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It`s been a solid start to the year for the gaming industry, with several high-profile deals setting the stage for robust growth in the sector. Still, several global brands are currently entangled in lawsuits. In this report, we canvass three high-profile litigations involving gaming operators.
We start with the gaming supply company Scientific Games, which has been sued by two casinos, namely, Casino Queen and Casino Queen Marquette, in an antitrust lawsuit. The casinos have alleged that the corporation has been stifling competition and monopolizing the market with frivolous lawsuits.
Next up is the legal tug-of-war waging between Flutter Entertainment and Fox Corporation over rights to the former’s 18.6% stake in FanDuel. Fox has filed a lawsuit contending to buy the stake at the same price that Flutter Entertainment had paid in December 2020. Flutter is refuting the proposal and wants Fox to pay “fair market value” to exercise the option in July 2021.
The Las Vegas-headquartered Wynn Resorts Inc. has reached a $5.60 Million settlement with the current and former dealers of its Wynn and Encore casinos. The dealers had brought a pair of class-action lawsuits over the casinos’ long-term policy of forcing them to share tips with non-dealer pit staff.
Scientific Games Hit With Antitrust Lawsuit by Two Casinos
Two Midwest riverboat casinos are suing the Las Vegas-based Scientific Games Corporation over claims that the company fraudulently monopolized the automated card shufflers’ market. The suit claims they did so by strangling competition with “sham lawsuits.”
Casino Queen of East St Louis, Ill., which trades as DraftKings at Casino Queen, and Casino Queen Marquette, of Marquette, Iowa, are both docked on the Mississippi River. They alleged that the gaming supply giant’s behavior allowed it to set prices without fear of being undercut.
The two casinos claim Scientific Games engaged in underhand techniques regarding its patents over the years, going so far as to say their patents were “fraudulent.” Armed with those patents, Scientific Games sues competitors once they introduce a new automatic shuffler. The lawsuits, even if Scientific Games loses, usually hurt the competitor enough to render them harmless. This also scares off other companies from introducing their automatic shufflers, lest they get challenged in court by Scientific Games.
The casinos’ lawsuit alleges Scientific Games has achieved a virtual monopoly in the $100 Million automatic shuffler market through such practices.
The lawsuit was filed on April 9 in the Chicago-based US District Court of Eastern Illinois. It names as defendants Scientific Games, Bally Technologies, Inc., and Bally Gaming, Inc, all of which are based in Nevada, and the related business entities Shuffle Master, Inc. and SHFL Entertainment.
The two casinos have alleged that Scientific Games and its subsidiaries “now control virtually 100% of that market as a result of their misconduct” and, as such, has no real competitors to challenge them on pricing. Hence, Scientific Games can charge sky-high prices because there are no viable automatic card shuffler alternatives for the casinos.
As the lawsuit states, “In other words, because the demand for automatic card shufflers is inelastic, sellers of automatic card shufflers—like the Defendants—can raise the prices of these shufflers above competitive levels without seeing a decline in sales revenue. It also means that entities like Plaintiffs and others similarly situated have no alternatives to use as substitutes for these machines to be able to avoid any supra-competitive prices charged by Defendants.”
The casinos included sales data from 2012 (the last year such data was publicly available), showing that Scientific Games’ shufflers sold for an average of nearly $16,000 or generated about $451/month when leased. The complaint did not note the current prices of Scientific Games’ machines.
The casinos’ lawsuit does not set a specific dollar amount for damages but claims that potential class members may number “in the thousands.” The lawsuit will also seek triple damages, as called for under Illinois antitrust law and asks for a jury trial in the matter.
Fox Corp. Sues Flutter Over FanDuel Stake
Flutter Entertainment, the parent company of PokerStars has been sued by Rupert Murdoch’s Fox Corporation over the price of buying a stake in FanDuel.
Fox is looking to acquire an 18.6% stake in the latter but wants to pay the same rate that Flutter had paid last December when it increased its holding in FanDuel to 95%. This is not acceptable to Flutter that wants Fox to pay according to the current valuation of FanDuel.
The two companies will meet in court over the pricing of the former’s option to buy an 18.6% stake in the FanDuel Group this summer.
In 2018, Flutter Entertainment merged its US business with FanDuel and in December 2020, the company raised its FanDuel holding by 37.2 % in a $14.18 Billion deal, making it a 95% stake-holder of FanDuel. Having helped get the transaction over the line, Fox was given the option to buy 18.6% of FanDuel in July this year.
Fox is looking to snap up the stake offered in FanDuel but basis the $11.2 Billion valuation that dates back to December 2020, when Flutter acquired its 37.2% stake.
However, Flutter has contended that Fox must pay “fair market value” to exercise the option in July, saying that buying at December’s valuation “would represent a windfall to Fox compared to the fair market valuation as of July 2021, to which the parties had previously agreed.”
The Dublin-headquartered Flutter says Fox’s legal filing “is without merit” and so it will “vigorously defend its position” in the arbitration process. The price of Fox’s option could be determined by an initial public offering (IPO) for FanDuel, which the company said last month it is considering.
Wynn Resorts to Pay $5.60 Million to Settle Illegal Tip-Sharing Class-Action Lawsuits
Wynn Resorts has agreed to pay $5.6 Million to settle two lawsuits over tip-sharing by dealers with non-dealing staff. The lawsuits were filed by the gaming union UAW Local 3555 Gaming Union, representing close to 1,000 dealers of Wynn and Encore casinos who were forced to share the tips they received with non-dealer staff.
With the settlement coming through, the casino company has ended the decade and a half long legal dispute.
Signing the judgment, US District Judge Andrew Gordon stated – “The court finds the proposed settlement is a fair and reasonable resolution of a bona fide dispute arising under the Fair Labor Standards Act for those collective action members, all of whom are current or former employees of (the) defendant, that elect to participate in such settlement.”
The dispute arose when Wynn reworded the employee supervisory positions by labeling them “casino service team leads”. This change of terminology made dealers liable to share 12% of the tips they earned with the supervisors. The UAW Local 3555 Gaming Union subsequently challenged the change in company rules in two cases filed in 2013 and 2018. However, over time, the dealers lost close to $50 Million in tips to this company policy.
Confirming the settlement, Wynn Resorts spokesperson Michael Weaver said, “We are pleased that all of the parties worked cooperatively to reach a resolution and bring this matter to an amicable conclusion.”
Since the legal costs of $1.4 Million have to be taken into account, the 1,000 current and former dealer workforce will receive only $4,170 each on average.