Eldorado Resorts and Caesars Entertainment; Analysis of Agreement Containing Consent Orders To Aid Public Comment, 40649-40653 [2020-14582]

Download as PDF Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices To the extent the instructions to the FR Y–9C, FR Y–9LP, FR Y–9SP, and FR Y–9ES reports each respectively direct the financial institution to retain the workpapers and related materials used in preparation of each report, such material would only be obtained by the Board as part of the examination or supervision of the financial institution. Accordingly, such information is considered confidential pursuant to exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). In addition, the workpapers and related materials may also be protected by exemption 4 of the FOIA, to the extent such financial information is treated as confidential by the respondent (5 U.S.C. 552(b)(4)). Consultation outside the agency: The Federal Reserve consulted with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation in the development of this proposal. Board of Governors of the Federal Reserve System, July 1, 2020. Michele Taylor Fennell, Assistant Secretary of the Board. [FR Doc. 2020–14572 Filed 7–6–20; 8:45 am] BILLING CODE 6210–01–P FEDERAL TRADE COMMISSION [File No. 191 0158] Eldorado Resorts and Caesars Entertainment; Analysis of Agreement Containing Consent Orders To Aid Public Comment Federal Trade Commission. Proposed consent agreement; request for comment. AGENCY: ACTION: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations. DATES: Comments must be received on or before August 6, 2020. ADDRESSES: Interested parties may file comments online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Please write: ‘‘Eldorado and Caesars; File No. 191 0158’’ on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the webbased form. If you prefer to file your comment on paper, please mail your comment to the following address: jbell on DSKJLSW7X2PROD with NOTICES SUMMARY: VerDate Sep<11>2014 16:59 Jul 06, 2020 Jkt 250001 Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. FOR FURTHER INFORMATION CONTACT: Joshua Smith (202–326–3018), Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis of Agreement Containing Consent Orders to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC website (for June 26, 2020), at this web address: https://www.ftc.gov/newsevents/commission-actions. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before August 6, 2020. Write ‘‘Eldorado and Caesars; File No. 191 0158’’ on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the https:// www.regulations.gov website. Due to the public health emergency in response to the COVID–19 outbreak and the agency’s heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https:// www.regulations.gov website. If you prefer to file your comment on paper, write ‘‘Eldorado and Caesars; File No. 191 0158’’ on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If possible, PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 40649 submit your paper comment to the Commission by courier or overnight service. Because your comment will be placed on the publicly accessible website at https://www.regulations.gov, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not include any sensitive personal information, such as your or anyone else’s Social Security number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any ‘‘trade secret or any commercial or financial information which . . . is privileged or confidential’’—as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)— including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names. Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled ‘‘Confidential,’’ and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on the public FTC website—as legally required by FTC Rule 4.9(b)—we cannot redact or remove your comment from the FTC website, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request. Visit the FTC website at https:// www.ftc.gov to read this Notice and the news release describing this matter. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive E:\FR\FM\07JYN1.SGM 07JYN1 40650 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices public comments that it receives on or before August 6, 2020. For information on the Commission’s privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/ site-information/privacy-policy. jbell on DSKJLSW7X2PROD with NOTICES Analysis of Consent Orders To Aid Public Comment I. Introduction and Background The Federal Trade Commission (‘‘Commission’’) has accepted for public comment, subject to final approval, an Agreement Containing Consent Orders (‘‘Consent Agreement’’) from Eldorado Resorts, Inc. (‘‘Eldorado’’) and Caesars Entertainment Corporation (‘‘Caesars’’). The purpose of the proposed Consent