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Spokane, Washington  Est. May 19, 1883

Pressured by U.S., PGA Tour and Saudi Fund drop key part of golf deal

Jimmy Dunne, a PGA Tour board member, testifies at a hearing of the Senate Permanent Subcommittee on Investigations focused on the merger between the PGA Tour and LIV Golf league on Tuesday.  (New York Times)
By Alan Blinder, Lauren Hirsch and Kevin Draper New York Times

The PGA Tour and Saudi Arabia’s sovereign wealth fund, facing pressure from the Justice Department about their ambitions for a new company to shape global golf, have in recent days abandoned a crucial provision of their tentative deal: A promise not to recruit each other’s players.

The decision – and the Justice Department’s choice to raise concerns so early in a review that could lead to a government attempt to block the transaction – reflected the fragility, uncertainty and turbulence surrounding the deal.

The framework agreement between the tour and the wealth fund included few binding provisions. But one of them was a nonsolicitation clause, which said the tour and wealth fund-backed LIV Golf league would not “enter into any contract, agreement or understanding with” any “players who are members of the other’s tour or organization.”

The agreement also said the tour and LIV would not “solicit” or “recruit” players away from each other.

Before the deal, LIV used norm-shattering prize funds and guaranteed contracts – some deals promised golfers at least $100 million – to entice some of the world’s top players away from the PGA Tour, which had 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 ultimately joined LIV, depriving the PGA Tour of some of the star power on which it had relied to draw fans and sponsors.

The nonsolicitation clause was a short-term way to stop the exodus while 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, though, antitrust experts warned that the clause could run afoul of 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 abandon the provision in hopes of staving off an extraordinary intervention by the Justice Department. Golf officials disagreed with the department’s misgivings but acquiesced nevertheless.

The original language appeared “to be right in the field of vision that the Department of Justice has staked out for its no-poaching enforcement program,” said William E. Kovacic, a former Federal Trade Commission chairperson.

“They haven’t had a great deal of success in their criminal cases yet,” he said. “But they have said, as a matter of policy, we regard no-poaching agreements as being a serious offense worthy of criminal prosecution.”

The Justice Department and the wealth fund declined to comment Thursday. In a statement on Thursday afternoon, the tour said it “chose to remove specific language” from the initial pact after it engaged with the Justice Department.

“While we believe the language is lawful, 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 the decision on Thursday, after the New York Times asked the tour to comment on its reporting. A person familiar with the tour’s internal deliberations said the circuit’s leaders had already planned to inform the board on Thursday.

Turmoil has enveloped the deal, which has not closed, since it was announced 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 inquiries. Tour executives have depicted the framework deal, and the final accord they hope to strike eventually, as necessary.

Without some kind of truce, they have said, the wealth fund would assuredly pour more resources into the fight, diminishing the tour one year after another.

“My fear is if we don’t get to an agreement, they were already putting billions of dollars into golf,” James J. Dunne III, a tour board member, said of the wealth fund when he addressed lawmakers Tuesday. “They have a management team wanting to destroy the tour. Even though 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.