[Federal Register Volume 68, Number 205 (Thursday, October 23, 2003)]
[Notices]
[Pages 60710-60713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26660]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. National Council on Problem Gambling, Inc.; 
Public Comment and Plaintiff's Supplemental Response

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
Sections 16(b) and (d), the United States hereby publishes below an 
additional written comment received on the proposed Final Judgment in 
United States of America v. National Council on Problem Gambling, Inc., 
Civil Action No. 1:03CF01278 filed in the United States District Court 
for the District of Columbia, together with the United States' 
supplemental response to the comment. Copies of the comment and the 
United States' supplemental response are available for inspection at 
the United States Department of Justice, Antitrust Division, 325 
Seventh Street, NW., Suite 200, Washington, DC 20530, and at the Office 
of the Clerk for the United States District Court for the District of 
Columbia, E. Barrett Prettyman Building, 333 Constitution Ave., NW., 
Washington, DC 20001.

Dorothy B. Fountain,
Deputy Director of Operations.

United States District Court, District of Columbia

    United States of America, 209 S. LaSalle Street, Suite 600, 
Chicago, IL 60604, Plaintiff, versus National Council on Problem 
Gambling, Inc., 208 G Street, NE., Washington, DC 20002, Defendant. 
Civil Action No. 1:03CF01278. Judge: Henry H. Kennedy.

Supplemental Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby responds to one additional public comment 
received regarding the Proposed Final Judgment in this case. This 
response supplements the Response to Public Comments filed by the 
United States on September 17, 2003.

I. Background

    On June 13, 2003, the United States filed a Complaint alleging 
that the National Council on Problem Gambling, Inc. (``NCPG'') had 
orchestrated an unlawful territorial allocation of problem gambling 
products and services along state lines in violation of Section 1 of 
the Sherman Act, 15 U.S.C. 1. Simultaneously with the filing of the 
Complaint, the United States filed a Proposed Final Judgment. A 
Competitive Impact Statement (``CIS'') was also filed with the Court 
at that time, and published in the Federal Register, along with the 
Proposed Final Judgment, on June 26, 2003 (see FR 38,093). Pursuant 
to 15 U.S.C. 16(c), a

[[Page 60711]]

summary of the terms of the Proposed Final Judgment and CIS was 
published in The Washington Post, a newspaper of general circulation 
in the District of Columbia, during the period of June 24 through 
30, 2003.
    Under the consent order, NCPG is prohibited from directly or 
indirectly initiating, adopting, or pursuing any agreement, program, 
or policy that has the purpose or effect of prohibiting or 
restraining any Problem Gambling Service Provider (``PGSP'') from: 
(1) Selling problem gambling services in any state or territory or 
to any customer; or (2) submitting competitive bids in any state or 
territory or to any customer. The NCPG is also prohibited from 
directly or indirectly adopting, disseminating, publishing, seeking 
adherence to or facilitating any agreement, code of ethics, rule, 
bylaw, resolution, policy, guideline, standard, certification, or 
statement made or ratified by an official that has the purpose or 
effect of prohibiting or restraining any PGSP from engaging in any 
of the above practices, or that states or implies that any of these 
practices are, in themselves, unethical, unprofessional, or contrary 
to the policy of the NCPG.
    The consent order further provides that the NCPG is prohibited 
from adopting or enforcing any standard or policy that has the 
purpose or effect of: (1) Requiring that any PGSP obtain permission 
from, inform, or otherwise consult with another PGSP before selling 
problem gambling services or submitting bids for the provision of 
problem gambling services in any state or territory or to any 
customer; or (2) requiring that any PGSP contract with, provide a 
fee or a portion of revenues to, or otherwise remunerate any other 
PGSP as a result of selling problem gambling services in any state 
or territory or to any customer. Finally, the NCPG is prohibited 
from adopting or enforcing any standard or policy or taking any 
action that has the purpose or effect of: (1) Sanctioning, 
penalizing or otherwise retaliating against any PGSP for competing 
with any other PGSP; or (2) creating or facilitating an agreement 
not to compete between two or more PGSPs.
    The sixty-day period for public comments expired on August 29, 
2003. During the period for public comments, the United States was 
sent one additional comment which was not noted in its original 
Response to Public Comments filed on September 17, 2003. That 
comment was from Messrs. Nicholas Provenzo, Chairman, and S.M. 
Olivia, Senior Fellow, The Center for the Advancement of Capitalism 
(``CAC''). The United States has carefully considered the views 
expressed in that comment, but nothing in the comment has altered 
the United States' conclusion that the Proposed Final Judgment is in 
the public interest. Pursuant to Section 16(d) of the Tunney Act, 
the United States is now filing with this Court its response to the 
comment submitted by the CAC. Once this comment and this response 
are published in the Federal Register, the United States will have 
fully complied with the Tunney Act and will file a motion for entry 
of the Proposed Final Judgment.