Agreement is to remedy the anticompetitive effects that would likely result from Eldorado’s acquisition of Caesars (‘‘the Acquisition’’). Under the terms of the proposed Decision and Order (‘‘Order’’) contained in the Consent Agreement, Eldorado is required to divest to Twin River Worldwide Holdings, Inc. (‘‘Twin River’’): (1) Eldorado’s only casino in the South Lake Tahoe area, the MontBleu Resort Casino and Spa (‘‘MontBleu’’) in Stateline, Nevada; and (2) Eldorado’s only casino in the Bossier City-Shreveport, Louisiana, area, the Eldorado Casino Resort (‘‘Eldorado Shreveport’’). The divestitures must be completed by the earlier of (i) 12 months from the closing of the Acquisition; or (ii) 30 days from the date that Twin River receives all regulatory approvals. Additionally, if Eldorado does not consummate its sale of the Isle of Capri casino (‘‘Isle of Capri’’) in Kansas City, Missouri, within 60 days from the closing of the Acquisition, the proposed Consent Agreement provides the Commission with the option (at its discretion) to require Eldorado to divest the Isle of Capri casino to a Commission-approved acquirer within 12 months. The Isle of Capri sale is independent from the Acquisition. The proposed Consent Agreement has been placed on the public record for 30 days for receipt of comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will review the comments received and decide whether it should withdraw, modify, or make the Consent Agreement final. On June 24, 2019, Eldorado agreed to acquire Caesars for approximately $17.3 billion. By a vote of 3–1–1 on June 25, 2020, the Commission issued an administrative complaint alleging that the Acquisition, if consummated, would violate Section 7 of the Clayton Act, as VerDate Sep<11>2014 16:59 Jul 06, 2020 Jkt 250001 amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, by eliminating meaningful and substantial competition between Eldorado and Caesars for casino services in the South Lake Tahoe, Bossier City-Shreveport, and Kansas City area markets. The elimination of this competition would likely have caused significant competitive harm, specifically higher prices and diminished quality and service levels in each of these markets. The proposed Consent Agreement would remedy the alleged violations by requiring a divestiture in the affected markets. The divestitures will establish a new independent competitor to Eldorado in each relevant area, replacing the competition that otherwise would be lost as a result of the Acquisition. II. The Parties Eldorado is a publicly traded casino entertainment and hospitality services provider headquartered in Reno, Nevada. Founded in 1973, Eldorado operates 23 casino gaming properties in 11 states. Eldorado operates casinos under several brands, including Eldorado, Isle of Capri, and Tropicana. In the aggregate, Eldorado’s properties feature approximately 23,900 slot machines, 660 table games, and more than 11,300 hotel rooms. In the South Lake Tahoe area market, Eldorado operates the MontBleu casino in Stateline, Nevada. In the Bossier CityShreveport area market, Eldorado operates the Eldorado Shreveport casino in Shreveport, Louisiana. In the Kansas City area market, Eldorado operates the Isle of Capri casino in Kansas City, Missouri. Eldorado had approximately $2.5 billion in revenue in 2019. Caesars is a publicly traded casino entertainment and hospitality services provider headquartered in Las Vegas, Nevada. It operates 53 properties in 14 states and five countries outside of the United States. Caesars’ properties offer approximately 38,000 slot machines, 2,700 table games, and more than 36,000 hotel rooms. Caesars’ gaming properties operate primarily under the Harrah’s, Caesars, and Horseshoe brand names. In the South Lake Tahoe area, Caesars operates two facilities offering casino services: Harrah’s Lake Tahoe Hotel and Casino, and Harveys Lake Tahoe Hotel and Casino, both in Stateline, Nevada. In the Bossier City-Shreveport area, Caesars operates two facilities offering casino services: Horseshoe Bossier City Hotel and Casino in Bossier City, Louisiana, and Harrah’s Louisiana Downs, a gaming and racetrack facility located eight miles east in Shreveport, Louisiana. In the Kansas City area PO 00000 Frm 00031 Fmt 4703 Sfmt 4703 market, Caesars operates Harrah’s Kansas City Hotel and Casino in Kansas City, Missouri. Caesars had approximately $8.7 billion in revenue in 2019. Twin River is a publicly traded casino entertainment and hospitality services provider headquartered in Providence, Rhode Island. It operates eight properties in four states, including the Twin River Casino Hotel in Lincoln, Rhode Island. Twin River’s properties feature approximately 9,130 slot machines, 267 table games, and 1,200 hotel rooms. The company had approximately $524 million in revenue