The 11th U.S. Circuit Court of Appeals has affirmed a district court’s grant of summary judgment in a case where Morris Communications argued unsuccessfully that the PGA Tour violated antitrust laws by requiring it to pay a fee to have access to the Tour’s real-time scoring feed.
“The district court correctly found that a company – even a monopolist company – that expends time and money to create a valuable product does not violate the antitrust laws when it declines to provide that product to its competitors for free,” held the appeals court.
The product in question was a Real-Time Scoring System (RTSS), which allows the PGA to monitor the play around the entire golf course. The court described the system as “an elaborate electronic relay scoring system that relies on state-of-the-art computer technology and equipment as well as dozens of trained workers and volunteers” to create a real-time leaderboard.
The feed is transmitted to an on-site media center where members of the media access the scores. To get access to the feed, media must obtain free press credentials from PGA. To get the credentials, the media agrees to follow the PGA’s terms and conditions, including its On-Line Service Regulations (OLSR). “The OLSR requires media organizations to delay publication on their internet websites of scoring information obtained by RTSS until the earliest of (1) 30 minutes after the actual occurrence of the shot or (2) such information has become legally available in the public domain, i.e. after the scores are posted on PGA’s official website, www.pgatour.com,” wrote the appeals court.
“In addition, the OLSR prohibits credentialed media organizations from selling, or syndicating, compiled scoring information obtained in the media center to non-credentialed third-party internet website publishers without first buying a license to do so from PGA.”
Morris, which was active selling PGA Tour scoring data to third parties in violation of the OLSR, sued the Tour. Specifically, it claimed the “the PGA has an unfair advantage in the publication and syndication of the scores.”
In its four antitrust claims, the plaintiff argued that the Tour violated antitrust laws in the following ways:
(1) monopolization of the Internet markets;
(2) unlawful refusal to deal;
(3) monopoly leveraging; and
(4) attempted monopolization of the internet markets.
The claim quickly reached a climax at the district court level, where both parties filed cross-motions for summary judgment. In finding for the Tour, the district court determined that the PGA had a valid business justification for its OLSR because “the OLSR prevented Morris from free-riding on PGA’s investment in its costly RTSS.”
In setting the table for its review, the appeals court noted that “the only real issue before us is whether PGA’s restrictions and prohibitions regarding Morris’s ability to sell compiled real-time golf scores to third parties violates § 2 of the Sherman Act.”
It further zeroed on the second element of section 2, which requires there to be “predatory or exclusionary acts or practices that have the effect of preventing or excluding competition within the relevant market. See United States v. Microsoft, 346 U.S. App. D.C. 330, 253 F.3d 34, 58 (D.C. Cir. 2001).
The plaintiff’s second claim centered on the defendant’s “refusal to deal.
“In the absence of any purpose to create or maintain a monopoly, however, a company may deal or refuse to deal with whomever it pleases. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601-02, 105 S. Ct. 2847, 2857, 86 L. Ed. 2d 467 (1985) (quoting United States v. Colgate & Co., 250 U.S. 300, 307, 39 S. Ct. 465, 468, 63 L. Ed. 992, 1919 Dec. Comm’r Pat. 460 (1919)). Even a company with monopoly power has no general duty to cooperate with its business rivals and may refuse to deal with them if valid business reasons exist for such refusal. Mid-Texas Communications Sys., Inc. v. AT&T, 615 F.2d 1372, 1387 n.12 (5th Cir. 1980).
“In this case, PGA met its business justification burden by showing that it seeks to prevent Morris from ‘free-riding’ on PGA’s RTSS technology. See Cont’l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 55, 97 S. Ct. 2549, 2560, 53 L. Ed. 2d 568 (1977) (stating that prevention of ‘free-riding’ by competitors is a legitimate business purpose).”
The appeals court added that “the compiled real-time golf scores acquired through RTSS are not a product that Morris has a right to sell because they are a derivative product of RTSS, which PGA owns exclusively. We agree with the district court that PGA ‘has a right to sell or license its product, championship golf, and its derivative product, [compiled] golf scores, on the Internet in the same way the [PGA] currently sells its rights to television broadcasting stations.’ Morris Communication Corp. v. PGA Tour, Inc., 235 F. Supp. 2d 1269, 1282 (M.D. Fla. 2002).”
In its conclusion, the appeals court wrote that the Tour “has accommodated Morris at every step along the way, has agreed to sell its product to Morris, and has acted appropriately to protect its economic interests and investments. Yet Morris demands that it be given access to the product of PGA’s proprietary RTSS, without compensating PGA, so that Morris can then sell that product to others for a fee. That is the classic example of ‘free-riding,’ the prevention of which, under antitrust law, constitutes a legitimate pro-competitive reason for imposing a restriction.” Morris Communications Corp. v. PGA Tour, Inc.; Nos. 03-10226, 03-11502
11th Cir.; 3/31/04
Attorneys of Record: (for plaintiff) David Clark Borucke of Holland & Knight, LLP, in Tampa, FL.; George D. Gabel of Holland & Knight, LLP, Jacksonville, FL.; Jerome W. Hoffman of Holland & Knight, Tallahassee, FL. Timothy J. Conner, of Holland & Knight, LLP, Jacksonville, FL; Steven L. Brannock of Holland & Knight, Tampa, FL. (for defendant) Jeffrey A. Mishkin of Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY.; James M. Riley of Rogers, Towers, Bailey, Jones & Gay, Jacksonville, FL.; Richard Stuart Vermut of Rogers, Towers, Bailey, Jones & Gay, P.A., Jacksonville, FL.; Christine M. Russell of Rogers, Towers, Bailey, Jones & Gay, Jacksonville, FL.