Market Definition Failure Dooms Golf Caddies’ Antitrust Class Action Against PGA Tour

by Proskauer - Minding Your Business

An antitrust class action lawsuit brought by golf caddies against the Professional Golf Association will not be afforded a mulligan after a federal district court dismissed their complaint with prejudice. A putative class of similarly-situated golf caddies sued PGA Tour, Inc. over the “bibs” that caddies wear during Tour-sponsored golf tournaments. Plaintiffs alleged that, by adopting and implementing a uniform policy that required caddies to wear a bib as a condition of their participation in a Tour event, the Tour violated the Sherman Act and the Lanham Act, misappropriated the caddies’ images and likenesses, breached its contracts with the caddies, was unjustly enriched, engaged in acts of duress and business compulsion, and violated California’s unfair competition law.

As fans of the Tour know, caddies are hired and paid by professional golfers who play on golf tours operated by the Tour. The caddie bibs are the primary part of the caddies’ uniform, as established by the Tour’s uniform policy. The bibs typically display, among other things, the logos of the PGA Tour’s corporate sponsors. The Tour requires the caddies to wear these bibs — a requirement that has existed for decades and is contained in the contracts between each caddy and the Tour.

The suit was originally filed in February 2015. A year later, the District Court judge granted defendants’ motion to dismiss all claims.  Hicks v. PGA Tour, Inc.

The court dismissed the Sherman Act claims for failure to properly allege a relevant antitrust product market that encompassed the product at issue as well as all economic substitutes for the product. Plaintiffs had attempted to distinguish certain forms of advertising to golf fans from others and alleged two relevant product markets: the “Endorsement Market” and the “Live Action Advertising Market.” Id. at 11. The court found that these alleged product markets were “not plausible” and “not natural” — “[t]hey are artificial, contorted to meet [Plaintiffs’] litigation needs.” Id. at 13-14.

The court’s market definition analysis is instructive for defendants seeking to dismiss antitrust claims based on narrow product markets, especially in sports and in advertising. As to the first alleged market in the case — the Endorsement Market — Plaintiffs alleged that “endorsements by pro golfers and caddies displayed during golf tournaments are not reasonably interchangeable with other forms of advertising to golf fans, such as television ads, magazine ads, internet ads, or posters displayed at golf course clubhouses.” Id. at 11-12. The Live Action Advertising Market alleged by Plaintiffs included advertisement opportunities during live tournament play, such as signs on the course and logos on a graphic displayed during play. Id. at 12. Plaintiffs alleged that each of these two categories of advertisement “are unique and not reasonably interchangeable with other forms of advertising to golf fans, because broadcast viewers can fast-forward through commercials, or ignore magazine ads or posters, but cannot readily avoid observing a logo that appears on screen during tournament play.” Id.

The court explained that “it’s not enough to allege that these forms of advertising have differences,” and found that Plaintiffs had not alleged any “facts from which one could plausibly conclude that these different methods of advertising to golf fans are not reasonably interchangeable, such that even if the price of one advertising method went up in a meaningful way, companies would not switch to another method of advertising.” Id. at 13. Notably, the court discounted the effect of DVRs on other forms of advertisement to golf fans. The court explained that “it does not plausibly follow that a price increase in in-play advertisement opportunities would have no effect on the demand for other forms of advertisement to golf fans.” Id. The court noted that the alleged forms of advertisements might be reasonably interchangeable with magazine ads, walls in golf course clubhouses, or any number of other places where advertisements could reach golf fans. Id. at 13-14.

Plaintiffs’ breach of contract claim relied on the absence of bibs in the Tour uniform policy’s silence as to bibs, which Plaintiffs asserted did not allow the Tour to require caddies to wear bibs. The court disagreed, finding that the language in the contracts was susceptible to only one reasonable interpretation when considered in the context of this case because “no reasonable person signing the contract after 2010 could believe he [or she] retained the right not to wear a bib during a tournament.” Id. at 6.

The court also disagreed with Plaintiffs’ alternative assertion that each caddy agreed to this contract language under economic duress because caddies lacked viable alternative employment. Id. at 7. The court found that the doctrine of economic duress did not apply here because there was a long-standing requirement to wear bibs when the caddies entered into the contracts, and because the caddies were not “coerced into the arrangement on the threat of extreme economic hardship.” Id. at 8.

Finally, the court dismissed Plaintiffs’ Lanham Act and “right of publicity” claims because both claims required lack of consent and “the only plausible interpretation of the parties’ agreements is that the caddies consented to the very thing they now complain of — namely, the Tour’s right to make the caddies wear bibs at tournaments and to televise and otherwise accurately depict the caddies participating in those tournaments.” Id. at 9, 14.

One of the key takeaways for antitrust practitioners is that plaintiffs’ alleged market was implausibly narrow because it did not consider all the reasonable alternatives sponsors consider when advertising to golf fans. According to the court, the caddies’ attempt at defining the relevant antitrust market too narrowly was akin to a caddy advising a player on a golf shot without considering all the reasonably interchangeable clubs that could be appropriate for that shot.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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