[Why Tim Wu thinks regulators might block a PGA Tour-LIV Golf
“partnership.” ]
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BIDEN’S ANTITRUST ADVISER TEES OFF ON GOLF MERGER  
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Sara Morrison
June 9, 2023
Vox
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_ Why Tim Wu thinks regulators might block a PGA Tour-LIV Golf
“partnership.” _

Tim Wu, gruntzooki

 

The golf world was rocked this week by news that the PGA Tour,
Europe’s DP World Tour, and Saudi Arabia’s controversial LIV Golf
plan to merge
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Or, as the PGA Tour put it
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“unify the game of golf.” PGA Tour commissioner Jay Monahan —
who as recently as a year ago
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9/11 attacks, carried out mainly by Saudi citizens, to criticize PGA
Tour players who had jumped to LIV — framed it
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a little differently: “take the competitor off the board.”

The entities involved haven’t finalized the terms of the deal and it
will need approval from various stakeholders, like the PGA Tour’s
board of directors, before it can go forward. But even if it does,
there may be another hazard up ahead: antitrust regulators, who have
generally taken a more adversarial stance on corporate consolidation
in the last several years. They might not be thrilled with the game
(and business) of golf being “unified.”

Tim Wu [[link removed]] is a Columbia
law professor who’s one of the leaders
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of an antitrust reform movement that would like to see US competition
policy go back to its pre-1980s roots, when antitrust regulators and
enforcers took a more oppositional stance to big mergers and corporate
consolidation. He’s pretty doubtful
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antitrust authorities will approve the deal.

Wu knows what he’s talking about, especially considering he’s a
former competition adviser to President Biden who helped shape the
administration’s policies regarding competition, including authoring
the sweeping executive order
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designed to promote it.

Vox asked Wu to elaborate on some of those points and make the case to
Americans who don’t watch golf for why this proposed merger should
be important to them. This interview has been lightly edited for
length and clarity.

Sara Morrison

Does antitrust law cover sports?

Tim Wu

Yes. It’s a business.

Sara Morrison

Is this a merger? The PGA Tour is now calling it a “partnership.”
What’s the difference?

Tim Wu

No one knows how the deal will be structured (maybe not even the
parties who agreed to it). But if the result — whether a merger or a
partnership — is an agreement not to compete, the antitrust law will
care. The law doesn’t care what you call it.

Sara Morrison

Why should Americans who don’t follow golf or sports care about
this?

Tim Wu

Three reasons:

First, I think there’s a question of public sovereignty. It’s
illegal to merge to monopoly. For the Saudis and the PGA to so
brazenly flout that raises basic rule-of-law questions. In other
words, I think people should want to know that the laws will be
enforced even if the Saudi government has lots of money.

Second, what we have here is mostly a labor case. While professional
athletes may not be the most sympathetic workers, the fact is that
when employers merge, employees usually get hurt. Many may not care if
a pro-golfer makes less money, but there are other employees as well,
and the principle of defending employees against mergers that will
hurt them.

Finally, Saudi Arabia buying and controlling a major American sports
league matters as just a matter of geopolitics — these are
significant assets, and who controls them matters for propaganda and
other purposes.

Sara Morrison

Sen. Mitch McConnell says
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it’s “not a governmental concern.” Why wouldn’t it be a
governmental concern?

Tim Wu

It is an irresponsible thing to say and he’s wrong. Congress made
monopolization a “government concern” back in 1890 when it passed
the Sherman Act. So I don’t know why he’d say that unless he is
trying to pressure law enforcement, which is also wrong.

Sara Morrison

The US has two antitrust enforcers, the Department of Justice and the
Federal Trade Commission. Which one will handle this?

Tim Wu

The Justice Department.

There also is an outside chance that another entity, the Committee on
Foreign Investment in the United States
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might take a look too. They’d be looking for national security
concerns, including those related to data collection. To be sure,
national security isn’t so obviously implicated by the buying of a
professional sports league as it is in the buying of a semiconductor
firm. But that said, sports leagues are valuable media properties, and
the US has traditionally been concerned about foreign ownership of
major media properties.

Sara Morrison

What will DOJ’s considerations be when reviewing this merger and
deciding whether or not to block it?

Tim Wu

As I said, no one knows what the “partnership” will actually look
like. However, PGA Tour Commissioner Jay Monahan gave a hint when he
said a benefit of the deal is “to take the competitor off the
board.”

For that reason, I think a big question will be similar to the
JetBlue-American Airlines alliance that was just blocked
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Is the “partnership” actually a merger? More generally, does it
“eliminate competition”? If the answer is yes, then the deal may
be dead on arrival, but I think the Justice Department will want to
have a sense of what this will mean for players and for media buyers.