in 2019. III. Casino Services in South Lake Tahoe, Bossier City-Shreveport and Kansas City Eldorado’s proposed acquisition of Caesars would likely result in substantial competitive harm in the markets for casino services in South Lake Tahoe, Bossier City-Shreveport and Kansas City. The relevant product market in which to assess the competitive effects of the proposed Acquisition is casino services. The casino services market consists of casino-based gaming services (e.g., slots and table games), as well as other amenities such as lodging, entertainment, and food and beverage services. Casino operators typically generate the vast majority of their revenues from gaming. Casino services differ significantly from other entertainment and leisure activities in a number of respects. For example, casinos are highly regulated, with a limited number of casinos licensed to operate in any given state and age restrictions on who can gamble. Consistent with prior Commission precedent, the evidence here supports a distinct relevant market consisting of casino services. Local geographic markets are appropriate to assess the competitive effects of the proposed Acquisition. There are three relevant geographic markets in which to analyze the merger’s effects: (1) The South Lake Tahoe area, which approximately corresponds to the area in and around the cities of Stateline, Nevada, and South Lake Tahoe, California; (2) the Bossier City-Shreveport, Louisiana area, which approximately corresponds to the Bossier City-Shreveport, Louisiana metropolitan statistical area; and (3) the Kansas City area, which approximately corresponds to the Kansas City, Missouri metropolitan statistical area. Absent relief, the Acquisition would result in significant increases in concentration and lead to highly E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES concentrated markets in all three markets, resulting in a presumption of the enhancement of market power under the Horizontal Merger Guidelines. Further, Eldorado and Caesars are close and vigorous competitors in the South Lake Tahoe, Bossier City-Shreveport, and Kansas City area markets. Absent relief, the Acquisition would substantially lessen the significant headto-head competition between Eldorado and Caesars and would likely increase Eldorado’s ability and incentive to raise prices post-Acquisition in the form of hold rates, rake rates, and table game rules and odds that are less favorable to customers, and lower player reinvestments. The proposed Acquisition also would likely diminish Eldorado’s incentive to maintain or improve the quality of services and amenities to the detriment of casino customers in each of these markets. New entry or expansion is unlikely to deter or counteract the likely anticompetitive effects of the Acquisition in the South Lake Tahoe, Bossier City-Shreveport, and Kansas City area markets. The affected markets are insulated from new entry or expansion by significant regulatory barriers, including limitations on the number of casino licenses available and the ability to expand existing gaming operations. In the South Lake Tahoe area market, entry or expansion is unlikely to occur in a timely manner because of, among other things, the time and cost associated with acquiring the necessary state, county, and city approvals. In the Bossier CityShreveport area market, Louisiana law limits the number of casino licenses and it has already issued all available licenses. Louisiana also has statutory restrictions that make significant expansion by current market participants unlikely absent legislative action. Similarly, in the Kansas City area market, Missouri and Kansas law limit the total number of casino licenses available and both states have already issued all available licenses. Expansion in Missouri is unlikely and only limited expansion in Kansas is possible. Entry or repositioning would be unlikely to be sufficient to deter or counteract the anticompetitive effects of the Acquisition. IV. The Proposed Consent Agreement The proposed Consent Agreement remedies the likely anticompetitive effects in the South Lake Tahoe and Bossier City-Shreveport area markets by requiring divestitures of the MontBleu and Eldorado Shreveport casinos to Twin River by the earlier of (i) 12 months from the closing of the VerDate Sep<11>2014 16:59 Jul 06, 2020 Jkt 250001 Acquisition; or (ii) 30 days from the date Twin River receives all regulatory approvals. Until the completion of each divestiture, the parties are required to abide by the Order to Hold Separate and Maintain Assets, which requires them to maintain the viability, marketability, and competitiveness of the divestiture assets until the divestitures are completed. The proposed Consent Agreement appoints a Monitor to ensure the parties’ compliance with the Order to Hold