Foreign Relations & International Law

Live and Let LIV?

Matt Perault, Asheesh Agarwal
Wednesday, July 12, 2023, 8:00 AM

If the Saudis want to play golf, they must look for models outside of sports.

Paul Casey tees off while competing for LIV Golf in Bedminster, July 29, 2022. (JazzyJoeyD, https://commons.wikimedia.org/wiki/File:Paul_Casey_at_LIV_Golf.jpg; CC BY-SA 4.0, https://creativecommons.org/licenses/by-sa/4.0/legalcode)

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For more than a year, the most important competition in golf has been taking place far from the fairways. The PGA Tour, long the primary purveyor of professional golf tournaments in the United States, faced a challenge from LIV Golf, an upstart tour funded by Saudi Arabia’s sovereign wealth fund. When the PGA responded by banning golfers who joined LIV from participating in PGA Tour events, several LIV players sued. Then, with the suit still pending, the PGA Tour announced in June that it had reached a deal: The Saudi fund would make a major investment in the PGA Tour, ending the litigation. 

LIV Golf’s entry into the golf world ignited debates about sports, law, and policy. The recent agreement may resolve the court case, but not the controversy. If you listen to commentators on ESPN and others, Saudi Arabia’s entry into the sports world presents novel challenges of morality and greed, with their financing of golf tournaments amounting to “blood money.” The families of 9/11 victims accused LIV golfers of “betrayal, not only of us, but of all your countrymen.” Numerous sports commentators have questioned the deal’s ethics and called PGA Tour Commissioner Jay Monahan a “sellout.” 

Yesterday, Congress held a hearing on the matter. Sen. Richard Blumenthal (D-Conn.), chairman of the Senate Permanent Subcommittee on Investigations, was blunt: “There is something that stinks about this path that you’re on right now.” He suggested that the PGA Tour should avoid the deal entirely, stating that it should “resist those buckets full of money” and that to have professional golf “taken over by a repressive foreign regime certainly is a matter of our national security.” In a June letter, he said that the deal raised “serious questions” and referenced both “Saudi Arabia’s deeply disturbing human rights record at home and abroad” and intent “to use investments in sports to further the Saudi government’s strategic objectives.” Similarly, the Senate’s leading antitrust lawmakers, Amy Klobuchar (D-Minn.) and Mike Lee (R-Ariz.), wrote that the deal “raises a number of concerns, including the impact on competition.” Sens. Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.) raised similar issues. By contrast, Sen. Ron Johnson (R-Wisc.) contended that the deal could “preserve the game of golf and the purity of competition at the highest level,” while Sen. Rand Paul (R-Ky.) argued that there is “no grounds for government to be involved in the game of golf."

In short, the PGA-LIV deal has left the government and the sports world scrambling. The question is what to make of a financial arrangement in the sports world that raises questions about human rights, foreign influence, and antitrust. These legal and policy questions threaten the deal’s future, and so far, both the deal’s proponents and its defenders have struggled to articulate a framework for responding to them. 

This uncertainty may seem a little bewildering to Lawfare readers, for whom corporate transactions that raise complex questions of foreign policy, national security, and human rights are par for the course. 

Other industries—ranging from tech to energy to apparel—have long histories of wrestling with these questions. They have battled members of Congress, taken heat from nonprofit groups, and defended themselves in court. But over time, these industries have aligned on a set of best practices that enable them to navigate these challenges. The key lesson? If a company wants to engage with a country with a troubling human rights record, it must operate responsibly. This piece aims to use the experiences of other industries to propose a framework for addressing concerns with the deal. 

Although sports fans seem to believe that sports operate differently, they actually don’t—or, at least, they shouldn’t. The architecture for analyzing this type of transaction is well established and in no sense terra incognita. And the bottom line is simple. The deal is facing scrutiny from all sides. If the new tour wants to hit out of the bunker, it will have to anticipate and respond to the criticism. To address antitrust concerns, the new tour must take steps to ensure the deal will benefit consumers. And to address human rights concerns, the new tour must implement the best practices that have become common in other industries.

