October 24, 2024
On June 6, 2023, the PGA Tour announced that it had entered into a Framework Agreement with the Public Investment Fund of the Kingdom of Saudi Arabia (PIF) to create “a global golf partnership.” For this deal to go through, there are at least two U.S. regulatory hurdles that the parties must navigate: (1) antitrust scrutiny; and (2) The Committee on Foreign Investment in the United States (CFIUS) scrutiny.
Antitrust
Parties are required, unless exempted, to report transactions that are above a certain threshold ($119.5 million in 2024) to both the Federal Trade Commission (FTC) and the U.S. Department of Justice Antitrust Division (DOJ) for antitrust review. The agencies will then review the transaction to determine whether it should be investigated or challenged under antitrust laws. While the Framework Agreement does not specify the investment amount, Ron Price, the PGA Tour’s Chief Operating officer, testified in a Senate Subcommittee hearing held on July 11, 2023 that a PIF investment “north of $1 billion” had been discussed. Regardless of potential reporting requirements, the DOJ has notified the PGA Tour that it will review the deal contemplated by the Framework Agreement for antitrust concerns.
Past statements and actions by both parties could undermine their argument that the proposed deal does not raise concerns under the antitrust laws. The PIF’s current golf asset, LIV Golf, has previously sued the PGA Tour alleging violations of antitrust law, using the word “monopoly” multiple times in its complaint and accusing the PGA Tour of “transparently anticompetitive” actions. Similarly, Jay Monahan, the CEO of the PGA Tour, stated that the agreement with PIF was a means of taking a “competitor off of the board.”
However, the professional sports industry is unique in that some level of coordination among competitors is essential. In 1922, the Supreme Court issued a controversial decision allowing major league baseball to operate outside the ambit of antitrust law, and in 1966 Congress passed a law permitting the merger between the National League and the American Football League to proceed. Few antitrust lawsuits against professional sports leagues have succeeded.
CFIUS
The Committee on Foreign Investment in the United States (CFIUS) is responsible for reviewing foreign investments in U.S. businesses and real estate to determine if the transaction threatens U.S. national security. CFIUS evaluates the vulnerabilities to national security that a U.S. business generates and the likelihood that the foreign entity will exploit those. Although CFIUS is largely a voluntary process, CFIUS has implemented mandatory filing requirements in 2018 and 2020. Upon review, CFIUS can block a transaction or require that the parties alter the transaction to mitigate any national security concerns. If the parties do not notify CFIUS of the transaction, CFIUS unilaterally can investigate after the closing and direct that the buyer divest the acquired U.S. business or investment if national security concerns cannot be mitigated.
A number of categories of transactions subject to mandatory filing requirements may apply to a PGA Tour/PIF merger. For example, one mandatory filing category pertains to certain investments in a U.S. business by foreign investors with substantial foreign government ownership. To determine whether CFIUS filing would be mandatory for the proposed merger, the parties must determine several elements, such as the nature of the transaction and the nationality of the newly formed entity.
Parties can also file voluntarily to obtain CFIUS clearance, typically when they perceive that the transaction could impact national security. CFIUS assesses this risk based on the “threat” posed by the buyer and the “vulnerability” of the target. Factors such as the foreign investor’s nationality and the target asset’s proximity to sensitive U.S. government locations could be scrutinized to determine potential threats posed by the merger.
Members of both the Senate and the House have expressed concerns regarding the merger, criticizing the “repressive” Saudi regime and calling for greater scrutiny during CFIUS evaluations. Given the high-profile nature of the transaction and the parties involved, voluntary filing may be merited.
Conclusion
The proposed PGA/PIF merger may raise both antitrust and national security concerns. Even if a definitive agreement is signed, review would delay the closing of the transaction. Although the outcome of such regulatory review is uncertain, it is virtually certain to be required.
The original article can be found here.
Haesun Burris-Lee (LAW ‘21) is an associate at Ballard Spahr in Philadelphia, focusing her work on antitrust matters, regulatory compliance, and complex commercial litigation.
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only.
Reprinted with permission. Copyright © 2024 by Ballard Spahr LLP.