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Today I’m writing about the merger deal between the PGA and LIV Golf, which is almost certainly illegal. Don’t be fooled by the press coverage, this deal in its current form isn’t going to happen.
Over the past two days, there’s been breathless reporting of a merger between the PGA Golf Tour and LIV Golf, the new Saudi-backed golf tour that has been challenging the dominant establishment by poaching players. Here’s the gist of the deal, as far as anyone can tell.
The tour is receiving upwards of $2-3 billion, all litigation ending and LIV likely going away, according to an industry source briefed on the matter and granted anonymity because they were not authorized to speak publicly.
The background to this deal is that the PGA has been the dominant monopolist over the world of golf for decades until the Saudi government through its Public Investment Fund (PIF) decided to finance a competitor in 2021, LIV Golf. LIV Golf started luring top players and putting on rival events, creating competition in the space. The two entities have been involved in a bitter antitrust suit for a year over allegations of anti-competitive behavior on the part of the PGA, and the PGA itself is under antitrust investigation by the government. Donald Trump is involved, with his properties hosting LIV events put on by his Saudi allies.
If you read the antitrust complaint filed against the PGA last year, it seems pretty clear that the PGA has been a problematic organizer of golf. “Members of the Tour receive a substantially lower percentage of the Tour’s revenues than professional athletes in other major sports,” players argued. When LIV began challenging the PGA, the Tour “threatened lifetime bans on players who play in even a single LIV Golf event” and “threatened sponsors, vendors, and agents to coerce players to abandon opportunities to play in LIV Golf events.” As Ted Tatos wrote, this is consistent with the history of competition in sports leagues, where rivalry pushes up compensation for players, and consolidation does the opposite.
To ward off its new competition, the strategy of the PGA was to denigrate LIV Golf as funded by murderous thugs. Because of the Saudi government’s bad track record on human rights, a lot of players refused to play in the new league. So this merger shocked everyone who believed the PGA’s human rights rhetoric. On a broader level the public discussions have been frantic about the rise of Saudi influence. I saw Tom Friedman and Andrew Ross-Sorkin on CNBC this morning wondering whether the Saudis could do the same thing to the NBA or other sports leagues, as part of a geopolitical play. And here’s a headline in the New York Times.
But I’m just baffled. There is no way this merger happens in its current form, as it’s obviously creating an illegal monopoly. There is a lot of grey area in antitrust law, but when two companies want to merge to a monopoly, and announce it as such, that’s a violation of black letter law. In fact, this deal is so wildly and comically against the law that I actually don’t think it is intended to close. If I had to guess, I would say it’s a desperate move by the Saudis to keep their dirty laundry out of an American courtroom in a separate but related case. Indeed, the more I look into it, the more baffled I become.
First, let’s talk about why this deal is illegal.
For that, I’ll go to the head of the PGA tour, Jay Monahan, who said that this merger is good for his organization because it allows them to “take the competitor off the board.” When a corporate leader publicly says the point of a merger is to monopolize a market, I can only imagine what’s in the private emails. Antitrust scholar H
