By Bob Needham
Michigan Law
When the PGA Tour, the leading professional golf league, and its upstart competitor, Saudi Arabia-based LIV Golf, recently said that they plan to join forces, the announcement raised a host of questions—from the details of the merger to the motivations behind it.
Recent weeks have brought clarity to some issues but not to others. Two Michigan Law professors with some relevant expertise, Richard Friedman and Daniel Crane, recently agreed to answer five questions about the deal.
Friedman, the Alene and Allan F. Smith Professor of Law, is an expert on evidence and US Supreme Court history. He also is a pioneer in the developing field of sports as legal systems and has co-authored a book on the subject.
Crane, the Richard W. Pogue Professor of Law, teaches Contracts, Antitrust, Antitrust and Intellectual Property, and Legislation and Regulation. He is the author of several books on antitrust law, including Antitrust.
Note: This interview was conducted before the PGA/LIV deal dropped a provision not to hire away each other’s players.
1. What is driving the merger of the PGA Tour and LIV?
Friedman: As is so often the case, the short answer is: money. It’s a pretty classic case, I think, of competitors (not only the PGA Tour and LIV but also the DP World Tour, formerly the European Tour) deciding that they’d rather work together than beat each others’ brains out. Beyond that, I think the PGA Tour recognized that LIV could pose a real threat to its preeminence.
2. What are the advantages and disadvantages of the merger to the two organizations?
Friedman: The PGA Tour gives up a substantial measure of control; the chair of the new organization will be the governor of the Saudi Arabian sovereign wealth fund. But the PGA will continue to be the dominant force in professional touring golf. The LIV sponsors give up some opportunity to make fundamental changes in the way touring golf is conducted but get what they were probably seeking all along, respectability and a seat at the table—in fact, right smack at the center of the table.
3. Is this deal overall a good thing or a bad thing for the players? For the fans?
Friedman: A mixed bag for both, I think.
For the players, presumably (assuming the deal goes through) there will no longer be those giant, tantalizing contracts dangled before them. But there also presumably won’t be civil war among the ranks, and peace has considerable value. For fans, I think the most important thing was the ability to see all the best players in the world in the same competitions. That’s been true at the Grand Slam tournaments, even since the advent of LIV, but not at the weekly tour stops. The merger may mean some loss of variety; I’m curious how LIV’s 54-hole format, with no cuts before the weekend, would play with fans and whether the new entity will continue to experiment with that.
4. Are there antitrust issues that are serious enough to stop the merger?
Friedman: Any sensible reader will be far more eager to learn what Dan has to say about this than what I do, but for what it’s worth: It sure seems to me that when the only competitors in a field—who were competing both for services and for customers—decide to merge, there’s a pretty whopping antitrust problem. And while I’m at it, I thought the purported lifetime bans imposed by the PGA Tour on players who participated at all in LIV tournaments was a rather egregious use of monopoly power to gain a competitive advantage.
Crane: In order for there to be an antitrust issue with the merger, there would have to be a finding that the relevant market in which the PGA Tour and LIV compete is restricted to professional tour golf and doesn’t include other golf competitions or other sports. There’s good precedent for so limiting the relevant market; for example, the Supreme Court once found that championship boxing is its own relevant market. Also, keep in mind that, until a few weeks ago, LIV was accusing the PGA Tour of being a monopolist and the PGA Tour was accusing LIV of anticompetitive practices, so any argument that they don’t have market power may be suspect. The Justice Department is investigating the proposed merger, and I agree with Rich that there are likely to be serious antitrust issues.
5. What would be at issue if the Justice Department opposes the deal?
Crane: Assuming the Justice Department sues to block the merger, one of the interesting angles will be to identify who would be harmed or benefited by the merger. Would it be golf fans, professional golfers, or both?
In recent decades, antitrust law has focused mostly on effects on consumers. As Rich notes, fans might prefer a single “league” for the same reason that fans were made better off by the merger of the NFL and AFL: Fans get to see all of the best players competing on the same platform. (As a Chicago Bears fan, I still have warm feelings about the Bears trouncing the New England Patriots 46-10 in Super Bowl XX). On the other hand, professional golfers might be worse off because they would have less bargaining power with the tour organizer. Suppose that’s true—that fans would be better off and golfers worse off. Should the merger be allowed or not?
A similar question was raised recently with respect to the proposed merger of Penguin-Random House and Simon & Schuster. The Justice Department successfully blocked the merger on the theory that it would allow the merged companies to depress the compensation paid to authors. There was at least an arguable case that readers would be better off because of the merger, but the Justice Department focused just on the authors—and won. One might take the view that antitrust analysis should consider the interests of both authors and readers, or golfers and fans, but that would make the analysis very complicated, to say the least.
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