Antitrust and Unfair Competition Law

Ninth Circuit Affirms Rejection of Caddies’ Antitrust Claims Against PGA Tour – But Grants a Mulligan

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Harrison (Buzz) Frahn, Jennifer S. Palmer, Tomi Mendel
Simpson Thacher & Bartlett LLP

In a July 27, 2018 decision, the Ninth Circuit affirmed a ruling rejecting the Sherman Act claims of a group of golf caddies (“Caddies”) who challenged the PGA Tour’s requirement that they wear bibs containing various advertisements during tournaments. Hicks v. PGA Tour, Inc., 2018 WL 3597316 (9th Cir. July 27, 2018). Although bib-wearing has been a long-standing practice in the golf profession, the Caddies argued that the requirement violated antitrust law by foreclosing any opportunity for the Caddies to feature their own sponsors and endorsements. Additionally, the Caddies argued that the practice artificially restricted the supply of advertisements in two proposed markets: the Endorsement Market and the Live Action Advertising Market. Ultimately, both the Northern District of California and the Ninth Circuit held that the Caddies had not alleged any plausible market, and thereby dismissed the federal antitrust claims.


Defendant PGA Tour is a professional golfing organization that administers three different tours of golf tournaments throughout the year: The PGA Tour, the Champions Tour, and the Tour. Second Amended Complaint, Hicks v. PGA Tour, Inc., 3:15-cv-00489, ECF No. 77 ¶ 68 (N.D. Cal. Sept. 11, 2015). These events feature competition by professional golfers, each of whom, in order to participate, must partner with a caddy. Id. at ¶ 69. Generally, a caddy is an independent contractor who, in addition to carrying the bag of golf clubs, serves as a golfer’s deputy, helping to navigate course topography and conditions as well as develop general strategy. Caddies have traditionally served an important role in the sport as “coaches, strategists, and counselors to professional golfers.” Hicks, 2018 WL 3597316 at *1.

The PGA tournaments, which take place at different golf courses throughout the year, are run by third-party organizations or “Local Hosts.” Id. at *2. The PGA Tour and the Local Hosts collaborate on each PGA event, and, in relevant part, make joint decisions about sponsorships and advertising. Id. One advertising pursuit they have long undertaken together is to design unique “bibs” for Caddies to wear during the course of play at each tournament. Id. As part of their contracts to participate, the Caddies agree to wear these bibs, which drape over their shoulders and cover their shirts, as part of their required uniform. Id.The bibs are unique to each tournament, but generally feature the name of the Caddy’s golfer, as well as the logo of the tournament and the logos of major sponsors. Id. Thus, they function as an advertisement targeting in-person spectators and television viewers. In their Second Amended Complaint, the Caddies contended that these bibs were worth $50 million in advertising value each year, with the PGA Tour and Local Hosts receiving the entirety of the money generated. Hicks, 3:15-cv-00489, ECF No. 77 ¶ 10 (N.D. Cal. Sept 11, 2015).

Northern District of California Dismisses the Caddies’ Claims

Named plaintiff William Michael Hicks, a PGA Tour Caddy with approximately thirty-three years of experience, filed a complaint challenging the bib requirement on February 3, 2015, with amended complaints filed on March 16, 2015 and September 11, 2015. Hicks and 167 other Caddies purported to represent a class of all Caddies residing in the United States who were, without remuneration, made to wear bibs during PGA tournaments featuring the logos of PGA Tour sponsors and affiliates. Id. at ¶ 173. The Second Amended Complaint challenged the bib requirement as violating federal antitrust law under the Sherman Act and also raised various other legal theories, including breach of contract, duress, right of publicity/misappropriation of likeness, unjust enrichment, and violations of the California Unfair Competition Law and the Lanham Act.

