What Is Likely Happening With The PGA Tour And LIV Golf Merger?

Many people are curious about what is happening with the PGA Tour and LIV Golf since the parties first announced their proposed, so-called “merger” on June 6 of this year. But, because government investigations are typically confidential and the parties involved have an incentive to stay mum, nobody can be certain where things are presently. The best one can do is rely on typical business behavior and a basic understanding of federal antitrust laws to draw some presumptions. Both here seem to facilitate reasonable guesswork of where matters stand.

Typically, when two businesses announce a planned merger, the merger does not commence immediately. The Hart-Scott-Rodino Act of 1976 requires companies of greater than a certain size, prior to commencing a merger, to submit certain paperwork and documents to the federal antitrust agencies for review. If these materials spark competitive concerns, then either the Department of Justice or the Federal Trade Commission is allowed to temporarily halt a proposed merger by submitting a Second Request for Information. If, at the conclusion of reviewing these materials, either agency still believes the proposed merger is likely to substantially lessen competition, either agency may then file a federal lawsuit seeking to enjoin the proposed merger.

For purposes of clarity, under antitrust laws, the term “merger” includes a wide range of technically different business transactions, including transactions that are known in the business world as both “mergers” and as “acquisitions.” Thus, despite some more recent statements from PGA Tour officials, the form of the new company that would be created if this transaction moves forward should make little legal difference in the antitrust process.

With that said, not all mergers (or, if you prefer the business term, “acquisitions”) that undergo agency scrutiny ultimately clear regulatory hurdles (think, for example, the failed proposed merger of DraftKings and FanDuel). Thus, for the PGA Tour and LIV Golf, they should be presently in a waiting game.

That, of course, does not mean that both parties are waiting for agency review equally patiently. When companies agree to partake in a merger, one of the many terms they need to agree upon is how to allocate the risk if the transaction does not clear regulatory hurdles. Oftentimes, parties agree to split the costs 50/50; however, that is not always the case. If either the PGA Tour or LIV Golf signed a “hell or high water clause,” or otherwise agreed to incur all of the financial risk if the transaction is not approved, that party is probably investing more cost, time—and even anxiety—trying to make sure the proposed merger clears all regulatory hurdles.

Indeed, there is always a chance that the PGA Tour and LIV Golf are attempting to commence their transaction without first filing the traditional Hart-Scott-Rodino paperwork. However, if the parties failed to file Hart-Scott Rodino paperwork where it is deemed legally necessary or they filed their paperwork incorrectly, this could result in civil penalties for these companies of up to $42,530 per day. This means if the PGA Tour and LIV Golf moved forward with acts towards a merger two weeks ago and still have not filed proper Hart-Scott-Rodino paperwork, they could have already racked up over $595,000 in fines.

With all of that said, there has been no public announcement by the PGA Tour, LIV Golf or any government agency that their proposed transaction has cleared antitrust hurdles. So, one is reasonably left to suspect that one of the relevant antitrust agencies—and almost certainly the Department of Justice—is presently taking a deep dive into the PGA Tour and LIV Golf’s submissions. And, even presuming the PGA Tour and LIV Golf have filed all of the necessary Hart-Scott-Rodino paperwork and are fully cooperating with the U.S. government agencies, it is still hard to imagine the proposed merger will clear antitrust scrutiny before the Second Request process, much less at all.

Thus, we should expect silence to continue for quite some time forward on the proposed golf transaction, unless one of two unexpected things happens: (1) the PGA Tour and LIV Golf brazenly attempt to merge without obtaining government clearance—thus, triggering almost certain huge fines and legal challenge from the Department of Justice; or (2) one or both of the parties, recognizing the legal costs involved in proceeding, voluntarily abandon their proposed transaction.

Simply stated: expect the public silence to continue for quite a bit longer.

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Marc Edelman ([email protected]) is a Professor of Law at Baruch College’s Zicklin School of Business, Sports Ethics Director of the Robert Zicklin Center on Corporate Integrity, and the founder of Edelman Law. He is an author of “A Short Treatise on Amateurism and Antitrust Law” and “The Collegiate Employee-Athlete,” among many other articles of legal scholarship.