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COR Ruling - Mutterings Over the Merlot

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BEAVERTON, Ore. ' During a celebration here at Nikes world headquarters, golf retailers, media, and Nike executives mingled at a reception in the rotunda lobby of the Tiger Woods Center, each group following its own version of a Jekyll-and-Hyde script.
 
The retailers, some of them leaders of the biggest chains in off-course golf sales, mooned for a moment over the new Nike Pro Combo irons (the reason for the celebration), then muttered in the next minute something derisive about the U.S. Golf Association, which had just pulled the rug out from under any forecasting the retailers were able to do in this off-kilter golf equipment year.
 
The media, who despite their affection for seeming jaded are even bigger golf gearheads than their readers and viewers, also went wide-eyed at the new, chromed-up creations from Nikes Tom Stites ' and then fell to their notebooks or microphones when they perceived a mood shift in the retailer camp.
 
And Nike execs, lambasted by breaking news but with a captive audience nonetheless, spoke somberly one moment of the effect of reckless regulation, then smiled the next at the thought of jump-starting the sluggish premium irons market with the first set of Nike irons designed for non-elite players.
 
The wrench entered the works Tuesday morning, when the USGA announced that instead of instituting a five-year grace period for so-called 'hot' drivers (those with a coefficient of restitution of .86), it would stay with the current limit of .83 indefinitely, for all levels of play. The rest of the world will adopt a .83 limit as of Jan. 1, 2008.
 
This contradicted the joint USGA-Royal & Ancient Golf Club of St. Andrews proposal of May 9, which set up the grace period for 2003 through 2007, except for highly skilled players, who would always play .83 drivers via a Condition of Competition expected to be adopted by all the top tours and tournaments.
 
Im amazed we were able to keep a secret, said David Fay, USGA executive director, when told of the universal ' and intense ' surprise the Tuesday announcement caused. It also caused turmoil, perhaps more than the May 9 proposal itself, because certain companies relied on adoption of the May 9 proposal as written ' relied economically, in their forecasting, marketing, and advertising.
 
How It Came to This
 
The May 9 proposal was a compromise designed to ease the rest of the world into a limitation on drivers that had been adopted in the United States only. The R&A, whose jurisdiction covers the world outside the United States and Mexico, never saw a problem with spring-like effect, and therefore never instituted the .83 limitation that the USGA did following the introduction of clubs such as Callaways hot-faced ERC series.
 
The regulation rift threatened the integrity of events such as the American Express World Championships of Golf, whose venues change and whose fields include pros with legal access to hot drivers. The problem became severe enough to move both PGA Tour commissioner Tim Finchem and Masters chairman Hootie Johnson to threaten this spring to devise their own equipment regulations. Those warnings helped get the USGA and R&A off the dime.
 
But the organizations had already been working for at least 18 months on healing the rift caused by the adoption of the .83 COR line in the sand, which Fay announced at a pre-U.S. Open press conference in 1998 at Olympic in San Francisco.
 
After San Francisco, what the USGA considered a reasonable solution soon became golfs Little Round Top, a battleground sure to be remembered ' and bloody. The games most persuasive and visible business personality, the late Ely Callaway, repeatedly took the USGA to task for imposing on the recreational game the kind of strictures needed only in the elite game. The USGA, which had employed that modus operandi for years, bristled, and resisted any attempt at bifurcation of the Rules of Golf based on ability.
 
Before the May 9 proposal, Fay kept largely mum about efforts to harmonize the USGAs equipment approach with that of the R&A, except to report sadly from time to time that it looked as if little progress had been made. So it was no surprise when he seemed elated on May 9, figuring that the joint proposal for a five-year grace period would settle the issue. And indeed, he got applause from an industry tired of the distraction of a rules rift.
 
Reaction to ' and Reliance on ' May 9
 
Callaway Golf and TaylorMade-Adidas Golf, both heavily invested in high-COR product, came down on the positive side of the new COR fence. Titleist did not, and more quietly, Ping expressed concern as well.
 
But the applause was not universal. Titleist, highly vocal through its leader, Wally Uihlein, said the Jan. 1, 2003 start date for the five-year .86 grace period was too soon after May 9, and that Jan. 1, 2004 would give manufacturers more time to clear out less-desirable .83 product.
 
Other issues clouded the proposal, Uihlein said: What is a highly skilled player, to whom the .83-only Condition of Competition would apply? Did that definition reach down into the amateur ranks? (USGA officials deflected such questions at the U.S. Open in June.) If the highly skilled players meant pros only, what of college golfers and juniors, whose September-to-May seasons straddled the Jan. 1, 2003 effective date for .86 drivers? Would they start the season with one club and finish with another? Uihlein also expressed concern that the notice and comment period, scheduled to last until July 15, was not being taken seriously.
 
