The Federal Trade Commission on Wednesday filed suit to block the $2.8 billion merger of rival casinos Pinnacle Entertainment, Inc. and Ameristar Casinos, Inc., arguing the deal would raise prices and lower quality for gamblers in Missouri and Louisiana.
In an administrative complaint, the FTC alleged that the merger would eliminate "meaningful and substantial competition," harming consumers of casino services in St. Louis and Lake Charles, La.
"For customers of Pinnacle and Ameristar casinos, this competition translated into better odds (directly or indirectly), free or lower-cost amenities, and a better gambling experience," the FTC complaint states. "That incentive and those efforts to take customers from each other continues to benefit customers to this day, but will be eliminated by the Acquisition."
In St. Louis, where under state law casinos must be within 1,000 feet of the Mississippi or Missouri rivers, there are four casino operators. The merger would reduce that number to three, with no real possibility of new entrants because Missouri law limits the number of casino licenses to 13, and all are taken.
In Lake Charles, Pinnacle operates one casino, while Ameristar is building a comparable one next door that’s set to open in 2014.
"The new casino will be Pinnacle’s closest and most significant competitor in the Lake Charles market and, according to the parties’ own projections, will have a direct and substantial impact on the market share, revenues, and profits of Pinnacle’s existing casino," according to the FTC. "This competition will lead Pinnacle to offer ‘better events, better special promotions, better direct marketing, better advertising and a better service’ to customers."
As in Missouri, Louisiana strictly limits the number of casino licenses, making new competitors unlikely.
While the FTC acknowledges that "casino games are designed for the house to win over the long term," the agency noted that slot hold rates (which determine a customer’s theoretical loss at a given slot machine), rake rates (the casino’s charge for certain table games, such as poker), and table game rules and odds can affect how often and how much customers win.
The acquisition will "increase Pinnacle’s ability and incentive to raise prices … in the form of less-customer-favorable hold rates, rake rates, table game rules and odds, and lower player reinvestments," the FTC argues.
It’s not just about money. The FTC said competition between the casinos has also inspired "an increased variety of table games, entertainment options, food offerings, alcohol selection, even improved lighting and higher-quality WiFi service."
The commission vote to bring the complaint was 4-0.
Jenna Greene can be contacted at email@example.com.