Does the GolfNow Acquisition of EZLinks Deserve Antitrust Scrutiny?

gb_weekly_logo_new.png

Does the GOLFNOW Acquisition of EZLinks Deserve Antitrust Scrutiny?
Is it about tee times or software… or both?

By Harvey Silverman, Silverback Golf Marketing



gavel-2492011_1920.jpgAn old boss once told me, “If you hear the same rumor three times, it’s a fact.” Despite my former boss being a nutbag, I’ve experienced his statement proven true more than once.

During the months I spent researching, interviewing, compiling, and writing the NGCOA’s “Beware of Barter" document, I heard more than three times that EZLinks was for sale and would be acquired by GOLFNOW. But it didn’t become a fact, in November 2019, until we completed the document and sent it for legal review. The Conclusion opened with an added message about the acquisition along with, “The material in this document stands as is with the caveat that over time, things may change. They typically do when two dominant forces merge. The NGCOA will continue to remain vigilant to any changes that affect the businesses and livelihoods of our members and golf course operators across the country.”

Andre Barlow is the attorney who reviewed “Beware of Barter” for NGCOA. Barlow is a partner at Doyle Barlow & Mazard, PLCC and a former trial attorney with the Antitrust Division of the U.S. Department of Justice. The NGCOA and the USA Tee Time Coalition consults with attorneys who specialize in antitrust matters to be sure they are not overstepping their legal bounds in discouraging certain behaviors or doing business with certain companies or avoiding collusion. Boycotts or collusion by associations is an avoidable sin with appropriate legal advice.

Barlow was intrigued by GOLFNOW’s acquisition of EZLinks and walked the document over to people he knows at the DOJ. The result was an invitation to Jay Karen and Jared Williams for a preliminary discussion in Washington, D.C., with the DOJ. It so happened to coincide with the 2020 NGCOA Golf Business Conference and the PGA Merchandise Show, but when the DOJ summons you, I don’t think “Not now, we’re busy” is an acceptable response. And so, the meeting ensued.

board-game-3024839_1920.jpgThe NGCOA has long had issues with GOLFNOW’s business practices, and behaviors reported to it by members and competitors. Fueling NGCOA’s concern of possible monopolistic aspirations was a public statement by GOLFNOW executive Jeff Foster that “we want to facilitate the booking of every round, everywhere.” (Golfweek, January 25, 2016).

The acquisition of EZLinks and, with it, Teeoff.com by NBC Sports Group moved NGCOA’s concerns to a new level – GOLFNOW’s primary competitor was no longer. Jay Karen, the NGCOA CEO, cites a call with EZLinks’ leadership the day of the announcement where he learned that the acquisition had “flew through” the government’s merger approval process, and “they asked us hardly any questions.” And so began a series of meetings with Barlow and high-level leadership at DOJ.

Attorney Barlow published an article on June 9 of this year, expressing his opinion that “NBC Sports’ purchase of EZLinks deserves antitrust scrutiny.” Barlow makes the case that “few missions are as important to the U.S. antitrust agencies as preventing anti-competitive mergers,” but that some might evade their radar. And despite a merger having already closed, “the antitrust agencies have jurisdiction to challenge any transaction that may substantially lessen competition,” and unwinding those already consummated. He cites several cases proving this point.

Barlow insists the GOLFNOW/EZLinks merger should be on the antirust radar with several key points:

  1. Comcast’s NBC Sports Group’s acquisition of EZLinks eliminated head to head competition in both the online tee time agency space, as well as the golf management software markets.
  2. With the addition of EZLinks, GOLFNOW controls about 90% of aggregated, online tee time inventory, and over 60% of the golf management software market (Pellucid Corp, and Edgehill Golf Advisors who collaborated with Apparation Golf to assemble the data in the Internet Golf Course Database [IGDB], reports the combined entities with 62% market share as of summer 2019).
  3. The software is the “key technology piece controlling the distribution of a public golf course operator’s tee times to any rival online tee time agency or booking technology.”
  4. Trial courts accept narrowly defined markets even in technology mergers. In this instance, “no other products have the same attributes as an online tee time agency platform.” GOLFNOW and EZLinks “competed on both sides of the online platform,” competing for both golf course tee times and golfers.
  5. Due to indirect network effects, significant entry barriers exist for any rival online tee time agency. Given the figures quoted above, GOLFNOW is in a position to deny upstart online tee time agencies and booking apps access to its clients’ tee sheets.
  6. With approximately 90% of the online tee time agency market post-merger and GOLFNOW having eliminated its biggest competitor, Barlow thinks the merger is presumptively unlawful.

Colleagues have asked whether it’s the NGCOA’s place to get involved in a potential antitrust case involving two of golf’s largest technology providers. Jay Karen responded passionately (Note: I invited GOLFNOW to comment on Barlow’s article, and they declined).

Most troubling to Karen is that “the tee time distributors and marketers controlling most of the software market is the most troubling structural aspect of the marketplace. GOLFNOW has enough control of the inventory to prevent their client golf courses from distributing their tee times on sites that GOLFNOW would deem competitive.  Conversely, if a competing or new online tee time agency desired access to the golf courses, GOLFNOW can lock them out or control the economic conditions for that to happen.  That kind of control of a golf course’s inventory, let alone a majority of the industry’s tee time inventory, is too dangerous to overlook.  I would like to see the federal government look into decoupling the software platforms from the distribution platforms as a structural remedy.” 

Karen continues, “Let the distribution companies compete, let the software companies compete, and let there be more open connectivity among all systems.  We are in favor of whatever allows golf courses more choice and fewer restrictions by their software and distributor vendors.  In the end, the golf course should be in complete charge of their rates and where their tee times are sold. In that regard, the current marketplace is broken, and the by-far largest player seems to have stretched beyond legal bounds.”

The courts consider two aspects in antitrust cases – structural and behavioral. A structural decision might force GOLFNOW to divest of its acquisition or somehow split it. A behavioral decision would force the combined company to follow a prescribed set of conditions like DOJ did with the Ticketmaster and LiveNation online ticketing case.

Will it happen? The antitrust agencies, DOJ and FTC, have to make the first move. Should it happen? If this article starts the debate, and NGCOA has stated its case, we’ll hopefully soon hear the other side of the argument. A judgment awaits from both the golf industry and maybe the courts.



Harvey Silverman is the proprietor of his marketing consultancy, Silverback Golf Marketing, and the co-founder of Quick.golf, golf’s only pay-by-hole app. Harvey authored NGCOA’s “Beware of Barter” document and has spoken at their Golf Business Conferences and Golf Business TechCon. 

subscribe.png




Yamaha
__________________


Deluxe_Ad_-_Wk3_Jun_17.jpg

___________________