Competition Authority Decision of 12th December, 1996 relating to a proceeding under Section 4 of the Competition Act, 1991.

Notification No. CA/28/95 - The Professional Golfers’ Association.

Decision No. 474

Introduction

1.	This decision concerns the Constitution and Regulations of the Professional Golfer’s Association.  The Constitution is effective from April, 1992 and the Regulations from April, 1995.  The Constitution and Regulations form a contract between the Professional Golfers’ Association and its members who are golf professionals in the whole island of Ireland.  The arrangements were notified on 15th August, 1995 with a request for a certificate under Section 4(4) of the Competition Act, 1991.

The Facts

(a)  The Subject of the Notification

2.	The notification concerns the Constitution and Regulations of the Professional Golfers’ Association (PGA) which form a contract between the PGA and its members in the entire island of Ireland.

(b)  The Parties Involved

3.	The PGA is a UK body which organises and represents golf professionals in Ireland, the UK and abroad, and which organises and promotes golf tournaments and ensures the          participation of golf professionals in such tournaments.  The PGA has 280 members in Ireland and 5,000 in the UK and elsewhere.  It has three subsidiary companies i.e. PGA Travel Ltd , British Professional Golf Tour Limited and PGA Holdings Ltd, all of which are 100% subsidiaries of the PGA and which are non-trading companies except for British Professional Golf Tour Limited but the overall turnover figure for the PGA as previously notified is unaffected..  The PGA is not a subsidiary of any other company nor does it form part of any other group of companies.  There are other bodies which use the initials PGA such as PGA European Tour and PGA of America but they are not legally associated or connected with the PGA.  The turnover of the PGA in 1994 was approximately Sterling £5.2m.  Approximately 10% of the total turnover was attributable to the Irish region which encompasses the whole island of Ireland.  The turnover of each of the PGA’s 280 members in Ireland is not available.  The subsidiaries of the PGA are non-trading and therefore have no sales or turnover.

(c)  The Market

4.	The markets involved in this notification are the professional golf circuit                   and the representation of golf professionals in Ireland.  The PGA organises and promotes golf tournaments and ensures golf professionals participate in them.  The PGA principally represents golfers engaged at a golf club who provide tuition and operate the golf shop.  Many of its members participate in PGA tournaments and some make their livelihood in this way.  The more serious golf competitors are also members of the PGA European Tour, a separate organisation which is not legally connected with the PGA.  Professional golf tournaments are also organised in the UK and in Ireland by the PGA European Tour and the Royal and Ancient Golf Club of St. Andrews.  These organisations arrange tournaments in competition with the PGA although they are aimed at the upper end of the market offering higher prize money than the PGA.  The notified Constitution and Regulations of the PGA apply to 280 members of the PGA  based in Ireland and approximately a further 5,000 members based in the UK or elsewhere, all of whom are golf professionals.  There are a handful of top professionals who are not members of the PGA but are members of the PGA European Tour which offers higher profile tournaments and greater prize money.

5.	In 1994 approximately 44 PGA designated tournaments were held in the Irish Region.  Of these, 9 were run by the southern branch of the PGA in the southwest of the country, while the other 35 tournaments were organised by the main Irish Region of the PGA.  The competitive rounds of these 35 tournaments lasted a total of 59 days.  PGA members are free to play in other tournaments organised by any other body or person for the remainder of the year.  The tournament in Ireland which attracts the greatest level of interest is the Irish Open - previously the Carrolls Irish Open, now the Murphy’s Irish Open.  Generally there is no PGA tournament during the week of the Irish Open.

(d)  The Arrangements

6.	The arrangements notified are the Constitution and Rules of Association of the PGA.  These form a contract between the PGA and its members.  Membership is for one year, renewable at the choice of the member.  In applying for membership or renewal of membership, a member agrees to be bound by the Memorandum and Articles of Association and the Constitution and Regulations of the PGA.  According to the PGA the purpose of the Regulations is to ensure the promotion of the members’ interests as golf professionals and the promotion of professional golf in Ireland and in the UK for the benefit of the PGA and all its members.  Section 3 of Part 8A of the Regulations provides as follows:-
	“3.1 With the exception of class C Members competing in PGA European Tour - approved tournaments, Members must not play in a tournament which conflicts with an Association - approved tournament in which he is eligible to play without seeking a written release from the Executive Director/Regional Secretary as appropriate”.
 The effect of Section 3 of Part 8A is that a PGA member is unable to play in another event or tournament which conflicts with a PGA approved tournament in which he is eligible to play.  Where a tournament is designated as a PGA tournament, a PGA member may not play in any other tournament or exhibition match for which he receives prize money, appearance fees or any other payment, above a certain figure set by the PGA, without the permission of the PGA.  The competitive rounds of PGA tournaments normally last 1 to 2 days.  Section 18 of Part 8B of the PGA Regulations provides as follows:-
	“18 No Member, or his caddie, during the playing of a tournament will be permitted to wear or display any advertising matter, which in the opinion of the Regional Secretary or Tournament director, may embarrass a Sponsor or place in jeopardy the conduct of a tournament.  In all cases, approval to wear conflicting advertising matter must be obtained from the Regional Secretary/Tournament Director, or his appointed representative prior to the commencement of the tournament.”
(e)  Submission by the Parties

