The PGA Tour and Saudi Arabia’s sovereign wealth fund, facing pressure from the Justice Department over their ambitions for a new company to shape global golf, in recent days dropped a crucial provision of their tentative agreement: a promise not to recruit each other’s players.
Three people familiar with the change, who spoke on the condition of anonymity to discuss confidential negotiations, signaled that the decision was an early casualty of an antitrust review by Justice Department regulators, who are expected to decide in the coming months whether to try to block it. the transaction.
The tour moved to notify its board of the decision only on Thursday, after The New York Times asked the tour for comment on its reporting.
The framework agreement between the tour and the wealth fund included few binding provisions. But one of them was an unsolicited clause, which said that the tour and wealth fund LIV Golf league will not “enter into any contract, agreement or understanding with” any “players who are members of the tour or organization of the other.”
The agreement also said the tour and LIV would not “solicit” or “recruit” players away from each other.
Before the deal, LIV used record-breaking prize pools and guarantee contracts — some deals promised golfers at least $100 million — to lure some of the world’s top players away from the PGA Tour, which has spent decades as the premier, and largely unchallenged, circuit in men’s professional golf.
Dustin Johnson, Brooks Koepka, Phil Mickelson and Cameron Smith were among the players who eventually entered LIV, stripping the PGA Tour of some of the star power it relied on to draw fans and sponsors.
The no-solicitation clause was a short-term way to stop the exit on the tour and the wealth fund negotiated the final terms for their new company, which would bring the golf business ventures of the PGA Tour, the 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, however, antitrust experts warned that the clause could violate federal law because it threatened 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 tour and the wealth fund decided to drop the provision in hopes of preventing an extraordinary intervention by the Justice Department. Golf officials took issue with the department’s doubts but agreed nonetheless.
The original language seemed “right in the scope that the Justice Department has set for its anti-poaching enforcement program,” said William E. Kovacic, former chairman of the Federal Trade Commission.
“They haven’t had much success in their criminal cases yet,” he said. “But they said, as a matter of policy, we consider no-poaching agreements to be a serious offense worthy of criminal prosecution.”
The Justice Department and the wealth fund declined to comment Thursday. The PGA Tour did not immediately comment.
Controversy has enveloped the deal, which has not closed, since it was announced on June 6. On Tuesday, a Senate subcommittee questioned a pair of PGA Tour leaders during a lengthy hearing, part of at least two unfolding congressional investigations. Tour executives presented the framework agreement, and the final agreement they hope to strike eventually, as needed.
Without any pause, they said, the wealth fund would surely pour more resources into the fight, shrinking the tour year after year.
“My fear is if we don’t reach an agreement, they’ve already put billions of dollars into golf,” James J. Dunne III, a tour board member, said of the wealth fund when he addressed lawmakers on Tuesday. “They have a management team that wants to destroy the tour. Although you can say take 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 revelations. But Justice Department scrutiny is seen as the more likely path for the government to try to derail the deal, if it chooses to try.
Regulators and antitrust scholars have watched the tour’s public statements with interest, such as when Jay Monahan, the tour’s commissioner, said June 6 that the deal would let the circuit “remove the competitor from the board.”
“Those are sound bites that the Justice Department would look at and say, ‘Does what happened promote competition, or does what happened stifle competition to the extent that an entity with a monopoly hold on the market eliminated a competitor and consolidated its hold on the market.’ market?” said Gerald Maatman Jr., who chairs the workplace class group at the Duane Morris law firm.
Not every binding provision of the framework agreement caused such great alarm among antitrust regulators. The wealth fund and the tour, for example, have agreed to dismiss an acrimonious lawsuit over their golf pursuits. And although Sen. Richard Blumenthal, the Connecticut Democrat who is leading one of the Senate’s investigations into the deal, expressed concern this week about a nondisclosure pledge included in the deal, experts said that type of restriction is unlikely to be a concern in the Department of Justice.