A golf tie-up and its antitrust implications

I have to admit that golf is not (yet) my sport. However, on my way back from a client meeting last week, I listened to a really interesting podcast regarding the envisaged tie-up between the Professional Golfers’ Association (PGA) and Saudi Arabia sponsored LIV Golf and remembered that we briefly mentioned the case in one of our previous posts . This time I will dive deeper into the subject, giving some background on the parties and exploring antitrust implications of the envisaged tie-up.

The parties involved

The PGA is an established and most-renowned golf association with a rich history and a wide range of professional tournaments. Founded in 1916, it is one of the most prominent golf organizations globally and has long been recognized as the governing body for professional golf in the United States, overseeing the PGA Tour, PGA Championship, and numerous other prestigious events.

LIV Golf, on the other hand, is a newer entity that aims to challenge the PGA’s current status by organizing its own events and attracting top golfing talent. Founded in 2021, driven by its 93% shareholder PIF (sovereign wealth fund of Saudi Arabia, not an unknown name in the world of sports) and supported by a group of top-tier professional golfers dissatisfied with the existing system, LIV Golf aimed to create an alternative professional golf league with allegedly more rights for players and a fairer revenue-sharing model.

The history

When the launch of LIV was announced, it was met with a hail of criticism. PGA and LIV engaged in fierce competition for 18 months. LIV lured well-known players with large sums of money and also offered enormous prize money at individual tournaments. The PGA banned those players from playing in its tournaments for life. The DP World Tour, formerly known as the European Tour, imposed heavy fines and suspensions on those players. The players from both camps hurled accusations at each other. But you could also say: Players had the option to choose between two series, each of which wanted to establish itself as the top golf series (please recall that I write here as a golf layman).

Antitrust questions in the past

Antitrust law already played a role in the (very recent) history of the dispute. Some professional golfers took the PGA to court in August 2022 (you can find the complaint here), claiming that threatening life bans and imposing suspensions on players who take part in LIV Golf events was not in line with antitrust law. The players argued that PGA used its power and market standing to protect its monopoly which was threatened by the entry of LIV Golf. They emphasized that good players were key for establishing a successful golf series and that by threatening players not to join LIV Golf, PGA tried to “choke off the supply of elite professional golfers” and “cement its dominance over the sport”.

LIV Golf joined the lawsuit and PGA submitted a counterclaim in September 2022. PGA claimed that LIV Golf “seeks to wield the antitrust laws as a cudgel instead of engaging in an honest effort to compete in the market for professional golf, while at the same time free riding on the TOUR’s decades-long investment in tournament promotion for the various tours it operates, and in particular the PGA TOUR”.

In addition to these law suits, the US DOJ initiated an antitrust investigation into the PGA’s actions. In any case, it is fair to say that, prior to their tie-up, the parties did quite a bit with their behaviour to bring antitrust law (and thus themselves) into the focus of the antitrust authorities.

Future antitrust questions

So far it seems unclear in which form PGA and LIV Golf want to cooperate in the future. According to the press release on the PGA website, the plan is to form a new, collectively owned, for-profit entity. However, the tie-up raises several antitrust questions. PGA Commissioner Jay Monathan sums it up: “To take the competitor off of the board, to have them exist as a partner, … and for us to be able to control the direction going forward put us in a position as the PGA TOUR to serve our members, and at the same time get to a productive position for the game at large”.

Some US Senators raised serious concerns about the project and called the DOJ to investigate the matter (see here). And the DOJ indeed informed the parties that it will investigate the deal. Allegedly, the deal will also be scrutinized by other international antitrust authorities.

From a European perspective, in case the parties plan to engage in a loose cooperation without any structural changes, they might face questions around why such a cooperation might be in line with the cartel prohibition (Art. 101 TFEU), in particular given that, e.g., agreeing or even only exchanging information regarding player remuneration, tv and other marketing as well as agreements with local organizers, sponsors and advertisers could be seen as restricting competition on a market for services of professional golfers for elite golf events.

In case the parties will combine their activities, e.g., in a JV, they are also likely to face a thorough examination by antitrust authorities. I understand from people more interested in Golf than me that before the launch of LIV Golf, PGA was a quasi-monopolist (as LIV Golf also repeatedly claimed). So, going back to this scenario might not be the easiest case to argue in front of a competent merger control authority.

In particular the lawsuits summarised above will give antitrust authorities a lot to “chew” on. For example, LIV Golf inter alia claimed that before its launch, players had no option to play another tour than PGA and that this has given the PGA enormous powers to impose restrictions on players. LIV Golf also held that its entry was the first meaningful competitive threat the PGA had faced in decades and that the relevant market was protected by high barriers to entry, requiring hundreds of millions of dollars in capital, a sufficient number of elite professional golfers, venues and tournaments, television coverage, sponsors and advertisers.  

So, it remains interesting

While the case has not sparked my interest in the sport of golf, I will follow it closely in the future to see how it develops from an antitrust perspective. Rumour has it that no antitrust lawyers were involved in the discussions between the parties, and it will be interesting to see how the case will be dealt with. Ultimately, the outcome will shape the future of the golf industry and determine the level of competition and diversity in professional golf tournaments. Thus, it is fair to say that antitrust authorities play a crucial role in forming the landscape of professional golf for the years to come.

Photo by Will Porada on Unsplash