DV Journal

When some of professional golf’s biggest names left the PGA Tour to join the more lucrative LIV Golf, it created headlines.

Now the PGA’s treatment of those players is creating litigation. And an ongoing federal investigation.

The Department of Justice (DOJ) has launched an investigation into the PGA Tour over allegations of anticompetitive behavior. And the tour, which once held an unchallenged monopoly in professional golf, may find it is running afoul of rules for the new “gig-economy” labor market.

The Wall Street Journal broke the story that players’ agents have received inquiries from the DOJ’s antitrust investigators regarding the tour’s bylaws and how the PGA is treating pros who chose to play in the PGA’s actions as many players leave for the Saudi-backed LIV Golf tour.

The list of golfers who have left the PGA includes Phil Mickelson, Bryson DeChambeau, and Dustin Johnson. And just days after he won the British Open, rumors are swirling that Cameron Smith might join them, along with Ryder Cup captain Henrik Stenson.

The PGA has banned and fined players for joining the Saudi tour. According to PGA Tour Commissioner Jay Monahan, “their participation in the Saudi Golf League/LIV Golf event is in violation of our Tournament Regulations. The same fate holds true for any other players who participate in future Saudi Golf League events in violation of our regulations.”

Monahan said the “players have made their choice for their own financial-based reasons. But they can’t demand the same PGA TOUR membership benefits, considerations, opportunities and platform as you. That expectation disrespects you, our fans and our partners.”

LIV Golf Commissioner Greg Norman responded in a recent interview. “We haven’t done anything other than putting together a business model and giving independent contractors a right to earn a living doing something else, as well as still being a member of the PGA Tour.”

John Lauro, a Florida attorney who said he might represent the golfers if they litigate, said the PGA’s stance is wrong because the workplace is changing. “This a very problematic policy,” he told InsideSources.

The latest battle is more than a millionaires’ moneybrawl. It could portent legal battles in many American workplaces. When is the worker a freelancer and when is he an employee?

For the PGA to win in any potential litigation, Lauro adds, it would have to prove “some sort of compelling business interest that would support a restriction of this type.” That would mean the worker had received some kind of special training or had intimate knowledge that could be given to competitors. Lauro says “naked restrictions” would likely violate federal anti-trust statutes.

Still, PGA spokeswoman Laura Neal told InsideSources the controversy “was not unexpected. We went through this in 1994 and we are confident in a similar outcome.” In the 1990s, the PGA Tour resolved similar problems with the Federal Trade Commission.

Now the DOJ is asking questions of the suspended golfers’ agents. Justice Department spokesmen won’t confirm it but PGA officials say the government is involved. Lauro contends “the Justice Department is firing a warning shot across the bow of the PGA.”

And, says antitrust attorney Luke Hasskamp, the Feds could make a much bigger issue out of this base if they choose.

“Any time a dominant market player takes aggressive steps in the face of competition, that can catch people’s attention, especially those attuned to antitrust issues,” Hasskamp said. “The reality is true for the PGA Tour and its response to reports of efforts to launch a competing league.”

Hasskamp, who writes for the blog “Antitrust Attorney,” told InsideSources he believes the most likely antitrust challenge would be based on Section II of the Sherman AntiTtrust Act of 1880. It prohibits “monopolization or attempts to monopolize trade in the United States.”

Is there a PGA defense?

A former DOJ antitrust attorney speaking on background told InsideSources the PGA might argue “professional golf has never been a team sport based in a specific city with home stadiums. Instead the PGA is about promoting an affiliation” of individual golfers.”

“Frankly, given all the pressing concerns facing most Americans today, the allocation of DOJ resources to the potential PGA antitrust activity seems a colossal waste; however, I appreciate that from DOJ’s perspective they may feel political pressure to open up an inquiry,” the attorney said.

Texas Sen. John Cornyn is not happy about the PGA’s treatment.

“I am concerned about whether members of the Department of Justice’s Antitrust Division, or any other member of your administration, were involved in the investigation recently being made public,” the Republican wrote to President Joe Biden. “I also have questions about whether your administration had any contact with the Saudi-Arabian government about the investigation, either before it opened or afterward.”

A White House spokesman did not respond.

Former President Donald Trump, however, encouraged the players to “take the money now.”

“All of those golfers that remain ‘loyal’ to the very disloyal PGA, in all of its different forms, will pay a big price when the inevitable MERGER with LIV comes, and you get nothing but a big ‘thank you’ from PGA officials who are making millions of dollars a year,” Trump wrote on Truth Social.

Trump told golfers they should join the controversial Saudi-backed our. The next LIV Golf Invitational Series event is scheduled for Trump National Golf Bedminster later this month.

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On the heels of NBC’s Beijing Winter Olympics coverage, in which the network faced criticism for publicizing a sporting event staged by an authoritarian regime, numerous sports and entertainment organizations are facing renewed scrutiny over their relationships with China.

That includes professional golf’s PGA Tour, an organization whose close ties and extensive business investments with China have only recently come to light, raising potential legal and regulatory problems for the PGA Tour, which enjoys tax-exempt status courtesy of the American taxpayer.

China has long had a complicated and even strained relationship with the game of golf–going back to the days of Chairman Mao, who in 1949 denounced golf as “a sport of millionaires” and banned it from being played in China. As recently as 2015, the ruling Chinese Communist Party (CCP) banned its members from joining golf clubs, warning expulsion awaited anyone who defied the ban.

