Posted by: David Giacalone | June 28, 2014

arts venues want more than a fair game

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.

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’ actionby 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:

Mr. Park,

I was referred today to a Statement from Robert Williams, dated October 22, 2013, regarding the Update Theater Coalition.

   The Statement goes beyond agreeing with the Coalition on the policy that an applicant must attempt to enter partnerships with local entertainment venues.  Instead, it states that the Commission will work with the Coalition to include in the RFA language that will ensure “that no casino operator can successfully bid for a New York casino license unless it has a partnership agreement with live entertainment venues in the local market in consultation with the Upstate Theater Coalition.” (emphasis added)

I am wondering whether that Statement has ever been further clarified.  Of course, the RFA does not require “consultation” with the Coalition.  Did the Commission, and now the Siting Board, envision that the Coalition would be more than a source of information and advice for Applicants?  The Fair Game Coalition appears to have gone much further and looks like a set of competitors collectively “negotiating” with the Applicant about acceptable terms for any partnership Agreement.  The Coalition also seems to have a very broad notion of what constitutes a “local market.”

As I wrote today to the NYS Attorney General, I believe such collective pressure on the casino applicants may amount to an antitrust violation that cannot be immunized under the State Action Doctrine [under] the terms of the RFA itself and the general policy of enhancing arts and entertainment venues.

Any further explanation would be much appreciated.

David Giacalone

Any developments from my Complaint to the AG will be reported at this website.

¿ GarbagePailPoint ? update (July 26, 2014: As of today, I have not received an acknowledgement that my message had been received, much less a substantive reply from either the Attorney General’s Office nor Mr. Parker or the Gaming Commission.

 


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