SEARCH NEWS:

 

Casino Watchers Ponder Possible Antitrust Issues

by Richard N. Velotta

LAS VEGAS -- Some casino industry watchers have begun wondering how the regulatory scrutiny of an MGM MIRAGE acquisition of Mandalay Resort Group would be affected if a Democratic administration is in power.

Industry and antitrust experts began weighing in on the issue as negotiators for the two casino companies continued to huddle Wednesday over a proposed $7.65 billion deal to create the world's largest gaming company.

MGM MIRAGE officials set a 5 p.m. Friday deadline for expiration of their offer. MGM MIRAGE already extended the deadline once, from Tuesday afternoon.

Industry leaders are convinced that regulators would scrutinize any acquisition involving the two companies. Federal regulators from the Department of Justice's Antitrust Division and the Federal Trade Commission share oversight of market share issues involving the casino industry.

In addition to federal scrutiny, regulators in several states -- Nevada, Michigan, Mississippi, Illinois and New Jersey -- would have a look at the deal.

Nevada law requires the state Gaming Control Board and the Nevada Gaming Commission to consider competitive issues whenever a licensed company buys another. Nevada regulators have never blocked a deal on antitrust grounds in the more than 30 years gaming regulations have been in effect.

It's clear that a merged company would have to divest one of its Detroit casinos to pass muster in Michigan since there only are three licensed operators there, including MGM MIRAGE and Mandalay.

While some observers say partisan politics won't be a factor when federal regulators look at the deal, others think otherwise.

Bill Thompson, chairman of the Department of Public Administration at the University of Nevada, Las Vegas, said Las Vegas itself could be setting itself up for a high level of government scrutiny if President Bush loses the November election.

"There'll be a big red flag posted over Las Vegas, especially if the Democrats win in November," Thompson said. "They like scrutiny of this kind and a deal of this magnitude provides the opportunity to look into all kinds of things."

Antitrust expert John Stann, president of St. Louis-based Stann Financial, LLC, said he doesn't believe there would be any different treatment of the gaming industry whether a Democrat or a Republican is in office -- it's more about an administration's attitude toward what constitutes anticompetitive behavior.

"During the Clinton years, several mergers were approved that concentrated market share," Stann said.

The Justice Department case against Microsoft Corp. was built during the Clinton years. Stann pointed out that the administration under President Bush continued the case and the appeals despite Microsoft's early political support for Bush.

"The enforcement is carried out by career civil service employees," Stann said. "It would be unlikely that politics would enter into enforcement."

Robert Lawless, who holds the Gordon & Silver Ltd. professorship at UNLV's William S. Boyd School of Law, said because the Federal Trade Commission would be the lead agency investigating any antitrust concerns and because the FTC is operated by independent commissioners, he doesn't think politics would play a part in the issue.

"The FTC and the Department of Justice have overlapping roles in this and because the FTC doesn't turn over with every change in administration, I don't think presidential politics would be involved with this," Lawless said.

Lawless concurred with Stann that the interpretation of the market is the key.

"If regulators say the market is Strip hotels south of Flamingo (Road), they're (MGM MIRAGE) cooked," Lawless said. "But if they (regulators) say the market is the entire entertainment industry, which includes television, movies and shows as well as casinos, then the merger wouldn't have much effect on the market.

"Regulators will be looking at what they call a 'relevant market,' which could be high-end resorts in Las Vegas or the entire entertainment industry," Lawless said. "Neither of those extremes are likely. It probably will be someplace in the middle."

Lawless said if the "relevant market" is determined to be geographic in nature, regulators could look at competition in an area as narrow as the resort corridor on the Las Vegas Strip or as broad as the entire West, since Las Vegas' market includes customers from California.

Charles Miller, a spokesman for the Department of Justice in Washington, said federal regulators are notified of all pending mergers and acquisitions and there's a 30-day period during which any initial competitive issues are raised.

"On the 30th day, if there are no problems, it's all done," Miller said.

But if the regulators receive insufficient information or competitive issues are raised -- a likely scenario in the MGM MIRAGE-Mandalay case -- then both companies would have to file additional documents and respond to interrogatories.

"Responses to those questions could take months," he said.

And those months could extend into November when John Kerry, the presumed Democratic nominee, and Bush will square off.

The Mandalay-MGM MIRAGE merger talks, in the meantime, apparently continued this morning with no announcements from either side. The stocks of both companies didn't move much today, with MGM MIRAGE up 5 cents and Mandalay down 27 cents in early trading.

Copyright © Las Vegas Sun. Inc. Republished with permission.

< Gaming News