

World Golf Hall of Fame member Greg Norman is spearheading the most aggressive effort yet to create a golf league to rival the PGA Tour. The Super Golf League (“SGL”) is a Saudi-funded effort that purports to bring together fields of 40-50 of the best golfers in the world for individual and team competitions approximately 18 times per year. Greg Norman, who failed in the 1990s to create a similar “World Golf Tour”, is set to become the Commissioner of the SGL.

The compensation structure is the primary difference between the PGA Tour and the SGL. On the PGA Tour, golfers do not earn appearance fees for playing in an event. If they miss the cut, they do not earn money that week. Conversely, the SGL has reportedly offered golfers contracts and appearance fees north of $2 million just for showing up. In response, the PGA Tour has taken several steps. First, they announced a “strategic alliance” with the European Tour. Next, they created a Player Impact Program (“PIP”), which is a $40 million fund that is paid out to the 10 players who drive the most engagement among fans and sponsors. Finally, the Tour increased individual tournament prize pools and the total FedEx Cup prize pool from $50 million to $75 million.

Despite these initiatives, Phil Mickelson has criticized the PGA Tour for what he believes is their failure to share digital assets with its members. Mickelson has stated that the PGA Tour only pays out 26% of its revenue to members and “would rather throw $25 million here and $40 million there than give back the roughly $20 billion in digital assets they control. . . .” Mickelson has also stated that the PGA Tour’s “obnoxious greed” in the control of his media rights has “opened the door for opportunities elsewhere”. Mickelson’s criticism of the Tour, which has enabled him to earn over $800 million in his career, is misguided. First, the Tour distributes 55% of its revenue to its members, not 26%. That is a higher percentage than any other major professional sport in the United States. Second, there is no sports league that allows their athletes to own and control their own media rights, including the NFL, MLB, and NBA. To do so would torpedo broadcasting deals, thus making the increased prize pools and PIP, which was ironically won by Mickelson this year, impractical. Finally, the profits generated from the revenues are used to pay Tour employees and provide the necessary infrastructure for tournaments.

It is under this backdrop that Mickelson, along with another 20 of the top 50 players in the world, recently accepted millions in appearance fees to play in the 2022 Saudi International at Royal Greens Golf & Country Club. The event, however, appears to have been both a golf tournament and a full-on courtship. On the first day of the event, it was reported that Bryson DeChambeau – one of the biggest young stars in golf – was offered $135 million to become the “face” of the SGL. Although Bryson has denied these claims, earlier reports claim that Ian Poulter has been offered nearly $30 million, and Dustin Johnson has also suggested he has been offered more than nine figures. While most of these players have signed non-disclosure agreements, Mickelson has acknowledged that “everybody in the top 100 (in the Official World Golf Ranking) is being talked to” about joining the SGL. For players like Poulter and Lee Westwood, who are past their prime, the money grab makes more sense. However, for the SGL to succeed, they will need a young face like Bryson to lead the charge, and it sounds like they are sparing no expense in that recruitment effort.

PGA Tour’s Response and Antitrust Considerations

In response to the SGL, the PGA Tour has threatened to impose lifetime bans for any golfer that leaves for the rival league. This type of language naturally raises some antitrust questions regarding their power to do so and the legal challenges they might face. Notably, the stance taken by the PGA Tour is not new but is merely a reminder and warning to its members. Golfers on the PGA Tour are independent contractors, but they agree to honor and abide by regulations and codes including the Player Handbook and Code of Ethics. The players also acknowledge that the Tour’s commissioner has the authority to ban a player from playing in certain events if they violate its rules. Leaving the PGA to play for a controversial rival league, the PGA could argue, is a violation that warrants expulsion. However, just because the PGA can make that decision does not mean that it will be free from legal challenges, specifically in the area of antitrust.

Section 2 of the Sherman Antitrust Act

Section 2 of the Sherman Antitrust Act makes it illegal for a company to “monopolize, attempt to monopolize, or combine or conspire to monopolize”. The purpose of Section 2 is to guard against companies’ use of their monopoly to fix prices, gain a competitive advantage, block competition, or destroy competitors. In short, federal law does not necessarily prohibit a company from obtaining monopoly power, but it does prohibit the abuse of that power through anticompetitive practices. To successfully bring an action under Section 2, a party would need to show that the PGA Tour has a monopoly in the professional golf industry, and that their actions are an effort to maintain that monopoly through anticompetitive means.

Under the first prong of the analysis, it seems clear that the PGA Tour does enjoy a monopoly in the professional golf industry. The Tour is synonymous with professional golf, and they are the preeminent force in both the domestic and international markets. The remaining question, therefore, is whether the PGA Tour’s threats to bar players is an anticompetitive practice that purports to maintain that monopoly. This question is not without precedent. In 1997, Harry Toscano, a former golfer who appeared on the PGA Tour for over a decade, sued the Tour alleging that their policy of restricting members from playing on rival tours prevented the emergence of competing senior professional golf tours. In essence, Toscano claimed that the PGA Tour monopolized the market for senior professional golf, and that their rules had a significant anticompetitive effect.

