The PGA Tour and Saudi Arabia’s sovereign wealth fund, which are under pressure from the Justice Department over their ambitions to create a new company to shape global golf, have in recent days ditched a crucial stipulation of their tentative deal: one promise, none to recruit each other’s players.
The decision — and the Justice Department’s decision to raise concerns so early in a review that it could lead to a government attempt to block the transaction — reflected the fragility, uncertainty and turmoil surrounding the deal.
The framework agreement between the tour and the wealth fund contained only a few binding provisions. But one of those was a poaching clause, which said the tour and wealth fund-backed LIV Golf League “would not enter into any contracts, agreements or understandings with” any “players who are members of each other’s tours or organizations.”
The agreement also stated that the Tour and LIV would not “poach” or “recruit” players from each other.
Prior to the deal, LIV used benchmark prize money and guaranteed contracts – some deals promising golfers at least $100 million – to poach some of the world’s best players from the PGA Tour, which had been the premier and largely undisputed tour for decades. Race course in professional men’s golf.
Dustin Johnson, Brooks Koepka, Phil Mickelson and Cameron Smith were among the players who eventually joined LIV, causing the PGA Tour to lose some of the star power it had relied on to attract fans and sponsors.
The non-solicitation clause was a short-term way to halt the exodus while the tour and wealth fund negotiated the final terms for their new venture that would bring together the golf businesses of the PGA Tour, wealth fund, and DP World Tour. formerly the European Tour, combined into one entity.
However, after the text of the agreement emerged late last month, antitrust experts warned that the clause could violate federal law as it jeopardizes the integrity of the labor market and promised to stifle competition for actors who have long been independent contractors.
People familiar with the change said the tour and wealth fund had decided in recent days to abandon the provision in hopes of averting extraordinary intervention by the Justice Department. Gulf officials did not agree with the ministry’s concerns, but agreed nonetheless.
The original wording seemed to “fit properly with the focus that the Department of Justice has established for its anti-poaching enforcement program,” said William E. Kovacic, a former chair of the Federal Trade Commission.
“They haven’t had much success in their criminal cases,” he said. “But they have said that for political reasons we consider non-poaching agreements to be a serious offense worthy of prosecution.”
The Justice Department and the wealth fund declined to comment Thursday. In a statement Thursday afternoon, the tour said it had elected to drop “certain language” from the original pact, after consulting with the Justice Department.
“While we believe the language is legal, in the spirit of cooperation and because all parties are negotiating in good faith, we also believe it is unnecessary,” the tour said.
The tour officially notified its board of the decision Thursday after The New York Times asked the tour for comment on its coverage. A person familiar with the Tour’s internal deliberations said circuit officials had already planned to update the board on Thursday.
The deal, which has yet to be finalized since it was announced on June 6, is surrounded by turmoil. On Tuesday, a Senate subcommittee questioned two leaders of the PGA Tour during a lengthy hearing that was part of at least two ongoing congressional investigations. The guides have set out the framework contract and the final agreement they may intend to conclude.
Without some sort of truce, they said, the wealth fund would certainly pour more resources into the fight, reducing the tour year by year.
“I’m afraid if we don’t come to an agreement, they’re already pouring billions of dollars into golf,” Tour Board member James J. Dunne III said of the wealth fund when he addressed lawmakers Tuesday. “They have a management team that wants to destroy the tour. Even if you can say that you need five or six players a year, they have an unlimited horizon and an unlimited amount of money.”
The reviews on Capitol Hill could lead to damaging public disclosures. But Justice Department scrutiny is seen as the more likely path for the government to scuttle the deal if it decides to do so.
Regulators and antitrust officials have followed the Tour’s public statements with interest, such as when Jay Monahan, the Tour’s commissioner, said on June 6 that the deal would allow the circuit to “cut the competitor off the board.”
“These are quotes that the Justice Department would look at and say, ‘Is what happened pro-competitive, or did what happened suppress competition in the sense that a company with a monopoly in the market eliminated a competitor and its tightened control of the market?’ Market?’” said Gerald Maatman Jr., chairman of the workplace class at the law firm Duane Morris.
Not every binding provision of the framework agreement has caused so much concern among the antitrust authorities. For example, the wealth fund and the tour agreed to drop bitter litigation over their golf operations. And although Sen. Richard Blumenthal, the Connecticut Democrat who is leading one of the Senate investigations into the deal, expressed concern this week about a non-denigration promise included in the agreement, experts said that kind of restriction is unlikely to cause concern at the Justice Department .