The settlement of the antitrust lawsuit between the PGA Tour and the Public Investment Fund signals the end of the beginning from a legal standpoint.
In the deal announced Tuesday, the PGA Tour, DP World Tour and Saudi Arabia’s sovereign wealth PIF, which finances LIV Golf, will merge their commercial interests in a new for-profit entity. The three tours will maintain separate operations. The deal may well spark review by the U.S. Department of Justice. Subsidiary litigation also could follow in the wake of the agreement.
What can golf fans expect? The future legal landscape is filled with landmines, but several possibilities are likely over the next year.
The PGA Tour/DP World Tour/PIF combination is apt to draw antitrust merger review by government enforcement agencies (and across the Atlantic by their European counterparts).
PGA Tour commissioner Jay Monahan labeled the transaction during his initial press statement as “a combination of commercial assets by partnering entities,” not a merger. That statement will do nothing to dissuade the DOJ from scrutinizing the deal. At the same press conference, Monahan did the deal no favors when he said he felt “very good about the changes we’ve made and the position that we are in, but ultimately, to take the competitor off the board – to have them exist as a partner, not an owner – and for us to control the direction going forward.”
That statement stunned antitrust specialists. It also prompted an outpouring of criticism. Within hours of the announcement, politicians on Capitol Hill called for an investigation of the deal while criticizing the link with the Saudis’ sovereign wealth fund on account of human-rights concerns.
The devil will be in the details, as the exact parameters of the union are presently unknown and presumably remain to be ironed out. Whether the deal secures DOJ approval depends on a multitude of factors. At its core, the essential question is whether the partnership enhances competition or reflects – as LIV asserted in its lawsuit – a further power grab by the PGA Tour to ensure its dominant monopoly with a vise-like grip over professional golf. The combination is known in legal terms as a “two-for-one merger,” which transforms a market from two competitive entities into one behemoth.
The DOJ under the Biden Administration has acted aggressively with civil and criminal legal actions involving wage suppression caused by alleged antitrust violations. Golf Channel commentator Brandel Chamblee said on the day of the announcement that the deal “reeked of wage suppression.”
That said, the optics of a future investigation are not unimportant. Policing a market where laborers experience wage suppression is one thing. Where the market involves multimillionaire professional golfers asserting that stifled competition is adversely impacting their earnings is another matter.
The one sure bet is the contours of the 2024 golf season – and lineup of professional tours – is anything but a done deal. Golf fans can expect further legal issues to follow the PGA Tour and LIV Golf for the foreseeable future.
Government legal review is but one aspect of the combination. Litigation by others is a distinct possibility.
Consider players on the PGA Tour who turned down significant offers from LIV Golf in reliance on the PGA Tour’s representations that any disloyal player would suffer a lifetime ban. This is especially acute for the players who will be squeezed out of upcoming tournaments who previously had enjoyed a place at the table with the exit of three dozen LIV players.
What about LIV players who signed blockbuster contracts for three to five years? Will they receive the full value of the contracts should LIV effectively end its tournament schedule upon its combination into the new entity?
How about sponsors who signed their deals based on the PGA Tour’s standing on human rights in contrast to that of the financial backers of LIV Golf? Corporations operate in the court of public opinion, and the fallout from sidling up to the Saudi aspects of the newly combined entity may cause them to pull out or sue over the PGA Tour’s new path forward.
Change is inevitable in life. The bombshell announcement of the PGA Tour-Saudi partnership signals that change and attendant legal issues are equally inevitable in professional golf in the coming year.
Jerry Maatman is a partner of Duane Morris LLP, and a nationally recognized antitrust and class-action litigator. He is also a professor of law at Northwestern University School of Law and a two-time NCAA Division III all-American in golf at Washington and Lee.
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Top: PGA Tour commissioner Jay Monahan describes the deal among the PGA Tour, DP World Tour and Saudi Arabia's Public Investment Fund as a combination of assets, not a merger.
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