It’s been a year since the shocking announcement in June 2023 that the PGA Tour and LIV Golf had settled their antitrust litigation and, with the DP World Tour (the European Tour), had entered a Framework Agreement to create a “global golf partnership.” 1[1] The author provides a description of the antitrust litigation, and the professional golf ecosystem in her earlier LawInSport article: LIV Golf v. PGA Tour and the Future of Professional Golf.; Yet, unification still eludes the sport as negotiations toward a definitive agreement drag on and government concern about the consolidation has surfaced at both the U.S. Senate and the U.S. Department of Justice (DOJ).
Meanwhile, LIV Golf’s owner — the Kingdom of Saudi Arabia’s Public Investment Fund (PIF) — continues to pour its wealth into LIV while the PGA Tour strives to (1) generate revenue to compete with LIV and (2) empower and enrich its golfers sufficiently to keep them loyal. This article examines how professional golf has evolved during this tentative truce, the legal shoals it still must navigate, and the prospects for the proposed PGA Tour-LIV Golf alliance:
- Breaking down the Framework Agreement
- Government concerns about the proposed partnership
- Negotiating a definitive agreement between the Tour and the PIF
- Moving forward: PGA Tour internal governance and product model
- If no deal, what next?
Breaking down the Framework Agreement
A skeletal document, the four-page Framework Agreement contains only a handful of binding commitments on the PGA Tour and LIV:
- to dismiss the U.S. litigation with prejudice (i.e., cannot be refiled),2[2] Stipulation of Dismissal in LIV Golf Inc. v. PGA Tour, Inc., No. 22-cv-04486 (June 16, 2023)..;
- to negotiate in good faith,
- to keep confidential any information shared in pursuit of a partnership, and
- to refrain from disparaging the other party.
In terms of its aspirations, the Agreement anticipates a new entity funded by the Saudi PIF to the tune of $3 billion, but controlled by the PGA Tour. The new entity would hold both tours’ commercial assets—including television rights—and maximize their value. The PGA Tour Commissioner would function as CEO and PIF governor Yasir Al-Rumayyan would chair its board and get a seat on the PGA Tour Policy Board. The PGA Tour would remain a nonprofit organization responsible for regulating the competitions and, as majority shareholder of the new entity, it would determine the fate of LIV Golf.
Beyond that, everything was up for grabs. Open questions included:
- How to value the assets that each tour will contribute to the new entity.
- Whether and in what form LIV Golf will survive as a distinct tour.
- Whether and how to reinstate the defectors from the PGA Tour who were banned from its events after taking hundreds of millions of dollars in Saudi money to play for LIV.
- Whether PGA Tour players who stayed loyal, spurning LIV’s huge paydays, will receive compensation.
The Agreement initially included a clause that LIV would not poach any Tour players, but the parties struck that clause as a preemptive attempt to alleviate DOJ antitrust concerns.
Government concerns about the proposed partnership
Those DOJ concerns nonetheless persist, and the agency has indicated it will subject the final terms of any definitive agreement to antitrust scrutiny. Past sports mergers in U.S. football, basketball, and hockey were similarly scrutinized. 3[3] The NFL-AFL merger in 1970 required an Act of Congress exempting it from antitrust challenge. See Football Merger Act of 1966, Public Law No. 89-800, 80 Stat. 1508 (codified at 15 U.S.C. Sec. 1291). See also Robertson v. National Basketball Association, 389 F. Supp. 867 (S.D.N.Y. 1975) (challenging the NBA-American Basketball Association merger); Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351 F. Supp. 462, 480 (E.D. Pa. 1972) (challenging the NHL-World Hockey Association merger).; In addition, the European Union and the United Kingdom may review a final deal under their competition laws.