Separate and Maintain Assets, Consent Agreement, and divestiture agreements between Eldorado and Twin River following the divestiture. The proposed Consent Agreement also remedies the likely anticompetitive effects in the Kansas City area market in the event that Eldorado’s independent sale of the Isle of Capri casino does not close within 60 days from the closing of the Acquisition. In the event the Isle of Capri sale does not timely close as required, the proposed Consent Agreement provides the Commission with the option (at its discretion) to require Eldorado to divest the Isle of Capri casino to a Commission-approved acquirer within 12 months. Although these divestiture deadlines are longer than typically ordered by the Commission, they are appropriate in this matter to accommodate the lengthy state regulatory approval process, which may be subject to continued disruption from the COVID–19 pandemic. Additionally, the proposed Consent Agreement requires the parties to provide transitional services to the approved acquirer for up to 12 months after the divestiture, as needed, to assist the acquirer with the transfer and operation of the divested assets. Finally, the proposed Consent Agreement contains standard terms regarding the acquirer’s access to employees, protection of material confidential information, and compliance reporting requirements, among other things, to ensure the viability of the divested business. A. South Lake Tahoe The proposed Consent Agreement remedies the likely anticompetitive effects of the proposed Acquisition in the South Lake Tahoe area market by requiring the divestiture of Eldorado’s MontBleu. This remedy would preserve the status quo in the South Lake Tahoe area casino services market, maintaining three independent casino operators and resulting in no change in market concentration. B. Bossier City-Shreveport The proposed Consent Agreement remedies the likely anticompetitive PO 00000 Frm 00032 Fmt 4703 Sfmt 4703 40651 effects of the proposed Acquisition in the Bossier City-Shreveport area market by requiring Eldorado to divest the Eldorado Shreveport. This remedy would preserve four independent casino operators and result in no change in market concentration. C. Kansas City In the Kansas City area market, the proposed Consent Agreement provides the Commission with the option (at its discretion) to require Eldorado to divest its Isle of Capri casino to a Commissionapproved buyer within 12 months if its independent sale of the Isle of Capri fails to consummate within 60 days of closing the Acquisition. If a divestiture is required, the proposed Consent Agreement remedies the likely anticompetitive effects of the Acquisition by requiring Eldorado to divest the Isle of Capri. The proposed Consent Agreement would preserve four independent casino operators and result in no change in market concentration. The purpose of this analysis is to facilitate public comment on the proposed Consent Agreement to aid the Commission in determining whether it should make the proposed Consent Agreement final. This analysis is not an official interpretation of the proposed Consent Agreement and does not modify its terms in any way. By direction of the Commission, Commissioner Chopra dissenting, Commissioner Slaughter not participating. April J. Tabor, Secretary. Dissenting Statement of Commissioner Rohit Chopra Summary • The Commission should not agree to merger settlements unless divestitures are completed promptly to a qualified buyer ready and willing to compete on day one. • It is risky and makes little sense to propose a complex settlement with a prolonged divestiture period and unorthodox terms to justify a merger that has no meaningful benefits, particularly given the financial uncertainties stemming from the COVID–19 crisis. • I am concerned that the Commission’s standard process for vetting divestiture buyers minimizes or ignores major financial red flags. We should revamp our approach. Caesars Entertainment (NASDAQ: CZR) is selling itself to one of its smaller competitors, Eldorado Resorts (NASDAQ: ERI). The transaction has no noteworthy benefits to customers, workers, suppliers, or competition. If anything, the transaction is risky for everyone involved. E:\FR\FM\07JYN1.SGM 07JYN1 40652 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices The enormous amount of debt financing could materially increase the likelihood of financial distress of the combined casino conglomerate, and rating agencies have already started to downgrade Eldorado’s debt.1 Given the major financial uncertainties looming over the gaming industry stemming from the pandemic, as well as the industry’s past experiences with leveraged buyouts, the proposed transaction might make conditions even more fragile and precarious. The agreement is subject to review by