[Asia Economy Reporter Byun Seon-jin]
The power struggle between the PGA Tour, supported by the U.S. professional golf organization, and the LIV Golf Invitational Series, backed by the Saudi Arabian sovereign wealth fund, has escalated to invoke antitrust laws. Earlier this month, 11 American players who participated in LIV Golf filed a lawsuit on the 4th in the Northern District Court of California, claiming that the PGA rule requiring "prior approval to participate in tournaments hosted by other organizations" violates antitrust laws. They argued that this rule is "a measure to exclude a strong competitor, LIV Golf, from the market."
Antitrust laws, which have led to the breakup and dissolution of major U.S. companies in sectors such as oil, telecommunications, and railroads, now seem to be spreading into the world of golf. Because of this, the antitrust lawsuit filed against the PGA is expected to become a historic battle of pride between American and Saudi capital surrounding golf.
The Three Core Acts Constituting Antitrust Law
Why did the 11 golfers who sued the PGA invoke antitrust laws?
Antitrust laws have a powerful history capable of deciding the fate of giant corporations within the United States. They have ruthlessly weakened companies that hinder fair market competition through monopolies or collusion by ordering their breakup.
The origin of U.S. antitrust law is the Sherman Act, enacted in 1890, which was introduced by Senator John Sherman. It was established to prevent the harms caused by monopolies amid rapid industrialization, increased competition, and mergers and acquisitions (M&A) among companies. Subsequently, the Clayton Act and the Federal Trade Commission Act were enacted in 1914, further strengthening antitrust laws. These three acts have since become the core federal antitrust laws. With this lawsuit, the U.S. court will determine whether the PGA violated Section 2 of the Sherman Act, which prohibits monopolies.
Forced Breakups Deciding Corporate Fate
The first and most representative case where antitrust laws exerted strong power was the breakup of Standard Oil, which controlled 90% of the U.S. oil market, into 38 companies including Exxon, Mobil, and Chevron in 1911. In the same year, American Tobacco, which held a 95% share of the U.S. tobacco market, was split into three companies. In 1932, RCA, a U.S. electronics company subsidiary of General Electric (GE), was forced to sell off assets after abusing mutual patent licenses with Westinghouse to block competition from other radio companies. In the 1930s, NBC, the dominant force in U.S. broadcasting, was split into NBC Red and NBC Blue in 1942. Alcoa, a Swiss company that monopolized the aluminum market, was the first foreign company to be broken up in 1945.
Since the 1980s, as the U.S. economic industrial structure shifted toward information technology (IT), antitrust laws began targeting these sectors. AT&T, which once controlled 80% of the U.S. telephone market, became a target of antitrust laws. Because AT&T owned long-distance communication and 22 regional telephone companies, it became the subject of a Department of Justice lawsuit. Ultimately, AT&T was broken up into eight companies, including seven regional telephone operators, in 1984. As a result, AT&T lost its industry-leading position to Verizon in 2009.
There are also assessments that antitrust laws have gradually lost some of their power. Microsoft (MS) was sued in 1998 for bundling its web browser, Internet Explorer, with Windows to block market competition, and in 2000, a trial court ordered the company to split into two. However, in the 2002 appeal trial, the lawsuit ended with changes to business operations rather than a corporate breakup. In the 2020s, giant IT companies like Google and Facebook have been embroiled in antitrust lawsuits. Facebook, sued by the U.S. Federal Trade Commission (FTC) in December 2020 for its monopoly position in the social media industry, won due to insufficient evidence of monopoly. Google was sued by the U.S. Department of Justice during the same period for allegedly hindering competition in the mobile search market by pre-installing its search engine on smartphones. The first trial is scheduled to begin in September 2023, three years later.
Antitrust Lawsuit Filed by 11 Golfers Against U.S. Major Golf... What Will Be the Outcome?
What will be the outcome of the 2022 antitrust lawsuit over the leadership of the global men's golf world? The key issue is whether the U.S. court will view the PGA rule requiring "prior approval to participate in tournaments hosted by other organizations" as a violation of antitrust laws. A legal insider also noted, "In cases involving domestic companies or organizations and foreign interests, there have been precedents where conclusions favored the domestic side."
Among U.S. legal circles, there is also talk that "it will be difficult for the 11 players who filed this antitrust lawsuit to achieve the results they desire." Previously, the Federal Trade Commission (FTC) reviewed the PGA's prior approval rule in 1994 and concluded that it did not violate antitrust laws. Considering that antitrust lawsuits typically take 3 to 4 years, some evaluate that this lawsuit itself may not benefit golfers for whom their prime years are crucial.
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