The proposed partnership is vulnerable to the same legal claims LIV Golf pursued against the PGA Tour before they settled their lawsuit. LIV had argued that the PGA Tour is a monopolist in the market to produce elite golf tournaments and a monopsonist in the market to purchase the services of elite pro golfers. Those claims were weakened by LIV’s success in recruiting some of the game’s highest-ranked golfers and producing a full season of events it touted as elite golf.4[4] See, supra, n. 1..;
However, the new entity would combine the PGA Tour, LIV, and the European Tour to create a superleague with no rival. The PGA Tour would be empowered to determine the future of LIV Golf, with no guarantee that it will continue to operate. If the merger takes a competitor off the board, the DOJ will be concerned that golfers may face lower compensation and fewer playing opportunities, broadcasters and sponsors may face higher prices to purchase golf rights, and consumers may find fewer tournaments to satisfy their appetite for golf.5[5] Cf. Case C-333/21 European Superleague Company v. FIFA, ¶¶ 97, 122 (Dec. 21, 2023) (requiring FIFA and UEFA pre-approval rules for new interclub football matches to be “transparent, objective, non-discriminatory and proportionate,” but allowing them to take into account the “social and educational function” of sport).; But consumers—the primary beneficiary of antitrust law—might not be worse off. The PGA Tour and LIV could credibly assert that their new entity offers a superior product that makes fans better off by reuniting the best golfers in regular competition.
Regulatory review of final deal terms will delay implementation of any deal by some months from the time those terms are announced. Consummation of a final deal may well depend on legislative intervention, as was the case in the NFL-AFL football merger, or a consent decree that conditions the deal on the survival of LIV Golf as an independent venture.
The proposed partnership also provoked scrutiny by the Senate Committee on Homeland Security & Government Affairs Permanent Subcommittee on Investigations. In hearings conducted on July 11 and September 13, 2023, the Committee grilled witnesses over whether the Kingdom is using investment in golf to “sportswash” its human rights abuses, influence an American cultural institution, and benefit from that institution’s tax-exempt status. PGA Tour witnesses were excoriated for their hypocrisy in withdrawing their moral objections to getting into bed with a brutal regime. Those witnesses defended the deal as a response to the financial reality that the Tour could not compete over the long run with LIV Golf given ongoing litigation expense and the limited capacity of Tour sponsors and media partners to match the PIF’s endless wealth. The Senators didn’t seem convinced and questioned why the Tour did not seek alternative sources of capital, including from U.S. investors.
The Senate Subcommittee is pressing forward in investigating Saudi business ties to the U.S. It has served subpoenas and demanded responses from the PIF, which has refused to turn over documents or produce Al-Rumayyan for testimony, asserting doing so would violate Saudi law and encroach on sovereign immunity. The PIF has even filed lawsuits in Saudi Administrative Court against four U.S. consulting firms it hired, seeking to prevent those firms from producing records to the Senate Subcommittee. No further hearings have been held, and the Subcommittee’s inquiry appears to be at a stalemate.
Negotiating a definitive agreement between the Tour and the PIF
The June 2023 announcement of the Framework Agreement was shocking to Tour golfers because it was negotiated in secrecy without player input. It was also shocking from a business and legal perspective for two reasons. First, the Agreement did not impose an exclusivity window. The PGA Tour remained free to talk to any and all other investors while it negotiates with PIF. Second, in most mergers and acquisitions, the parties maintain tight secrecy around the deal until close to final, with most details agreed upon. A premature public announcement was deemed necessary here to allow Tour players to digest the news and help shape the final agreement.
But negotiating in public has proven challenging. The December 31, 2023, target for finalizing the deal has now long passed, with that deadline mutually and indefinitely extended. Fast-forward one year from the big announcement and the Agreement’s architect Jimmy Dunne has resigned from the PGA Tour board, conceding in his resignation letter that “no meaningful progress” has been made toward a deal.
At this writing, a seven-man “transaction subcommittee,” including Tour Commissioner Jay Monaghan and golf greats Tiger Woods and Rory McIlroy, continues to negotiate sporadically, but few details have been shared. Questions have arisen as to whether player-members of the Tour’s negotiating team are conflicted because they would benefit most from any arrangement that prioritizes the elite players. However, controversy over the Kingdom’s human-rights record no longer seems to be an impediment to a deal. If the Tour’s player directors are morally opposed to a deal, they have not said so—and have repeatedly stated they are willing to make a deal if they like the terms.
