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A proposed merger between the PGA Tour and its Saudi-funded rival LIV Golf startled everyone from golfers to Wall Street bankers this week – leaving many questions about what the merger could mean.
The deal was announced after months of antitrust disputes and lawsuits between the two leagues. The agreement will terminate all pending lawsuits.
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PGA Tour commissioner Jay Monahan told CNBC’s “Squawk on the Street” on Tuesday that while there were a lot of “tensions” between the two organizations, the deal was good for golf.
Although these tensions have been settled between the tour and LIV, they may be relevant when the organizers comb the deal.
Henry Hauser said, “The Commissioner’s statement that this is necessary to end all this tension leaves the question of what do we mean when we say tension? It could be from a competition angle, which is good for pricing and for consumers.” A former attorney with the Federal Trade Commission, he is currently an antitrust attorney at Perkins Coie. It can also mean stress in the sense of distraction.
While the two organizations were feuding, golfers were divided between the PGA Tour and the LIV. Some left for huge stipends to be cashed in by the LIV, even as they lost their endorsements. Others refused large wages to stay with the tour. Monahan has been candid in the past, saying he believes players will face “major ramifications” for going into LIV. On Tuesday, he said he expected to be called a hypocrite and accept criticism.
Since the announcement, many players have expressed frustration with the deal. Likewise, sponsors have been slow to make statements or decisions, and will likely wait to see how the deal is structured and the regulatory process goes, according to two sponsors close to the tour.
Lawsuits aside, LIV Golf has been surrounded by controversy and criticism since its launch in 2022. Backed by Saudi Arabia’s Public Investment Fund – an entity controlled by the Saudi crown prince – critics have accused the sovereign wealth fund of “manipulating the sport” by using LIV Golf. To divert attention from the kingdom’s history of human rights violations.
Antitrust concerns
Lawsuits floated from both sides last year as LIV aggressively lured high-profile players, including Phil Mickelson and Bryson DeChambeau, away from the tour for big paychecks.
In response, the tour increased its prize pool and player benefits, as well as securing loyalty agreements from its top players as it attempted to prevent further poaching.
Both leagues alleged that the other’s contracts and policies restricted golf talent and stifled proper competition. LIV Golf sued the tour, also citing the anti-competitive practices of banning its players. The PGA Tour answered.
The proposed deal, which includes DP World’s tour of Europe, puts an end to all fights – on and off the court.
While PIF Governor Yasir Al-Rumayyan said he expects the deal to be completed within weeks, some are wondering how quickly it will bypass US regulators such as the Federal Trade Commission and the Justice Department.
“Anything that happened prior to this announcement is still enforceable,” Hauser said, noting that the DOJ can still look into these allegations outside of the merger. “You cannot use leveling as a disguise.”
Hauser noted that while it is always preferable to keep matters out of the courtroom, the settlements themselves are bound by antitrust laws—”especially if there is a legitimate legal dispute between the entities.”
Although the deal can close relatively quickly without the need for regulatory approval, lawmakers can raise issues afterward. This happened recently at the Ministry of Justice It ordered the end of the American Airlines and JetBlue Airways alliance, saying the merger would hurt consumers by raising fares. American Airlines plans to appeal the ruling.
Timothy Derdinger, associate professor of marketing and strategy, said the new entities need to show that consolidation benefits consumers, especially globally, by bringing top talent together under one umbrella and broadening the game. at Carnegie Mellon University’s Tepper School of Business.
“If the deal can show that it supports the growing portfolios of golfers, leads to more participation and innovation in golf, which adds value to viewers, I don’t see much of a fight coming from the US government,” said Deringer.
guarantees and the Saudis
The deal has also raised questions about how it will affect PGA Tour sponsors, as well as the endorsement of its players.
Many have spoken openly about LIV’s financial backer, the Public Investment Fund, and even protested at events.
Family members of those who died in the September 11, 2001 terrorist attacks protested the events of LIV because of its Saudi connections. US officials concluded that Saudi nationals helped finance the terrorist group Al Qaeda, which was linked to the September 11 terrorist attacks, although investigations did not find that Saudi officials were complicit in the attacks.
On Tuesday the 9/11 Families United group criticized the merger, especially after Monahan, the PGA Tour commissioner, brought it up this past summer in a public interview. “I would ask any player who left or any player who is considering leaving, ‘Do you ever apologize for being a member of the PGA Tour?'” Monahan said during an interview with CBS Sports last year.
The main sponsors of the tour have not yet spoken or made decisions. At least one sponsor is waiting to see how the regulatory process for a deal goes before making decisions, according to a person familiar with the matter, who declined to be named because internal discussions are private. Other sponsors have not commented publicly on the matter.
Marketers, advertisers, and sponsors pulled out of other partnerships when disagreements raised concerns.
“The fundamental reason the brands we work with decide to invest in (sponsorship) is to leverage the power of that equity to connect with their customers,” said Sampson Yemmer, Vice President of Sponsorship Advisory at Momentum Worldwide. “When these stocks deteriorate in any way or have the potential to do so, it makes these brands rethink their investments or hit pause.”
Shortly after joining LIV, Mickelson made disparaging comments about the tour and showed his support for the Saudis. The top golfer has lost endorsements from the likes of KPMG and others, some of whom are more than a decade old.
“If there is a consideration at all, it’s something we advise our clients about,” Yemmer said. “I imagine this deal could have a chilling effect.”
However, combining championships can also lead to more endorsements, at least in the long run.
“Players who left and lost their endorsements, they’re going to be able to re-engage that sponsorship and endorsement because that brings them back into the fold,” Dirdinger said.
Correction: This story has been updated to reflect the correct title of Timothy Derdinger’s Assistant Professor.
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