7.	In support of their request for a certificate the PGA argued that the restriction in Section 3 of Part 8A of the Regulations was necessary in order to ensure that PGA designated tournaments were well run, well supported, included a representative field of players and were an attractive professional event for sponsors and for the public.  It was in the interests of the members of the PGA as well as the tournament sponsors and the viewing public that a reasonable number of golf professionals participated in a golf tournament.  There was no obligation on any PGA member to attend at or play in any particular PGA tournament, but there was a restriction on PGA members involving themselves in other professional golf activities at the same time as a PGA designated tournament as such activities might detract from the PGA designated tournament and undermine its success, to the detriment of the PGA members, the sponsors and the viewing public.

8.	The PGA stated that the restrictions on PGA members contained in Section 3 of Part 8A were very limited in scope and were no more than were necessary to ensure the achievement of the objective set out in paragraph 7 above.  While competition in relation to organising or promoting professional golf tournaments could be said to be restricted by the said Section 3, the restriction was minimal, and was limited in its duration in that there was ample opportunity for a rival organisation to organise and promote other professional golf tournaments in the State.  It was in the interests of the members of the PGA, as well as the sponsors, tournament organisers and the viewing public that there were a reasonable number of golf professionals at any given tournament to ensure that a high standard of competitive golf is played.   The restriction was minimal and no more than was necessary for the PGA to function properly, to promote the tournaments, to promote the sport of golf in Ireland, to give the viewing public an opportunity of watching world class professionals and in that endeavour to give value for money to the viewing public and sponsors.

9.	The PGA stated that as far as it was aware there had been no decision of the European Court of Justice or the European Commission, whether by way of individual clearance or exemption or block exemption regulation, particularly relevant to restrictions on golf professionals or membership of golf associations.  It argued that it was accepted from the position taken by the European Commission that professional sportsmen can be considered to be undertakings within the meaning of Article 85 of the Treaty of Rome and that the same interpretation should be applied to the term “undertakings” in Section 4 of the Competition Act, 1991.  The PGA submitted that restrictions on professional sportsmen in relation to the tournaments which are organised for their benefit might be considered in a manner analogous to restrictions placed by the organisers of trade fairs and exhibitions on exhibitors.  They pointed out that the EU Commission had considered a number of cases in which a trade association had imposed a prohibition against exhibiting at exhibitions other than those organised by the trade association itself.

10. 	The cases considered by the EU Commission concerned prohibitions on exhibiting elsewhere for an extended period, known as the “closed period” or imposed restrictions and conditions which were discriminatory on the grounds of nationality.  However, in most cases, the Commission was prepared to grant an exemption under Article 85(3) on the grounds that exhibitors benefited from the rationalisation of such exhibitions, and the restrictions were necessary to guard against proliferation of minor exhibitions.  The Commission was generally concerned to ensure that the restrictions on exhibitors were no more than reasonably necessary, particularly as regards the period of protection and the extent of the prohibition.  The Commission was also concerned to ensure that the restrictions and other limitations should be based on objective criteria and be non-discriminatory.  The PGA submitted, that the restriction contained in Section 3 of Part 8A of the PGA Regulations was far more limited in scope than those considered by the EU Commission.  In particular, it submitted that Section 3 of Part 8A would have at most only a minimal impact on competition between organisers of professional golf tournaments.  The PGA submitted further that the restriction in Section 3 of Part 8A was no more than was necessary to ensure the proper organisation and functioning of professional golf tournaments, for the benefit of the members of the PGA, the tournament organisers, the tournament sponsors and the viewing public.  Any possible effect the restriction in Section 3 of the Part 8A may have on competition was limited, and was therefore not in breach of Section 4(1) of the Competition Act, 1991.

11.	By letter of 18th September, 1995 the Authority pointed out to the PGA that the Authority’s Notice of 18th September, 1992 on employment agreements stated that employees were not undertakings and asked what proportion of members of the PGA were employed by golf clubs as distinct from being self employed.  The PGA replied to the effect that the definition of an undertaking in Section 3(1) of the Competition Act, 1991 must be liberally interpreted and in the context of decisions of the European Courts of Justice which have held that professional cyclists and other sportsmen are undertakings engaged for gain.  The PGA’s opinion was that regardless of whether a golf professional was employed by a golf club, when he participated in a professional golf tournament with a view to winning prize money, he was engaged for gain and, therefore, an undertaking within the meaning of Section 3 of the Competition Act, 1991.

