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What to expect from the DOJ investigation into the PGA Tour and LIV Golf

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The PGA Tour’s decision to ban golfers who have joined the LIV Golf Invitational Series breakaway has renewed speculation about the legality of the tour’s policies – and whether government intervention could ultimately determine the viability of the money-sponsored league. ‘Saudi Arabia.

This issue has grown in popularity lately, with reports that the US Department of Justice is investigating the PGA Tour for possible antitrust violations, an investigation that could determine the Tour’s ability to police where and when its golfers are playing.

But with the tour dismissing any concerns about the investigation and LIV continuing to add high-profile players while releasing plans for its second season, there has been little indication of how potential legal drama might unfold. unroll.

The results of Justice Department investigations are often nearly impossible to predict, said Gabe Feldman, director of Tulane’s sports law program, who teaches antitrust issues at the school. But the general arguments the parties would likely make are less opaque.

The inquiry, Feldman said, is likely to focus on whether the PGA Tour rules “produce more harm than benefit”, whether “the anti-competitive effects of the restrictions outweigh the pro-competitive benefits”. and if “the rules they have in place are not reasonably necessary to obtain a legitimate business justification”. The tour does not allow its members to participate in unauthorized events without permission. It regularly grants permissions to players to participate in tournaments outside of North America — particularly events hosted by the DP World Tour in Europe, with which the PGA Tour has an operating agreement — but denied permission for LIV events.

LIV Golf’s Future On US TV Is Uncertain, But It Definitely Has One

The Department of Justice is likely considering whether there is enough evidence to determine “whether some of the actions taken by the PGA Tour are designed to harm competition rather than to make their product more attractive,” Feldman said. “And is the PGA doing anything that makes it more difficult for competing tours to exist and potentially limits golfers’ ability to make more money?”

But Jacob S. Frenkel, president of government investigations and securities enforcement at the law firm Dickinson Wright in Washington, said the PGA could say it has a legally valid reason to ban LIV players.

“The PGA will argue that its refusal to do business with the LIV Golf tour and its participants is designed to protect or promote the legitimate business interests and purposes of the PGA,” Frenkel said. “Proof of objective and valid business justification should defeat any claim of antitrust violation.

“An entity with monopoly power has no general obligation to cooperate with its business competitors and may even refuse to do business with them if the business can articulate a valid business reason for the refusal.”

The PGA Tour could also say that having the best golfers compete together is better for consumers of the sport, and that the “pro-competitive benefits” of hosting attractive tournaments would outweigh the anti-competitive effects of restricting where and when golfers can play, Feldman says.

“And so the PGA has to argue, ‘Well, for our product to be popular, we need all the best golfers playing in the same tournaments, because people want to see the best against the best,'” Feldman said. “…They want to see all the best at the same time, and the only way to do that, [the PGA Tour] would say is by having these rules in place.

An antitrust investigation, especially one not considered complicated, could be completed in a year or less, Frenkel said, and could yield a range of results, from nil to a criminal indictment, which would then lead to either an acquittal. , or a guilty plea. , or a condemnation. Typically, he said, if the DOJ finds that an organization like the PGA Tour has committed a violation, both parties would agree to “a deferred prosecution or non-prosecution agreement where the PGA would enter into a sort of compliance agreement, would implement corrective measures and pay a fine.

“But that’s a big ‘if,'” Frenkel said, adding that an investigation into an organization whose rival appears to be doing well seems unlikely to result in a significant sanction.

The Justice Department, which has not confirmed it is investigating the PGA Tour, did not respond to a request for comment. The investigation was first reported by The Wall Street Journal earlier this month.

Who are the LIV golfers? They range from famous to anonymous.

If a LIV player or the league itself sues the PGA Tour for antitrust reasons, they will have to prove that they suffered actual harm. and that the PGA Tour’s actions reduced competition in violation of federal law. Frenkel said proving harm “wouldn’t be particularly easy when they’re compensated in a way that may be greater than the PGA Tour’s ultimate compensation.”

“They made a personal decision to disassociate themselves from the PGA and join a competing tour. They weren’t obligated to do that,” Frenkel said. “As a PGA Tour participant, they also accepted certain standards, not just organizational standards, but also personal conduct standards. To me, it’s difficult to articulate a viable theory that would survive litigation for individual golfers to sue the PGA Tour, but still a Sometimes, in our society, taking legal action is easy, and being right and winning is the ultimate challenge in any litigation.

Feldman, however, said LIV golfers could still have a case, despite their winnings. They could argue, for example, that they would have earned more revenue years ago if not for the PGA Tour rules.

The LIV Tour itself could argue that it was harmed because the PGA Tour’s actions drove up its acquisition costs — and its cost of doing business — via defector sanctions.

“And even if they survive, and even if they thrive, they can hypothetically claim that they’ve paid twice as much for players because of the PGA restrictions,” Feldman said, “and so they’re entitled to the difference between what they would have paid and what they had to Pay.”

The PGA Tour has gone this route once before. In 1994, Federal Trade Commission antitrust lawyers tried to get the U.S. government to overturn the rule requiring golfers to be cleared to play in contentious events – and another that required players to obtain permission to appear on television programs not approved by the PGA Tour – because they have created possible “unfair methods of competition”.

But after intensive lobbying by then-commissioner Tim Finchem — a former official in President Jimmy Carter’s administration — the four FTC commissioners voted unanimously to reject the recommendation of staff antitrust lawyers. take legal action against the PGA Tour.

“We walked through this in 1994 and are confident of a similar outcome,” the tour said in a statement after the Wall Street Journal report.

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