In order to ensure continued competition in the market for casino services in Baton Rouge, Louisiana, the Federal Trade Commission today announced a consent order that will permit Penn National Gaming, Inc.’s (PNG) $2.2 billion acquisition of Argosy Gaming Company (Argosy), provided PNG sells Argosy’s Baton Rouge casino to Columbia Sussex Corporation within four months of the order’s becoming final. Because PNG and Argosy now operate the only two casinos in Baton Rouge, the divestiture is necessary to preserve a competitive alternative.
“PNG and Argosy are direct and actual competitors in the casino services market in Baton Rouge, and absent the relief provided by the Commission’s order, PNG would gain a monopoly in that market,” said Susan A. Creighton, Director of the FTC’s Bureau of Competition. “Columbia Sussex will take over the Argosy casino and continue competing with PNG in this market.”
The Commission’s Complaint
According to the Commission’s complaint, PNG’s acquisition of Argosy as proposed would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended, by lessening competition in the market for casino services in Baton Rouge, Louisiana. As defined in the complaint, the casino services market includes the combination of slot machine, video poker machine, and table gaming, along with associated amenities such as parking, food and beverages, and entertainment. The proposed acquisition would lead to the combination of the only two casinos – one owned by PNG and the other by Argosy – in Baton Rouge. Accordingly, after acquiring Argosy, PNG would have a monopoly of the Baton Rouge casino services market.
The complaint also states that new entry into this market is not likely to occur in a manner timely enough to replace the competition lost through PNG’s acquisition, as there are significant barriers to such entry. Louisiana law limits the number of licenses to 15 river boat casinos, four racinos (race tracks with slot machines), and one non-Native American land-based casino. All of these licenses have been granted, and there is no evidence that any of the currently operating businesses plan to relocate outside the state.
Terms of the Order
The Commission’s consent order remedies the proposed acquisition’s alleged anticompetitive effects in the casino services market in Baton Rouge, Louisiana, by requiring Argosy to divest its Baton Rouge casino and associated assets. Under the order, Argosy is required to divest these assets to Columbia Sussex Corporation within four months after the order becomes final. This period may be extended by two months, however, to allow the State of Louisiana to determine whether to grant the necessary regulatory approvals for the transaction. If Columbia Sussex does not gain regulatory clearance from the state, the order would provide PNG with up to 10 months to find a new Commission-approved buyer that does not itself present anticompetitive concerns.
If PNG fails to divest the Argosy casino in the time and manner required by the order, the Commission can appoint a trustee to divest these assets within six months. The order then would require PNG to provide the trustee with access to all information related to the Argosy casino. Finally, the Commission’s order contains a hold separate order requiring PNG to hold separate and maintain the viability of the Argosy assets pending their divestiture to a Commission-approved buyer. The FTC has appointed Frank Quigley, the current general manager of the Argosy Baton Rouge casino, as the hold separate trustee. Quigley will be in charge of the Argosy Baton Rouge casino until it is divested to Columbia Sussex or another Commission-approved buyer. PNG also is required to provide the FTC with reports until the divestiture is completed to ensure its compliance with the terms of the order.
Parties to the Transaction
PNG is a publicly traded company with headquarters in Wyomissing, Pennsylvania. It owns or operates nine casinos in Louisiana, Colorado, Illinois, Mississippi, West Virginia, and Ontario, Canada. A complete list of its holdings can be found in the Analysis to Aid Public Comment for this transaction, which is posted on the Commission’s Web site as a link to this press release.
Argosy, a publicly traded company headquartered in Alton, Illinois, owns and operates casinos and related entertainment and hotel facilities in the Midwestern and southern United States. It is an owner and operator of six casinos located in Illinois, Missouri, Louisiana, and Iowa.
Under the terms of a November 3, 2004 merger agreement, PNG proposed to acquire Argosy for $2.2 billion.
The Commission vote to accept the consent order and to place a copy on the public record was 4-0. The order will be subject to public comment for 30 days, until August 25, 2005, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed consent order, and an analysis to aid public comment are available on the FTC’s Web site at www.ftc.gov. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: email@example.com; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
(FTC File No. 051-0029)