Problem gambling antitrust lawsuit settled

By Liz Benston (contact)

Tuesday, July 29, 2003 | 10:58 a.m.

The U.S. Department of Justice has reached a settlement with the National Council on Problem Gambling Inc., the nation's largest provider of educational materials and other resources to help compulsive gamblers, that is expected to resolve an antitrust lawsuit filed last month against the nonprofit group.

The Justice Department on June 13 filed a civil antitrust complaint against the National Council in U.S. District Court for the District of Columbia, claiming that the council had prevented affiliate members from selling products and services outside their home states. At the same time, the government agency filed a consent decree that, if approved by the court, would settle the suit.

The National Council on Problem Gambling is a national trade association that provides education, advocacy, information and treatment center referrals through its 34 state affiliate members.

The council "was not designing a distribution system to enhance economic efficiency," the Justice Department said in a statement.

From 1995 to at least 2001, the council organized a "territorial allocation agreement" with state affiliates to prevent problem gambling service providers from crossing state lines to compete, the government complaint said.

"Concerned that competition from out-of-state problem gambling service providers would lead to reduced prices and lost sales, the state affiliates acted through the defendant to preclude competition among themselves," it said.

Council Executive Director Keith Whyte said the settlement doesn't constitute a finding or admission that the council broke the law.

"We firmly believe we did nothing wrong," he said. "There was certainly no intent to allocate territories."

Concerns by some members were addressed by the council's board of directors years before the Department of Justice intervened, he added.

The complaint said problem gambling service providers were threatened with fines or loss of their membership with the council for bidding for work outside their territory. As a result, competition among the affiliates was thwarted and "consumers were deprived of the benefits of free and open competition."

Innovations in problem gambling products and services were stifled and their quality decreased, the complaint continued.

The complaint did not indicate that insurance or treatment costs went up as a result of the alleged antitrust activity.

Such civil suits against companies don't result in fines, only injunctive action, Department of Justice officials said.

Whyte said he takes issue with the complaints.

"If you looked at the problem gambling services field over the time of this complaint, I don't believe there has been stifling of innovation," he said. "There are a lot of parts of this complaint we would vigorously contest."

The council agreed to a settlement to put the matter to rest, he said.

"Litigating against the government is an expensive proposition," he said. "This has already dragged out two years. Our money is best spent helping people with gambling problems."

Federal law protects the identity of individuals or entities that bring antitrust complaints to the attention of the Department of Justice, which may file either criminal charges or civil actions against companies.

But the complaint states that "a few affiliates, most notably the Minnesota affiliate," have sought business outside their home states.

When the Minnesota affiliate sought a contract from the state of Nebraska, the National Council asked that Minnesota withdraw its bid and support the efforts of the Nebraska affiliate, the complaint said. And when the Minnesota affiliate offered a gambling counselor training program in the state of Missouri, the council warned that it would not grant credit for the training, "thereby discouraging students from signing up for the program."

"The in-state program that ultimately was provided was inferior because it employed less qualified instructors than the Minnesota affiliate proposed to use," the complaint said.

In at least one case, the Minnesota affiliate won a bid in another state. The affiliate obtained a contract with the Arizona lottery by offering "a far more comprehensive program" than the state affiliate, the complaint continued. The Arizona affiliate complained to the National Council, precipitating a hearing on sanctions against the Minnesota affiliate, it said.

The nonprofit Minnesota Council on Compulsive Gambling, which goes by the name North American Training Institute, was contacted by the Department of Justice about two years ago for information, Chief Executive Officer Elizabeth George said. The council cooperated with the investigation, she said.

George said she did not know who initiated the complaint against the National Council. But the Minnesota council had raised the issue separately with its parent organization, she said.

"The North American Training Institute had concerns about possible antitrust activity and over the course of a couple of years had sent three letters to officials at the National Council," she said. "None of those letters were responded to."

The institute, which is no longer a member of the National Council, broke ranks about a year and a half ago, she said.

The Nevada Council on Problem Gambling, the chief supplier of education materials and gambling addiction hotline services to Nevada casinos, deferred comments on the complaint to the National Council.

Few Department of Justice investigations actually lead to lawsuits.

Of the 94 cases that the Department of Justice investigated for so-called "restraint of trade" activity in 2002, only two led to civil suits. Similarly, none of the 80 such investigations in 2001 led to suits that year. No data was yet available for this year.

The proposed final judgment, which is not an admission of guilt, requires the council to eliminate the activities identified in the complaint.

The consent decree would prohibit the council from restricting the sales of problem gambling services, from preventing the submission of competitive bids in any state or from adopting "any policy, code or ethics, by-law or certification standard which inhibits competition or implies that competition is unethical, unprofessional or contrary to (council) policy," the Department of Justice said.

The National Council was ordered to establish an antitrust compliance program including installing an antitrust compliance officer who is not an officer or director of the nonprofit.

The decree, filed June 13, is subject to a 60-day public comment period after which the court is expected to enter a final judgment.

State affiliates of the Washington, D.C.-based National Council independently create and market problem gambling services including training for casino employees, certification of problem gambling counselors and telephone help lines.

In its complaint, the government noted that many affiliates have unique programs, such as a 60-hour counselor training program and web-based course offered by the Minnesota state affiliate, Spanish-language materials developed by state affiliates including one in Texas and programs for troubled teens, such as one offered by the Washington affiliate.