The PGA Tour and Saudi Arabia’s sovereign wealth fund, facing pressure from the Ministry of Justice over their ambitions to start a new company to shape world golf, in recent days abandoned a crucial clause in their tentative agreement: a promise not to recruit players for each other.
The decision — and the Justice Department’s choice to raise concerns so early in the review that it might lead to the government trying to block the deal — reflected the fragility, uncertainty and turmoil surrounding the deal.
The framework agreement between the round and the wealth fund included some binding clauses. But one of them was a non-solicitation clause, which said the LIV Golf League backed by the Wealth Fund and Tours would not “enter into any contract, agreement or understanding with” any “players who are members of a tour or other organization.”
The agreement also stated that the tour and LIV would not “solicit” or “recruit” players far from each other.
Prior to the deal, LIV used benchmark-breaking prize money and guaranteed contracts — some deals promised golfers at least $100 million — to lure some of the world’s best golfers away from the PGA Tour, which has spent decades as the first, and largely unchallenged circuit in men’s professional golf.
Dustin Johnson, Brooks Kupka, Phil Mickelson and Cameron Smith were among the players who eventually joined LIV, depriving the PGA Tour of some of the star power it relied on to attract fans and sponsors.
The no-pleasure clause was a short-term way to stop the exodus while the Tour and Wealth Fund negotiated the final terms of their new company, which would bring the commercial golf ventures of the PGA Tour, Wealth Fund and the DP World Tour, formerly the European Tour, into a single entity.
After the text of the agreement emerged late last month, antitrust experts warned that the provision could run afoul of federal law because it threatens the integrity of the labor market and promised to stifle competition for players, who have long been independent contractors.
In recent days, people familiar with the change said, the round and the wealth fund decided to abandon the provision in hopes of avoiding extraordinary interference by the Justice Department. Golf officials disagreed with management’s concerns but agreed nonetheless.
William Kovacic, a former FTC chair, said the original language seemed “right in the field of vision that the Department of Justice has set out in the No-Poaching Law Enforcement Program.”
“They have not been very successful in their criminal cases so far,” he said. “But they said, as a matter of policy, we consider non-poaching agreements a serious offense deserving of criminal prosecution.”
The Justice Department and Wealth Fund declined to comment on Thursday. In a statement Thursday afternoon, the tour said it had “elected to remove certain language” from the initial agreement after its engagement with the Justice Department.
“While we believe the language is legal, we also consider it unnecessary in the spirit of cooperation and because all parties are negotiating in good faith,” the tour said.
The tour formally notified its board of directors of the decision on Thursday, after The New York Times asked the tour for comment on its reporting. A person familiar with the tour’s internal deliberations said ring leaders had already planned to inform the board on Thursday.
Turmoil has covered the deal, which has not closed, since it was announced on June 6. And on Tuesday, a Senate subcommittee questioned two PGA Tour leaders during a lengthy hearing, part of at least two congressional investigations. The framework agreement, the final agreement they hope to eventually conclude, has been filmed by touring executives as necessary.
Without some kind of truce, they said, the wealth fund would definitely pour more resources into the fight, reducing the round year after year.
Said James J. Dunn III, a member of the Tours Board of Directors, said of the wealth fund when he addressed lawmakers on Tuesday: “What I’m afraid of is that if we don’t get a deal, they’re already putting billions of dollars into golf.” “They have a management team that wants to destroy the tour. Although you could say you take five or six players a year, they have an unlimited horizon and an unlimited amount of money.”
Revisions on Capitol Hill may harm public disclosure. But DOJ scrutiny is seen as the most likely path for the government to try to derail the deal, should it choose to try.
Regulators and antitrust scholars have been watching the tour’s public statements with intent, such as when Jay Monahan, tour commissioner, said on June 6 that the deal would allow the ring to “take the contestant off the board.”
“These are the sound bites that the DOJ will look at and say, ‘Did what happened encourage competition, or did what happened stifle competition insofar as an entity with monopolistic control of the market eliminated a competitor and strengthened its grip on the market?'” ” said Gerald Mattman Jr., who heads the teamwork group at the law firm of Duane Morris.
Not every binding clause in the framework agreement has caused such great concern among antitrust regulators. The Wealth and Tour Fund, for example, agreed to reject acrimonious litigation over their golf endeavours. And though Sen. Richard Blumenthal, the Connecticut Democrat who’s leading one of the Senate’s investigations into the deal, this week expressed concern about a non-association pledge included in the agreement, experts said that kind of restriction is unlikely to cause concern within the Justice Department. .
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