Category Archives: Antitrust Concerns

a wicked concert cartel?

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 An article in today’s Schenectady Daily Gazette suggests that fears we expressed and explained in 2014, here and there, were warranted as to the likely anticompetitive and anti-consumer nature of the so-called Fair Game Theater Coalition. See “Rivers Casino, Proctors team up for entertainment: ‘In no way, shape or form do I feel like we’re competitors” (Daily Gazette, by Brett Samuels, A1, March 8, 2017). The article highlights the lack of rivalry and the depth of cooperation between Proctors and Rivers Casino, and the importance of the Upstate Theatre Coalition for a Fair Game in nurturing this chummy state of affairs between entities that clearly are two of the most prominent members of the live-entertainment and leisure activity market in Schenectady and the Capital Region.

Ironically, Proctors CEO Philip Morris seems to be bragging about the very kinds of restrictions that we warned about back in 2014, when we said:

feelin’ blue

 “[T]he “Fair Game” Coalition (a/k/a The Concert Cartel) may end up achieving joint booking and venue-size limitations, and a revenue-sharing agreement with each of the 3 or 4 winning casinos.  That could mean the equivalent of territorial exclusivity, and joint booking and ticket pricing, for all/each of FairGame members, across all of the eastern portion of Upstate New York, through midState locations such as Utica and Syracuse, and apparently stretching to their members in the Western end of the State.”

On the one hand, Proctors CEO Philip Morris asserts in the Gazette article that Proctors and Rivers Casino are not competitors (a contention that would clearly by rejected by objective economists and antitrust experts); on the other hand, he makes it clear that the Fair Game theater coalition is protecting its members from casino competition across Upstate New York. According to the Gazette:

Without the Fair Game agreement, Morris said, he likely wouldn’t be feeling quite as optimistic about the relationship between the two entertainment entities moving forward.

slicingthepie “It set the stage for a collaboration that probably was critical for any next step,” Morris said. “I think if there was no Fair Game, we probably wouldn’t be doing the booking, and we might be in competitive mode.”

Casino applicants were encouraged under the Act authorizing new commercial casinos to enter into arrangements with local entertainment venues, demonstrating that the local casino “actively supports the mission and the operation of the impacted entertainment venues.” [§1320(3)(2)(D)]. The members of the Fair Game coalition were expected to help their members and the applicants gather necessary information that would facilitate such agreements. Coalition members were not given the freedom to eliminate competition among themselves, nor to prevent competition from all casinos within a large (seemingly unlimited) region. Consumers will surely lose out, with fewer choices and higher prices.

trust-buster needed

In 2014, I asked the New York Attorney General’s Antitrust Bureau to take a look at the operation of Fair Game. Although they replied to me that a preliminary investigation was being undertaken, no further communications were received from the AG suggesting that Fair Game raised antitrust concerns. In 2017, the casinos are in operation in Tyre (near Syracuse), Tioga Downs (near Binghamton), and Schenectady. The AG can now see in more detail and in action the restrictions adopted by Fair Game’s group of the largest Upstate entertainment venues and by each of the new casinos. I hope the Antitrust Bureau will therefore take a close look this time. Restrictions that unnecessarily limit competition between and among the theater-arena venues and the new casinos should be barred, allowing consumers the broadest array of entertainment and location options, and hopefully the best value for their entertainment dollars.

The creation of the Fair Game theater coalition, with its potential to limit competition from casinos and other major venues, transformed Proctors CEO from a strong opponent of having a casino in town, to a fervent casino supporter. Does any one believe this cooperation will result in more entertainment choices and lower ticket prices (beyond token gimmicks and give-aways) for the people of our community? Moreover, will lesser-known entertainment venues and options benefit, or just lose market share to the Big Guys in Town? Did our Legislature really mean to greatly reduce competition across the state between and among casinos and major entertainment venues, when it tried to reassure theaters like Proctors that they would not be run out of business if a casino came to town?

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10 of 17 casino applicants accept FairGame’s terms

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 The Albany Times Union reported this afternoon that: “The Upstate Theater Coalition for a Fairgame” said Tuesday that it has reached agreements with 10 of the 17 casino applicants seeking casino licenses in the three upstate regions eligible for commercial gambling halls.” (“Entertainment coalition nets majority of casino bidders“, Capitol Confidential Blog, by James M. Odato, July 1, 2014). The three Capital Region applicants that have partnered with “FairGame” are Schenectady’s Rush Street Gaming, the Hard Rock Café in Rensselaer, and the Howe Caverns Casino.

According to TU’s Capitol Confidential, Philip Morris, CEO of Proctors and chairman of Fairgame, said:

“While we were not able to come to accord with a number of other applicants, the agreements we have reached are significant. They clearly declare the size and scope of casino entertainment plans; they have joint booking agreements that will guarantee access for the casinos and for Fairgame members to touring performers; they support the Fairgame Fund for those same facilities; and they establish arts granting programs for smaller organizations in every region. Finally, should the plans the casinos propose be significantly changed, each applicant has agreed to mitigate those impacts with additional support.”

