As many golfers know from firsthand experience, a missed tee shot is not necessarily fatal, but it certainly increases the pressure. Since the announcement of its framework agreement with Saudi Arabia’s Public Investment Fund (“PIF”) on June 6, 2023, to form an alliance with LIV Golf, the PGA Tour has continued to face backlash from lawmakers, its players, and fans of the sport. PGA Tour Commissioner Jay Monahan has openly stated that, in hindsight, certain aspects of the deal should have been handled differently—for example, recognizing that the shock announcement “put [the PGA Tour’s] players on their back foot.” But, true to the sport, there are no mulligans—the PGA Tour must play the ball where it lies. And this lie has put the PGA Tour in a particularly difficult position.
Pace of Play
Since Business Law Today’s last article on professional golf’s shifting landscape, there have been several developments worthy of mention, especially in light of the fast-approaching December 31 deadline. If the so-called protections outlined in the framework agreement are to stand, the PGA Tour and PIF must maintain a brisk pace of play and strike a definitive agreement before the year’s end. Under the framework agreement, the PGA Tour, DP World Tour, and LIV Golf would merge commercial operations into a new for-profit entity, with PIF serving as the entity’s exclusive investor. The agreement would allow the PGA Tour to maintain its tax-exempt status and, according to the PGA Tour itself, to control the new subsidiary through majority representation on the board, have “full decision-making authority with respect to all strategy and operational matters related to competition in golf,” and “oversee the commercial assets of the competitions and concentrate on making strategic investments into the game.” On August 22, while at East Lake Golf Club for the FedEx Cup finale, Monahan said he was “confident that we will reach an agreement that achieves a positive outcome for the PGA Tour and our fans—I see it and I’m certain of it.”
In August, the PGA Tour agreed to new transparency and governance measures, granting authority to its policy board’s Player Directors over potential changes to the tour arising from the framework agreement with LIV Golf, including any definitive agreement. Under these new measures, the Player Directors must be kept apprised of the status of negotiations contemplated by the framework agreement, with their special adviser to be granted full access to any necessary documents and information to keep the players informed. No major decisions concerning changes to the tour will be permitted without the approval of the Player Directors, now consisting of Tiger Woods, Patrick Cantlay, Charley Hoffman, Peter Malnati, Rory McIlory, and Webb Simpson. The policy board also includes five independent directors, including Jimmy Dunne, who played an instrumental role in brokering the framework agreement.
No Straight Shot to the Green
Far from a straight shot to the green, the PGA Tour and PIF must still clear certain hazards. For example, the alliance continues to face antitrust scrutiny from the Department of Justice—Monahan did not help the PGA Tour’s case when, following the June 6 announcement, he said the agreement with PIF was a means of taking a “competitor off of the board.” The Justice Department is examining whether the PGA Tour’s policy of barring members from playing in LIV Golf events constitutes monopolistic behavior, in contravention of federal antitrust law. Antitrust specialists have also pointed to other areas of possible antitrust concern, including the Official World Golf Rankings and the PGA Tour’s increased stake in the DP World Tour. But the analysis may not be as straightforward as in other probes, in light of the fact that LIV Golf may not necessarily be driven purely by economic motivations.
Congress has also stepped up its scrutiny. On June 12, the Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs opened a probe into the PGA Tour’s agreement with PIF and its implications for the United States. The subcommittee held a hearing on July 11, at which PGA Tour Chief Operating Officer Ron Price and PGA Tour Board Member Jimmy Dunne testified. During the hearing, Price testified that a PIF investment “north of $1 billion” in the potential new PGA Tour-controlled subsidiary had been discussed. After multiple attempts to obtain information and testimony from PIF, Senator Richard Blumenthal (D-CT), who chairs the subcommittee, issued a subpoena on September 13 for documents related to PIF’s U.S. expansion plans and testimony from PIF’s U.S. subsidiary, USSA International LLC. The subpoena cites Article 1, Section 8, Clause 3 of the U.S. Constitution, which grants Congress the power “to regulate commerce with foreign nations [and] among states,” explaining that this power “has been held to include the authority to legislate regarding the channels and instrumentalities of commerce, persons or things involved in interstate commerce, and activities that substantially affect interstate commerce.” The subpoena orders Jason Chung, senior director of USSA International LLC, to appear before the subcommittee’s slated October 13 hearing.
Birdie or Bogey for Golf Popularity
Despite the continuing saga surrounding the alliance, golf’s popularity in general does not appear to have suffered; and, interestingly, LIV Golf’s popularity appears to have strengthened, according to LIV Golf staffers, executives, and players, who describe increased interest from fans, media executives, and advertisers following announcement of the deal. Critics of the deal persist and tend to invoke principles and values that transcend the sport.
The Back Nine?
Ultimately, as those of us who love the game know, golf, after all, is a business sport. Many deals have been struck and relationships forged and mended on the golf course. Perhaps what critics and proponents of the alliance between the PGA Tour and LIV Golf need is a day out on the links together—followed, of course, by a couple rounds at the nineteenth hole. Regardless, the final outcome of the alliance remains uncertain. Only time will tell whether we are finally on the back nine of this business drama.