In recent years, however, CCP leaders have warmed to the game, presumably because of the big revenue tournaments can generate for China and the international prestige the game could provide the abusive regime. Indeed, the Beijing-based Shankai Sports in 2018 signed a 20-year contract with the PGA Tour Series-China, a development tour similar to circuits run by the PGA Tour in Canada and Latin America.

The PGA-China deal has led to criticism that PGA Tour is providing cover for a government accused of widespread human rights abuses by partnering with them on high-profile golf events. It also faces regulatory and legal scrutiny as the PGA apparently failed to disclose it in recent tax filings.

“Today, under the dictatorial rule of Xi Jinping – a neo-Maoist thug – the PGA Tour and LPGA Tour include annual treks to Shanghai, China for the WGC-HSBC Champions and Buick LPGA Shanghai,” Pro Golf Weekly’s Jeff Smith recently wrote in an article titled “Where’s the Sportswashing Outrage With Communist China?”

“How evil is the current regime in relation to Mao?” Smith continued, referring to the founding father of the People’s Republic of China. “Last year, the United States officially accused China of committing crimes against humanity, which had engaged in the forced assimilation and eventual erasure of a vulnerable ethnic and religious minority group.”

The PGA deal in China establishes a direct connection between the golf organization and China’s government. Financing came from Yao Capital, a company whose principal is also a member of the Chinese People’s Political Consultative Conference, a political advisory group to the Chinese government, which is in the midst of a five-year plan to develop the country’s sports into a $740 billion industry by 2025.

China has proven a difficult place to do business in for many American companies, with CCP leaders having a long history of pressuring them to conform to the nation’s principles and to avoid criticizing its policies.

China’s strong-arm tactics toward the NBA are well known. When Daryl Morey of the Houston Rockets tweeted his support for Hong Kong’s freedom in 2019, China stopped broadcasting the team’s game. The Rockets and the NBA quickly distanced themselves from Morey’s comments and issued apologies all around.

Even LeBron James, perhaps the biggest name in the NBA, has felt the need to publicly side with China. Now, fans fear the same will happen with the PGA.

“Decent people everywhere root against the power and influence of Communist China, which means hoping for the worst for CCP stooges like LeBron James,” said longtime sports journalist and podcaster Gerry Callahan. “Does golf want to see the PGA become the ‘Pro-Genocide Association?’” Callahan asked.

Those concerns have been heightened in the wake of a report from a public-integrity organization in Washington that the PGA is refusing to disclose details of its financial dealings with Shankai Sports.

Tom Anderson, director of the National Legal and Policy Center’s Government Integrity Project, said that as an organization with tax-exempt status from the IRS, the PGA Tour is required to file financial disclosures regarding its business dealings in China. But the PGA’s tax filings for 2018 and 2020 do not contain any disclosures about its transactions involving Shankai or Yao, Anderson told InsideSources.

In a statement, PGA Tour spokesperson Laury Livsey said the filing isn’t required because the China tour is a separate entity.

“The PGA Tour established a separate entity, based in Beijing,” Livsey said. “The PGA Tour’s Form 990 only relates to the tour’s activity, and the activity of a subsidiary would not be reported on the PGA Tour’s Form 990. In any event, it is not a requirement that organizations identify or disclose ancillary contracts or deals.”

Anderson doesn’t agree, and his organization is filing a complaint with the IRS about the PGA’s lack of disclosure.

“At the end of the day, if you have a serious operation outside of the United States and you’re a non-profit, you have to disclose that operation, and in detail: The number of employees you have, the companies you have contracts with,” Anderson said. “The PGA says they’ve found a loophole, but they haven’t.”

It is tempting to dismiss a topic like golf as just fun and games. But foreign policy experts say the Chinese regime sees it as something else: soft power.

“As China’s economy has grown in recent decades, so, too, has its desire to advance its soft power objectives around the world, including in sport,” said Craig Singleton, Senior Fellow at the Foundation for the Defense of Democracies (FDD), a nonpartisan think tank focused on foreign policy and national security issues.

“Beijing’s hosting of the 2008 summer Olympics was a watershed moment for China, representing the country’s return as a so-called ‘great power.’ Since then, and culminating in the most recent 2021 Olympics, Beijing has methodically invested in sport, entertainment, and international fora as a means to positively shape global perceptions about China.” Singleton added. “Beijing’s soft power investments are also intended to offset criticism of its hard power capabilities, namely China’s ongoing efforts to modernize its military and its intimidation of Taiwan.”

Will pro golfers who oppose China’s anti-democratic policies, its takeover of Hong Kong, or its threats against Taiwan be forced to remain silent or find themselves forced out of the league?

That type of arrangement is part of China’s playbook, James Carafano, vice president for national security and foreign policy at The Heritage Foundation, said in an interview.

“The Chinese purposefully look to take any national or international institution and essentially make it an extension of Chinese power and influence,” Carafano told The Daily Signal, which is Heritage’s multimedia news organization.

It is clear the PGA Tour has tried to minimize, if not outright conceal, their business relationship with China for years, and judging by their recent statement, they continue to downplay their close ties with the CCP. It is time for the non-profit, tax-exempt Tour to fully disclose the extent of their business dealings with China. If they refuse, the IRS and federal regulators must investigate to see if the Tour’s actions violate federal law.

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