State, federal regulators would review deal

Monday, June 7, 2004 | 11:21 a.m.

Federal and state officials would definitely review an MGM MIRAGE combination with Mandalay Resort Group on potential antimonopoly grounds.

Nevada law requires the Gaming Control Board and Nevada Gaming Commission to evaluate the potential competitive implications any time a licensed operator acquires another property, but state regulators have never used their power to block a deal in the almost three-and-a-half decades since the rules were established.

Federal oversight of casino-industry competition is shared by the Federal Trade Commission and the Justice Department's Antitrust Division, although the FTC has been more active on the casino antimonopoly front during the Bush administration.

When large companies plan to combine they must file a notice of intent to merge with the Justice Department and the FTC.

Presuming the FTC takes the lead as it did in reviews of Harrah's Entertainment's planned purchase of Jack Binion's Horseshoe Gaming, the commission would determine whether the two firms compete in the same product market -- casino gaming -- and geographic market.

Two markets in particular could pose problems on federal grounds, Deutsche Bank Securities equity analyst Marc Falcone noted in a research report.

On the Strip, an MGM MIRAGE-Mandalay Resort combo would control 11 of the top 22 properties, 49 percent of the hotel rooms, 44 percent of the table games and 40 percent of the slots.

The company would also control two of Detroit's three casinos.

Falcone predicted that FTC officials will take a close look at a possible combination.

State officials would rely on Regulation 3.070, which covers the state's so-called "multiple licensing criteria."

Created in 1969 to ward off threatened federal intervention after Howard Hughes planned to purchase the Stardust while already owning the Desert Inn, Castaways, Silver Slipper and Frontier, 3.070 requires regulators to consider the effect on gamblers, employees, vendors and taxpayers whever an existing casino owner purchases another casino.

State officials have never used the rules to block a combination, including the $6.4 billion MGM Grand purchase of Mirage Resorts in 2000, the 1998 purchase of Caesars World by Caesars Entertainment forerunner Park Place Entertainment, or Station Casinos' purchases of the Santa Fe, Reserve and Fiesta hotel-casinos.

The rules require regulators to consider the effect of consolidation on a nationwide, statewide and geographical location basis, but don't define what constitutes too much control of a market.