Judge Vince Chhabria of the Northern District of California granted the PGA Tour’s motion to dismiss the claims in the Caddies’ Second Amended Complaint. The court began by addressing the Caddies’ various non-antitrust theories, including breach of contract, unjust enrichment, and the right of publicity/misappropriation of likeness, rejecting each in turn and noting that “caddies have been required to wear the bibs for decades[, s]o caddies know, when they enter the profession, that wearing a bib during tournaments is part of the job [and] the primary part of a caddie’s uniform.” Hicks v. PGA Tour, Inc., 165 F. Supp. 3d 898, 905 (N.D. Cal 2016)

Turning to the Sherman Act claims, the court analyzed the threshold question of whether the Caddies had alleged that the PGA Tour had “market power within a ‘relevant market,’” along with offering a “facially plausible definition of that market.” Id. at 908 (citing Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044-45 (9th Cir. 2008)). “This threshold requirement,” the court explained, “exists to prevent the antitrust laws from applying too broadly.” Hicks, 165 F. Supp. 3d at 908. In this case, the Caddies had proposed two different markets: “the Endorsement Market” and “the Live Action Advertising Market.” 909. According to the Caddies, both of these markets involved advertisers targeting professional golf fans—who the Caddies claimed were wealthier, older, and more likely to have interest in luxury goods and services that would not appeal to fans of other sports. Id.

The Caddies described the proposed Endorsement Market as “the national market for the endorsement of products and services by participants in professional golf tournaments.” Id. An endorsement by a professional golfer or Caddy, they argued, was not reasonably interchangeable with other advertisement avenues like television, magazines, the internet, or posters, because “golf fans cannot ignore, say, a Nike hat worn by a golfer during a tournament in the same way they could ignore a Nike ad in a magazine.” Hicks, 165 F. Supp. 3d at 909.

As for the proposed Live Action Advertising Market, the Caddies described it as “the national . . . market for in-play or in-action commercial advertising at professional golf events between commercial breaks.” Id. (emphasis added). The district court explained that this proposed market was “different from the endorsement market in one sense: with the live action advertising market, it does not matter whether the advertisement of a product comes in the form of an endorsement.” Id. In other words, this proposed market included all forms of advertising on display during live tournament play at PGA events, including golfer apparel, the Caddies’ bibs, logos displayed during the television broadcast, and signage around the golf course. Id. at 909-10. The Caddies argued that these types of advertisements formed a distinct market 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 in tournament play.” Id.

Reviewing the Caddies’ two proposed markets, the court held that the allegations that these markets were distinct from other forms of advertising to golf fans were “not plausible.” Hicks, 165 F. Supp. 3d at 910. The court reasoned that different forms of advertising may have certain advantages or disadvantages, noting that a company can communicate a “detailed verbal and visual message” in a television ad, whereas a magazine ad is non-verbal, but “might be hard to ignore if it appears on the page opposite an article someone is reading.” Id. According to the court, however, “it’s not enough to allege that these forms of advertising have differences;” rather, the Caddies had to show that the bib advertising was not “reasonably interchangeable” with other advertising methods. Id. “If it became too expensive to put a logo on a bridge,” the court reasoned, “there is no logical reason a company wouldn’t decide instead to put its logo on a magazine ad, or on a wall in golf course clubhouses, or any number of other places.” Id. Ultimately, the court dismissed the antitrust claims with prejudice, reasoning that the proposed product markets were “not natural” and that the Caddies could not explain “how they could state an antitrust claim using a plausible product market definition.” Id. As to the related allegation under California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, the district court dismissed this claim with prejudice as well, explaining that “the conduct the caddies assert is unfair under the UCL overlaps completely” with the other allegations in the Complaint. Id. at 911.

The Ninth Circuit Affirms the District Court’s Dismissal

On appeal, the Ninth Circuit held that the district court had properly determined that the Caddies did not allege plausible products markets. Hicks, 2018 WL 3597316 at *5. The Ninth Circuit expanded on the district court’s analysis, analyzing the Caddies’ proposed markets as potential “submarkets” of the general advertising sphere. Id. at *8-9. A submarket can form the basis for an antitrust claim where the plaintiff can show “that the alleged submarket is economically distinct from the general product market.” Id. at *8. Citing the Supreme Court’s opinion in Brown Shoe v. United States, 370 U.S. 294, 325 (1962), the Ninth Circuit described several indicia of an “economically distinct submarket:” recognition as a separate economic entity; a product’s unique characteristics, uses, or mode of production; a distinct customer base; specialized vendors; and unique sensitivity to changes in price. Hicks, 2018 WL 3597316 at *8.

Echoing the district court’s reasoning, the Ninth Circuit explained that the Caddies’ proposed submarkets “omit many economic substitutes,” including “commercials during golf-related television programs, radio broadcasts, or podcasts,” advertisements “on golf-related websites or social media pages,” and “advertising through a search engine or social media platform that provides advertisers insights on users’ online history.” Id. at *9. Even assuming that golf fans constitute a unique customer base, the court explained that “judicial experience and common sense” suggest that there is no basis to distinguish between the advertising that occurs during commercial breaks and that which occurs during tournament play. Id. at *8-9.

