Driving towards monopoly? How PGA and LIV are changing the game of golf
Many Australian golf fans will be eagerly anticipating the second iteration of LIV Golf Adelaide, to be contested at The Grange Golf Club from April 26. However, LIV events are not without their detractors, particularly loyal fans of the concurrent PGA Tours. The relationship between the two organisations has swung dramatically from fierce competition to talks of a proposed merger. Naturally, the industry is of great interest to competition lawyers. This article details the litigious history between the parties, why antitrust concerns have been raised, and what the consequences of a merger could mean for the sport.
LIV’s entry and initial response
In 2021, rumours of a breakaway golf tour were realised as LIV Golf (“LIV”) was unveiled. With financial backing from the Saudi Arabian state-owned Public Investment Fund (“PIF”), the league promised lucrative contracts for players, as well as equity in the organisation. Premised on a new 54-hole format, compared with the standard 72, with team players on the course at the same time, LIV sought to revolutionise the sport for fans and sponsors.
LIV was met with hostility by the incumbent and not-for-profit PGA Tour, which has traditionally been the pre-eminent organiser of competition for professional golfers. PGA Tour Commissioner Jay Monahan told ESPN that co-existence was ‘not in the cards’ and ‘impractical’. However, he was forced to concede that the Tour’s prize money arrangements would need to become more competitive with LIV. The PGA Tour went on to begin suspending several players who participated in LIV events.
Allegations made by LIV Golf and its players against the PGA Tour
In August 2022, a group of LIV players, joined by LIV, sued the PGA Tour over allegations it engages in anti-competitive behaviour. Central to the lawsuit were claims that PGA Tour used its monopoly power in the market for professional golf services to quash competition as well as unfairly suspend players in restraint of trade.
In the originating motion filed, the plaintiffs claimed ‘the [PGA Tour’s] conduct serves no purpose other than to cause harm to players and foreclose the entry of the first meaningful competitive threat the Tour has faced in decades’. In other court documents, LIV described the PGA Tour as ‘an entrenched monopolist with a vice-grip on professional golf’.
The lawsuit, which was filed in a U.S. District Court, included the following alleged practices by PGA:
· Repeated threats against PGA Tour players for joining LIV, including lifetime bans;
· Threats against PGA Tour players’ agents and sponsors with punishment if players joined LIV;
· Amending internal regulations to prevent players from participating in LIV events;
· Pressuring championship organisers to follow suit and replicate their sanctions against defecting players.
The plaintiffs claimed that, through these actions, they suffered harm in being deprived of work and sponsorship revenue; having competition diminished for their services, and thus their bargaining power; as well as harming the brand and reputation of the players affected.
Proposed merger and antitrust concern
In June 2023, both parties made stunning headlines by announcing an agreement to unify with one another to create a new global golf entity. Notably, as part of the agreement, LIV and the PGA Tour filed a motion to dismiss the antitrust lawsuit and related countersuits. Monahan accepted criticisms of hypocrisy but lauded the merger as necessary to expand the sport and control its future.
Despite this news, the U.S. Department of Justice continues an antitrust inquiry into the industry on a similar footing to the private litigation. At the time of writing, this inquiry is ongoing and will include a review of the proposed merger. Some sources of concern for competition regulators might include the following:
· Less playing spots available for professional golfers, with one competition instead of several;
· Removal of incentive for price competition on player salaries and bonuses;
· Sources of revenue for advertisers and marketers substantially reduced;
· Stifling of innovation and product differentiation;
Of course, in addition to the competitive effects of any merger, there are public policy concerns. A consistent allegation against LIV by its critics is that it is used by Saudi Arabia to ‘sportswash’ the State’s reputation, particularly against alleged human rights abuses. There will inevitably be great scrutiny of the fact that a monopolist consumer of professional golfing services might be bankrolled by the PIF.
Conclusion
The entrance of LIV has shaken the golfing world and led to the incumbent governing bodies acquiescing in survival. In the absence of detail around the terms of the merger, or the results of regulatory inquiry, the future of golf remains uncertain. However, future decisions on the merger will have significant implications for other sporting codes.
References
https://www.espn.com.au/golf/story/_/id/34470437/liv-golf-joins-antitrust-lawsuit-pga-tour
https://golfweek.usatoday.com/lists/liv-golf-history-pga-tour-merger/
https://www.golfmonthly.com/news/saudi-golf-league-everything-we-know-so-far
https://incompetition.com.au/2022/08/fore-liv-golfers-hit-back-at-the-pga-tour/
https://www.washingtonpost.com/sports/2022/08/28/liv-golf-antitrust-lawsuit/
https://www.linkedin.com/pulse/analysis-pga-liv-merger-from-anti-trust-law-standpoint-krida-legal/