By Alyse F. Stach[1]
In August, we wrote about whether antitrust liability might be in the PGA Tour’s future through a reported DOJ Antitrust Division investigation about the PGA Tour’s actions relating to LIV Golf and about PGA Tour bylaws governing players’ participation in other golf events. Now, the same speculation exists around the surprise announced combination of the PGA Tour and LIV Golf, two leagues that were just making headlines as market competitors engaged in an intense legal dispute. As was widely reported, on Tuesday the two leagues, in addition to the PGA European Tour, agreed to merge – a move that would return the golf world to one largely centered around a single entity.
Until this week, the PGA Tour and LIV Golf had spent the better part of the past year engaged in an intense legal dispute that renders the merger a surprise to many. When the PGA Tour suspended players for violation of exclusivity contracts, LIV Golf and its players responded by filing a lawsuit, alleging that the PGA Tour violated the antitrust laws.[2] The PGA Tour countered, alleging that LIV Golf interfered with the PGA Tour’s player contracts. While the merger brings an end to the PGA/LIV litigation, the peace may not last long if the DOJ pivots its investigation towards the potential merger.
Likely anticipating the scrutiny, the PGA Tour has stated that this combination of assets is not a formal merger because the PGA will retain its 501(c)(6) tax-exempt status and that it is rather a partnership of assets. However, the DOJ has treated partnerships as de facto mergers in the past and may do the same here. The PGA Tour was already under DOJ scrutiny as a result of the LIV Golf lawsuit, and the DOJ’s recent focus on labor markets[3] could further weigh in favor of examining this deal, which impacts contracts with players. It is also possible that the merger could be subject to scrutiny by the European antitrust authorities.
When it comes to theories of liability, the DOJ may have options. The Department could potentially sue under Section 2 of the Sherman Act, alleging that the PGA has acted to preserve a golf monopoly through anticompetitive conduct. But it would be equally unsurprising to see the DOJ bring claims under Sherman Act Section 1, which prohibits collusive agreements among two or more parties to restrain trade. Notably, both theories of liability can be brought civilly or criminally, and the DOJ has not been shy about its pursuit of criminal sanctions[4] for violation of antitrust laws. Regardless, the stakes remain high for the PGA and other market participants – advertisers, sponsors, and other golf tours – all of whom could be subject to a likely DOJ investigation.
We will be watching to see how this develops.
[1] Assistance by Andrew J. Martin, a summer associate in the firm’s Philadelphia office in its litigation group.
[2] See our previous reporting on that lawsuit at “PGA Wins First Round in Antitrust Legal Fight with Players”
[3] https://www.antitrustadvocate.com/2022/09/27/doj-antitrust-division-not-backing-down-on-labor/
[4] https://www.antitrustadvocate.com/2023/06/01/criminal-no-poach-update-doj-seeks-to-contain-fallout-from-judgment-of-acquittal/