Skip to main content
SearchLoginLogin or Signup

PGA Tour Merger with LIV Golf: Will it Trigger the Morality Clause in Key Sponsorship Agreements?

Published onAug 18, 2023
PGA Tour Merger with LIV Golf: Will it Trigger the Morality Clause in Key Sponsorship Agreements?

The PGA Tour was founded in 1929 as the premier men’s professional golf league in the world. A key element to the Tour’s success has been their ability to obtain corporate sponsorship for all their events. The PGA Tour currently maintains 52 corporate sponsors that help fund these tournaments across the globe. Whether as title sponsors or simply for advertisement, the PGA Tour has relied on key partners to fund their $17.5 million prize purse for tournament winners.

The significance of sponsorship for the PGA Tour transcends the league ownership as the golfers are the greatest beneficiaries of sponsorship. In 2019, Phil Mickelson was estimated to have earned $37 million from sponsorships between Mickelson and global corporations like Barclays, KPMG, Rolex, and Workday. However, sponsorships of some of the PGA Tour’s most popular golfers came under fire in 2022 with the emergence of a competing league, LIV Golf.

LIV emerged as the greatest disruption the golf world has experienced. It presented itself as an opportunity to “reinvigorate golf through rich paydays, star players, team competition, and slick marketing.” However, this attempt at a new league has been met with staunch resistance due in large part to who is financially funding the new golf league.

LIV Golf is bankrolled with at least $2 billion by the Saudi Arabian Sovereign Wealth Fund (the “Fund”). The Fund is an investment pool that manages more than $700 billion of Saudi Arabian government money. With this money, the Fund invests in companies, real estate, and now, professional golf. In an effort to popularize the league, LIV Golf lured fan-favorite PGA Tour golfers, such as Phil Mickelson and Dustin Johnson, to leave the Tour and join LIV for signing bonuses rumored to be upwards of $200 million and $150 million respectively. While a new and exciting league, with improved winners’ purses, may be appealing, there has been a tremendous amount of controversy due to who will be in charge of the new league. Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto leader, is the chairman of the board for the Fund. Accordingly, the Fund, like its chairman, has been subject to criticism over investments in international politics and accusations of human rights violations.

In response to their sponsored athletes' announcements that they were leaving the PGA Tour to join LIV Golf, global corporations, such as KPMG and RBC, announced that they were terminating their sponsorship of golfers Phil Mickelson and Dustin Johnson. Despite being sponsored by KPMG since 2008, Mickelson and his long-time sponsor, KPMG, split due to Mickelson’s breaches of the sponsorship’s morality clause after he made inflammatory comments regarding his acceptance of the questionable morality of LIV’s financial backers. Similarly, Dustin Johnson and his long-time sponsor, Royal Bank of Canada, split over Johnson’s decision to join LIV. While Johnson did not make an inflammatory statement like Mickelson, RBC ended their sponsorship to remain in alliance with the PGA Tour’s, and its commissioner’s, Jay Monahan, anti-LIV Golf directive. In their termination announcements, both corporate sponsors showed an opposition to the new league and affirmed their support for the PGA Tour.

Jay Monahan has been outspoken in his criticism of LIV Golf, its financial backers, and the golfers who left the Tour for LIV. Monahan was a leader in the decision to suspend golfers from PGA Tour events if they competed in any LIV events. In response to questions regarding golfers leaving the PGA Tour to join LIV, Monahan said, “I would ask any player that has left or any player that would ever consider leaving, ‘Have you ever had to apologize for being a member of the PGA Tour?’” When asked how much of an issue it was that the money funding the LIV Golf series was coming from Saudi Arabia, Monahan replied: “Well, it’s not an issue for me because I don’t work for the Saudi Arabian government. But it probably is an issue for players that chose to go and take that money.” Ultimately, Monahan’s opposition to LIV Golf is fueled by his duty “to protect, defend and celebrate our loyal PGA Tour members, our partners and our fans.”

Despite such staunch opposition to LIV Golf, the PGA Tour announced the unthinkable in April of 2023 when the two leagues merged. Despite prior hostility, commissioner Monahan cited that “a change in circumstances” led to the merger. While the two leagues may be quashing their dispute, new questions emerge: will the sponsors of the PGA Tour agree to this change in circumstance? If not, will the long-time sponsors of the Tour terminate their sponsorship in light of the morality clauses?

As previously noted, golfers who joined LIV did so without many of their sponsors due to breaches of morality clauses in their sponsorship agreements. Generally, morality clauses in sponsorship agreements permit sponsors to terminate their agreements without liability towards the other party should the sponsored party disparage or impair the reputation of the sponsor. As evidenced by Monahan’s pre-merger statements, any corporate involvement with “that money” was problematic for the image of the PGA Tour, its members, its partners, and its fans. So, has this change in circumstance been so significant that it no longer triggers the sponsors’ morality clauses, or will the new PGA Tour require the financial support of its newest partner?

Ultimately, these questions have not been answered yet, but there will likely be a decision soon. While the merger has been announced, the specific details of how the leagues will integrate have not yet been defined. Perhaps the longstanding sponsorships will endure. However, there exists a legal avenue to termination without liability that may be exercised. The coming months and on-going negotiations will be indicative of how the new PGA Tour will operate.

John C. Fresco is a second-year law student at the Wake Forest University School of Law. He is a “Double Deac” graduating from Wake Forest University in 2021 with a degree in Economics. John has worked in complex civil litigation at Zarco, Einhorn, Salkowski in Miami, Florida and in criminal law at the Ocean County Prosecutor’s office in Toms River, New Jersey. At Wake Forest, John is an executive board member of the Latino Law Student Association and works as a research assistant with Wake Law’s Micro-Trade clinic. John is a native of Sea Girt, New Jersey and intends to return to the Garden State after graduation to practice full-time. 

Reach John here:

No comments here
Why not start the discussion?