[Federal Register Volume 78, Number 160 (Monday, August 19, 2013)]
[Notices]
[Pages 50416-50419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20058]


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FEDERAL TRADE COMMISSION

[Docket No. 9355]


Pinnacle Entertainment, Inc., and Ameristar Casinos, Inc.; 
Analysis of Agreement Containing Consent Orders 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 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 September 11, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/pinnacleentertainconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``Pinnacle, Docket 
No. 9355'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/pinnacleentertainconsent by following 
the instructions on the web-based form. If you prefer to file your 
comment on paper, mail or deliver your comment to the following 
address: Federal Trade Commission, Office of the Secretary, Room H-113 
(Annex D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Alexis Gilman (202-326-2579), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 3.25, 16 CFR 3.25, 
notice is hereby given that the above-captioned consent agreement 
containing a consent orders 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 August 12, 2013), on the World Wide Web, at 
http://www.ftc.gov/os/actions.shtm. 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.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before September 11, 
2013. Write ``Pinnacle, Docket No. 9355'' on your comment. Your 
comment, including your name and your state, will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of

[[Page 50417]]

discretion, the Commission tries to remove individuals' home contact 
information from comments before placing them on the Commission Web 
site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/pinnacleentertainconsent by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``Pinnacle, Docket No. 
9355'' on your comment and on the envelope, and mail or deliver it to 
the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before September 11, 2013. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction and Background

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Order (``Consent Order'') from Pinnacle Entertainment, Inc. 
(``Pinnacle''). The purpose of the proposed Consent Order is to remedy 
the anticompetitive effects that otherwise would result from Pinnacle's 
acquisition of Ameristar Casinos, Inc. (``Ameristar''). Under the terms 
of the proposed Consent Order, Pinnacle is required to divest one of 
its casinos in St. Louis, Missouri, the Lumi[egrave]re Place Casino 
(``Lumi[egrave]re), and all of Ameristar's assets in Lake Charles, 
Louisiana, consisting of assets and rights relating to Ameristar's 
Mojito Pointe casino (``Mojito Pointe''), which is currently is under 
construction and scheduled to open next year. The divestitures must be 
completed within six months from the earlier of (1) the date of 
Pinnacle's acquisition of Ameristar, or (2) the date the Decision and 
Order becomes final.
    The proposed Consent Order has been placed on the public record for 
30 days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission again will review the proposed Consent Order and 
comments received, and decide whether it should withdraw the Consent 
Order, modify the Consent Order, or make it final.
    On December 21, 2012, Pinnacle agreed to acquire Ameristar for 
approximately $2.8 billion, including the assumption of $1.9 billion in 
debt. By unanimous vote on May 28, 2013, the Commission issued an 
administrative complaint alleging 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 eliminating meaningful and substantial 
competition between Pinnacle and Ameristar for casino services in the 
St. Louis and Lake Charles area markets. The elimination of this 
competition would have caused significant competitive harm, 
specifically higher prices and diminished quality and service levels in 
both markets. The proposed Consent Order would remedy the alleged 
violations by requiring a divestiture in the two affected markets. The 
divestitures will establish a new independent competitor to Pinnacle in 
both relevant areas, replacing the competition that otherwise would be 
lost as a result of the proposed acquisition.

