PGA Tour’s Deal With LIV’s Saudi Backers to Be Investigated by the Justice Department
The probe introduces uncertainty to the agreement between warring bodies that stunned the golf industry, which was already facing scrutiny under federal antitrust law
The Justice Department has notified the PGA Tour that it will review the Tour’s planned merger with LIV Golf’s Saudi backers for antitrust concerns, people familiar with the matter said, initiating a regulatory obstacle to the stunning deal that the warring golf bodies hope will stabilize the divided sport.
A review by the Justice Department—which had already been investigating the PGA Tour and other leading golf bodies for anticompetitive behavior—introduces uncertainty to the planned joint venture between the PGA Tour and Saudi Arabia’s Public Investment Fund. It also makes it probable that any transaction that is hammered out between the rivals won’t take effect for some time.
One senior Tour executive told employees this week that the outcome of the blockbuster proposal, announced last week, likely won’t be known for at least a year, a person familiar with the remarks said. Regulatory review could extend even longer than that.
The official also said to them that it’s possible that the union between the Tour and Saudi Arabia’s sovereign-wealth fund will fall apart entirely if the sides cannot settle on specific terms.
“We are confident that once all stakeholders learn more about how the PGA Tour will lead this new venture, they will understand how it benefits our players, fans, and sport while protecting the American institution of golf,” the PGA Tour said in a statement issued late Thursday.
The Tour and the Saudi PIF, along with Europe’s DP World Tour, last week called a sudden truce in the battle that has divided golf for the last year.
LIV Golf had poached a number of the top golfers, while the sides had sued and countersued one another.
Then, to the surprise of everyone except the small crew of people who negotiated the pact, they decided to combine their commercial golf assets in a new entity.
But the initial agreement contained only the broadest of frameworks—chief among them that the Tour and LIV would drop their litigation against one another, and that the PGA Tour would control the board of the new, yet-to-be-named business.
That left major details still to be worked out—all under a microscope from regulators who have spent a year studying the golf ecosystem already, and while LIV alleged the Tour was acting as an illegal monopolist to stifle a nascent competitor.
Further complicating matters, the PGA Tour said this week that its commissioner, Jay Monahan—who helped negotiate the PIF deal and is set to be the chief executive of the combined entity—has taken a leave of absence because of what the Tour has described as “a medical situation.” Tour officials have said that work on the deal will go on, without pause, in his absence.
Federal antitrust scrutiny had been widely anticipated in the wake of the announcement, which came on the heels of the existing Justice Department investigation into the PGA Tour and other golf institutions including Augusta National Golf Club.
Antitrust lawyers have been quick to point to potentially problematic aspects of the deal, including statements by Monahan, who told reporters that it would be good for the Tour “to take the competitor off of the board, to have them exist as a partner, not an owner.”
People familiar with the agreement have said it wouldn’t be surprising if the Justice Department examined the deal, but that regulators should be happy with it because it benefits everyone within the industry.
“Every single player in men’s professional golf is going to have more opportunity and growth,” Monahan said in unveiling the plan.
The Tour official speaking to employees this week acknowledged the earlier Justice Department investigation when discussing the matter with employees and said the body fully expects the agreement to be scrutinized by the European Commission and regulators in the United Kingdom, as well.
It could be awkward for both parties if the Justice Department were to nix the deal.
The Saudis have committed billions to LIV Golf, but it has garnered little interest from fans, media partners or sponsors.
It is unclear if LIV events will even continue if the merger succeeds. At the same time, the Tour had largely fought back against LIV over moral grounds that would be difficult to argue after agreeing to partner with PIF.
Nonetheless, both sides stand to benefit from their agreement to end their litigation against one another. Monahan had previously indicated to employees that the spending war between the two sides, including legal fees, is unsustainable, The Wall Street Journal previously reported. On the other side, the deal enables the Saudis to extricate themselves from a situation in which PIF and its governor, Yasir Al-Rumayyan, would be subject to discovery and being deposed, an outcome they had sought to avoid by claiming sovereign immunity.
This isn’t the PGA Tour’s first time facing a federal antitrust inquiry.
But, unlike the last time, the politics are working against the Tour instead of for it.
When the Tour beat back an antitrust investigation from the Federal Trade Commission in the 1990s, it relied on powerful lawmakers who pushed to nix the probe. Now, influential lawmakers are lining up against the Tour.
While the Tour counted Capitol Hill as a powerful ally when it was battling LIV, fanning the flames of Saudi Arabia’s troubled record on human rights and how its golf enterprise was merely an exercise in sportswashing, those same politicians have pivoted to assail the Tour now that it has parked with its former enemy.
A bill has been reintroduced in the House of Representatives to strip the Tour of its tax exemption. Sen. Richard Blumenthal, a Connecticut Democrat, said earlier this week that he was opening an inquiry into the agreement and demanding documents from both parties.
And lawmakers previously broadly sympathetic to the Tour as it battled LIV have turned on it—becoming only more enraged after receiving a letter from Monahan in which he said the Tour had been left largely on its own to fend off the Saudis.