state gaming regulators and the Federal Trade Commission. In comparison to state regulators, who must weigh a number of public interest factors, the Federal Trade Commission’s mandate is more specific: To determine whether the transaction violates U.S. antitrust laws. Based on the Commission’s investigation, I agree that the transaction is illegal and I support the complaint. However, I have serious reservations about the terms of the settlement. As a policy matter, I disagree that the Commission should enter into risky, complicated settlements with delayed divestitures—like the resolution proposed here. jbell on DSKJLSW7X2PROD with NOTICES The Proposed Buyer Will Not Immediately Restore Competitive Intensity To remedy an illegal transaction, the FTC should only agree to settlements when divestitures will quickly restore the competitive intensity killed off from a merger. It is not enough to have some of the competition restored; it must be fully restored. A new competitor should be able to step in on day one to compete. For example, in 2015, the FTC prevailed in its challenge of the merger of Sysco and US Foods, the nation’s two largest food distributors, when divestitures could not cure the harmful merger on ‘‘day one.’’ The companies proposed to divest a lengthy list of US Foods’ assets to an entity controlled by the Blackstone Group. The FTC argued this was insufficient, and the court agreed that the new competitor could not replicate the same level of competitive intensity of US Foods.2 The Commission’s proposed remedy will definitely not cure this harmful casino merger on day one. Under the terms of the Commission’s proposed 1 See e.g., Moody’s downgrades Eldorado Resorts CFR to B2, rates new debt for Caesars acquisition; outlook, Moody’s Investor Service (June 17, 2020), https://www.moodys.com/ngrades-EldoradoResorts-CFR-to-B2-rates-new-debt-PR_ 426702?cid=7QFRKQSZE021. 2 Fed. Trade Comm’n v. Sysco Corp., 113 F. Supp. 3d 1, 73 (D.D.C. 2015). VerDate Sep<11>2014 16:59 Jul 06, 2020 Jkt 250001 settlement, Eldorado is required to divest one property in Nevada and another in Louisiana to Twin River Worldwide Holdings (NYSE: TRWH)— but after a prolonged period of time.3 Allowing a lengthy divestiture only compounds the problems with this settlement, as it necessitates the addition of other risky settlement provisions. To mitigate the anticompetitive harm from the prolonged divestiture schedule, the FTC’s proposed settlement sets up a complex arrangement where some casinos will be operated separately by Commission-appointed casino property managers until a buyer is ready to take over the assets. I do not believe that the Commission should be in the business of appointing casino property managers here.4 The Commission will also appoint a monitor. It is particularly unclear how the Commission and the appointed monitor can remove or discipline the casino property managers. In addition, the casino property managers will operate under a similar compensation and bonus plan as provided by the prior owner, which could easily lead to anticompetitive distortions. The anticompetitive harms could grow if Twin River is rejected as a suitable buyer by state regulators. There may be rare circumstances where unusual settlement terms are warranted, but this isn’t one of them. The proposed remedy is also a gamble on several other fronts. First, the Commission’s due diligence on Twin River did not adequately analyze the role of new investors exerting enormous control. The FTC must always consider the incentives and plans for those in control of a divestiture buyer. Sometimes, new investors can help a stagnant company change strategic direction. But too often, new investors find ways to buy, strip, and flip, rather than create a strong, long-term competitor. This is particularly true for certain private equity and hedge fund investors, so careful due diligence is critical. In 2019, a Wall Street hedge fund, Standard General, accumulated a major ownership stake in Twin River. Standard General now has significant control over the company and is, by far, 3 3 The divestitures must be complete by the earlier of 12 months from the closing of the merger or within 30 days of state regulatory approval. In theory, the divestitures may be completed before 12 months. However, past experience suggests that the approval process requires significant due diligence over an extended period of time. 4 If the state gaming regulators had already approved the transaction (as well as the corresponding divestitures) and selected casino property managers, this would raise fewer concerns. PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 its largest shareholder. Its stake is roughly equivalent to the maximum amount allowable under state law.5 Another hedge fund, HG Vora, has also emerged as a major