Golf’s Mega-Merger Could Spark Protracted Legal Fights

Last week’s announcement that the PGA Tour, DP World Tour (the European Tour) and LIV Golf are joining forces ends a multiparty and multinational legal dispute over how pro golf leagues compete.

It has also drawn widespread rebuke from golfers and fans.

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As a result, the PGA Tour faces an unprecedented public relations crisis, which could soon morph into an even larger legal crisis that unravels their plan.

The “newly formed entity”—which doesn’t have a name yet—is a work-in-progress. PGA Tour commissioner Jay Monahan acknowledged “there are many details to work through,” and he cautioned the final agreement will “require PGA Tour Policy Board approval.” Until a deal is signed, negotiations can fall apart, a situation that can trigger its own legal troubles.

But assuming negotiations advance, at least three areas of law could prove problematic for the PGA Tour, the European Tour and their new friend from Saudi Arabia, LIV Golf.

Antitrust and Competition Laws

Before they joined forces, LIV had sued the PGA Tour, arguing it is an illegal monopolist: a buyer of elite pro golfers’ services that possesses too much control and stifles competition. The litigation’s presiding judge, Beth Labson Freeman, appeared unpersuaded. She underscored the incongruity of LIV claiming the PGA Tour has too much control while convincing some of the world’s best golfers to leave it.

LIV raised the same basic argument against the European Tour, but it too was shot down. In April, the UK arbitration service Sports Resolutions held the European Tour could enforce regulations against golfers who contractually agreed to follow and then breached by joining LIV.

Yet their “newly formed entity” is a different and more formidable creature. Through it, these competing leagues will restrict how they compete for elite pro golfers’ services. The consequences will be felt globally.

The tricky question is, how will the shared entity impact the two groups most relevant to antitrust analysis—golfers and consumers?

Going forward, the PGA Tour, European Tour and LIV will presumably not compete when scheduling tournaments and events, which could mean fewer chances for golfers to ply their trade. But top golfers will continue to be in demand, meaning an antitrust lawsuit might be led by lesser known and less talented golfers—a group unlikely to pose much of a threat.

Also, if golfers don’t see a drop in pay and other benefits on account of the entity, it would be harder for a golfer to claim damages. If there are no damages, there won’t be a reason to sue.

Similarly, consumers—the primary beneficiary of antitrust law—might not be worse off. While some fans are disgusted by the PGA Tour joining forces with LIV Golf, which is funded by Saudi Arabia’s Public Investment Fund, that’s not a response of interest to the law. Consumers must be tangibly harmed, such as through fewer golf tournaments to watch, fewer chances to see top golfers or higher prices to explore their fandom. Even then, the PGA Tour and LIV could credibly insist their new entity offers a superior product that makes fans better off.

There’s still a chance a government regulator could try to block the entity. The Department of Justice’s antitrust division is already probing the legal ramifications of competition for pro golfers, and a counterpart in the United Kingdom, the Competition and Markets Authority, could do the same.

Even a threatening letter from a government agency could disrupt the new entity from forming. Recall the DOJ’s antitrust division warning the NCAA in January 2021 about regulating NIL. The NCAA then abruptly delayed a vote on NIL rules, leading to a failed attempt to convince Congress to pass NIL legislation.

But if regulators don’t see the entity as causing actual harm to competition, they’re unlikely to act.

Voting and Membership Rights

Much has been made of PGA Tour golfers being independent contractors, rather than employees. That status was confirmed by the U.S. Supreme Court in Casey Martin’s Americans with Disabilities case in 2001. It means golfers can’t form a union since only employees can do that.

But some PGA Tour golfers are also members, which means they have legal rights (and obligations) contractually guaranteed by the Player Handbook and Tournament Regulations and other PGA Tour documents. Members have a voice on what the PGA Tour does. It’s clear some feel blindsided.

Monahan acknowledged the deal will require a vote of the PGA Tour Policy Board, which sets membership policies, establishes distribution methods for tournament purses, determines dues and fees, and wields assorted other powers. Golfers have a significant but not controlling voice on the 10-member board, which consists of four player directors, one officer of the PGA of America and five “independent directors.”

It’s uncertain what degree of voice golfers will have in the new entity. The PGA Tour says it will appoint most of the entity’s board, and the PGA Tour will have a majority voting interest, but how players fit remains to be seen.

The PGA Tour could be legally challenged on voting-related fronts. If the PGA Tour doesn’t follow its own procedures in creating and approving this unprecedented entity, members could argue their contractual rights were breached. Members, particularly those on the policy board, might argue the letter or spirit of PGA Tour rules gave them a right to be consulted at every important step. If members stand to lose voting powers in the new entity, they could argue unjust business practices and similar claims.

These types of claims could be brought via a petition for a restraining order to block the deal from progressing. They could also be part of a case for money damages.

But there would be hurdles.

For one, it’s not clear the PGA Tour has violated any rules. There may be grounds for golfers’ attorneys to proffer plausible-sounding arguments, but the PGA Tour could insist the new entity is separate and not bound by the same procedures.

Also, courts ordinarily review membership organizations’ interpretations of their own rules under a deferential standard of review known as “arbitrary and capricious.” A golfer would need to show a rule was clearly not followed to advance; any sort of reasonable interpretation by the PGA Tour of a rule would likely pass muster.

Damages might be hard to show, too. A member golfer might not like the new arrangement, but the day-to-day of his career might not be much different.

Detrimental Reliance

While some PGA Tour golfers took LIV’s money, others turned down lucrative offers. Will Zalatoris reportedly declined $130 million to join LIV. Tiger Woods, the world’s most famous golfer, was apparently offered in the ballpark of $700 to $800 million.

Golfers could argue they detrimentally relied on the PGA Tour’s portrayal of LIV as a vehicle of the Saudi government using golf to sportswash its reputation. In a statement last week, 9/11 Families United excoriated Monahan—who last year said “you’d have to be living under a rock to not understand the implications of involving yourself with the Saudis”—as a “paid Saudi shill” comfortable “taking billions of dollars to cleanse the Saudi reputation.”

Prominent sports litigator Alan Milstein believes golfers who relied on the PGA Tour could sue.

“The flip-flopping of the PGA has real consequences,” Milstein, who has litigated on behalf of Allen Iverson, Maurice Clarett and other prominent athletes, told Sportico.

“Less than two years ago, Tiger Woods, Rory McElroy and others turned down hundreds of millions of dollars because of their loyalty to the PGA, which had convinced them that, one, LIV investors were bad guys and, two, that the PGA would suspend anyone who took the money. Now what can Tiger and Rory do? Their opportunity to cash in has passed unless they claim it is now the PGA which must make them whole.”

But the PGA Tour would have rebuttals. It could insist golfers were free to make their own decisions, and they are responsible for their choices. The PGA Tour might also say circumstances changed, and what they previously said is now moot.

That seems to be the PGA Tour’s script of late. Whether it proves convincing to the public and, potentially, judges and jurors remains to be seen.

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