After May 9, it was Titleist that led that charge to get out the vote on the proposal. Armed with the prediction that the proposal would probably be adopted as written (This is not going to be a rolling negotiation, Fay had said May 10 when asked about the notice and comment procedure), Titleist executives worked the phones to engage all manner of respondents: state golf associations, national groups, anyone with a stake ' just so they all knew that it wasnt only manufacturers who could make their voices heard.
 
Word is, the extra participation influenced the result that surprised the golf world Tuesday. But the real Jekyll ' or Hyde ' turned out to be Asia.
 
The Sudden Reversal
 
In mid-July, just before the notice and comment period on the May 9 proposals was set to close, the R&A began to get worried questions from Asian golf authorities, said R&A secretary Peter Dawson.
 
The problem was Japan, where some manufacturers believe they have drivers that exceed even .86, Dawson said Tuesday. With no portable measurement device yet adopted, how would a .86 limitation be enforced? Asian players, retailers and tournament organizers, all under R&A jurisdiction, chafed at the idea of a sudden rule after eons of no limitation. Confusion reined among sellers and buyers of equipment, and worry grew daily.
 
Informed by the R&A of this development, the USGA was only too happy to abandon the original May 9 compromise, having never been enamored of going beyond .83 in the first place ' the USGA did it only as a compromise to settle the rift issue.
 
So it was that manufacturers and retailers who had been aggressively anticipating the .86 period in their ads and forecasts woke up to a new headache Tuesday. Callaway had run a print ad showing the ERC II with the word Banned crossed out and Blessed written in. The implication was clear, despite an equally clear disclaimer in the ad that recognized the status of the May 9 proposal as just that, a proposal instead of law. TaylorMade went further, saying in its print ad copy that The USGA gave an inch. We give you 15 extra yards.
 
That language enraged competitors in all tiers of the industry, including Callaway (who relied on its disclaimer to distinguish itself from TaylorMade) and Zevo Golf, which made it clear to key golf journalists that it thought TaylorMades distance promise was scandalous.
 
TaylorMade was among a group of companies that went out on a limb product-wise as well. After May 9, TaylorMade hastened its release schedule for its new, hot-faced R500 Series drivers (the company also has a .83 version, called simply the 500 Series).
 
Likewise, many retailers planned for the expected demand for hot drivers. Some were said to go as far as closing out their entire .83 inventory in the expectation that only .86 would be on consumers minds come New Years Day.
 
We cant win, said one disgusted retailer who asked not to be identified Tuesday. Its impossible to forecast with this kind of stuff going on.
 
Callaway, which had banked heavily on the future of ERC II and had complained of the chilling effect of USGA pronouncements on prior ERC sales, was disappointed, but not surprised at Tuesdays regulatory reversal.
 
TaylorMades reaction ' or lack of it ' evidenced deeper misgivings. Not only did TaylorMade president Mark King not return calls, but stories circulated at the Nike gathering of a prominent golf journalist who was not even allowed on the premises of TaylorMades Carlsbad, Calif. headquarters on Tuesday. (TaylorMade has promised a substantial reaction by Friday, August 9.)
 
At Acushnet Co., owners of Titleist and Cobra, Uihlein focused on process, not result.
 
Were prepared to play by the rules, he said Tuesday. Whats important is that [the ruling bodies] listened to everyone, not just two people who had advertising goals for their own commercial gain.
 
Nike executives, glad their company is not invested too deeply in nonconforming product in the U.S. (although it has a hot driver in Japan), echoed Uihleins sentiments.
 
It certainly restores faith that theres a process at hand, said Mike Kelly, Nikes category business director for golf clubs.
 
We were prepared to go either way, said Stites, Nikes director of product creation. But this makes life more simple.
 
The Fallout
 
It may make life simpler for consumers as well, whether they like it or not. Just as every shot makes someone happy and someone else unhappy, so it is with regulation. Any .86 constituency Callaway and other manufacturers have developed will now be faced with a choice, as are those companies. Peer pressure and playing ability may affect consumer choice; market conditions and competitive pressures will bear down on the companies which, as Fay put it, gambled and lost on the May 9 proposal. (Callaway has already said it will replace any ERC II purchased during the recent promotional period with a product from its conforming line. TaylorMade is expected to make a similar arrangement.)
 
No aggrieved companies will discuss post-Tuesday strategy, including whether they will file lawsuits against the USGA or R&A. Callaway plans to continue selling .86 product in the R&As jurisdiction, and to abide by the .83 rule in the U.S., a spokesman said. TaylorMade continues to think things over.
 
As usual, though, the market will decide ' on hot drivers, the USGAs role in the recreational game, and what sells ' or doesnt.

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