holder of Twin River.6 Standard General and similar funds often seek to accumulate board seats to implement their desired investment strategy. Indeed, just a few months ago, Twin River’s longtime chairman ‘‘reluctantly’’ stepped down and was replaced by Standard General’s managing partner, Soohyung Kim.7 By approving Twin River as the divestiture buyer, I am concerned that the Commission is relying on Twin River’s past track record, rather than analyzing how changes in ownership and control of the company will impact their future business strategy. Second, buyers of divested assets need to prioritize competing on day one, but they cannot if other high-priority mergers and acquisitions distract them. In this matter, Twin River is in the midst of a string of other takeovers. In 2019, it completed an acquisition of Dover Downs Hotel and Casino in Delaware,8 and then in January of this year, Twin River acquired three casinos in Colorado.9 Several other acquisitions are pending: in the last twelve months, it has inked deals to purchase casinos in Missouri and Mississippi.10 Outside of 5 In a recent Schedule 13D securities filing, Standard General revealed that it was managing its holdings of Twin River, given Twin River’s share repurchase plan that could lead to Standard General violating the Rhode Island casino ownership cap of 39%. See Twin River Worldwide Holdings, Inc., Amendment No. 6 to Schedule 13D at 4 (Feb. 20, 2020). 6 Recent securities filings reveal significant ownership of Twin River by HG Vora Capital Management. See HG Vora Capital Management, LLC, Form 13F Information Table (Form 13F) (Aug. 8, 2019). Standard General and HG Vora are currently on the same side of a major battle in another public company. See Svea Herbst-Bayliss, EXCLUSIVE-Hedge fund HG Vora wants Tegna to consider a sale or merger—sources, Reuters (Jan. 21, 2020), https://www.reuters.com/article/tegnahgvora/exclusive-hedge-fund-hg-vora-wants-tegnato-consider-a-sale-or-merger-sourcesidUKL1N29Q0KT. 7 Ted Nesi, John Taylor out at Twin River, 12WPRI.com (Dec. 9, 2019), https://www.wpri.com/ business-news/john-taylor-out-at-twin-river/. 8 Press Release, Twin River Worldwide Holdings, Inc., Dover Downs Stockholders Approve Merger with Twin River; Merger Set to Close on March 28, 2019 (Mar. 26, 2019), https:// investors.twinriverwwholdings.com/news/newsdetails/2019/Dover-Downs-Stockholders-ApproveMerger-with-Twin-River-Merger-Set-to-Close-onMarch-28-2019/default.aspx. 9 Press Release, Twin River Worldwide Holdings, Inc., Twin River Worldwide Holdings Completes Acquisition of Three Colorado Casinos (Jan. 24, 2020), https://investors.twinriverwwholdings.com/ news/news-details/2020/Twin-River-WorldwideHoldings-Completes-Acquisition-of-ThreeColorado-Casinos/default.aspx. 10 Press Release, Twin River Worldwide Holdings, Inc., Twin River Worldwide Holdings E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Notices this settlement, it has also struck a deal to purchase Bally’s, its first foray into the large Atlantic City market.11 These acquisitions will require significant management attention, and I did not find any compelling evidence that Twin River will prioritize the divested assets to fully restore competitive intensity in the markets that the Commission believes would suffer from killed-off competition. Finally, the Commission should avoid acting without the benefit of a full review by the state gaming regulators. State regulatory agencies have unique insights and expertise into the industries they regulate; their findings inform the issues the Commission takes into consideration, and not just relating to the appointment of casino managers. Some states have a specific mandate to look at the ownership and financial conditions of the transacting firms, and we would benefit from that expertise. Their analysis is particularly important during this period of uncertainty, as the industry is roiling from closures due to the current COVID–19 pandemic. It is important that we consider all of the information and work across government bodies to protect competition. While the Commission does work with some of these authorities, I am not convinced that acting before state regulators have completed their analysis is the right approach. Conclusion jbell on DSKJLSW7X2PROD with NOTICES The proposed resolution in this transaction offers a unique window into the assumptions and philosophy of the Federal Trade Commission. The merger is clearly anticompetitive in the markets where the Commission alleged a violation, and offers no meaningful benefits to the public. Since the Commission would not need to go to trial to block the transaction because the state regulators have yet to act, there is no immediate concern about limiting FTC resources or weighing the litigation risk. Given these facts, why