United States: Professional Rodeo Cowboys Association Bucks Antitrust Claims By Elite Rodeo Association

Last Updated: May 3 2016
Article by J. Bruce McDonald and Thomas F. Allen Jr.

A Texas federal district court recently rejected an attempt to enjoin preliminarily the Professional Rodeo Cowboys Association from enforcing its bylaws restricting competing activities of its members. Though plaintiffs have since voluntarily dismissed the complaint, the decision on the injunction motion nevertheless raises important antitrust issues for sports leagues, standard-setting organizations, and other associations of competitors joined to promote a common objective. Together with the Fifth Circuit's recent decision in American Quarter Horse Association, these cases provides a blueprint to help such organizations avoid antitrust liability.

Background

The Professional Rodeo Cowboys Association ("PRCA") is the nation's oldest and largest rodeo association, with approximately 7,000 members worldwide. The PRCA sanctions about 600 rodeo events each year across the United States and Canada, culminating in the National Finals Rodeo held each December in Las Vegas. PRCA is governed by a nine-member board of directors, with two directors representing rodeo committees, two directors representing stock contractors, one director representing contract personnel, and four directors including two retired athletes representing rodeo contestants.

PRCA's rodeos are open to all PRCA members, except that to participate in the National Finals a cowboy must rack up sufficient points at other PRCA-sanctioned rodeos throughout the year. In 2015, the total available prize money ("purse") for all PRCA events exceeded $41 million; the purse at the National Finals alone was nearly $10 million. For its organizing role, PRCA keeps about 6% of the overall purse.

Unhappy with some elements of PRCA, several top professional cowboys formed the Elite Rodeo Association ("ERA") in February 2014. Unlike PRCA, ERA is entirely owned by its member-athletes. ERA plans a shorter tour with only 8 regular-season events scheduled in 2016, followed by the ERA World Championship to take place in November. In September 2015, over 70 top PRCA contestants publicly announced their support for the ERA Tour.

At least partially in response to ERA, in October 2015 the PRCA board of directors enacted two new bylaws. The first bans from PRCA membership and rodeos any officer, employee, or owner of any other multiple-event rodeo organization (including ERA). The second imposes a blackout window prohibiting rodeo committees, contracting parties, vendors, and other rodeo entities from any involvement in a non-PRCA rodeo during or for the three days before or after any PRCA-sanctioned rodeo.

Shortly after these bylaws were enacted, the ERA and several of its athlete-owners brought an antitrust lawsuit against PRCA. ERA sought a preliminary injunction to prevent PRCA from enforcing its new bylaws. The plaintiffs claimed the bylaws constituted an unlawful agreement among competitors to restrict ERA from competing against PRCA in violation of Section 1 of the Sherman Act, and an attempt by a monopolist to unlawfully maintain its monopoly power in the market for professional rodeo athletes in violation of Section 2. (Sherman Act § 1 prohibits anticompetitive agreements among competitors, Sherman Act § 2 prohibits anticompetitive monopolization.) The PRCA moved to dismiss the ERA complaint.

District Court Opinion

Considering both ERA's application for a preliminary injunction and PRCA's motion to dismiss, the district court denied ERA's request for a preliminary injunction, holding that plaintiffs had failed to establish either a likelihood of success on the merits or irreparable harm. The court (somewhat curiously) also found plaintiffs had sufficiently and plausibly pleaded facts to support the complaint, therefore the court denied PRCA's motion to dismiss, albeit without much analysis.

No "group boycott" agreement. In the district court's view, ERA and the cowboy plaintiffs failed to show a likelihood of success on their claim that PRCA's bylaws constituted an unlawful conspiracy in violation of Section 1. The court wrangled with the question of whether PRCA is even capable of conspiring with its members. Unlike many trade associations, PRCA consists of a variety of economic actors—including rodeo contestants, rodeo committees, and stock contractors—not all of which are horizontal competitors. Thus, it was unclear to the court whether the PRCA's members could ever have a "meeting of the minds" required for a Section 1 violation.

Despite expressing skepticism on this issue, the court assumed as a legal matter that concerted action legally could have occurred, but found that plaintiffs had failed to present evidence of an actual conspiracy here. Only a minority of PRCA board members (active rodeo contestants and rodeo committees) stood to profit from the PRCA bylaws. No evidence suggested these minority board members coerced or otherwise unduly influenced any of the other members of the board. So, because plaintiffs failed to show a "meeting of the minds" among the PRCA board, they could not establish a likelihood of success on the merits on their Section 1 claim.

No monopolization of "rodeo cowboy" market. Next, ERA and the cowboy-plaintiffs could not show a likelihood of success on the merits on their claim that PRCA monopolized the "professional rodeo cowboy" market. While PRCA's market share was substantial, the court concluded that PRCA did not have monopoly power because there was no meaningful barrier to entry. Notably, ERA's success in scheduling a full season of events, securing a television contract, and arranging for a high-profile performance venue demonstrated PRCA did not have any ability to exclude competitors from the market. The existence of other non-PRCA rodeos, such as the American Rodeo and RodeoHouston (still the world's largest livestock show and rodeo), also suggests that PRCA's endorsement is not needed to effectively compete.

No irreparable harm. Finally, the court found ERA and the other plaintiffs had failed to show that they would suffer irreparable harm absent a preliminary injunction. The court distinguished rodeo athletes from athletes in other "lock out" cases (e.g., NFL, NBA): even with PRCA's bylaws, the plaintiff-athletes could still compete to earn a living in their sport—namely, through the ERA Tour rodeos, which had sponsors lined up and an anonymous financial backer to ensure a successful season. In fact, plaintiffs' evidence showed that ERA members were projected to earn as much as they had previously earned through PRCA. Thus, the plaintiff athletes could not demonstrate that losing the ability to compete in PRCA events constituted irreparable harm to merit a preliminary injunction.

Implications

Following closely on the heels of the Fifth Circuit's American Quarter Horse decision, Rodeo Cowboys contains key lessons for sports leagues, trade associations, and similar organization of competitors:

First, Rodeo Cowboys highlights the difficulty of proving that a large and diverse association can legally conspire with its members. Like the Fifth Circuit in American Quarter Horse, the Rodeo Cowboys court was skeptical that an organization like PRCA comprised of different types of members, not all of whom are horizontal competitors, could ever have a "meeting of the minds" necessary for a Section 1 violation. These decisions do not immunize such associations from antitrust liability; instead they suggest that Section 1 claims against associations composed of non-competitors will face tough scrutiny.

Second, even if such an organization legally could conspire with its members, Rodeo Cowboys imposed a high evidentiary threshold for a finding of conspiracy or concerted action. The court relied heavily on the fact that only four of PRCA's nine-member board had economic incentives to exclude ERA members from PRCA events, and plaintiffs offered no evidence that those four members otherwise influenced the other five members. Sports leagues, trade associations, and similar organizations could be similarly protected if they incorporated non-competitors in their rulemaking process. Again while not immune from a Section 1 claim, a diverse board comprised of members with different economic incentives will nevertheless have a strong argument that an exclusionary bylaw or similar rule was not the result of an unlawful conspiracy.

Finally, Rodeo Cowboys offers an important reminder that market shares are not determinative in a Section 2 case. Despite its high market share, PRCA did not, in the court's view, have monopoly power (and therefore could not violate Section 2) because there were not significant barriers of entry, as evidenced by entry of competing rodeos. Though ease of entry is often overlooked in Section 2 cases, the prominence of this factor in Rodeo Cowboys reaffirms its importance in the stable of monopolization defenses.

The court's February 4, 2016, order denying the PRCA motion for preliminary injunction can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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