The PGA Tour and LIV Golf’s New Alliance May Not Survive Federal Scrutiny

If the two rival tours come together in a 'two-for-one merger' it may be considered a monopoly, one antitrust expert says.

LIV Golf began on June 10, 2022, with a field of 48 players outside London.

Fifty-four days later, on Aug. 3, 11 named plaintiffs—Phil Mickelson, Talor Gooch, Hudson Swafford, Matt Jones, Bryson DeChambeau, Abraham Ancer, Carlos Ortiz, Ian Poulter, Pat Perez, Jason Kokrak and Peter Uihlein—filed a 106-page antitrust complaint against the PGA Tour and demanded a jury trial.

On Tuesday, 307 days later, the Public Investment Fund of Saudi Arabia and the PGA Tour announced that hostilities would end and agreed to settle all outstanding lawsuits.

How we got here, from 11 ex-PGA Tour players suing their former workplace as the Tour fought back, to a new partnership between fierce rivals, is one for the history books.

While things may now appear amicable between the PGA Tour and the PIF, the events of the last year may carry more legal baggage than anyone imagined.

The Department of Justice's investigation of potential anticompetitive behavior toward LIV Golf by the PGA Tour was first reported by the Wall Street Journal on July 11, 2022.

Recently, individual players, including Phil Mickelson and Bryson DeChambeau, have been interviewed by DOJ investigators.

It’s clear that the DOJ will not stop its investigation into the PGA Tour’s actions in regard to antitrust and anticompetitive behavior no matter what settlement is reached between the PIF, LIV Golf and the PGA Tour.

In fact, with the PGA Tour's potential partnership with PIF and the combination of a new and stronger commercial entity in the marketplace, the DOJ may have more to look at than before.

Separately, the DOJ, Federal Trade Commission and agencies in the UK and Europe may want to review the new company that comes out of the settlement announced Tuesday.

If it is reviewed by any or all these agencies, they may approve the deal outright or restrict the deal in some way. Either way, this process will take time and would clearly slow the timeline down that Yasir Al-Rumayyan laid out when announcing the partnership,

“I think it’s a matter of weeks,” Al-Rumayyan said on CNBC when describing the timeframe for a definitive agreement. “We have agreements on, you know, the framework, which is an excellent first step. And it all depends on just finalizing the many things, including the valuation. Once we get that, I think it’s, it’s just a matter of weeks.”

No matter which agency takes on the investigation of the potential partnership between the entities, they have the law to follow and that law has been used as a sword more times than not. Just ask current PGA Tour Policy Board member Randall Stevenson, whose company, AT&T, wanted to acquire Time Warner for $84.5 billion.

Stevenson was CEO of AT&T and when he could not get the DOJ to sign off on the Time Warner acquisition for antitrust issues, he went to court, suing the DOJ and eventually winning in 2018. But it cost the telecommunications giant hundreds of millions of dollars for a property they would eventually spin off in 2021.

The AT&T merger with Time Warner wasn’t a merger of equals or even competitors, which is unlike the potential connection between the PGA Tour, DP World Tour and LIV, as all three are in the same business of professional golf and all three are competitors.

It’s not much of a leap to suggest any merger between the three could be anticompetitive, taking an 800-pound gorilla and making it a 1,600-pound behemoth.

“Merger statute says it forbids mergers (when) the effect which may be substantially to lessen competition, or to tend to create a monopoly,” Robert Lande, professor at the University of Baltimore Law School and co-founder and Director of the American Antitrust Institute, said of antitrust statutes. “So a two-to-one merger creates a monopoly, no question about it."

Lande went on to say that a two-to-one merger is presumptively illegal under the Clayton Act, but as with many legal statutes there are exceptions, in this case for failing companies.

According to the Federal Trade Commission, the law bars mergers when the effect "may be substantially to lessen competition or to tend to create a monopoly."

Of the three types of mergers, only horizontal mergers, which involve two competitors, could apply here, and those mergers are two-way mergers between competitors that can lessen competition and harm consumers.

None of these issues are black and white and all will take time to be reviewed.

Interestingly, the process of review of any mergers by the DOJ will not take place until the merger has a potential cost, which won’t happen until all the entities value their contributions into the newly formed company and they then make a filing with the DOJ and the FTC.

To close the litigation chapter between the 307 days of legal hostilities between the PGA Tour and LIV Golf, there were 456 separate docket entries, some just notifying the court of a new attorney joining the case and some much meatier, such as the Motion for a Temporary Restraining Order by the plaintiffs so those eligible players could participate in the FedEx Cup playoffs in 2022, which was denied.

Numerous attorneys represented the players, LIV Golf, the PIF and the PGA Tour at numerous times.

The case cost tens of millions of dollars and the legal fees are still accumulating as the antitrust issues will heat up over 2023 and beyond.