would the Commission put the public at risk with delayed divestitures to a questionable Signs Definitive Agreement To Acquire Two Casinos From Eldorado Resorts (July 11, 2019), https://investors.twinriverwwholdings.com/news/ news-details/2019/Twin-River-Worldwide-HoldingsSigns-Definitive-Agreement-To-Acquire-TwoCasinos-From-Eldorado-Resorts/default.aspx. 11 Press Release, Twin River Worldwide Holdings, Inc., Twin River Worldwide Holdings to Acquire Three Casinos from Eldorado and Caesars (Apr. 24, 2020), https:// investors.twinriverwwholdings.com/news/newsdetails/2020/Twin-River-Worldwide-Holdings-toAcquire-Three-Casinos-from-Eldorado-and-Caesars/ default.aspx. VerDate Sep<11>2014 20:21 Jul 06, 2020 Jkt 250001 buyer that has no guarantee of obtaining a license? I am concerned that the Commission is rolling the dice with this complex settlement that will clearly not lead to an immediate restoration of lost competition. It is also clear that we must revamp our approach when it comes to vetting proposed divestiture buyers, particularly when a new financial investor is in charge in the boardroom. Our state partners will obviously need to scrutinize the financial aspects of the proposed transaction between Caesars and Eldorado, given the harms inflicted on the public and regional economies from past leveraged buyouts—and resulting bankruptcies—in the industry.12 They will also need to carefully assess whether the restoration of competition will come too late, and whether Twin River can guarantee that it will actually accomplish this goal. The stakes are high right now. For these reasons, I dissent. [FR Doc. 2020–14582 Filed 7–6–20; 8:45 am] BILLING CODE 6750–01–P FEDERAL TRADE COMMISSION [File No. 201–0074] Tri Star Energy, LLC; Analysis of Consent Orders To Aid Public Comment Federal Trade Commission. Proposed consent agreement; request for comment. AGENCY: ACTION: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations. DATES: Comments must be received on or before August 6, 2020. ADDRESSES: Interested parties may file comments online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Please write: ‘‘Tri Star Energy, LLC; File No. 201–0074’’ on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the webbased form. If you prefer to file your comment on paper, please mail your SUMMARY: 12 See, e.g., Sujeet Indap, What happens in Vegas...the messy bankruptcy of Caesars Entertainment, THE FIN. TIMES (Sept. 16, 2017), https://www.ft.com/content/a0ed27c6-a2d4-11e7b797-b61809486fe2. PO 00000 Frm 00034 Fmt 4703 Sfmt 4703 40653 comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. FOR FURTHER INFORMATION CONTACT: Ashley Masters (202–326–2291), Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis of Agreement Containing Consent Orders to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC website (for June 24, 2020), at this web address: https://www.ftc.gov/newsevents/commission-actions. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before August 6, 2020. Write ‘‘Tri Star Energy, LLC; File No. 201–0074’’ on your comment. Your comment— including your name and your state— will be placed on the public record of this proceeding, including, to the extent practicable, on the https:// www.regulations.gov website. Due to the public health emergency in response to the COVID–19 outbreak and the agency’s heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https:// www.regulations.gov website. If you prefer to file your comment on paper, write ‘‘Tri Star Energy, LLC; File No. 201–0074’’ on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex E:\FR\FM\07JYN1.SGM 07JYN1

Agencies

[Federal Register Volume 85, Number 130 (Tuesday, July 7, 2020)]
[Notices]
[Pages 40649-40653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14582]


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FEDERAL TRADE COMMISSION

[File No. 191 0158]


Eldorado Resorts and Caesars Entertainment; Analysis of Agreement 
Containing Consent Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before August 6, 2020.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``Eldorado and 
Caesars; File No. 191 0158'' on your comment, and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, please 
mail your comment to the following address: Federal Trade Commission, 
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 
(Annex D), Washington, DC 20580; or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Joshua Smith (202-326-3018), Bureau of 
Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis of Agreement Containing Consent Orders to Aid Public 
Comment describes the terms of the consent agreement and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC website (for 
June 26, 2020), at this web address: https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before August 6, 2020. 
