[Federal Register Volume 70, Number 152 (Tuesday, August 9, 2005)]
[Notices]
[Pages 46177-46179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15685]


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FEDERAL TRADE COMMISSION

[File No. 051-0029]


Penn National Gaming, Inc.; Analysis of Proposed Consent Order To 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before August 25, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Penn National Gaming, Inc., et al., File No. 
051 0029,'' to facilitate the organization of comments. A comment filed 
in paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 135-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to e-mail messages 
directed to the following e-mail box: [email protected].
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Joseph Lipinsky, FTC Northwest Region, 
Seattle (206) 220-4473.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for July 27, 2005), on the World Wide Web, at http://www.ftc.gov/os/2005/07/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

I. Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Penn National Gaming, Inc. (``PNG''), which is 
designed to remedy the likely anticompetitive effects resulting from 
Penn's acquisition of Argosy Gaming Company (``Argosy''). If the 
Commission grants final approval, PNG will be required to divest 
Argosy's Baton Rouge, Louisiana, casino and associated assets to 
Columbia Sussex Corporation within four (4) months after the Consent 
Agreement becomes final. The Consent Agreement also includes an Order 
to Hold Separate and Maintain Assets (``Hold Separate Order'') that 
requires PNG to preserve Argosy's Baton Rouge casino and associated 
assets as a viable, competitive, and ongoing operation until the 
divestiture is achieved. The Commission has issued the Hold Separate 
Order.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to solicit comments from interested persons. 
Comments received during this period will become

[[Page 46178]]

part of the public record. After thirty (30) days, the Commission will 
again review the proposed Consent Agreement and the comments received 
and will decide whether it should withdraw from the proposed Consent 
Agreement or make it final.
    Pursuant to the November 3, 2004, merger agreement, PNG proposes to 
acquire Argosy (``Proposed Acquisition''). The total value of the 
Proposed Acquisition is approximately $2.2 billion. The Commission's 
Complaint alleges that the Proposed Acquisition, if consummated, would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, by lessening competition in the Baton Rouge, Louisiana, 
metropolitan area casino services market.

II. The Parties

    PNG is a publicly traded company headquartered in Wyomissing, 
Pennsylvania. The company owns and operates: Casino Rouge in Baton 
Rouge, Louisiana; Hollywood Casino in Aurora, Illinois; Charles Town 
Races & Slots in Charles Town, West Virginia; the Bullwhackers casino 
properties in Black Hawk, Colorado; and three Mississippi casinos: 
Hollywood Casino in Tunica, Casino Magic in Bay St. Louis, and the 
Boomtown Biloxi casino in Biloxi. Penn also operates Casino Rama, a 
gaming facility located approximately 90 miles north of Toronto in 
Ontario, Canada, pursuant to a management contract.
    Argosy is a publicly traded company headquartered in Alton, 
Illinois. The company owns and operates casinos and related 
entertainment and hotel facilities in the Midwestern and Southern 
United States. Argosy owns and operates the Argosy Casino-Baton Rouge 
in Baton Rouge, Louisiana; the Alton Belle Casino in Alton, Illinois; 
the Argosy Casino-Riverside in Riverside, Missouri; the Argosy Casino-
Sioux City in Sioux City, Iowa; the Argosy Casino-Lawrenceburg in 
Lawrenceburg, Indiana; and the Empress Casino Joliet in Joliet, 
Illinois.

III. Casino Services

    The casino services market includes a combination of slot machine, 
video poker machine, and table gaming services, and associated 
amenities such as parking, food and beverages, and entertainment.
    There are three main categories of casino gaming: Slot machines, 
video poker machines, and table and counter games. Coin or ticket-
operated slot machines usually are allocated the largest portion of the 
gaming floor. These machines are controlled by random-number-generating 
computer chips that are set to return a percentage of the amount played 
to the player (``player win'') and to keep a percentage for the casino 
(``casino win'' or ``hold''). The machines may be programmed to provide 
many different game styles or themes, but they all fall into the 
subcategories of traditional ``reel'' slot machines or video slot 
machines.
    Video poker machines sometimes are counted among the slot machines, 
but they actually represent a separate gaming category. While still 
based on a random-number-generating computer chip, the programming of 
the video poker rules and pay tables allows an element of player skill 
to affect the outcome of a game.
    Table and counter games represent the third gaming category. Table 
games include blackjack, craps, poker, and let it ride. Counter games, 
which are played without cards, include roulette and keno. Casinos have 
been quick to capitalize on their consumers' preference for slot 
machines, as those machines require far less labor, consume fewer 
square feet of the casino floor, and generate both greater profits and 
higher profit margins than other types of casino gaming.
    Louisiana's riverboat casinos offer a number of games from each of 
the three main gaming categories. Each riverboat casino has a similar 
number of gaming machines and tables, because they are limited by 
statute to a maximum of 30,000 square feet of aggregated casino floor 
space. When riverboat casinos differ in gaming minimums, limits, 
denominations, and hold rates, it is likely in response to highly 
localized competition. Other differences among riverboat casinos are 
the colors and layout of the casino's decks, and the level of amenities 
provided within the shoreside pavilions alongside of which the 
riverboats are moored. In December 2004, Louisiana's riverboat casinos 
generated nearly $125 million in gaming revenue.\2\
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    \2\ Louisiana State Police, Gaming Revenue Report.
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IV. The Complaint