II. Supplemental Response to Public Comments

The Center for the Advancement of Capitalism

    Among the issues the CAC has raised in its comment are: NCPG's 
status as a nonprofit corporation; the relationship of the antitrust 
laws to the First Amendment; and the Court's public interest 
determination. The CAC also noted the absence of a barrier to entry 
analysis. A copy of the CAC comment is attached as Exhibit A.
    The CAC argues that, as a nonprofit organization, the NCPG is 
exempt from the authority of the antitrust laws. Section 1 of the 
Sherman Act specifically states that ``[e]very person'' who acts in 
restraint of trade or commerce falls within its scope. 15 U.S.C. 1. 
The Supreme Court has consistently held that nonprofit organizations 
are not exempt from Section 1 of the Sherman Act. See NCAA v. Board 
of Regents, 468 U.S. 85, 100 n. 22 (1984) (``There is no doubt that 
the sweeping language of Sec.  1 applies to nonprofit entities, and 
in the past we have imposed antitrust liability on nonprofit 
entities which have engaged in anticompetitive conduct.'' (citations 
omitted)); American Soc'y of Mechanical Eng'rs, Inc. v. Hydrolevel 
Corp., 456 U.S. 556, 576 (1982) (``[I]t is beyond debate that 
nonprofit organizations can be held liable under the antitrust 
laws.''); see also Goldfarb v. Virginia State Bar, 421 U.S. 773 
(1975).
    The CAC also argues that the Proposed Final Judgment violates 
the First Amendment by ``the shackling of NCPG's future speech and 
assembly'' and that this amounts to ``overt censorship by the United 
States.'' A horizontal agreement to allocate territories, whether by 
spoken or written word, is conduct within the reach of the Sherman 
Act.

    . . . [I]t has never been deemed an abridgement of freedom of 
speech or press to make a course of conduct illegal merely because 
the conduct was in part initiated, evidenced, or carried out by 
means of language, either spoken, written, or printed . . . Such an 
expansive interpretation of the constitutional guarantees of speech 
and press would make it practically impossible ever to enforce laws 
against agreements in restraint of trade as well as many other 
agreements and conspiracies deemed injurious to society.

California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 
514 (1972), quoting Giboney v. Empire Storage Co., 336 U.S. 490, 502 
(1949). The California Motor Transport Court went on to say that 
``First Amendment rights may not be used as the means or the pretext 
for achieving `substantive evils' [citation omitted], which the 
legislature has the power to control.'' Id. at 515. See also 
Associated press v. United States, 404 U.S. 1 (1945).
    With respect to the public interest determination, the CAC 
suggests the availability of other remedies in lieu of the Proposed 
Final Judgment. The territorial allocation alleged in the Complaint 
was a horizontal agreement among state affiliates, effectuated by 
the NCPG, the sole purpose and effect of which was to reduce 
competition for the sale of problem gambling products and services 
between and among state affiliates. The Proposed Final Judgment 
addresses the violation alleged in the Complaint--an unlawful 
territorial allocation of problem gambling products and services 
along state lines in violation of Section One of the Sherman Act. 
Nothing in the CAC's comment changes the view of the United States 
that the Proposed Final Judgment is in the public interest. In 
making its determination whether the Proposed Final Judgment is ``in 
the public interest,'' the ``court is without authority to `reach 
beyond the complaint to evaluate claims that the government did not 
make and to inquire as to why they were not made''' United States v. 
Microsoft Corp., 231 F. Supp 2d 144, 154 (D.D.C. 2002) (quoting 
United States v. Microsoft Corp., 56 F. 3d 1448, 1459 (D.D.C. 
1995)).
    Finally, the CAC also expressed concern about the absence of a 
barrier to entry analysis. However, the Division took into account 
all relevant economic and legal factors in its investigation of 
NCPG's practices.