Toscano’s claims ultimately failed on two fronts. First, the court pointed out that Toscano’s argument that other senior tours would have emerged if the PGA Tour did not threaten to ban anyone who joined them was speculative. This is one area where Toscano is not directly on point with the current SGL situation. The SGL is already in the works, meaning that no speculation will be necessary to see the effects of the PGA Tour’s policies on its development. Second, and more importantly, Toscano’s arguments failed under the “Rule of Reason” analysis that courts use to review claims of anticompetitive practices.

Courts ask three questions when analyzing claims under the Rule of Reason. First, whether the defendant’s behavior produces significant anticompetitive effects. As mentioned, the court answered this question in favor of the Tour, reasoning that the claims under this prong were merely speculative. Second, courts ask whether there is a procompetitive explanation for the behavior. In Toscano, the Tour successfully argued that their policies and restraints were necessary to assure TV networks and sponsors a reliable supply of quality golfers for its events. These explanations are genuine, legitimate, and still exist today. Finally, courts ask whether less aggressive behavior could accomplish the same procompetitive goals. In Toscano, the court also answered this in favor of the Tour, and likely would do the same with in the face of an SGL challenge.

Ultimately, the PGA Tour would likely prevail on a Section 2 challenge to their policy of banning golfers that leave for rival tours. It is notable that the Tour has successfully defended against federal antitrust investigations in the past. In the 1990s, the FTC initiated an investigation into the same Tour policies now in question, but the commissioners ultimately voted 4-0 in favor of ending that investigation. Armed with the precedent from Toscano and the defeated FTC investigation, the Tour would likely succeed again.

Section 1 of the Sherman Antitrust Act

The Tour could also face challenges under Section 1 of the Sherman Antitrust Act, which bars anticompetitive agreements. As mentioned, the PGA Tour and European Tour entered into a “strategic alliance” shortly after the emergence of the SGL. The European Tour then subsequently removed its co-sanctioning of the Saudi International Tournament. Although the explanation for the alliance was to “collaborate on global scheduling, prize money, and playing privileges for both tours’ memberships”, the timing of the announcement invites speculation. Additionally, golf’s four major tournaments and the Ryder Cup are not operated by the PGA Tour, but qualifying for them is tied to performance in Tour events. If, for instance, the Masters also banned players who compete in the SGL from playing at Augusta, it could invite questions about anticompetitive agreements. Additionally, the Masters, the Open Championship, and the PGA Championship extend lifetime invitations to past winners. A revocation of those invitations for past winners who join the SGL would be an even more overt action on their part. Relatedly, the top 50 or 60 golfers in the Official World Golf Ranking (“OWGR”) are usually given automatic invites to those tournaments. Given the OWGR’s close ties to the PGA Tour, it remains to be seen if they would recognize points earned from SGL events. Finally, the Tour has strong relationships with many sponsors whose revocation of endorsement deals for SGL participants would, whether right or wrong, give the appearance of a group boycott.

Thankfully for us, Toscano also filed a claim under Section 1 of the Act on these very grounds, alleging that the Tour and its sponsors conspired to restrain trade in senior professional golf. The court, however, quickly disposed of these claims by calling them no more than a “conspiracy theory” and pointing out that any party, including “sidewalk vendors, limousine services, and local businesses seeking advertising”, would all be subject to antitrust liability for doing business with the PGA Tour under this argument. In the context of the SGL, a court would very likely dispose of such a claim in a similarly swift fashion. To begin with, major tournaments and sponsors have a multitude of reasons to take a hostile approach toward the SGL. For instance, many commentators have opined that the SGL is in line with similar efforts by Saudi Arabia in the sports of tennis, Formula One, and horse-racing to “sportswash” its human rights abuses. There is little incentive for sponsors to align themselves with a nation with that type of track record. Additionally, the primary market for most sponsors is golf fans in the United States. It would make little sense for DraftKings, for example, to continue to sponsor Bryson DeChambeau while he plays in a market they cannot tap into and in tournaments that take place in the middle of the night for most of its demographic. For these reasons, a Section 1 challenge would likely also be unsuccessful.

Conclusion and Final Thoughts

Despite the inevitable legal challenges that the PGA Tour would face if they chose to ban players if they join the SGL, they will likely prevail in both Section 2 and Section 1 antitrust challenges. Although Toscano is not directly on point, it will serve as strong precedent when combined with the FTC decision and the alternative explanations available to sponsors and tournaments for distancing themselves from the Saudi-backed SGL. Notwithstanding the threat of being banned by the PGA Tour, older golfers will likely consider offers from the SGL as it may be their last chance at a significant payday at the end of the career. However, young players should not defect given the prestige of the PGA Tour and its majors, the inevitable loss of endorsement opportunities, and a significantly harmful impact on their legacies. These reasons are why Tiger Woods, Jon Rahm, and Rory McIlroy have all spoken out in support of the Tour, and why many young golfers will likely follow suit.

John Nucci is a 3L at Penn State Law and can be reached via Twitter @JNucci23 or by email at [email protected].