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Nevada Regulators to Get Earful on Antitrust Rule Monopoly

Scherer's draft rule would toughen the existing regulation, which contains no "bright line" level to which regulators could point in determining that a casino purchase or merger would give an operator an unfair competitive advantage. Scherer's draft includes market-share thresholds.

For example, if a combination of casinos would control less than 10 percent of the state market and less than 40 percent of the applicable county's market, regulators would normally presume that the deal passes muster.

But regulators are likely to hear at a workshop in Las Vegas that the state's casino industry opposes the bright line limits.

Station Casinos top executives said recently that they plan to oppose the rules, but expect Nevada Resort Association lawyer Jack Godfrey, who also a represents Station, to oppose the rules.

"We don't think bright-line numbers are needed," Station Chairman Frank Fertitta III said after the company's recent annual meeting. "We like the current system." Station Casinos operates 10 Las Vegas-area casinos and announced Monday an option agreement to buy a 73-acre casino-approved site in Summerlin that would host Station's most expensive casino.

Station Casinos Chief Financial Officer Glenn Christenson said Las Vegas consumers don't need additional antitrust protection.

"We've got 150,000 machines in Las Vegas," Christenson said. "It's not like the power company where consumer's have only one source."

The principal owner of Station's biggest locals competitor said he plans to back Station and oppose the new rules, despite Station's dominance of the locals market. Coast Casinos Chairman Michael Gaughan said Fertitta III had recently asked him to oppose the rule change, and that Coast will oppose Scherer's proposal.

"Who knows, we may end up wanting to join up with Station someday," Gaughan said. Boyd Gaming Corp. spokesman Rob Stillwell said the operator of Sam's Town, three downtown and two Henderson casinos would watch the rule-writing process develop.

"It's still early," Stillwell said.

Scherer said he's not aware of a single company that backs the bright-line limits in his first draft, but he's not worried.

"This draft is not set in stone," Scherer said Friday. "We're seeking input and guidance.

The industry has a right to try and change the rules and offer input on the draft regulation."

Scherer said his main concerns are making sure that casino combinations would not be so big that they hurt consumers or have a negative impact on the casino employment market.

"But there comes a point that concentration becomes so egregious that something has to be done," he said.

The existing rules were created in the '60s after the U.S. Department of Justice threatened to intervene to block Howard Hughes' planned purchase of the Stardust on antitrust grounds after he had already bought the Desert Inn, Sands, Castaways, Silver Slipper and Frontier casinos on the Strip.

A 1969 state law ratified the commission antitrust rules, but in 33 years they have never been used to block a purchase or merger.

University of Nevada, Las Vegas professor Bill Thompson said regulators need to be careful not to write rules that restrict casino operators from growing.

"We need bigger companies to take over struggling smaller ones, as the bigger companies can offer more to customer and make the economy stronger," Thompson said. "It is the 'bigness is badness,' versus 'bigness may do badness, but not necessarily,' debate. States should seek to stay away from the issue as much as possible, and only be concerned when the threat of badness is real and the feds show no concern." Recent casino deals that regulators approved after considering the state's multiple-licensing criteria include:

-- Park Place Entertainment's 1998 purchase of Caesars World.

-- MGM Grand's 2000 acquisition of Mirage Resorts and its subsequent rechristening as MGM Mirage.

-- Station Casinos' 2000 and 2001 deals to buy the Santa Fe, Reserve and Fiesta hotel-casinos.

-- Harrah's Entertainment's 2001 purchase of Harveys Casino Resorts.

-- Randy Black's 2001 deal to buy Si Redd's Oasis in Mesquite.

Godfrey said recently that the proposed rule is a departure from the current information-gathering system.

"This establishes a rebuttable presumption," Godfrey said.

Godfrey noted that operators applying to make a purchase that would put them over the state or county thresholds would be faced with the burden of proving that the deal wouldn't hurt the economic viability of the gaming industry or allow the operator to exert undue influence over casinos, employees and vendors.

The control board workshop is open to the public, and is scheduled for 10 a.m. at the Sawyer Building, conference room 2450 at 555 E. Washington Ave.

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