On Tuesday morning, the PGA Tour, DP World Tour and LIV golf released a joint statement announcing a surprise merger between the warring professional golf leagues. The news shocked the world of professional golf with an unnamed PGA Tour player saying “No f---ing way” to ESPN when reached out to on Tuesday.
As would be expected, the announcement also stated that it will be “followed by a mutually agreed end to all pending litigation between the participating parties.” However, the end of the mutually destructive litigation does not mean that all potential legal risks are gone.
First, remember that the Department of Justice launched an investigation into the PGA Tour regarding possible Anti-Trust violations the Tour may have committed during the course of their “battle” against LIV Golf. While it is currently unclear exactly what that investigation uncovered, what is clear is that the PGA Tour did not appreciate the US government taking a look behind the curtain at how the Tour operates. This lack of appreciation within the PGA Tour can be seen within the shocking 180 degree approach the PGA Tour took in merging with LIV Golf, an entity that PGA Tour Commissioner Jay Monahan said last summer was an “irrational threat” attempting to buy the sport of golf. To Monahan’s credit, he did show some foresight when he said, “if this is an arms race and if the only weapons here are dollar bills, the PGA Tour can’t compete… with a foreign monarchy that is spending billions of dollars in attempt to buy the game of golf.”[1] Whether it was the pressure from the Department of Justice or the seemingly infinite checkbook of a foreign monarchy, the PGA Tour and Commissioner Monahan clearly took the hint that it may be time for the Tour to cash out and expand the amount of seats at the dinner table of professional golf spoils. However, just because the PGA Tour is finally willing to cooperate with other leagues does not mean that the Department of Justice investigation will suddenly conclude. The Department of Justice’s Antitrust division will likely continue to investigate and then recommend a course of action, but until then, anyone would be remiss to declare the PGA Tour free of any wrongdoing.
Second, while the joint press release clarified certain aspects of how the merger will be achieved and operate in the future, many of the details surrounding the merger have yet to be revealed, which leaves major regulatory questions looming over the deal. According to the press release,
“Under the terms of the agreement, the Board of Directors of the new entity will oversee and direct all the new entity’s golf-related commercial operations, businesses and investments. The new entity will work to ensure a cohesive schedule of events that will be exciting for fans, sponsors and all stakeholders. PIF will initially be the exclusive investor in the new entity, alongside the PGA TOUR, LIV Golf and the DP World Tour. Going forward, PIF will have the exclusive right to further invest in the new entity, including a right of first refusal on any capital that may be invested in the new entity, including into the PGA TOUR, LIV Golf and DP World Tour. The PGA TOUR will appoint a majority of the Board and hold a majority voting interest in the combined entity.”
Two of the more interesting points include the PIF possessing the exclusive right to further invest in the new entity, whereas the PGA Tour will seemingly control a majority of the board and hold a majority voting interest in the new entity, leaving everyone to wonder who will truly control and operate this new entity. More terms for this merger agreement or at least partial terms will likely begin to surface in the coming weeks, but the PGA Tour made it clear in the press release that they intend to remain as a 501(c)(6) tax-exempt organization, a decision that many people will definitely question as a traditional 501(c)(6) tax-exempt organization must not be organized for profit and this new entity has clearly been organized as a “for-profit entity” as per the press release. (If you are interested in learning more about the PGA Tour’s 501(c)(6) tax-exempt structure, check out the previous blog I wrote on the topic here.)
Whether or not merging with LIV Golf was the right move for the PGA Tour and how the PGA Tour’s 501(c)(6) tax exempt structure will be affected going forward is unclear, but as Winston Churchill once said, “those that fail to learn from history are doomed to repeat it.” It seems safe to say that Jay Monahan has been studying the history of professional golf and may have learned a lesson on how ego and arrogance can ruin multi-billion-dollar professional sports leagues.
(P.S – this entire feud was pointless if the new entity isn’t named the “Super Golf League”)
Benjamin Kaner is a 3L at New York Law School with a passion for sports and law. Benjamin is passionate about all sports but especially Golf, International Football, and Formula 1. Benjamin is interested in working with sports leagues and teams in the future. You can find Benjamin on Twitter and Instagram @BenKaner.
[1] https://golf.com/news/jay-monahan-calls-liv-golf-irrational-threat/
