Columnist Jeff German: Public’s well-being important in mergers

Friday, July 16, 2004 | 4:36 a.m.

Jeff German's column appears Tuesdays, Wednesdays, Fridays and Sundays in the Sun. Reach him at german@lasvegassun.com or (702) 259-4067.

WEEKEND EDITION

July 17 - 18, 2004

The age of the megamerger in the casino industry is upon us, and it's being called a natural evolution for gaming.

Casino executives say Wall Street-minded Nevada companies need to get larger and stronger to compete within the rapidly expanding industry across the country. Tribal gaming in neighboring California, which is growing by leaps and bounds, has become the most serious threat here.

Getting larger gives the fittest of the Nevada companies the wherewithal to protect their lucrative Las Vegas interests, which, in turn, protect the state's economy.

But it doesn't make it any less frightening to think that in the near future two giant corporations could control half of the casino market in the state.

If the multibillion-dollar mergers between Harrah's Entertainment and Caesars Entertainment and MGM MIRAGE and Mandalay Resort Group are approved by federal and state regulators, the two supersized companies would own more than half of the Strip's big-name megaresorts and employ 39,000 of the Culinary Union's 50,000 members.

They would be able to dictate how business is conducted on the Strip -- what hotel rooms should cost, which games of odds customers should play, which vendors and suppliers should be used and what entertainment should be brought to town.

And they would be able to set the bar for hiring and firing workers, which union leaders and others watching the industry fear could lead to blacklisting.

"In the past, if a dealer was fired, he could always go next door," says UNLV professor Bill Thompson, an expert on gaming.

"But now he could be locked out."

The mergers also would have a profound impact on politics in Nevada, where gaming is the dominant player. Elected officials who get on the wrong side of these two companies could see their careers end in a flash.

It might explain why we haven't heard many elected leaders publicly voicing concerns about the megamergers.

Even casino industry leaders are reluctant to raise objections out of fear of retribution down the line. The half-dozen casino insiders I spoke with had plenty of worries, but none wanted to be quoted in the newspaper.

The mergers haven't even been approved, but the movers and shakers here are already scared to death.

One guy who's not afraid to speak out is Nevada Consumer Advocate Timothy Hay. His job is to look after the little guy in matters like these.

Hay worries the mergers will concentrate too much economic power within the casino industry and lead to monopolistic practices that could hurt consumers and vendors.

"It's going to be a huge amount of Strip rooms under the control of two entities," he says.

This is something state gaming regulators will have to consider as they dust off Regulation 3.070 and start looking at the impact of the mergers.

The regulation, which gives authorities a broad range of powers to look into corporate mergers, was created in 1968 to stop Howard Hughes from gobbling up casinos on the Strip.

It hasn't been used much since the Hughes days, but it's going to get a workout in the coming months.

There are more than two dozen criteria -- mostly relating to the concentration of economic power -- that can be weighed by regulators.

Such things as how mergers affect the concentration of hotel rooms, employees, slot machines and even revenues within the industry all are likely to be examined in these cases.

The most important criterion, however, is the last one listed in Regulation 3.070.

This gives regulators the ability to consider the impact on the "general welfare of the public" in Nevada

I'm hoping regulators pay close attention to that one.

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