New rules could dampen casino merger mania

July 03, 2001 4:41 AM
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Are Nevada’s casino consolidations coming to a screeching halt?

State regulators say they’re looking at tightening anti-trust rules now that the feds are examining Harrah’s acquisition of Harveys. In a rare move, the Federal Trade Commission delayed the sale of Harveys’ South Lake Tahoe resort last month amid monopoly concerns.

“We want to ensure that there’s competition here,’’ state Gaming Control Board member Scott Scherer told GamingToday.

Harrah’s remains confident that its $675 million purchase of four casinos in Nevada, Iowa and Colorado will be approved. But before the sale can go through, it will have to pass muster with federal regulators.

Acting on an anonymous complaint, the FTC ordered both companies to provide detailed market and financial information. A ruling is due within 30 days and Harrah’s spokesman Gary Thompson expects the green light.

“The complainant fears that we’ll cut prices. And since the FTC’s anti-trust regulations focus on the consumer, we’re confident that approval will be forthcoming,’’ Thompson said.

(Though Park Place Entertainment denies it, most industry observers strongly suspect the gaming giant challenged the Harrah’s-Harveys deal. Park Place’s Caesars Tahoe is the third largest hotel-casino at Stateline.)

The Tahoe tussle comes in the wake of major casino consolidations in Las Vegas. In the past two years, Park Place itself evolved from the merger of Bally’s, Hilton and Caesars; MGM purchased Mirage; and Station Casinos went on a buying binge, snapping up the Santa Fe, the Fiesta and the Reserve. Last month, Randy Black Sr. bought out Si Redd’s Oasis to control three of Mesquite’s four casinos.

Concerned about the merger trend and spurred by the FTC intervention, the Nevada Gaming Commission and the Control Board announced they will re-examine state rules on multiple licensing. The 33-year-old statutes, which have never stopped a casino merger, may need a tune-up, Scherer said.

“There are vague factors that don’t provide much guidance,’’ he said.

With a goal of serving “the best interests of the state,’’ the regulations stipulate, for example, that companies merely show evidence of “adequate” performance and personnel. While market-share statistics are compiled, there are no specific guidelines or thresholds to determine if a merger should proceed.

Accordingly, commissioners quickly approved each of the recent buyouts. But Scherer and his fellow regulators now seek more answers. “I want to examine the effects on consumers, employees and suppliers,’’ Scherer said. “We need to make it more meaningful and that could mean thresholds (on market share).’’

But regulators say they also could grant exemptions based on location. It may be unrealistic, for instance, to prohibit single ownership in small towns such as Jackpot or Primm.

In the Tahoe case, a combined Harrah’s and Harveys would control 54 percent of the hotel-casino rooms, 63 percent of the casino space and 65 percent of the slot machines, Bear, Stearns reports. By contrast, Black’s buyout of the Oasis gives him control of more than 80 percent of the Mesquite market.

State gaming officials say they will wait for the FTC to rule before enacting any new laws. Scherer said that when the regulators get together in September, “We’ll focus on state issues.’’