III. Conclusion

    After careful consideration of this public comment, the United 
States has concluded that entry of the Proposed Final Judgment will 
provide an effective and appropriate remedy for the antitrust 
violation alleged in the Complaint, and is therefore in the public 
interest. Pursuant to Section 16(d) of the APPA, the United States 
is submitting this public comment and this response to the Federal 
Register for publication. After this comment and this response are 
published in the Federal Register, the United States will move this 
Court to enter the Proposed Final Judgment.
Dated:--------Washington, DC.
Respectfully submitted,
Rosemary Simota Thompson, IL Bar  6204990, United States 
Department of Justice, Antitrust Division, 209 South LaSalle Street, 
Suite 600, Chicago, Illinois 60604, (312) 353-7530 (telephone), 
(312) 353-4136 (facsimile), [email protected].

Certificate of Service

    I hereby certify that I served a copy of the foregoing 
Supplemental Response to Public Comments via First Class United 
States Mail, this -------- day of --------, 2003, on:
Sanford M. Saunders, Jr., Esq., Greenberg Traurig, LP, 800 
Connecticut Avenue, NW., Suite 500, Washington, DC 20006.
Rosemary Simota Thompson, Attorney, Chicago Field Office, U.S. 
Department of Justice, Antitrust Division, 209 South LaSalle Street, 
Suite 600, Chicago, Illinois 60604, (312) 353-7530 (telephone).

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. National Council on Problem 
Gambling, Inc., Defendant. Civil Action No. 1:03CV01278. Before: Judge 
Henry H. Kennedy.

[[Page 60712]]

Public Comments of The Center for the Advancement of Capitalism

    Pursuant to the United States' publication of a Proposed Final 
Judgment (PFJ) in the above-captioned action,\1\ the Center for the 
Advancement of Capitalism (CAC) \2\ files the following comments.
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    \1\ 68 FR 38,090-38,098 (June 23, 2003).
    \2\ CAC is a District of Columbia nonprofit corporation which 
regularly files public comments in Tunney Act proceedings. See, 
i.e., United States v. Mountain Health Care, 68 FR at 44,591 (July 
29, 2003), United States v. The MathWorks, Inc., et al., 68 FR at 
3,270-3,272 (January 23, 2003).
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1. Material Facts

    On June 13, 2003, the United States filed a complaint against the 
National Council on Problem Gambling, Inc. (NCPG), a nonprofit 
corporation headquartered in Washington, DC. According to NCPG, its 
mission is to ``public awareness of pathological gambling, ensure the 
widespread availability of treatment for problem gamblers and their 
families, and to encourage research and programs for prevention and 
education.'' \3\ NCPG only provides limited services through its 
national office, and instead relies on 34 state affiliates to produce 
and provide ``problem gambling services'' to customers. NCPG's 
customers include state governments.\4\ NCPG's members adopted, through 
its board of directors, a series of internal agreements to coordinate 
the affiliates' work. Among these agreements, according to the United 
States, was a ``territorial allocation'' scheme that the Government 
considered a violation of section one of the Sherman Act, 15 U.S.C. 1.
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    \3\ http://www.ncpgambling.org/about.htm.
    \4\ See Competitive Impact Statement at 8-9 (NCPG affiliates 
contracted with the State of Nebraska and the Arizona lottery.)
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    The United States alleges that from 1995 to 2001, NCPG enforced a 
policy restricting individual state affiliates from offering problem 
gambling services--such as counseling and educational programs--in a 
state served by another NCPG affiliate. For example, the United States 
alleges NCPG ``asked'' its Minnesota affiliate to cease efforts to 
contract with the State of Nebraska, and instead support that the 
state's NCPG affiliate.\5\ The Government charges acts such as this 
violate the Sherman Act violation because customers are denied the 
``benefits of free and open competition'' and that ``innovations in 
problem gambling products and services [are] stifled.'' \6\
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    \5\ Id.
    \6\ Complaint at 5.
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    The United States further claims NCPG maintained ethical guidelines 
designed to support the organization's illegal anticompetitive conduct. 
In 1996 and 1999, for instance, NCPG's directors and affiliates adopted 
an ``ethics resolution'' which codified the non-competition policy. 
According to the Government, NCPG could sanction a member internally, 
with ``fines or revocation of NCPG membership,'' for offering services 
in a state served by another affiliate without the incumbent 
affiliate's permission.\7\
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    \7\ Competitive Impact Statement at 7.
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    The PFJ now before the Court resolves the Government's concerns by 
restricting NCPG's future conduct. The PFJ prevents NCPG from 
``prohibiting or restraining'' any state affiliate from selling problem 
gambling services to any customer in any state. The PFJ further 
prohibits NCPG from declaring such competition ``unethical, 
unprofessional, or contrary to the policy of the NCPG.'' The PFJ will 
expire 10 years from the date of entry by the Court.

