<em>Hicks v. PGA</em>: Caddies’ Complaint Lands in the Rough

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Hicks v. PGA: Caddies’ Complaint Lands in the Rough

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Steven J. Cernak, Jacob K. Danziger

A lawsuit filed against the PGA Tour by a group of 168 golf caddies was recently dismissed with prejudice by the District Court for the Northern District of California. In Hicks et al. v. PGA Tour, Inc., the caddies alleged that the PGA Tour’s requirement that they wear “bibs” displaying logos of the PGA’s sponsors violated the caddies’ right of publicity and the antitrust laws.

The court dismissed the publicity claims, saying the caddies had consented to the PGA’s uniform requirements, including bibs. The court also dismissed the antitrust claims because the caddies had alleged only implausible markets “contorted to meet their litigation needs.” The dismissal is another example of a court skeptically viewing an alleged market covering the products of only one competitor.

Right of Publicity Claims

The caddies alleged that the PGA violated their “right of publicity” by using them as “human billboards” displaying corporate sponsor logos on the bibs that caddies wear. They claimed they had never consented to the PGA’s use of their “likenesses and images” with these bibs in televised broadcasts of PGA events. The court, however, determined that the caddies had known that the required caddy uniform included such bibs before entering into contracts with the PGA at each golf tournament. In short, “wearing a bib during tournaments is part of the job,” has been part of the job for decades, and is required by contract.

The caddies also argued that the bib requirement interferes with each caddy’s “right to make money off endorsements, because the bib covers space on their shirts that could otherwise display endorsements.” Because the court found that the caddies had consented to allow the PGA to impose uniform requirements, no “right of publicity” was violated by the bib requirement. Additionally, because the caddies had formally assigned all of their television and media rights with respect to PGA events to the PGA through the same challenged contracts, the caddies had consented to their appearance in televised broadcasts.

Further, the court found that the caddies “can still seek to promote or endorse products,” even if the bib requirement diminishes the potential available space for such endorsements. Finally, the court found that the specific endorsements that the caddies sought to profit from—but that were allegedly precluded by the bib requirement—did not constitute a well-defined relevant market, as discussed below.

Antitrust Claims

The caddies asserted a variety of theories of antitrust liability—both under Section 1 and Section 2 of the Sherman Act—but for each antitrust claim, the relevant markets were the same: the “Endorsement Market” and the “Live Action Advertising Market.”

The alleged “Endorsement Market” is a national market for the endorsement of products and services by participants in professional golf tournaments, including golfers and caddies. The consumers in this market are “companies who employ professional golf tournament participants to endorse products and services during professional golf tournaments.” The alleged “Live Action Advertising Market” is a national market for “in-play or in-action commercial advertising at … golf events between commercial breaks.” The consumers in this market are “companies who seek specifically to advertise products and services during play at professional golf tournaments…only between commercials during live play and to live spectators.”

With regard to each of these markets, the caddies alleged that other forms of advertising available to the companies seeking to promote their products in these markets—such as internet, television, and print advertising—are not interchangeable. According to the caddies, companies seeking to promote products attractive to golf fans specifically seek to place their advertisements in such a manner that golf fans view the messages during live play.

The court rejected the caddies’ contentions regarding the non-substitutability of other forms of media advertisements, finding it implausible even on a deferential pleading standard of review that an increase in the price of in-play advertisements would have no effect on the demand for other types of advertisements. The court recognized that not all forms of advertising are the same, and that some forms have unique benefits. To properly plead any antitrust claims, however, plaintiffs must define a market by including all economic substitutes based on reasonable interchangeability of use or cross-elasticity of demand.

The court concluded: “[i]f consumers are not precluded from responding to the defendant’s conduct simply by turning to reasonable alternatives in the market, the conduct of the defendant (even if otherwise wrongful) was not meant to be covered by the antitrust laws.” This is particularly true, the court noted, when plaintiffs improperly attempt to define a market to meet their litigation needs, citing Adidas America, Inc. v. NCAA, a 1999 Kansas district court case. That case held that “an antitrust plaintiff may not define a market so as to cover only the practice complained of, [as] this would be circular or at least result-oriented reasoning.” In that case, the plaintiff (Adidas) had failed to demonstrate why sponsorship agreements with the defendant (NCAA) were not reasonably interchangeable with sponsorship agreements with other sports leagues. (Disclaimer: Attorneys now at Schiff Hardin represented the NCAA in the Adidas matter and continue to represent the NCAA in current matters.)

Conclusion

Where a plaintiff alleges that the contours of a relevant market are coterminous with the scope of a single defendant’s business or promotional rights, courts may dismiss at the pleading stage for failure to demonstrate that there are no reasonable substitutes for consumers. The ruling also supports a procompetitive assertion of control of one’s own promotional rights to promote investment in a brand and protect against free riders.

The lawyers in Schiff Hardin’s Antitrust and Trade Regulation Practice Group have years of experience with right of publicity claims and antitrust matters that turn on market definition, both in and out of sports industries. To discuss your right of publicity or antitrust market definition matters, contact any member of our Antitrust and Trade Regulation Group.