Meanwhile, the parties continue to operate separate tours and make strategic moves to improve their negotiating positions. LIV Golf resumed poaching PGA Tour players, notably Masters champion Jon Rahm who jumped to LIV for a reported $550 million. This staggering sum suggests to some that a Definitive Agreement is not close: why would the PIF throw so much money at Rahm if progress was being made toward a deal where it would, as rumored, fund a $1 billion equalization pool for the Tour players who earlier turned down LIV offers? Rahm’s defection arguably puts the Tour in an even worse negotiating position than a year ago—when LIV Golf lured five of the top 10 players with enormous offers, posing an existential threat to the Tour.
The Tour in turn has taken the Senate Subcommittee’s advice and sought U.S. investment partners. In January 2024, the Tour announced the creation of PGA Tour Enterprises, a for-profit corporation that will hold the Tour’s business rights and other commercial assets. That move answered one of the open questions surrounding a Tour-PIF partnership—how to value those assets. Strategic Sports Group (SSG), a private equity firm, pledged up to $3 billion for a 25% interest in the new entity—meaning the assets are valued at $12 billion.
The SSG transaction potentially confers leverage on the Tour in negotiating with the PIF, as the funds enable the Tour to appease players tempted by LIV. With the SSG investment, the Tour can offer players higher purses, popularity bonuses, and even equity in the new entity. SSG’s presence also defuses Senate concern about the foreign takeover of an American sport as it would relegate the PIF to a minority co-investor, with a diluted and presumably more passive interest. Even that deal structure might appeal to the PIF because the SSG investors include other sports property owners in baseball, football, and basketball, relationships the Saudis would value as they expand their presence in global sport.
The pressure is now on for the PIF-PGA Tour negotiations to make significant progress by the end of summer, or the golf offseason could see LIV moving aggressively to sign some of the tour’s biggest names. Deal terms will require approval of the PGA Tour Policy Board. Notably, if the parties never make a deal, the Framework Agreement imposes no financial penalties, and the parties have no continuing obligations to each other.
Moving forward: PGA Tour internal governance and product model
The past year has been tumultuous for the PGA Tour in terms of its internal governance and product model. Facing lingering player resentment over the secrecy and surprise of the Framework Agreement, the Tour agreed on new governance and transparency measures. It restructured its Policy Board, adding a seat so it now has 11 members. Players now hold six seats, with Tiger Woods joining the Board, outnumbering the independent directors. But a revolving cast has filled those seats, creating instability and challenges in charting a path forward for the Tour and the broader game.
One area of friction was over how to distribute to Tour members nearly $1 billion in equity from the SSG investment. Tour Board members reportedly hold differing views over whether the criteria should prioritize spreading the wealth throughout the Tour, or catering to elite golfers to deter further high-profile defections to LIV. Regardless of how many shares each player receives, the grants create incentives for the players to approve a deal with the PIF because it would most certainly increase the value of the equity shares.
The product model is also shifting, with the Tour increasing purse sizes and altering its format in response to LIV. Certain tournaments have been designated signature events with larger purses, smaller fields, and, in some cases, no 36-hole cut, allowing every player to compete in all four rounds. Signature events award significantly more “FedEx Cup” points, which are the basis for participation in the season-ending Tour Championship. The Tour is also expanding its media presence to appeal to younger fans and connect golf with mainstream culture, building on the success of “Full Swing”—the Netflix documentary series that follows a diverse group of Tour golfers through a season.
But essentially the Tour is banking on its legacy and the opportunities it affords players to earn Official World Golf Ranking (OWGR) points. LIV Golf has abandoned its bid for OWGR points which are generally not available to no-cut, 54-hole events. As a result, LIV players have been plummeting in the rankings since joining the league, narrowing their opportunities to play in the major tournaments outside of the PGA Tour. The four majors—the Masters, U.S. Open, PGA Championship, and Open Championship—grant entry to golfers largely based on ranking points.