Tee Time: “A horrible record on human rights”

Last year, Phil Mickelson shocked the sports world by signaling that he planned to join the LIV Tour to gain “leverage” over the PGA Tour, even though it is financed by the Saudi Arabia Public Investment Fund, Saudi Arabia’s sovereign wealth fund, and even while he acknowledged Saudi Arabia’s “horrible record on human rights.” He even referred to Saudi Arabia as “scary motherf---ckers.” 

Members of the PGA Tour piled on. “Have you ever had to apologize for being a member of the PGA Tour?” PGA Commissioner Monahan asked

LIV fired back with a lawsuit alleging that the PGA Tour had violated the antitrust laws. In a nutshell, LIV contended that the PGA Tour had a “monopsony” (a buyer’s side monopoly) on golfers, as the world’s top players had few choices other than to join PGA Tour-affiliated events to earn top prize money, endorsements, and sponsors. According to LIV, the PGA Tour improperly limited competition by requiring golfers to sign exclusive, long-term contracts, with a penalty of lifetime bans if they played elsewhere. The PGA Tour countered that its contracts protected its brand and ensured a reliable supply of top golfers for TV networks. 

Had the case gone to trial, the outcome would have hinged on the key question in antitrust law: Did the PGA Tour’s practices harm consumers, typically measured by factors such as price, output, quality, and innovation? In a series of cases dating back to the 1980s, for instance, the Supreme Court regularly invalidated the NCAA’s various limits on televising college football games, which helped lead to far more televised games today.

Although last month’s deal settles that lawsuit, the new tour may still face court battles ahead. Antitrust regulators might challenge the deal if they conclude that it will lessen competition to the detriment of consumers or, possibly, professional golfers. 

In the 1990s, the Federal Trade Commission’s (FTC’s) antitrust lawyers wanted to sue the PGA to invalidate rules, similar to those in place today, that effectively gave the PGA veto power over where its golfers played. In its response, the PGA aimed straight at the flag: Congress. It persuaded 26 members of Congress to write to the FTC and intimate that they could pull part of its budget if the agency moved forward with a lawsuit. The FTC ultimately decided to pass on an enforcement action.

Today, there is a chance that antitrust regulators could take a mulligan and argue that the deal would harm the market for professional golfers. Early in his term, President Biden issued an executive order that directed agencies to promote competition in labor markets and elsewhere. The agencies are taking the order to heart. In a controversial policy statement, the FTC has declared that the antitrust laws protect workers and competitors, as well as consumers, and proposed a rule to ban virtually all non-compete clauses across the country. Amid a series of other court losses, the Justice Department successfully blocked one merger on the theory that the merger would harm workers, specifically best-selling authors. The Justice Department is reportedly investigating the deal, and the senators who lead antitrust oversight have said that the deal presents “serious competition concerns.” There’s also a history of sports mergers receiving significant antitrust scrutiny, including in professional football, basketball, and hockey.

Moreover, because the PGA-LIV union includes the European tour, both the European Union and the United Kingdom’s Competition and Markets Authority could intervene. In recent years, both the EU and U.K. have attempted to block deals involving primarily American companies. Historically, the EU has been far more aggressive than antitrust enforcers in the United States and lately has been accused of using its competition policy to protect domestic competitors. On some deals, the U.K. has been the most combative of all—for instance, the British have rejected Microsoft’s proposed purchase of Activision, even though the EU cleared it

On the Green: How LIV Changed Professional Golf

Despite its controversial launch in 2021, in many ways, LIV’s entry into the golf market has so far demonstrated that competition works. The disruptive new entrant increased compensation for golfers, spurred new formats like staggered starts and shorter tournaments, and led to more tournaments for fans. The PGA Tour responded by trying to improve its own product. The PGA Tour now guarantees players minimum annual compensation of $500,000 and awards bonuses to the most popular players.  

On the other hand, the new, combined tour may reduce options for fans. With a combined tour, fans may have fewer events to attend and televised tournaments to watch. LIV has spent the past year calling the PGA Tour a monopoly, and a combined golf entity would have an even more dominant market position. 

