How Antitrust Laws Could Kill the PGA-LIV Golf Merger

8 minute read

The staid game of golf is not the usual backdrop of an international controversy. But since the PGA Tour stunned the world by announcing a merger with LIV Golf, the Saudi-backed upstart that had been luring players with lucrative contracts, it set off an immediate and intense backlash—with many of the sport’s players and fans expressing outrage over what it could mean for the future of the game.

Yet the deal is facing more headwinds than aggrieved golfers and an enraged public. There’s a formidable obstacle that could put the proposed venture at existential risk: American antitrust law.

“The PGA is selling out to the Saudi regime trying to draw attention away from its atrocious human rights record with a new golf monopoly,” Sen. Elizabeth Warren, the Massachusetts Democrat, tells TIME. “I have serious concerns about this PGA-LIV deal, and it should be closely scrutinized by the Justice Department.”

In the days after the agreement was made public, leading members of Congress, the nation’s top antitrust experts, and federal enforcers have been exploring whether the two leagues establishing a new for-profit entity would violate the 1914 Clayton Act, the primary federal statute that prohibits mergers and acquisitions that squash competition. The deal in question is what’s known in antitrust parlance as a two-to-one merger, meaning it would shrink an already concentrated marketspace from being controlled by two firms to just one. While the pact would put to bed a separate antitrust lawsuit that LIV players filed against the PGA Tour last year, it would amount to a garden-variety case of two mammoth companies joining forces to avoid competing against each other—the main scheme that antitrust law was designed to prevent.

While the PGA Tour for decades held a monopoly position over professional golf, the deal would establish a new dominant association with complete control over an industry that only recently gained a competitor. The Justice Department, which was already conducting an antitrust investigation into the PGA Tour, will review the proposed deal. So, too, will antitrust enforcers in the United Kingdom and Europe. The agencies will probe the agreement’s impacts on players, workers, sponsors, and television broadcasters. They will also be forced to evaluate whether a new league would effectively stifle innovations that rivals typically concoct to make the game more entertaining to fans.

But the deal is not finalized; no paperwork has yet been submitted to the federal government. (The Justice Department hasn’t commented on the deal, and is unlikely to do so until after it’s been filed.) Based on what’s known about the agreement thus far, however, some of the nation’s foremost antitrust experts say it appears to stand on shaky regulatory ground.

“It looks illegal what they’re up to here,” Tim Wu, a Columbia University law professor who served on President Joe Biden’s National Economic Council, tells TIME. “You have one sort of monopolist or quasi-monopolist in golf. They have a challenger. The idea that the existing dominant monopolist can buy out its challenger because it’s causing problems is just sort of a facial violation of antitrust laws.”

Jay Monahan, the commissioner of the PGA Tour, has already described the agreement as intended to eliminate a competitor, the ultimate violation of U.S. competition law. “I felt very good about the changes we’ve made and the position that we were in, but ultimately, to take the competitor off of the board—to have them exist as a partner, not an owner—and for us to be able to control the direction going forward,” he told reporters at a press conference on Tuesday.

The admission flabbergasted some antitrust scholars. “You’re supposed to say this will increase competition, this will help consumers. You’re supposed to use all of this coded language. You’re not supposed to say this is gonna help us remove a competitor and that’s great. You don’t say that, and you certainly don’t say it publicly,” Matt Stoller, director of research at the American Economic Liberties Project, an anti-monopoly think tank, tells TIME. “So I can only imagine what’s in the internal correspondence and discovery about the deal itself. Does this Saudi sovereign wealth fund want their internal correspondence exposed in a trial?”

The PGA Tour’s embrace of LIV amounts to a significant about-face. It had previously castigated the league for its connections to the Saudi government’s Public Investment Fund. Much of the outrage over the deal stems from the tour’s willingness to suddenly turn the cheek on Riyadh’s support of terrorism, human rights record, and role in the gruesome 2018 murder of Washington Post journalist Jamal Khashoggi. Rep. John Garamendi, a Democrat from California, introduced a bill on Wednesday to strip the PGA Tour of federal tax loopholes over its new business arrangement with the Saudis.

Read more: A Stunning Golf Merger Shows How Saudi Cash Could Change Sports

One of the last times two adjacent sports leagues became a single dominant entity was in 1966, when the American Football League merged with the National Football League to create the modern NFL. That pairing was so apparently a violation of antitrust law that Congress passed a special exemption to let the deal through. It was also the mechanism through which former Rep. Hale Boggs, a Louisiana Democrat, exerted leverage over the new league to establish the New Orleans Saints.

The PGA Tour and LIV have already signaled one strategy to circumvent antitrust regulators. Monahan and LIV representatives have described the deal as the creation of a new business entity, not a conventional merger. Many other details remain unknown until more information about the transaction becomes available.

“We don’t know how they tried to structure this to avoid antitrust scrutiny,” Wu says. “But I’ll also say that the Justice Department and courts are perfectly capable of overlooking or ignoring facial efforts to avoid antitrust.” In other words, antitrust enforcers are likely to treat the deal as a merger, no matter what the PGA Tour and LIV call it.

Last month, the Department of Justice successfully thwarted an attempt by two other major firms to create a partnership that resulted in monopoly power. U.S. District Judge Leo Sorokin ruled that American Airlines and JetBlue had to end their so-called “alliance” on flight routes in Northeast America within 30 days, saying the arrangement was designed to “strengthen their own competitive positions” against rivals Delta and United. It was the latest example of the courts calling foul on corporate consolidation under the guise of a business partnership that the parties hoped could avoid antitrust scrutiny. The DOJ also successfully staved off another high-profile acquisition last November, when the courts blocked publisher Penguin Random House’s attempt to buy Simon & Schuster.

The PGA Tour is also likely to claim that they were losing money and struck a deal to save their business. “They could argue, ‘We’re a failing firm, if we don’t do this merger, we’ll go out of business,’” Stoller says. “I don’t know if that’s credible, but they could argue that.”

That defense has traditionally been reserved for companies on the verge of bankruptcy. While the PGA Tour might have been losing out on player contracts as well as marketing and advertising dollars to LIV, it does not appear to have been that far down the hole. “Saying we’re losing money is not a defense to a merger claim,” Wu says. “Uber was losing money for a long time. Does that mean they get to buy Lyft?”

Despite its storied history, the PGA Tour was dogged by the competition posed by LIV, which poached some of its top players, including the likes of Phil Mickelson and Dustin Johnson. The most prominent supporter of the league was former President Donald Trump, who hosted LIV events and tournaments at some of his own golf clubs and predicted the merger a year ago. “A BIG, BEAUTIFUL, AND GLAMOUROUS DEAL FOR THE WORLD OF GOLF, CONGRATS TO ALL!!!” Trump wrote on his social media platform Truth Social on Tuesday.

But such a celebration may be premature. If the past is prologue, the Biden Administration appears poised to try to stop the deal, setting off an epic legal clash that could halt the remaking of pro-golf in its tracks. “Antitrust prefers competition to monopoly,” Wu says. “Everything about monopoly over competition is worse for workers and ultimately worse for the country.”

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