GOLF

Reviews | Golf LIV controversy raises crucial antitrust questions

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Neither antagonist in the fight for the new golf league commands much sympathy. On one side is LIV Golf, which is generously funded by the sovereign wealth fund of Saudi Arabia, a nation with an abysmal human rights record. On the other is the PGA Tour, which is fighting to prevent its golfers from earning bigger paychecks with LIV Golf, by suspending 17 of them for playing in the LIV Golf Invitational Series. It’s tempting to wish the plague on both of their clubs.

Economically, however, there are some interesting things to say about the battle. Specifically, can restricting trade – which some lawyers accuse the PGA Tour of engaging in – be a good thing?

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Even Louis Brandeis, the Supreme Court Justice who was a staunch enemy of trusts, acknowledged that trade restrictions could not be outright banned. “Every agreement concerning trade, every regulation of trade, restricts,” Brandeis wrote for the court in a 1918 decision. “To bind, to restrain, is of their very essence.”

In his next sentence, Brandeis left the door open to consider positive restraints: “The real test of legality is whether the restraint imposed is of a nature merely to regulate and thus perhaps to promote competition or whether it is likely to suppress or even destroy competition. .”

What Brandeis enunciated was a principle of antitrust analysis called the rule of reason. It is widely applied in cases of restricted trade, except for the worst behavior – naked agreements to fix prices, rig bids, organize boycotts or divide markets that are presumed illegal on their face.

Under the rule of reason, a manufacturer might be allowed to restrict the supply of a product in different geographic markets to existing retailers. This is clearly a trade restriction, but it could allow retailers to make higher profits and have an incentive to advertise the product and provide better service to customers, says the Organization for Development Cooperation economic. Consumers might actually be better off.

In the view of some economists and jurists, the seemingly anti-competitive behavior of sports leagues can also potentially be legal under the rule of reason. “Professional sports are built around competition, but the industry would not exist without collusion,” attorney Leah Farzin wrote in a 2015 law review article.

Team owners have a financial incentive to help other team owners, Farzin wrote. “An economically monopolistic club will not succeed,” she concluded, “because, if it effectively eliminates the existence of weaker teams, as a monopoly does, it will be left with no competitors on the pitch.” And that would be embarrassing.

Sports leagues have even argued in court that a league is a single, unified entity and therefore its constituent teams cannot get along – because only separate entities can get along (just like your right hand cannot not “agree” with your left hand).

Major League Baseball enjoys an explicit exemption from US antitrust law, although it has been curtailed over the years. This is what allows the league to assign exclusive territories to teams and pay pitifully low salaries to minor league players.

I asked Farzin what she thought of the PGA Tour’s stance on LIV Golf. She is now an assistant attorney general for the state of Alaska, but she commented on the dispute as a private citizen. In an email, she predicted that the PGA Tour could play the consumer defense card, arguing that allowing golfers to play in the LIV series would “lose value and eventually cease to exist” to the detriment public. .

“Ironically,” she wrote, the better the LIV series performs, the harder it will be to sustain an antitrust case against the PGA Tour: “I think it would be difficult for them to show that the PGA Tour rules are anti-competitive, as they would have created a competitive league for high level golfers.

Still, the PGA Tour has flaws in its legal armor, says John Lauro, an attorney who once worked as a federal prosecutor in the Eastern District of New York. Lauro says the PGA Tour is basically trying to enforce non-compete agreements on its golfers without justification. A non-compete agreement is justifiable when an employee learns valuable trade secrets the disclosure of which to a competitor would be devastating to the employer, but that’s not the case with golfers, Lauro says.

I wrote last year about the farce of getting fast food workers and other low-wage workers to sign non-compete agreements. Top golfers don’t induce as much sympathy as burger flippers, but their issues are the same, Lauro said.

Another shortcoming of the PGA Tour is that it states its mission is to “promote the sport of professional golf by sanctioning and administering golf tournaments and furthering the common interests of touring golf professionals.” Trying to shut down rival tournaments doesn’t appear to be in line with the stated mission, according to a post on the intriguing golf website Lying Four.

You can see how this fight has wide ramifications. Some people say golf is life. I don’t know, but golf is definitely about economics.


While we’re on the subject of antitrust and unsympathetic protagonists: there’s an interesting new filing by plaintiffs in the case against elite universities that coordinate their financial aid policies. As I wrote in January, the plaintiffs argue that by agreeing to adhere to a detailed rubric of how families’ financial needs are determined, elite universities can go a long way in eliminating aid as a recruitment tool. It saves them money.

The new brief examines the additional financial aid universities could provide if they increased it by 2% of their unrestricted endowments per year (an increase small enough that endowments continue to grow on average). While the numbers for the 17 defendant universities vary, for nine of them, according to the filing, such an increase would be enough to entirely erase the remaining cost of attendance for existing aid recipients. This appears to weaken the universities’ case that ending their antitrust exemption, which would trigger increased financial aid offers, would be unaffordable for them.


“We work our jobs / Get our wages / Think we’re slipping on the highway / When in fact we’re slipping.”

– Paul Simon, “Slip Slidin’ Away” (1977)


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