II. The Parties

    Based in Las Vegas, Nevada, Pinnacle is a publicly traded casino 
operator and developer. Pinnacle owns and operates nine casinos and 
horseracing facilities in five states. In addition, Pinnacle owns a 26% 
stake in Asian Coast Development, Ltd., a British Columbia-based 
corporation that is developing Vietnam's first integrated casino 
resort. Two of Pinnacle's casinos are in the St. Louis area. The first, 
Lumi[egrave]re, opened in late 2007 and is located in downtown St. 
Louis, north of the Gateway Arch. In March 2010, Pinnacle opened its 
second St. Louis casino, River City Casino, in the south St. Louis 
suburb of Lemay, Missouri. Pinnacle owns and operates one casino, 
L'Auberge Lake Charles (``L'Auberge''), in Lake Charles. For fiscal 
year 2012, Pinnacle generated nearly $1.2 billion in net revenue, with 
EBITDA of $285.2 million
    Ameristar is a publicly traded casino operator and developer, 
headquartered in Las Vegas, Nevada, with eight properties in six 
states. Ameristar owns and operates one casino in the St. Louis area. 
Opened in 1994, the Ameristar Casino Resort Spa St. Charles 
(``Ameristar St. Charles'') is located in the St. Louis suburb of St. 
Charles, Missouri, approximately 22 miles from downtown St. Louis. In 
Lake Charles, Ameristar is currently constructing Mojito Pointe, a 
casino resort directly adjacent to Pinnacle's L'Auberge, which is 
scheduled for completion next year. For fiscal year 2012, Ameristar 
generated over $1.2 billion in net revenue, with EBITDA of $361.6 
million.

[[Page 50418]]

III. Casino Services in St. Louis and Lake Charles

    Pinnacle's proposed acquisition of Ameristar poses substantial 
antitrust concerns for casino services. The casino services market 
consists of slot, video poker, and table gaming (i.e., gambling) along 
with associated amenities that are used to drive gaming revenue, which 
typically include some combination of hotel accommodations, food and 
beverages, entertainment, and other amenities. Casino operators 
typically generate the vast majority of their revenues from gaming.
    Other forms of entertainment activities do not meaningfully compete 
with casino services and are not in the relevant service market. 
Notably, casino operators--including the merging parties--do not track 
other leisure activities when assessing their competitors, tracking 
market shares, or making business decisions. Casino services differ 
significantly from other entertainment activities in a number of 
respects. For example, casinos are highly regulated, with a limited 
number of casinos licensed to operate in any given state, there are age 
restrictions on who can gamble, and, more generally, the casino 
experience differs greatly from other entertainment and leisure 
activities. Thus, consistent with prior Commission precedent, the 
evidence here supports a distinct relevant market consisting of casino 
services.
    There are two relevant geographic markets in which to analyze the 
merger's effects: (1) The St. Louis, Missouri metropolitan statistical 
area (``MSA''); and (2) the Lake Charles, Louisiana area. The 
conclusion that these are the relevant geographic markets is supported 
by party and third-party ordinary-course documents, testimony, and 
data, and is consistent with how the state gaming regulators view the 
gaming markets. A hypothetical monopolist of casino services in each 
relevant area could profitably impose a small but significant non-
transitory increase in price.
    Pinnacle and Ameristar are close and vigorous competitors in the 
St. Louis area market and--but for the acquisition--soon will be each 
other's closest competitor in the Lake Charles area market. Absent 
relief, the proposed acquisition would eliminate the significant head-
to-head competition between Pinnacle and Ameristar and would increase 
Pinnacle's ability and incentive to raise prices post-acquisition, in 
the form of less-customer-favorable hold rates, rake rates, table game 