Sara Morrison

Does the fact that there was already an investigation
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into the PGA Tour’s allegedly anticompetitive actions against LIV
mean anything? Or is it a clean slate?

Tim Wu

It means they have a head start.

Sara Morrison

LIV Golf didn’t even exist just a few years ago. Does that make this
merger any less of an antitrust issue, since it’s not a longtime
competitor leaving the space? Or is it more of an issue, since it
could also be seen as the PGA Tour almost immediately quashing a
competitive threat?

Tim Wu

I think it can be spun both ways, but it looks an awful lot like the
elimination of an upstart competitor. It is one of the classic
antitrust stories: established monopoly faces upstart challenger;
eventually both parties recognize it would be better for them to stop
competing and split the profits. But the law doesn’t let you do
that.

Sara Morrison

Is there a labor issue? Many in the antitrust reform movement —
including the Biden competition executive order — have said
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that competition concerns need to include the impact on labor. One
thing the PGA Tour was not happy about was how LIV lured golfers away
with the promise of much larger purses. So there’s a real
possibility that golfers will get less prize money once LIV is no
more.

Tim Wu

This would probably be brought as a labor case. The blueprint for
bringing this as a merger case would be the recent blocking
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of the Random House/Simon-Schuster merger. The Justice Department sued
on the theory that fewer buyers of authorial labor would hurt authors,
and won on that theory.

Sara Morrison

Do you think the DOJ will sue to block this? What about the UK and
Europe?

Tim Wu

It does depend on how the deal is structured. But if it is a
straight-up merger to monopoly there may be an [international] race to
block it. The UK authority has been
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aggressive.

Sara Morrison

The DOJ and the FTC have made it pretty clear that they’re taking a
stricter approach to mergers and competition than the agencies did
under the last several administrations. And we have the Biden
executive order
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which you had a lot to do with. Yet we’re still seeing companies
attempting these massive, even audacious mergers: JetBlue/AA,
JetBlue/Spirit
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Microsoft/Activision
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Spirit/Frontier
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Penguin Random House/Simon & Schuster. Are they not taking the FTC and
DOJ seriously? Or is there an assumption that they’ll be okay in the
courts?

Tim Wu

I think it takes a while for the industry to adjust. Many have gotten
used to enormous paydays and golden parachutes during the “green
light” era and don’t easily change their habits. Say you have a
multimillion-dollar golden parachute waiting for you [if the merger
goes through] — wouldn’t you want to try rolling the dice?

But of the deals you mentioned, two are already blocked, and the rest
are in trouble. So it may take a few more hard knocks — old habits
die hard.

Sara Morrison

Has the Biden administration accomplished what you thought it could or
should on competition, or has it fallen short? What is left to do that
can reasonably be done before the end of his first (or only) term?

Tim Wu

I think we’ve done great! Antitrust had become an overly technical
backwater — and now has returned, in my view, to the forefront of a
national conversation about the economy and how it should be
structured. Having the president involved in setting antitrust policy
is a big deal, historically taking us back to FDR’s approach. So I
feel that we’ve definitely changed the conversation, changed the
institutions, and have begun to change the case law. What more could
you want?

As for what comes next: This is a big topic, but over the rest of the
term the administration should keep bringing good, big, winner cases,
block bad mergers, and institutionalize the leadership and positions
at the White House Competition Council. That’s just a matter of
appointing staff to the Council, which I hope they’ll do soon.

Sara Morrison

We had antitrust bills
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last session in Congress and most of them didn’t go anywhere. They
probably have an even worse chance with a split Congress. Are you
optimistic that we’ll get anything from Congress? And do you think
the FTC and DOJ have what they need to do the job if not?

Tim Wu

I’ve long thought it important that antitrust revival not depend on
Congress. Waiting for Congress — assessing your success by
congressional action or inaction — is a big Washington trap. The
fact is that Congress is no longer capable of doing what
supermajorities of voters want, but has become an undemocratic body.
So yes, it would be nice if Congress were to pass new antitrust
legislation; it would also be nice if Congress would fix American
health care, reform immigration laws, pass a privacy law. It is good
at spending money, but that’s it. These issues are all too important
to waste time with Congress’s offer to hold the football so Charlie
Brown can kick it.

The fact is Congress did act and gave enormous powers to the agencies
in 1890
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1914 [[link removed]],
1936
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and 1950 [[link removed]],
not to mention the powers it gave to the Department of Transportation,
United States Department of Agriculture, Surface Transportation Board,
and many other agencies. I have more faith in returning to what
Congress asked for when passing those laws than sitting around hoping
this Congress can overcome its many dysfunctions.

Sara Morrison [[link removed]] is a senior
Vox reporter who has covered data privacy, antitrust, and Big Tech’s
power over us all for the site since 2019.

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* PGA
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* Anti-trust
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* Saudi Arabia
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