Still, LIV Golf has hardly been marginalized, despite low attendance and poor television ratings in the U.S. It has expanded to 13 teams, added C-suite executives, signed sponsorship deals, and already put together a schedule for 2025. It has found modest success in Asia and Australia where fans are grateful for a product that delivers stars like Rahm, Bryson DeChambeau, Brooks Koepka, Dustin Johnson, and Phil Mickelson, who rarely visited when they played on the PGA Tour.
If no deal, what next?
If the PGA Tour and LIV Golf ultimately abandon their efforts towards a Definitive Agreement, what next? The professional golf war would continue to rage, in the boardrooms and possibly return to the courts.
In the boardrooms, new dealmaking could reshape the professional golf landscape. The PIF could continue to fund LIV, picking off Tour players and degrading the Tour product. The Tour could limp along with watered-down fields that start to alienate the fans, or seek more investors in an attempt to battle back. The major tournaments might need to revisit how they select their fields, as fan interest in those contests depends on pitting the greatest players against each other. Similarly, to stay relevant, the OWGR might need to reevaluate its ranking system to accommodate different golf leagues’ approaches to the game. Meanwhile, as LIV Golf player contracts expire, it raises the question as to whether they might resign from that league and attempt to return to Tour. And it’s even possible that the PIF abandons LIV in favor of other sports investments that have greater prospects for success—both financial and in terms of its foreign influence project.
As for the courts, while LIV Golf could not revive its original antitrust claims against the PGA Tour, the individual golfers who brought the initial suit could do so. Those golfers all had earlier voluntarily withdrawn as plaintiffs, but did so without prejudice to refiling. They could renew claims against the PGA Tour that banning LIV golfers from participating in Tour events violates the antitrust laws.
LIV Golf could also bring a new lawsuit against the Tour and perhaps other participants in the professional golf ecosystem, based on antitrust violations that allegedly have occurred after the date of the litigation settlement. But such claims would not have much traction in light of LIV’s success in luring away star golfers and expanding its business.
Further, such claims would rekindle the risk that the PIF and Al-Rumayyan would have to comply with U.S. litigation discovery. The federal court in the original lawsuit had ruled that the Saudi parties are subject to U.S. judicial process and must respond to subpoenas.6[6] Order in Jones v. PGA Tour, Inc., No. 22-CV-04486-BLF (N.D. Cal. April 6, 2023), https://www.law360.com/articles/1594786/attachments/0.; The court rejected the argument that they were entitled to immunity under the U.S. Foreign Sovereign Immunity Act,7[7] 28 U.S.C. § 1602 et seq. finding that they engaged in “commercial activity” in the U.S. through their control over LIV Golf. This ruling is highly problematic for the Saudis since the PIF invests in a wide range of U.S. companies that are often engaged in civil litigation. Furthermore, even if compelled by legal process to answer questions, Al-Rumayyan would still be subject to Saudi Arabia’s strict secrecy laws that severely punish those who reveal the confidential workings of government.
The PGA Tour could similarly initiate a new lawsuit, based on LIV’s post-settlement maneuvers, arguing that LIV’s pursuit of PGA Tour members during the negotiation period amounted to tortious interference with contract. That argument is weakened by the very existence of the Framework Agreement, and the Tour’s assent to withdrawing the non-solicitation clause.
Conclusion
As of this writing, the PGA Tour and the PIF have intensified their negotiations to merge their golf tours. The parties reportedly have exchanged term sheets and largely agreed on the financial piece. Ongoing discussions are focused on defining the combined product as to format, schedules, media rights, and how to reinstate the LIV players. Even if they finalize a deal, the Department of Justice will undoubtedly have the last word.
This article was first published on the LawInSport blog. The original is available to view here.
Written by: Jodi Balsam, Professor of Clinical Law, Director of Externship Programs, Brooklyn Law School.