Congressional Fallout From the PGA-PIF Deal

Congressional Fallout From The PGA-PIF Deal

There was of course zero chance that interest groups and Congress would stay out of the PGAT-PIF deal that sells the US-based tour to the Saudis.

As a longtime teacher of government and economics with a Masters Degree in Public Policy Analysis, I find the merger’s implications fascinating. For example, how is it that the solution to a lawsuit over the PGA Tour’s monopoly power is to create an even bigger and more powerful monopoly owned by an anti-democratic monarchical foreign regime?

I am also amused that LIV players who said they are independent contractors and should be able to work for whomever they choose now have been reduced to a single choice of employer. It is as though all the roofing contractors in the world have discovered that there is only a single house that needs a roof. That situation is guaranteed to drive down what the independent contractors can earn.

It would be irrational for the Saudis to continue to pay tens of millions in purses when there is nowhere those “independent contractors” can go. “You’ll take what we offer and like it.”

Meanwhile, the proposed monopoly on golf has not gone unnoticed by the political class.

Democratic Senator Richard Blumenthal of Connecticut is calling for the Justice Department to investigate what he terms “The PGA sellout — its monopolistic merger with LIV.”

If Ford and GM were to combine in this way, there’d be a DOJ investigation… conceivably the Department of Justice could block it. There are a variety of steps they could take short of blocking it, like require certain conditions, but I think an investigation is certainly well merited.

Sen. Blumenthal in the Huffington Post

On the other side of the aisle, Senator Mitt Romney suggested that the Committee on Foreign Investment in the US (CFIUS) would look into the matter.

Democratic Senator Chris Murphey of Connecticut concurred:

It seems like another classic case for CFIUS,” Sen. Chris Murphy (D-Conn.) said. “It seems tailor-made for a process that tries to get to the bottom of what the Saudis are getting out of this.”

via Huffington Post

The American Economic Liberties Project, a Progressive interest group focused on the problems of monopolies released the following statement on their website

“This deal is one of the most brazen mergers to monopoly in recent history. PGA admits it aims to ‘unify the game of golf, on a global basis,’ its Commissioner Jay Monahan says the deal ‘takes[s] the competitor off the board’, and Bloomberg is reporting that no antitrust lawyers were involved in the deal. These are huge red flags.

The PGA Tour enjoys monopoly control over elite professional golf in the United States; DP World Tour has the same position in Europe. Both entities exerted that power to squash LIV’s attempts to enter their markets by threatening any golfer that wanted to play in an LIV tournament. But as LIV grew, they were forced to compete on the merits and began offering golfers on their tours bigger tournament prizes.

Now, PGA, DP, and LIV will operate as a unified for-profit machine with a global monopoly. The consequences for golfers and their fans could be devastating and stunt innovation in the sport. Unless Congress grants this new venture some sort of antitrust exemption, there is no way this deal would survive legal scrutiny. Antitrust enforcers in the United States, Europe, and the UK have a clear path to block it.”

Katherine Van Dyck, Senior Legal Counsel at the American Economic Liberties Project

Another member of Congress, Rep. John Garamendi of California, has introduced the ” “No Corporate Tax Exemption for Professional Sports Act” .

The legislation would end the tax loophole that PGA Tour and other professional sports leagues exploit to avoid paying any federal corporate income tax. These professional sports leagues each generate more than $100 million annually in corporate income, which would be taxable under the Garamendi bill.

“Saudi Arabia cannot be allowed to sports wash its government’s horrific human rights abuses and the 2018 murder of American-based journalist Jamal Khashoggi by taking over the PGA,” Garamendi said. “PGA Tour Commissioner Jay Monahan should be ashamed of the blatant hypocrisy and about-face he and the rest of PGA’s leadership demonstrated by allowing the sovereign wealth fund of a foreign government with an unconscionable human rights record to take over an iconic American sports league and avoid paying a penny in federal corporate income tax. This merger flies in the face of the PGA players who turned down hundred-million-dollar paydays from the Saudi-backed LIV to align themselves with the right side of history and human decency.”

Will Congress act? I doubt it. There seems to be a significant caucus that delights in the antics of dictators like those in Russia, China and Saudi Arabia.

Will the DOJ get involved? It think it is possible, but geopolitics plays a huge factor. With the unprovoked war the Russians are waging on Ukraine — and their alignment with Iran — theoretically friendly countries with petro resources are at a premium.

I suppose that an individual player or players could sue to block the merger. I can imagine an argument in which the merger of the PGA TOUR, DP World and LIV will cause them harm. Since purses have gone steadily up over the years in which the PGAT and DP World were (friendly) competitors, and skyrocketed when LIV was introduced, the merger means that the Saudis will determine what each player is worth — and if the Saudis are rational, that will be below market rates.

Indeed, a player lawsuit seems to me the most likely of the scenarios that could block this merger. Maybe Rory, Tiger and some others who feel betrayed by this could file a motion. Frankly, in their position, I would. Leaving aside the question of Saudi ownership, I am viscerally opposed to the idea of monopolies and am convinced that lack of competition will result in a lesser product than we otherwise would have had.

Perhaps a player or two could file for an injunction in a friendly federal court to at least temporarily prevent the merger from moving forward until a trial at some unspecified point in the future, giving Congress the time to act. There are interest groups (eg The American Economic Liberties Project) who might be interested in helping.

All of that said, I don’t actually think any of this will come to pass. The merger will go through, the LIV Golf multi-millionaires will laugh as they swim in their Scrooge McDuck vaults of money, and in the long run, professional golf will be much less than it could have been.