SlicingThePie By also reaching agreement with seven applicants in the two other Upstate regions that are eligible for casino licenses, the “FairGame” Coalition (a/k/a The Concert Cartel) may end up achieving joint booking and venue-size limitations, and a revenue-sharing agreement with each of the 3 or 4 winning casinos.  That could mean the equivalent of territorial exclusivity, and joint booking and ticket pricing, for all/each of FairGame members, across all of the eastern portion of Upstate New York, through midState locations such as Utica and Syracuse, and apparently stretching to their members in the Western end of the State.

Will the members of the FairGame Coalition be allowed to try to leverage the protection that the State meant to give local and regional entertainment venues from local casinos into a vast network of competition-killing promises among themselves and between each entertainment center and far-spread casinos covering several large regions, and perhaps all of Upstate New York?

NYg My “State Action” Analysis: To survive antitrust scrutiny, the FairGame group would need to justify such clearly anticompetitive joint action with a “state action” defense: the claim that their action is immunized from the antitrust laws because of the actions and policy of the State where the conduct takes place.  However, just last year, in its FTC v. Phoebe Putney Health Sys. Inc. (No. 11-1160, 2013) opinion, the U.S. Supreme Court reiterated that state-action immunity is a disfavored exception that will get careful examination before being accepted. The Phoebe Putney Court further stressed that to successfully invoke state-action immunity, state laws should be explicit in their intent to displace competition.  In addition, although the issue was not reached in Phoebe Putnam, prior cases have required that the state must “actively supervise” the conduct that would otherwise be deemed anticompetitive where — as here — the actors are private parties rather than governmental entities.

The FairGame Coalition may be able to show that New York State wanted to limit the competition that entertainment venues would normally face from a nearby casino, when it passed The Upstate New York Gaming Economic Development Act of 2013.  But they cannot show that the State wanted to greatly reduce competition among the major art and entertainment centers themselves, or even between the arts venues and casinos that would not normally be considered part of their local entertainment market.  The Act merely requires that the Siting Board evaluate whether the applicant has established:

“a fair and reasonable partnership with live entertainment venues that may be impacted by a gaming facility under which the gaming facility actively supports the mission and the operation of the impacted entertainment venues.” [§1320(3)(2)(D)]

As of COB today, I have not received any sort of reply from the State Attorney General’s office on the antitrust Complaint that I submitted last Friday. See our June 28th posting “arts venues want more than a fair game“.

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follow-up (March 8, 2017): An article in today’s Schenectady Daily Gazette, “Rivers Casino, Proctors team up for entertainment: ‘In no way, shape or form do I feel like we’re competitors” (by Brett Samuels, A1, March 8, 2017), suggests that my fears expressed above and in a prior post were warranted. See “a wicked concert cartel?” (March 8, 2017).

arts venues want more than a fair game

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SlicingThePie It’s been twenty-five years since I practiced antitrust law at the Federal Trade Commission in Washington, D.C.  But, it’s still a good bet that when a bunch of major competitors get together and start throwing the word “fair” around, they are hoping to limit competitive pressure on themselves by placing restrictions on market forces that are helping to give consumers more choices and lower prices.  It seems to me that is what is happening with the Fair Game campaign that the UpState Theater Coalition for a Fair Game has turned into “joint negotiations” with casino owners.

follow-up (March 8, 2017): An article in today’s Schenectady Daily Gazette, “Rivers Casino, Proctors team up for entertainment: ‘In no way, shape or form do I feel like we’re competitors” (by Brett Samuels, A1, March 8, 2017), suggests that my fears expressed below and in a subsequent post were warranted. See “a wicked concert cartel?” (March 8, 2017).

It was one thing — and probably a useful thing — for the major arts venues across Upstate New York to lobby the legislature and the Gaming Commission last year. They were successful inserting into the casino application process the requirement that applicants take into account the needs of local arts and entertainment venues, and attempt to enter into partnerships that would help assure the casino does not take away so much business or garner so many big acts that they cause grievous injury to important local entertainment venues.  It is quite another for the Fair Game folks to morph into a joint negotiation team with a long litany of restrictions and financial obligations they hope to impose on all casino operators.  They are now using the tight deadlines of the application process as a club to strengthen their powers of “persuasion”.

trustbuster Teddy Roosevelt

trust-buster

Antitrust law frowns on the use of collective action or coercion by competitors to impose their will on others and to keep the group of competitors marching to a single beat.  That’s why I wrote yesterday to the N.Y. State Attorney General asking that the Antitrust Bureau look into the lawfulness of the activities of the Fair Game group, which includes 13 major arts venues located across Upstate New York, including the five major theaters and entertainment centers in the Capital Region (Proctor’s in Schenectady, whose CEO Philip Morris is chairing the group.; SPAC and Saratoga City Center; and the Palace and Times Union Center in Albany), plus organizations in nearby Bethel, Kingston, Binghampton and Utica.