Next, the court addressed the Caddies’ various claims as to why these markets are in fact distinct. The Caddies repeated their assertions that: (1) in-play advertising cannot be ignored or skipped over; (2) endorsements made by Caddies or golfers are much more effective forms of advertising; (3) unique subsets of companies, such as those who cannot afford to pay for television commercials, often purchase live-action advertisements; and (4) econometric studies allegedly show that purchasers in the proposed markets “’will not switch to products outside of th[ose] market[s] in response to a small but significant and non-transitory price increase by [the Tour] . . . to such a degree that the price increase is unprofitable.” Id. at *9.

The Ninth Circuit rejected each of these arguments. The fact that some forms of advertising are easier to avoid, it reasoned, does not suffice to show that they make up a distinct market. Id. To conclude otherwise, the court continued, would rest on the “implausible assumption” that golf fans who watch PGA Tour broadcasts “either consume[] no other forms of golf media or [are] uninfluenced by advertisements in all other forms of golf media.” Id. As to the Caddies’ claims regarding the uniquely small companies that most often used in-play advertising, the Ninth Circuit noted that these companies could also advertise through “smaller golf periodicals, less frequented websites, and radio programs,” even if television commercials were prohibitively expensive. Id.Finding that the Caddies’ argument about econometric studies was a “legal conclusion veiled as a factual allegation,” the court declined to consider this claim at the motion to dismiss stage. Id.

Next, the court reviewed similar cases from sister circuits and found them to be consistent with the conclusion that the Caddies’ antitrust claims should be dismissed. For example, in Chapman v. New York State Division for Youth, 513 F.3d 230, 237-78 (2d Cir. 2008), the Second Circuit affirmed a dismissal of antitrust claims where plaintiffs had “failed to show how the market for restraint training services to child care providers is any different from the larger market for restraint training services to other businesses, agencies, and organizations.” Id. at 238 (emphasis in original). Likewise, a case from the Fifth Circuit, PSKS, Inc. v. Leegin Creative Leather Products Inc., 615 F.3d 412, 416-19 (5th Cir. 2010), also resulted in a dismissal based on an implausible proposed product market definition. There, the plaintiffs had proposed a market “limited to a specific brand of women’s accessories,” but could not show any “structural barrier to the interchangeability of [these] products with goods produced by competing manufacturers.” Id. The Fifth Circuit rejected a second proposed market, for “brand-name women’s accessories,” because plaintiffs failed to allege that brand-name products were not interchangeable with non-brand name substitutes. Id. Similarly, the Hicks court also found support among the federal courts for its rejection of a proposed market limited to a single type of advertising. Hicks, 2018 WL 3597316 at *10 (citing Am. Online, Inc. v. GreDeals.Net, 49 F. Supp. 2d 851, 858 (E.D. Va. 1999); Huron Valley Publ’g Co. v. Booth Newspapers, Inc., 336 F. Supp. 659, 662 (E.D. Mich. 1972)).

The Ninth Circuit then concluded that the district court had correctly dismissed the federal antitrust claims and the related allegations under California’s Unfair Competition Law. Hicks, 2018 WL 3597316 at *11. Noting, however, that the “district court made a ‘simple denial of leave to amend’ here without adequate explanation,” the Court of Appeals vacated the district court’s decision to dismiss these claims with prejudice. Id. (quoting Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003)). Defendant PGA Tour had not identified any prejudice it would experience from allowing the Caddies to amend their Complaint, and the Ninth Circuit could not conclude that such an amendment by the Caddies would be futile. Id. Accordingly, the case was remanded with instructions that the district court reconsider the decision to deny the Caddies leave to amend their antitrust and state unfair competition claims.


The Ninth Circuit’s decision in Hicks v. PGA Tour, affirming the district court’s dismissal of the federal antitrust and various other claims, has put an end to the Caddies’ initial challenges to the bib requirement. In vacating the decision to dismiss with prejudice, however, the Ninth Circuit has offered the Caddies a chance to refine their proposed market definition and revive their claims. It remains to be seen whether they will take advantage of this mulligan in the coming months.

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