12.	The PGA stated that a golf professional received a monthly payment from his golf club for carrying out his duties at the club.  This monthly payment was most often a retainer or service fee on which the golfer must pay tax as a self-employed contractor.  In the minority of cases (estimated to be less than 25%), the monthly payment could be described as a wage and in such instances the golf club was liable for the payment of tax and PRSI on behalf of its employee.  The PGA further stated that golf professionals generated income through four main areas i.e. (i) playing and organising playing at a golf club (ii) teaching or coaching golf (iii) managing the pro-shop, buying in stock, merchandising and other commercial activities (iv) repairing golf equipment.  It pointed out that almost without exception the bulk of a golf professional’s income would derive from the above activities carried on on his own account as a self-employed person as opposed to being carried on by him as an employee.  The PGA was satisfied that nearly all golf professionals, with the exception of young golf professionals, retired golf players and golf players directly employed by the PGA, would consider themselves, and be treated for tax purposes, as being either wholly self-employed or substantially self-employed.

Assessment

(a) Section 4(1)

13.	Section 4(1) of the Competition Act, 1991 states that “all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void”. 

(b)  The Undertakings and the Agreement

14.	Section 3(1) of the Competition Act, 1991 defines an undertaking as “a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service.”

15.	The PGA is a corporate body engaged for gain in the organisation of golf tournaments and the promotion of golf.  It is, therefore, an undertaking for the purpose of Section 3(1) of the Competition Act, 1991.  Having considered the arguments of the PGA regarding the question of whether golf professionals are undertakings for the purposes of the 1991 Act, the Authority is satisfied that the golf professionals who are members of the PGA are not employees but are self-employed.  They are engaged for gain in the supply of goods in so far as their pro shop activities are concerned and are engaged for gain in the supply of a service in so far as their tournament playing and tuition is concerned.  The golf professionals are, therefore, undertakings for the purpose of Section 3(1) of the Competition Act, 1991 and the Constitution and Regulations of the PGA, therefore, constitute an agreement between undertakings i.e. the PGA and its members.

(c)  Applicability of Section 4(1)

15.	The Authority considers that Section 3 of Part 8A of the Regulations of the PGA which prevents PGA members from participating in a golf tournament which conflicts with a PGA organised golf tournament without the permission of the PGA, does not prevent, restrict or distort competition.  PGA organised golf tournaments take up only a small portion of the playing year e.g. 59 days in 1994.  Therefore, it is open to a rival organiser of golf tournaments to organise a golf tournament for PGA members during the large portion of a year during which PGA tournaments are not held.  In addition, care is taken by the PGA to ensure that no PGA golf tournaments are organised in Ireland during Ireland’s most prestigious golf tournament, the Irish Open, which is organised by the PGA’s rival, the PGA European Tour.  PGA players are free to enter non-PGA organised golf tournaments during the large part of the year in which PGA golf tournaments are not held.  Even without Section 3 of Part 8A of the PGA Regulations any PGA player playing in a PGA organised golf tournament is implicitly precluded from playing in a rival golf tournament as his agreement to play in the PGA organised golf tournament means he cannot play elsewhere in a rival golf tournament.  It should be noted that the above findings are similar to the findings in Decision No. 423 dated 12th September, 1995 - Gallaher/Snooker Players, in which the Authority found that a provision in the agreement between the parties whereby snooker players who participated in the Goffs Snooker Tournament sponsored by Gallaher could not play in any snooker exhibition, match or tournament within a 50 mile radius of the Goffs tournament while that tournament was in progress, did not prevent, restrict or distort competition.

17.	Section 18 of Part 8B of the PGA Regulations provides that during the playing of a PGA tournament no member or his caddie will be permitted to wear or display any advertising material which in the opinion of the Regional Secretary or Tournament Director may embarass a sponsor or place in jeopardy the conduct of a tournament.  In the opinion of the Authority this provision does not prevent, restrict or distort competition.  A sponsor of a golf tournament has the right to have its product promoted at a golf tournament without competition from a product which has not supported the tournament in any way.  If advertising material cannot be worn or displayed because it would embarass a particular sponsor, the caddie and golfer are free to wear or display that material at other golf tournaments not sponsored by that particular sponsor or while not engaged in tournament golf.  The following decisions of the Authority are relevant in relation to the above finding:- Decision No. 421 of 12th September, 1995 - Adidas/FAI,  Decision No. 422 of 12th September, 1995 - Adidas/Sports Stars and Decision No. 423 of 12th September, 1995 - Gallaher/Snooker Players. 

The Decision

18.	In the Authority’s opinion the Professional Golfers’ Association and the golf professionals it represents are undertakings within the meaning of Section 3(1) of the Competition Act, and the notified arrangements constitute an agreement between undertakings.  In the Authority’s opinion the arrangements do not have, as their object or effect, the prevention, restriction or distortion of competition in goods or services within the State or any part of the State.

The Certificate

19.	 The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, that the Constitution and Regulations of the Professional Golfers’ Association, which forms a contract between that organisation and its members and which was notified to the Authority on 15th August, 1995, under Section 7 of the Competition Act, 1991 (Notification No. CA/28/95), does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority

Patrick Massey
Member
12th December, 1996