2. NCPG's Actions and Barriers to Entry

    The major flaw in the Government's case is their complete failure 
to demonstrate, or even allege, that NCPG's actions created a barrier 
to competition in the market for ``problem gambling services.'' The 
United States typically alleges in antitrust cases that the defendant's 
actions create a de facto barrier to entry because of the relative 
difficulty in entering the marketplace. Here there is no such 
allegation. All the United States argues is that NCPG restrained 
competition among its own membership. This is not a sufficient basis to 
find entry of the PFJ is in the public interest.
    In the first place, the ``problem gambling services'' market does 
not possess any substantial natural barriers to entry. The United 
States itself defines the market in very general terms:

    ``Problem gambling services'' means all services relating to the 
treatment or prevention of problem or compulsive gambling, including 
dissemination of information regarding problem gambling, telephonic 
hot-line or help-line services, training of problem gambling 
counselors, certification of various problem gambling training 
programs, and provision of any product or service aimed at assisting 
problem gamblers.\8\

    \8\ Proposed Final judgment at 3.
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    It is unclear from the Government's definition how many or much of 
these services one must offer to be considered part of the market, but 
it is fairly clear that entry itself is not difficult. Any individual 
or organization could disseminate information on compulsive gambling 
and operate a hotline for gambling addicts. NCPG is not a monopolist in 
this market, but rather a successful group of experienced problem 
gambling service providers.
    The United States presents no evidence that NCPG created, or 
attempted to create, any barriers to prevent any interested party from 
entering the market. From all accounts, NCPG's policies and actions 
were limited to governing the voluntary association among its own 
affiliates. Furthermore, NCPG and its affiliates are all nonprofit 
organizations. They are not organized to compete with each other, but 
rather to provide beneficial services to the public without regard for 
maximizing profit or paying dividends to stockholders. For the United 
States to hold NCPG to the same antitrust standards as a for-profit 
corporation or association both misconstrues the intent of antitrust 
laws, and imposes an unreasonable burden on NCPG's operations.\9\
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    \9\ The United States argues that NCPG's policies did not 
``enhance economic efficiency'' (Complaint at 5). Once again, 
nonprofit organizations are not generally designed to maximize 
economically efficiently. And even if this were the case, there's no 
evidence that lack of ``efficiency'' is itself anticompetitive. 
Under this standard, for example, one could hold an amateur sports 
association in violation of the Sherman Act for limiting the number 
of games member teams may schedule in a season.
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3. Free Speech and Free Assembly

    The most disturbing aspect of the PFJ is the shackling of NCPG's 
future speech and assembly. Section IV(B) of the PFJ prohibits NCPG 
from adopting or making any statement that ``states or implies'' 
intrastate competition of the type at issue in this case is 
``unethical, unprofrofessional, or contrary to the policy of NCPG.'' 
This requirement does nothing to enhance competition, and in fact is 
overt censorship by the United States. The Government is not content to 
simply restrict NCPG's commercial conduct; they also seek to prevent 
NCPG from expressing, or even holding, ethical views that contrast 
those of the United States.
    The First Amendment forbids the federal government from ``abridging 
the freedom of speech.'' The PFJ's restrictions on NCPG's future speech 
plainly violate this constitutional commandment. The United States 
possesses no authority, under either the Constitution or the Sherman 
Act, to prevent private associations from declaring conduct 
``unethical'' or ``unprofessional''. Indeed, if the Government had such 
power, it could easily prohibit individuals, under color of antitrust 
enforcement, from making

