State regulators consider anti-monopoly measures

By Liz Benston (contact)

Thursday, July 25, 2002 | 11:14 a.m.

Regulations aimed at preventing real estate magnate Howard Hughes from snapping up most of the casinos on the Las Vegas Strip in the late 1960s began a months-long makeover process Wednesday.

Nevada's antitrust laws for casino operators are vague at best and arcane at worst, costing regulators and casinos time and money to review and interpret them, observers say. A rash of gaming industry mergers and buyouts in recent years has prompted interest in clarifying those regulations.

The state Gaming Control Board held a workshop Wednesday to seek comment on a draft regulation that would set first-ever numeric threshholds for market share concentrations. Under the proposed regulation, casino operators applying for additional licenses could control no more than 10 percent of the gambling market statewide, no more than 40 percent of the market countywide and no more than 60 percent of a distinct local market.

The state now requires casino operators applying to license more than one location to assure that the deals are "in the best interests of the state of Nevada." Regulators apply a number of criteria to that rule, such as whether market concentration could hurt employees, suppliers and consumers.

The law, though vague, goes beyond federal antitrust rules that concentrate primarily on how transactions affect consumers, Scherer said.

It was adopted in 1968 in response to a series of Strip acquisitions by Hughes, a recluse whose motives were unknown. It has yet to be used to deny a company a gaming license.

Creating rules that could exempt smaller companies makes sense, the chief lobbyist for Nevada casinos said at Wednesday's meeting.

Still, changing a law that has so far worked for the industry could potentially create more red tape and confusion for licensees, said Bill Bible, president of the Nevada Resort Association.

State regulations have fostered a very competitive market for both small and large casinos, while some companies must already comply with federal antitrust laws, he said.

"Before we go much further in the rulemaking, we need to determine whether there is a problem."

Las Vegas' dominant operator of locals' casinos, also present at the meeting, said categorizing local markets can be difficult when customers visit casinos across the Las Vegas Valley.

"We do compete with about everyone in Southern Nevada," said Scott Nielson, executive vice president and general counsel for Station Casinos Inc. "Gaming is literally offered on every corner."

Regulations limiting the company's ability to grow locally could hurt the company's access to capital, he said, though some kind of threshhold could be useful.

Applying threshholds could eliminate red tape for smaller and medium-sized companies, which must now review and submit anti-monopoly assurances alongside the state's largest casino empires, he said. The review process might not change much for big casino operators, he added, though clarifying the rules could ease some of the burden that now lies on gaming industry attorneys and regulators.

The state's biggest casino companies, some of which could already be above the proposed percentages, will likely express the most concern during the draft process, Scherer said. That concern may be misplaced, however. Companies above the threshhold for market concentration probably wouldn't be denied a license outright, he said, but would trigger a review of their business plan. The threshholds could be changed or even eliminated depending upon input from the industry and other sources.

Scherer said he expects to hold a second public workshop next month in Carson City. A revised draft could be ready for review by Gaming Control Board staff by September. The final regulation would require a vote by the Nevada Gaming Commission before it becomes law.