    The Commission's Complaint alleges that the Proposed Acquisition 
would create a monopoly in the Baton Rouge, Louisiana, metropolitan 
area casino services market. This includes the combination of slot 
machine, video poker machine, and table gaming, and associated 
amenities such as parking, food and beverages, and entertainment. The 
Proposed Acquisition would combine the only two casinos--one owned by 
PNG, the other by Argosy--in Baton Rouge, Louisiana. Industry 
participants refer to the Baton Rouge, Louisiana, riverboat casinos as 
``locals' casinos'' because the vast majority of their revenue comes 
from consumers who make frequent visits to the casinos and live in the 
Baton Rouge, Louisiana, metropolitan area.
    The Complaint further alleges that new entry into the Baton Rouge, 
Louisiana, metropolitan area casino services market is not likely to 
occur in a timely manner, even if prices increased substantially after 
the Proposed Acquisition, because there are significant impediments to 
such entry. Louisiana law allows the operation of only 15 riverboat 
casinos, four racinos, and one non-Native American land-based casino. 
All those licenses have been granted, and there is no evidence that any 
of the licensees are planning to relocate.

V. The Consent Agreement

    The Consent Agreement effectively remedies the Proposed 
Acquisition's likely anticompetitive effects in the Baton Rouge, 
Louisiana, metropolitan area casino services market by requiring PNG to 
divest Argosy's Baton Rouge casino and associated assets. Pursuant to 
the Consent Agreement, PNG is required to divest Argosy's Baton Rouge 
casino to Columbia Sussex Corporation within four (4) months from the 
date the consent order is final. This period may be extended for an 
additional two (2) months to allow the State of Louisiana to determine 
whether to grant regulatory approvals required to operate the casino. 
If Columbia Sussex Corporation does not obtain regulatory approvals, 
the Consent Agreement provides PNG with up to ten (10) months from the 
date the Consent Agreement becomes final to divest the casino to a 
buyer approved by the Commission. The Commission's goal in evaluating 
possible purchasers of divested assets is to ensure that the 
competitive environment that existed prior to the acquisition is 
maintained. A proposed acquirer of divested assets must not itself 
present competitive problems.
    Should PNG fail to accomplish the divestiture within the time and 
in the manner required by the Consent Agreement, the Commission may 
appoint a trustee to divest these assets. If approved, the trustee 
would have the exclusive power and authority to accomplish the 
divestiture within six (6) months of being appointed, subject to any 
necessary extensions by the Commission. The Consent Agreement requires 
PNG to provide the trustee with access to information related to 
Argosy's

[[Page 46179]]

Baton Rouge casino as necessary to fulfill his or her obligations.
    The Commission's Hold Separate Order requires that PNG hold 
separate and maintain the viability of the Argosy Baton Rouge casino as 
a competitive operation from the date PNG acquires Argosy until the 
business is transferred to the Commission-approved acquirer. 
Furthermore, it contains measures designed to ensure that no material 
confidential information is exchanged between the PNG and the Argosy 
Baton Rouge casino (except as otherwise provided in the Consent 
Agreement), and provisions designed to prevent interim harm to 
competition in the Baton Rouge, Louisiana, metropolitan area casino 
services market pending divestiture. The Hold Separate Order names 
Frank Quigley, the present general manager of the casino, as the Hold 
Separate Trustee who is charged with the duty of monitoring Penn's 
compliance with the Consent Agreement and Hold Separate Order until the 
casino is divested.
    In order to ensure that the Commission remains informed about the 
status of Argosy's Baton Rouge casino's pending divestiture, and about 
the efforts being made to accomplish the divestiture, the Consent 
Agreement requires PNG to file periodic reports with the Commission 
until the divestiture is completed.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and is not intended to constitute an official 
interpretation of the proposed Decision and Order or the Order to 
Maintain Assets, or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05-15685 Filed 8-8-05; 8:45 am]
BILLING CODE 6750-01-P