rules and odds, and lower player reinvestments. The proposed 
acquisition also would diminish Pinnacle's incentive to maintain or 
improve the quality of services and amenities to the detriment of 
casino customers in the St. Louis and Lake Charles markets. The 
evidence of close competition between Pinnacle and Ameristar in both 
markets comes from numerous sources: testimony of Pinnacle and 
Ameristar executives, ordinary-course documents, data from the parties 
and various market participants, and third-party testimony. 
Additionally, the evidence suggests that the proposed transaction would 
substantially increase the risk of coordinated effects in the St. Louis 
market. The acquisition would result in a highly concentrated market 
with just two competitors to Pinnacle, only one of which is significant 
and has a casino of a similar size and with similar offerings to the 
parties' casinos. There is already evidence of information exchange as 
well as ``price following'' behavior in the St. Louis market.
    In St. Louis, the proposed acquisition would reduce the number of 
competitors from four to three, increasing the Herfindahl-Hirschman 
Index (``HHI'') 1,667 points to 4,443. Under the Horizontal Merger 
Guidelines (``HMG''), such concentration levels trigger the presumption 
that the transaction likely enhances Pinnacle's market power in St. 
Louis. Additionally, the parties' ordinary-course documents show they 
are close competitors, compete vigorously with one another, and respond 
to each other on price and non-price terms. For example, Pinnacle 
entered the St. Louis market in 2007 with Lumi[egrave]re; shortly 
after, in 2010, Pinnacle opened River City. In both instances, Pinnacle 
took sales and market share from Ameristar, and Ameristar responded.
    In Lake Charles, Ameristar's Mojito Pointe will be located directly 
adjacent to Pinnacle's existing casino resort, L'Auberge. Ameristar's 
planned casino will be nearly identical to Pinnacle's high-end 
L'Auberge casino in gaming and amenities offered. The remaining casino 
services competitors in the Lake Charles area are highly differentiated 
and not nearly as close substitutes for the merging parties' casinos as 
the merging parties' casinos will be for each other. Based on 
Ameristar's ordinary-course revenue projections, the proposed 
acquisition increases the HHI in the market by 1,306 points to 3,514. 
This delta and concentration level triggers the presumption that the 
transaction would enhance Pinnacle's market power in Lake Charles. If 
the merger is consummated, the significant competitive impact of 
Ameristar's entry and close competition with Pinnacle--and the benefits 
that competition would generate--will be eliminated.
    New entry or expansion is unlikely to deter or counteract the 
anticompetitive effects of the proposed acquisition in the St. Louis or 
Lake Charles area markets. The two affected markets are insulated from 
new entry or expansion by significant regulatory barriers, including 
limitations on the number of casino licenses available and the ability 
to expand existing gaming operations. In the St. Louis casino services 
market, Missouri and Illinois law limit the number of casino licenses 
and both states have issued all of their respective licenses. Missouri 
and Illinois also have restrictions in their respective gaming license 
regulations that make significant expansion by current market 
participants extremely unlikely in the St. Louis market.
    Entry and expansion is also unlikely in the Lake Charles area 
casino services market. Louisiana law limits the number of casino 
licenses to fifteen and all fifteen licenses have been issued. 
Louisiana law also limits the size of each existing casino's gaming 
floor, thus preventing material expansion by current market 
participants, except for Native-American tribe-owned Coushatta Casino 
Resort. Entry by a casino in Texas is highly unlikely to occur soon as 
the Texas Constitution prohibits gambling.