[[Page 60713]]

such statements as well. Had the United States chosen to name NCPG's 
officers individually, they could have extended the Section IV(B) 
speech restrictions to them.
    The First Amendment also protects the right of individuals to 
``peaceably'' assemble and ``petition the Government for a redress of 
grievances''. The PFJ imposes restraints on these rights. By forbidding 
NCPG from expressing views that disagree with the United States' 
position on competition, NCPG is arguably prohibited from lobbying 
other branches of the government, such as Congress, to alter or abolish 
the policy set forth by the Department of Justice in this matter. The 
United States is trying to prevent any future dissent or discussion of 
the merits of NCPG's policies with respect to competition among its 
affiliates. This not only violates the plain meaning of the First 
Amendment, but it usurps the potential role of Congress and the 
judiciary in making future assessmens arising from this case. Such 
drastic measures bear no relation to the stated objectives of the PFJ, 
namely to prevent allegedly anticompetitive conduct. The Constitution 
makes a clear distinction between punishing speech and punishing actual 
illegal conduct. The United States failed to make this distinction in 
formulating the PFJ.
    Finally, the entire PFJ unreasonably interferes with the free 
association and assembly rights of NCPG and its members. For all the 
Government's complaining over alleged restraints of trade, this case 
arises solely from the voluntary actions of NCPG's members. The state 
affiliates agreed to participate in, and abide by, NCPG's collective 
decision-making process. They agreed to restrict their competitive 
conduct, as was their right. A key element of contract law is that a 
party may agree not to do something in exchange for consideration, 
which in this case was continued membership in NCPG. These rights 
should not be impugned upon by the United States for no better reason 
than certain consumers might be temporarily inconvenienced. Consumers, 
in this context, have no right to demand NCPG act a certain way or 
promulgate certain rules. There is a right to contract; there is no 
corresponding right to demand a service from certain producers, as the 
United States erroneously argues.

4. Availability of Other Remedies

    The United States does not identify any specific ``private'' 
customers that were allegedly injured by NCPG's policies, only a few 
state governments. It is odd for the United States to contend state 
governments are powerless to direct the procurement of particular 
services as the result of a private association's ``anticompetitive'' 
actions. For instance, the United States contends Nebraska was denied 
the benefits of competition when the Minnesota NCPG affiliate was 
barred under the organization's rules from bidding for Nebraska's 
business. If this were the case, and Nebraska was unhappy with the 
options presented, why then didn't Nebraska simply create another 
option? If NCPG is getting in the way, a state could easily create its 
own agency to provide problem gambling services. Alternatively, the 
state could impose licensing or other professional requirements to 
ensure problem gambling services are provided on terms deemed 
acceptable to the state's interests.\10\ In any case, there appears to 
be little practical justification for wielding a blunt federal remedy 
like this PFJ to dispose of a matter that could be dealt with better by 
the states.
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    \10\ CAC does not support any governmental use of force to 
affect economic outcomes. Nor do we consider ``problem gambling 
services'' the proper domain of the state. This case, however, 
involves only the alleged restraint of competition in the 
marketplace, and to that end, our suggestion is merely that state 
customers can remedy their situation without resorting to federal 
antitrust intervention.
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5. Conclusion

    For the numerous independent grounds discussed above, the Court 
should reject the PFJ as inconsistent with the public interest under 
the Tunney Act. The Government has not alleged facts sufficient to 
warrant any antitrust relief, and the remedies contained in the PFJ 
unreasonably restrain NCPG's First Amendment rights, as well as the 
right of NCPG members to voluntarily contract.

Respectfully Submitted, The Center for the Advancement of Capitalism

Nicholas P. Provenzo V, Chairman & CEO, P.O. Box 16325, Alexandria, 
VA 22302-8325, Telephone: (703) 625-3296, Facsimile: (703) 997-6521, 
E-mail: [email protected].

S.M. Oliva, Senior Fellow, 2000 F Street, NW., Suite 315, 
Washington, DC 20006, Telephone: (202) 223-0071.

    Dated: August 25, 2003.
[FR Doc. 03-26660 Filed 10-22-03; 8:45 am]
BILLING CODE 4410-11-M