The proposed merger between the PGA Tour and its Saudi-funded rival LIV Golf this week stunned everyone from golfers to Wall Street bankers, leaving many wondering what the merger might mean.
The deal was announced after months of feuding and antitrust litigation between the two leagues. The agreement would put an end to all pending litigation.
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PGA Tour Commissioner Jay Monahan told CNBC’s “Squawk on the Street” on Tuesday that while there were many “tensions” between the two organizations, the deal was a benefit to the game of golf.
While tensions between the tour and LIV have been resolved, they could be relevant when regulators comb through the deal.
“The Commissioner’s statement that this is necessary to end all this tension leaves the question of what do we mean when we talk about tension? That could be from a competitive point of view, which is a good thing for pricing and consumers said Henry Hauser, a former FTC attorney and currently an antitrust attorney at Perkins Coie. “It can also mean tension in the sense of distraction.”
While the two organizations feuded, golfers were divided between the PGA Tour and LIV. Some left for the hefty paychecks handed out by LIV even as they lost their notes. Others turned down large payouts to stay with the tour. Monahan has been outspoken in the past, saying he believed players would face “significant consequences” if they went to LIV. On Tuesday he said he expected to be called a hypocrite and accepted the criticism.
Since the announcement, several players have expressed their frustration with the deal. Sponsors have also been slow to make any statements or decisions, likely waiting to see how the deal is structured and the regulatory process progressing, according to two sponsors close to the tour.
Lawsuits aside, LIV Golf has been surrounded by controversy and criticism since its launch in 2022. Backed by the Saudi Arabia Public Investment Fund — an entity controlled by the Saudi crown prince — critics have accused the sovereign wealth fund of “sportswashing” by using LIV Golf to distract from the kingdom’s history of human rights abuses.
Concerns about antitrust
Lawsuits rolled out from both sides last year when LIV aggressively lured high-profile players, including Phil Mickelson and Bryson DeChambeau, away from the tour for big paychecks.
In response, the tour had increased its prizes and player benefits, as well as signed loyalty deals with its top players, while trying to prevent further poaching.
Both leagues had alleged that the other’s contracts and policies restricted golf talent and stifled proper competition. LIV Golf sued the tour and also cited anti-competitive practices for banning its players. The PGA Tour resisted.
The proposed deal, which includes the European DP World Tour, will end all fighting – in and out of court.
While Public Investment Fund governor Yasir Al-Rumayyan said he expected the deal to close within a few weeks, some wonder how quickly it will move to US regulatory bodies like the Federal Trade Commission and Justice Department. bypass.
“Everything that happened before this announcement is still actionable,” Hauser said, noting that the DOJ can still investigate these claims outside of the merger process. “You can’t use a settlement as a masquerade.”
Hauser noted that while it’s always preferable to keep cases out of court, settlements themselves are bound by antitrust laws — “particularly if there’s a legitimate legal dispute between the entities.”
While the deal could close relatively quickly without regulatory approval, lawmakers could raise issues after the fact. This recently happened at the Ministry of Justice ordered the end of the American Airlines and JetBlue Airways alliance, saying the merger would harm consumers by driving up fares. American Airlines plans to appeal the ruling.
The new entities should demonstrate that the merger benefits consumers, especially on a global basis, by bringing together the best talent under one umbrella and expanding the reach of the game, said Timothy Derdenger, an assistant professor of marketing and strategy at Carnegie Mellon University’s Tepper School of Business.
“If the deal can demonstrate that it will support golfers’ growing wallets and lead to greater involvement and innovation in golf, adding value to viewers, I don’t see much of a fight coming from the US government.” Derdenger said.
The deal also raised questions about the implications for PGA Tour sponsors and player support.
Many have spoken out about LIV’s backer, PIF, and even protested at events.
Relatives of those who died in the September 11, 2001 terrorist attacks have protested LIV events because of Saudi ties. U.S. officials have concluded that Saudi nationals contributed to funding the al-Qaeda terror group, which was linked to the September 11 terrorist attacks, though the investigation has not found that the Saudi officials were complicit in the attacks.
On Tuesday, the group 9/11 Families United spoke out about the merger, especially after Monahan, the commissioner of the PGA Tour, publicly brought this up in an interview last summer. “I would ask any player who has left or any player who would consider leaving, ‘Have you ever had to apologize for going on the PGA tour?'” Monahan said in an interview with CBS Sports last year.
Major tour sponsors have yet to speak out or make any decisions. At least one sponsor is awaiting the regulatory process for the deal before making any decisions, according to a person familiar with the matter who declined to be named because the internal discussions are private. Other sponsors have not yet publicly commented on the matter.
Marketers, advertisers and sponsors have pulled out of other partnerships as controversies raised concerns.
“The fundamental reason the brands we work with decide to invest in something is to leverage the power of that equity to connect with their customers,” said Sampson Yimer, a senior vice president of sponsorship consulting at Momentum Worldwide . “When that equity is compromised in any way or has the potential to do so, it causes these brands to potentially rethink their investments or hit pause.”
Shortly after joining LIV, Mickelson made disparaging remarks about the tour and showed his support for the Saudis. The top golfer lost his notes from KPMG, among others, some of which were more than a decade old.
“If it’s a consideration at all, it’s something we advise our clients on,” Yimer said. “I can imagine this deal could have a chilling effect.”
However, the combination of the leagues could also lead to more endorsements, at least in the long run.
“The players who have left and lost their endorsements will be able to re-engage with those sponsorships and endorsements because it brings them back into the fold,” Derdenger said.