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U.S. Antitrust Law Threatens Prospects Of PGA-LIV Golf Merger

This article will act as an extension to last year’s article by Ewan Henderson for the St Andrews Law Review regarding The Legal Issues Facing European Golfers. Since that article’s publication, the PGA Tour and LIV Golf have announced a merger. This article will analyse the impact of U.S. antitrust laws on the merger and evaluate whether this proposed merger circumvents antitrust law or whether it will end up being blocked by the U.S. Department of Justice (DOJ).


Overview of the Situation


The emergence of the LIV Golf Invitational Series onto the professional golfing scene has been littered with legal disputes ever since its inaugural season in 2022. According to the U.S. Federal Trade Commission (FTC), antitrust laws forbid unlawful mergers and practices. For instance, on 4 August 2022, 11 LIV Golf players filed antitrust lawsuits against the PGA for preventing “independent-contractor golfers from playing when and where they choose." However, the 2023 merger announcement leaves “a single, dominant association controlling almost the entire world of professional golf.” Hence, if the PGA Tour was considered a monopoly before – as argued by LIV Golf players – this announced merger between the two entities would definitely create one.


Mergers are complex procedures. However, a key point, which may influence the future of either the PGA Tour or LIV Golf, is how the two entities allocated the risk if the transaction falls through and fails to meet regulatory standards. Writings by Marc Edelman summarise how oftentimes “parties agree to split the costs 50/50,” but if either side signed a ‘hell or high water clause,’ there could be subsequent financial implications which impact the future of that golf tour.


Historical Cases of Sports Mergers


Monopolistic sports mergers have previously occurred in the U.S., specifically in the cases of Basketball and American Football. However, both examples consisted of special conditions which forced the merger through, neither of which are likely to occur in the case of golf.


In 1966, the National Football League (NFL) and American Football League (AFL) agreed to merge and form the modern-day NFL. Like the PGA-LIV merger, the NFL-AFL merger endured antitrust challenges, but Congress granted a special antitrust exemption to the owners of the NFL, thus green-lighting the merger.


A slightly different case arose in 1976 between the National Basketball Association (NBA) and American Basketball Association (ABA). Antitrust lawsuits by players held up the merger for years, with the merger only going through after the ABA was on the brink of financial dissolution.


U.S. Antitrust Laws


There are three major pieces of U.S. antitrust legislation, all of which (to some extent) can be applied in the case of the PGA-LIV merger: the 1890 Sherman Act, the 1914 Clayton Act and the 1976 Hart-Scott-Rodino Act.


Complaints have been made about the merger’s violation of the 1914 Clayton Act. The main provision of the 1914 Clayton Act is to prevent mergers and acquisitions that form monopolies and essentially eliminate competition. This potential deal between the PGA Tour and LIV-Golf is a two-to-one merger which would “shrink an already concentrated marketspace from being controlled by two firms to just one.” For instance, Tim Baysinger’s article for Axios outlines how “the proposed deal [between the PGA Tour and LIV Golf] violates the Sherman Act and Clayton Act.” This argument has been further pursued by Elizabeth Warren. Senator Warren argues the merger “violates multiple provisions of antitrust law including Section 1 of the Sherman Act, which criminalises actions in restraint of trade or commerce.” Hence, the merging of the PGA Tour and LIV Golf into one where the primary intent is to avoid competing against each other exemplifies what antitrust laws are designed to prohibit.


Finally, the 1976 Hart-Scott-Rodino Act is the last bit of legislation that the PGA-LIV Golf merger seems to violate. The companies must submit certain paperwork to antitrust agencies for review. If competitive concerns are raised, the DOJ or FTC are permitted to “temporarily halt a proposed merger by submitting a Second Request for Information." A second request typically requests information about the “sales, facilities, assets and structure of the businesses party to the transaction.” Building on the earlier financial argument surrounding the possible ‘hell-or-high-water clause’, if either golf tour fails to file the Hart-Scott-Rodino paperwork correctly or where legally necessary, whoever took responsibility for the financial burden of the potential merger will be fined “civil penalties of up to $42,530 per day” until they do so.


Analysis of the Merger


To provide an analysis of the situation between the PGA and LIV Golf, the merger seems illegal. Tim Wu, Professor of Law at Columbia University, indicates that the idea that an existing dominant monopolist can buy its challenger is “a flagrant violation of antitrust laws” that epitomises the existence of antitrust laws. Henceforth, the potential PGA-LIV Golf merger is far from complete and may ultimately be blocked from ever occurring.


Unlike the historic mergers in basketball and American football in the 1970s, this golf merger is unlikely to receive special dispensation from U.S. antitrust enforcement agencies. In addition, the prospective deal violates the Sherman Act, Clayton Act and Hart-Scott-Rodino Act. Thus, further accentuating the obstacles facing the merger which may end up being a quadruple bogey rather than a hole-in-one.


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