If the new tour wants to win this round against potential antitrust challenges, it will need to demonstrate that it will not harm competition. Given that the deal eliminates a competitor in a concentrated market—which would seem on its face bad for competition—the new tour should learn from past antitrust challenges in sports. For instance, the National Football League received a congressional exemption to merge with the American Football League after agreeing to create new franchises and to improve their stadiums. Likewise, the new tour can work to persuade the antitrust agencies and policymakers that it will increase output, continue to innovate, and benefit fans and golfers. In fact, in his announcement, PGA Commissioner Monahan already hinted that the new tour would continue to innovate, such as by adopting elements of LIV’s team golf format and promising that the Saudis will invest heavily to grow the sport (including likely increasing compensation for golfers). The new tour also could reform its contracts to give golfers more flexibility to play elsewhere. Such flexibility, in the form of free agency, helped to resolve a player’s lawsuit challenging the merger of the National Basketball Association with the American Basketball Association.

Of course, the primary component of the antitrust analysis is whether the new tour benefits consumers. Here, the biggest benefit is conspicuous and immediate: It ends the current stalemate between the two tours that kept many of the world’s best golfers from competing against one another week in and week out. Fans want to see the best golfers compete against each other in the same events. If the union moves forward, that outcome becomes a reality, not a wistful hope at the end of years of litigation. 

Moreover, the new tour need not lead to a decrease in the number of tournaments. With new investment, the combined tour could commit to more tournaments, held in more parts of the country and world, with better facilities for fans and more compensation opportunities for golfers. At the same time, antitrust regulators will have to consider a world in which the tours are not allowed to combine. Would the Saudis continue to subsidize LIV indefinitely, even though LIV is not profitable today and, on its own, has no realistic timetable for becoming so. Would the PGA have the resources to keep pace with LIV in terms of compensating golfers? At the Senate hearing, the PGA argued that LIV presents an “existential threat” to its revenue streams. Ranking minority member Ron Johnson (R-Wisc.) acknowledged that perspective in his opening statement, arguing that “[t]here is nothing wrong with the PGA Tour negotiating its survival.” 

The answers are not clear, but at a minimum, there is no guarantee that the two leagues would continue to operate as they do today. The ongoing viability of franchises and even leagues has been a topic of discussion for other sports leagues and mergers generally. For example, regulators approved the combination of two struggling companies, Sirius and XM, in part due to concerns that satellite radio would not survive without a merger. The antitrust regulators will have to consider the myriad possible outcomes.

The Sand Trap: Is Human Rights a Deal Breaker?

Beyond antitrust, Saudi involvement in an American sports league raises human rights concerns. In what now appears an ironic critique, the PGA Tour once argued that LIV was paying golfers “astronomical sums of money … to sportswash the recent history of Saudi atrocities.” The new tour arguably would take that “sportswashing” to a new level. It would involve a significant financial investment from Saudi Arabia’s Public Investment Fund (PIF), which would become a “premier corporate sponsor.” PIF’s Yasir Al-Rumayyan would become the chairman of the new entity. PIF reports to the government of Saudi Arabia, a government that has repeatedly drawn condemnation for infringing human rights

These sorts of serious concerns have not, however, stopped other foreign investment from flowing into the United States. In fact, sovereign wealth funds have become a routine part of investment in America. Last year, NBA owners voted to permit sovereign wealth funds to own stakes in teams. In addition, the Saudis have invested in numerous U.S. organizations, including Twitter, Uber, and many U.S. universities. In 2018, MIT reviewed its Saudi relationship and recommended against terminating it. If Saudi Arabia can invest so deeply in American institutions, and in sports generally, why not golf?

Moreover, the U.S. government has had a clear foreign policy objective of promoting U.S. business engagement with Saudi Arabia. In 2022, the White House announced a Commercial Partnership Shared Work Plan, and President Biden notoriously fist-bumped Crown Prince Mohammed Bin Salman. A State Department website on U.S. embassies in Saudi Arabia states that “Saudi Arabia has a growing and increasingly diverse economy that presents rich opportunities for U.S. firms in a wide variety of sectors.” The two countries signed a Trade and Investment Framework Agreement in 2003 that remains active today, and the State Department website says that “the United States and Saudi Arabia enjoy a strong economic relationship.” This approach cuts across party lines. President Trump signed a $110 billion defense package with Saudi King Salman in 2017. 