IV. The Proposed Consent Order

A. St. Louis

    The proposed Consent Order remedies the likely anticompetitive 
effects in the St. Louis market by requiring the divestiture of 
Lumi[egrave]re to a Commission-approved buyer within six months. The 
divestiture assets include the Lumi[egrave]re casino (including hotels, 
restaurants and retail assets) and the set of associated assets--such 
as real property, licenses and permits, equipment, customer databases, 
intellectual property, contracts, and books and records--necessary for 
a Commission-approved acquirer to independently and effectively operate 
Lumi[egrave]re. The proposed Consent Order would preserve four 
independent casino operators in St Louis. Although the proposed consent 
only requires Pinnacle to divest one of its two St. Louis casinos, this 
remedy likely will result in a St. Louis casino services market that is 
even more competitive than it is today. By requiring a divestiture of 
Lumi[egrave]re, the proposed Consent Order will maintain the premerger 
competition between Lumi[egrave]re and Ameristar St. Charles and

[[Page 50419]]

will enhance competition between Lumi[egrave]re and River City--which 
Pinnacle tries to minimize today. The geographic positioning of the 
casinos (i.e., the fact that Lumi[egrave]re is closer to Ameristar St. 
Charles and River City than Ameristar St. Charles and River City are to 
each other) and the quantitative and qualitative evidence gathered 
during the investigation support the conclusion that competition will 
be enhanced by the divestiture of Lumi[egrave]re notwithstanding the 
competition of Ameristar and River City.
    If Pinnacle does not divest Lumi[egrave]re to a Commission-approved 
acquirer within six months, the Consent Order provides that a 
divestiture trustee may be appointed to sell Lumi[egrave]re, and 
includes a crown-jewel provision requiring the divestiture trustee to 
divest either Lumi[egrave]re or the Ameristar St. Charles casino. Until 
the completion of the divestiture, Pinnacle is required to abide by the 
Order to Hold Separate and Maintain Assets, which requires Pinnacle to 
hold Lumi[egrave]re separate and maintain its viability, marketability, 
and competitiveness until the Lumi[egrave]re divestiture is completed. 
The proposed Consent Order appoints a Hold Separate Monitor to manage 
Lumi[egrave]re's operations pending the divestiture.
    Additionally, the proposed Consent Order requires Pinnacle, upon 
request by the acquirer and subject to prior approval of the 
Commission, to provide transitional services to the approved acquirer 
for one year, as needed, to assist the acquirer with the transfer of 
necessary administrative support services. Finally, the proposed 
Consent Order contains standard terms regarding the acquirer's access 
to employees, protection of Material Confidential Information, and 
compliance-reporting requirements, among other things.

B. Lake Charles

    In Lake Charles, the proposed Consent Order remedies the likely 
anticompetitive effects of the proposed acquisition by requiring 
Pinnacle to divest all of the assets associated with Ameristar's 
development and construction of Mojito Pointe to a Commission-approved 
buyer within six months. The divestiture assets include the Mojito 
Pointe real property, licenses and permits, equipment, customer 
databases, intellectual property, contracts, books and records, 
including construction documents, and other assets necessary for a 
Commission-approved acquirer to independently and effectively build, 
open, and operate Mojito Pointe. The proposed Consent Order would 
preserve five independent casino operators in Lake Charles and ensure 
that the owner of the Mojito Pointe assets has the incentive to 
expedite construction of Mojito Pointe and to compete vigorously with 
Pinnacle's L'Auberge casino.
    Under the proposed Consent Order, the potential acquirer of Mojito 
Pointe is subject to prior approval by the Commission. If Pinnacle is 
unable to find a Commission-approved acquirer for Mojito Pointe within 
six months, the Consent Order provides for the appointment of a 
divestiture trustee and includes a crown-jewel provision that permits 
the divestiture trustee to divest either Mojito Pointe or Pinnacle's 
L'Auberge casino. Additionally, the proposed Consent Order requires 
Pinnacle, upon request by the acquirer and subject to prior approval of 
the Commission, to provide transitional services to the approved 
acquirer for one year, as needed, to assist the acquirer with the 
transfer of necessary administrative support services. The proposed 
Consent Order also contains standard terms regarding the acquirer's 
access to employees, protection of Material Confidential Information, 
and compliance-reporting requirements, among other things.
    The Hold Separate Order requires Pinnacle to hold Mojito Pointe 
separate until the Mojito Pointe divestiture is completed. Pinnacle is 
also required to maintain the economic viability, marketability, and 
competitiveness of Mojito Pointe and L'Auberge, the crown-jewel asset. 
The proposed Consent Order appoints a Hold Separate Monitor to oversee 
the development and construction of Mojito Pointe prior to divestiture.
* * * * *
    The sole purpose of this analysis is to facilitate public comment 
on the proposed Consent Order. This analysis does not constitute an 
official interpretation of the proposed Consent Order or modify its 
terms in any way.

    By direction of the Commission.
Richard C. Donohue,
Acting Secretary.
[FR Doc. 2013-20058 Filed 8-16-13; 8:45 am]
BILLING CODE 6750-01-P