If Schenectady is saddled with a casino and its operators have greatly limited their ability to compete with the biggest arts venues, the average resident of our City and County will lose (at least) twice: saddled both with the casino and with fewer choices and higher prices likely at Proctor’s and at the other large entertainment centers in Albany, Saratoga, the Region and beyond.  Here is the explanation that I wrote on June 27 in my Complaint to the Attorney General (slightly edited for clarity):

   Fair Game is taking advantage of the Casino Siting process, which includes criteria concerning the formation of partnerships with affected local entertainment venues.  Fair Game is using collective action among the largest theater venues in the State to pressure casino applicants — who are major potential competitors with such entertainment venues — into accepting a stringent, uniform set of restrictions and financial obligations in order to demonstrate Local Support in the Application process.  That pressure is greatly magnified by the very tight and imminent deadlines for all Applicants. 

    As seen in news articles such as the one that appeared in today’s Schenectady Gazette, Fair Game members not only seek to eliminate competition with casinos for top talent and productions, but also have agreed among themselves to a formula for dividing the revenues received from casinos. See “Coalition asking for a piece of casinos’ action” by Haley Viccaro (June 27, 2014, at A6; see also “Coalition, casinos yet to sign deals”, at A1)

     This appears to go far beyond any possible State Action defense under legislation establishing the casino licensing process for restricting competition among themselves and with casinos.  The major entertainment venues are encouraged under the Act to enter into partnerships with “local casinos”, they are not given the freedom to eliminate competition among themselves, nor to prevent competition from all casinos within a large (seemingly unlimited) region.

    For example, in explaining the concept of Partnerships with Live Entertainment Venues, the Request for Applications for Gaming Facilities [RFA] seeks “copies of any and all contracts, agreements, MOUs or other understandings with live entertainment venues that may be impacted by the Gaming Facility.” (at 60). Also, in their applications, each applicant must include, in Ex. IX.B.2, copies of “agreements with impacted entertainment venues” and any declined agreements.  (RFA at 74-75)  One omnibus agreement with a coalition of venues is clearly not anticipated (nor, separate agreements which merely take collective terms and apply them in a separate contract with each venue).

    At its website, Fair Game brags about its “collective impact” in ticket receipts, jobs created, moneys invested, etc.  Major theaters such as Proctors and SPAC and the Times Union Center already have ticket prices for major acts and productions that are far out of reach of large percentages of residents of our region.   By acting jointly, they are likely to increase their ability to raise prices, not only by eliminating future competition from casinos, but also competition within the siting application process with eachother to form advantageous partnerships with local casinos.  (The ability of the East Greenbush applicant to achieve agreements separately with local venues shows that a joint bargaining team of theaters is not needed.)

    The partnerships envisioned under The Upstate New York Gaming Economic Development Act (Chapters 174 and 175 of the Laws of 2013), appear to favor the largest theaters, further disadvantaging the small and “mom-and-pop” venues and businesses that are likely to see the disposable income of many customers spent instead at a local casino.

    For the past couple of weeks, Philip Morris has gone public with his pressure for applicants to accept the collective terms of the Fair Game members.  Clearly, Fair Game hopes to use the looming June 30 application deadline to pressure-coerce casinos to sign onto their scheme.   I hope the Attorney General will make some sort of statement today cautioning Fair Game from attempting to wield such undue coercive power.

  Thank you for considering this last-minute appeal for action.

 Jim Odato covered my AG Complaint yesterday at the Times Union” at the Capital Confidential weblog, Anti-casino lawyer complains to AG about arts groups and antitrust” (Capitol Confidential, June 27, 2014), and a related TU article.  The article ends:

“Morris said he would await word from Schneiderman before commenting, although he said he did not get legal advice before pursuing the agreements with casino teams on behalf of his coalition of entertainment entities.”

The Gazette carried an article by Haley Viccaro this morning, “Schenectady casino foe says Fair Game pact would be illegal” (June 28, 2014, C3).

NYg update: State Action: See our posting  “10 of 17 casino applicants accept Fair Game’s-terms“, reacting to “Entertainment coalition nets majority of casino bidders“, The Times Union Capitol Confidential Blog, by James M. Odato, July 1, 2014. The posting contains an analysis of the application of the State Action Doctrine to the actions of the FairGame coalition: that is, whether any action by the State or the Racing Commission has given the Coalition immunity from the charge that their collective negotiation violates the antitrust laws.

Even if Fair Game does not hammer out agreements with the casinos before submission of their complete applications on Monday, June 30, the groups may continue in July to pressure casinos who want to strengthen their demonstration of support by the local arts and entertainment venues.   An admonition or cautionary statement from the Attorney General might lessen that pressure.

Yesterday afternoon, I also sent the following email message to a Gaming Commission spokesman. It concerns a Statement made in October 2013 about Fair Game that some may suggest blesses the collective negotiations by the theater group:

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