The U.S. government has a wide variety of tools at its disposal if it wants to restrict business engagement with foreign governments to minimize national security risks. If the United States possessed evidence of national security harm that was sufficient to warrant action limiting or blocking business investment in Saudi Arabia or with the Saudi government, it could label Saudi Arabia a foreign adversary or put Saudi entities on export restriction lists. The current administration has taken this approach with countries like China, using a foreign adversary designation as the basis for a variety of policies that restrict business transactions with foreign entities and dealings with foreign governments. Are Phil Mickelson and Brooks Koepka akin to advanced microchips and semiconductors, whose export could raise national security concerns? Maybe, but the U.S. government has not taken these steps. 

If the U.S. government were less worried about outbound investment itself and more concerned about the national security risks of inbound Saudi investments in U.S. businesses, it could use the Committee of Foreign Investment in the United States to investigate. Sen. Wyden wrote a letter to the PGA Tour expressing concern about “risks this arrangement may pose to America’s national interests, particularly with respect to foreign investment in U.S. real estate.” In the event that CFIUS found evidence of potential harm to national security, it has the power to break up the deal entirely. Is being a corporate sponsor of a golf tournament similar to owning a dating app, which involves the collection of sensitive data about a user’s location and romantic interests? If so, then CFIUS should take the lead. But in the absence of any evidence of risks that would warrant a CFIUS investigation, the deal shouldn’t be treated differently from a similar one in any other industry. 

To the Clubhouse: A Path Forward

If it wants to get to the 19th hole, the new tour should consider an approach that confronts the human rights concerns head on. Aim for the flag. An entire field—the business and human rights field—has emerged to help companies navigate the challenges of operating in countries with troubling human rights records. At a minimum, the new tour could choose a path that is new to the sports world but familiar to other industries: commit to following best practices for respecting human rights. 

The accusations of Saudi human rights abuse are certainly unsettling. There is no sugarcoating that reality. Still, the founding principles in the field, the UN Guiding Principles on Business and Human Rights, ask companies to operate responsibly, not to cease operations. Businesses should identify human rights risks, try to mitigate them, and be transparent about their policies and practices. The new tour can adopt this logic and apply the principles as a demonstration of good faith. Even if it cannot mitigate human rights risks by directly influencing Saudi Arabia—which is, after all, only an investor—it can show the world that for its own part, the new tour takes human rights seriously. In golf, a sport that has a history of exclusion, a human rights-oriented approach to business operations, would be welcome.

Since the Guiding Principles were published, other organizations have sprung up to help guide businesses toward more responsible decision-making. The Global Network Initiative, a multi-stakeholder organization focused on business and human rights in the technology and telecoms sectors, developed implementation guidelines to help tech and telecom companies manage human rights risks. An advisory industry has emerged to help companies implement responsible human rights practices, with organizations like BSR and Article One providing consulting services to companies looking to expand into new markets, roll out new products, or improve their current operations.

If the new golf league wants to show its commitment to human rights, it could incorporate these best practices into its own work, such as by using human rights impact assessments to guide its business decisions. For instance, an assessment might indicate the new tour should not hold events in certain jurisdictions that use forced labor to maintain golf courses. Human rights assessments also require businesses to consult with stakeholders about risks and impacts. Outside of the sports world, companies regularly meet with nonprofit organizations to learn more about the impact of their work. Likewise, the new tour could benefit from discussions with those who have deep expertise in Middle East human rights issues. The new tour could even pioneer the use of audits in sports by allowing independent assessors to evaluate its compliance with international human rights norms. These types of tools are widely used in the tech and telecom sectors to help companies identify and mitigate potential risks. Golf could do the same.

In the months ahead, the golf merger will face antitrust hurdles and human rights scrutiny. If the company in question was a leading tech, apparel, or telecom company, the path forward would be clear: The company would ensure the merger benefits consumers and implement responsible human rights practices. The new tour should do the same. In yesterday’s hearing, Senator Blumenthal worried about the precedent the deal would set. “It’s about other sports and institutions that could fall prey, if their leaders let it be all about the money,” he said. But done right, the deal might actually establish a positive precedent. If the new tour can find its way through this tricky terrain, then the past battles between LIV and the PGA Tour will resonate far beyond golf, serving as a template for how other sports leagues approach competition and human rights.


Matt Perault is the director of the Center on Technology Policy at the University of North Carolina at Chapel Hill, and a consultant on technology policy issues.
Asheesh Agarwal is an attorney who has served in senior roles at the Department of Justice and Federal Trade Commission.

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