Should Ponte Vedra based PGA TOUR, INC. and its Saudi Arabian merger partner, LIV Golf, be sued for antitrust violations under the Hart-Scott-Rodino Antitrust Improvements Act and the Sherman and Clayton Antitrust Acts? I vote yes.
Here's a June 8, 2023 Atlantic article why Baruch College law professor Marc Edelman:
The Golf Merger May Be Dead on Arrival
The PGA Tour wants to team up with LIV Golf to eliminate competition. Federal antitrust enforcers aren’t going to like that.
On tuesday morning, the PGA Tour and LIV Golf announced a planned merger that ended nearly a full year of antitrust litigation between the two rivals. Until recently, LIV Golf, an upstart league founded in 2021, had portrayed the PGA Tour as a monopoly that illegally controlled the market for professional golf competitions. Meanwhile, the PGA Tour and its commissioner, Jay Monahan, had blasted LIV Golf for partnering with the Saudi Arabian Public Investment Fund, which is largely controlled by the Saudi royal family and has been accused of funding terrorism. The announcement brought sudden peace to a bitter, dramatic conflict.The logic of the deal is easy to see. The PGA Tour was feeling pressure from LIV Golf, which had poached some marquee golfers. To keep up with the Saudis’ lavish spending, it was forced to pay out bigger prizes and dip deeper into its reserves. And the two organizations were enmeshed in an expensive lawsuit. “We were competing against LIV,” Monahan said after the deal was announced. The merger, he explained, was a way “to take the competitor off the board, to have them exist as a partner.”
That’s a very understandable reason to do a deal. In this case, it’s also most likely an illegal one.
The most basic principle of antitrust law is that companies with large market share can’t make agreements to avoid competing against each other. It is very difficult to characterize the PGA-LIV merger in any other way. The antitrust suit originally filed last year by a group of LIV players alleged that without “any meaningful competition (prior to LIV Golf’s entry), the Tour has failed to innovate and its product has grown stale.” The PGA Tour, they argued, “has used its monopoly position to extract substantially increased revenues from broadcasters and advertisers” while paying players less “because there is no competition for players’ services.”
LIV Golf eventually joined its golfers as a plaintiff in this very lawsuit. To now claim that a combined PGA-LIV entity is something less than a monopoly would lack any semblance of credibility. The merger would leave just a single, dominant association controlling almost the entire world of professional golf. Even if the PGA Tour was not a monopoly before the proposed merger, the new entity certainly would create one.
The situation is a textbook lesson in why the antitrust laws were passed in the first place. When the PGA Tour and LIV Golf existed as rivals, their competition led to a range of innovations—such as shotgun starts, fewer tournament holes, and eliminating mid-tournament player cuts—all of which were designed to make the game more entertaining to fans. (Indeed, many of the best innovations in professional sports history, including the introduction of basketball’s three-point shot, emerged during periods of interleague competition.) Competition between the two organizations was also benefiting golfers financially. To lure players away, LIV Golf in its first year offered seven different tournaments, each featuring a $25 million prize pool—more than the PGA Tour had ever paid. The PGA promptly raised its prize money in response. If the merger were to go through, the incentive to pay players more would disappear. The golf labor force would suddenly have only one source of employment to choose from.
The merger could also harm the other businesses involved in broadcasting and marketing pro golf. The emergence of a rival association gave sponsors and television stations the choice of working with two different golf tours, increasing their bargaining power. It also gave potential advertisers more freedom to choose an association partner that best aligned with their corporate mission.
Considering all that, will the Department of Justice or the Federal Trade Commission sue to block the deal? Although predicting exactly what will happen is impossible, a challenge seems likely. Many antitrust cases pose tricky questions about market definition, competitive conditions, and so on. This one doesn’t. The market is easy to define: professional golf. The number of competitors that would exist post-merger is easy to specify: one. And the barriers to entry are clear: Very few would-be challengers have the backing of a $700 billion sovereign wealth fund.
Rival sports leagues have been allowed to merge in the past, but under very different circumstances. The 1976 merger between the NBA and the rival American Basketball Association was held up for years by an antitrust lawsuit brought by players. The case settled only when the ABA was on the brink of dissolution. The 1970 merger between the National Football League and American Football League probably would have faced a challenge, but the NFL owners shrewdly persuaded Congress to give them a special antitrust exemption.
The proposed merger between the PGA Tour and LIV Golf is not as good as done. At a minimum, antitrust enforcers will conduct a thorough investigation before even considering letting the deal through. The time, cost, and loss of privacy associated with this process could be enough to lead one, if not both, of the associations to walk away.
Support for this article was provided by the William and Flora Hewlett Foundation.
1 comment:
These wine sipping crackers in Pontevedra will do business with the Russians and the Saudis before they do business with the people who they've essentially made into sub-apes by neglecting the town for decades.
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