The 2022 PGA Tour season has resumed in Hawaii this month, and the golf world continues to watch how the Tour responds to players who want to play in February’s Saudi International, a competing event on the Asian Tour that conflicts with the PGA’s annual Pebble Beach celebrity pro-am held the same week.
At issue is whether professional golfers are independent contractors who are free to compete wherever they chose to maximize their earning potential, or if the PGA Tour has the legal authority to tell their members, who are not employees bound by collective bargaining, where and when they can and can’t play.
If the PGA Tour does attempt to restrict players from playing in competing events, the Tour may be in violation of its stated mission “to promote the sport of professional golf and the common interests of touring golf professionals.”
The PGA could also be seen by regulators to be engaging in anti-competitive behavior that could run afoul of U.S. anti-trust laws and jeopardize the PGA Tour’s coveted designation as a non-profit, tax-exempt charitable organization.
The controversy first started last year when the PGA Tour preemptively threatened fines or even bans for players who were planning to compete in the Saudi International this February.
Yet fearing possible legal challenges, the Tour reversed course right before Christmas and granted conditional waivers for 30 stars to compete in the event, albeit with questionable restrictions, including requiring players to play in the Pebble Beach event in future years and requiring players to submit waiver requests for competing tournaments 45 days before the tournament in question..
Since the initial waivers were granted in late December, six more top ranked players have declared their intention to play in Saudi Arabia, further testing the Tour’s resolve, and specifically their 45-day waiver request stipulation.
The Tour must tread lightly to avoid legal and regulatory scrutiny regarding anticompetitive behavior. First, the PGA Tour is registered with the IRS as a 501(c)(6), meaning net earnings cannot benefit private individuals. A review of the Tour’s tax filings from 2014-2018 shows Tour commissioner Jay Monahan making $7.4 million in salary and bonuses in 2018, and senior advisor Ed Moorehouse making $7.5 million — despite the fact that he had “retired” the year before.
Additionally, the PGA Tour bills itself as a charitable organization, however, executive compensation regularly exceeds direct charitable donations. In 2018, the Tour paid its top exes $49 million, while its charities received $42.7 million. Year after year, the PGA Tour earns over $1 billion in revenue, but its charitable donations stay under $50 million. With annual charitable spending averaging a mere 3.4% of its revenue, auditors like Charity Watch would give the Tour an “F” grade.
The PGA Tour purportedly exists to promote golf, but instead prioritizes its own power and executive wealth. Nonetheless, the hypocrisy of its “non-profit” mission and its self-serving actions is not new. In the 1990s, the Federal Trade Commission attempted to right this wrong by filing an antitrust complaint against the organization. But the Tour launched an aggressive counter campaign, and eventually, the FTC backed off.
Through the years, whistleblowers continued to sound the alarm about the Tour. In 2013, investigative reporters at ESPN confirmed that a very small percentage of PGA revenue actually went to charity.
Fast forward to 2017, and lawmakers tried to repeal the Tour’s tax-exempt status in the Tax Cuts and Jobs Act. The law passed, but the organization managed to escape the change when the Senate mysteriously reversed course at the last minute.
The controversy around the Saudi International is not a one-time issue, and the Tour made clear that the waivers it granted for the tournament are not precedent-setting, all but assuring a legal battle if the Tour ever goes through with its threats.
Ultimately, if the PGA Tour tries in any way to prevent independent contractors from playing in non-PGA Tour sanctioned tournaments, regulators must consider revoking their tax-exempt status. The organization is less about promoting golf and giving to charity and more about solidifying its monopoly over the sport and its profits.
The Tour’s behavior against its members exposes the organization’s duplicity — and everyone needs to take notice.
Jared Whitley is a long-time politico who has worked in the U.S. Congress, White House and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.
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