Write ``Eldorado and Caesars; File No. 191 0158'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Due to the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Eldorado and 
Caesars; File No. 191 0158'' on your comment and on the envelope, and 
mail your comment to the following address: Federal Trade Commission, 
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 
(Annex D), Washington, DC 20580; or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include any sensitive personal information, such as your or anyone 
else's Social Security number; date of birth; driver's license number 
or other state identification number, or foreign country equivalent; 
passport number; financial account number; or credit or debit card 
number. You are also solely responsible for making sure your comment 
does not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at https://www.ftc.gov to read this Notice and 
the news release describing this matter. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding, as appropriate. The 
Commission will consider all timely and responsive

[[Page 40650]]

public comments that it receives on or before August 6, 2020. For 
information on the Commission's privacy policy, including routine uses 
permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Consent Orders To Aid Public Comment

I. Introduction and Background

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Eldorado Resorts, Inc. 
(``Eldorado'') and Caesars Entertainment Corporation (``Caesars''). The 
purpose of the proposed Consent Agreement is to remedy the 
anticompetitive effects that would likely result from Eldorado's 
acquisition of Caesars (``the Acquisition''). Under the terms of the 
proposed Decision and Order (``Order'') contained in the Consent 
Agreement, Eldorado is required to divest to Twin River Worldwide 
Holdings, Inc. (``Twin River''): (1) Eldorado's only casino in the 
South Lake Tahoe area, the MontBleu Resort Casino and Spa 
(``MontBleu'') in Stateline, Nevada; and (2) Eldorado's only casino in 
the Bossier City-Shreveport, Louisiana, area, the Eldorado Casino 
Resort (``Eldorado Shreveport''). The divestitures must be completed by 
the earlier of (i) 12 months from the closing of the Acquisition; or 
(ii) 30 days from the date that Twin River receives all regulatory 
approvals. Additionally, if Eldorado does not consummate its sale of 
the Isle of Capri casino (``Isle of Capri'') in Kansas City, Missouri, 
within 60 days from the closing of the Acquisition, the proposed 
Consent Agreement provides the Commission with the option (at its 
discretion) to require Eldorado to divest the Isle of Capri casino to a 
Commission-approved acquirer within 12 months. The Isle of Capri sale 
is independent from the Acquisition.
    The proposed Consent Agreement has been placed on the public record 
for 30 days for receipt of comments from interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission will review the comments received and 
decide whether it should withdraw, modify, or make the Consent 
Agreement final.
    On June 24, 2019, Eldorado agreed to acquire Caesars for 
approximately $17.3 billion. By a vote of 3-1-1 on June 25, 2020, the 
Commission issued an administrative complaint alleging that the 
Acquisition, if consummated, would violate Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. 45, by eliminating meaningful and 
substantial competition between Eldorado and Caesars for casino 
services in the South Lake Tahoe, Bossier City-Shreveport, and Kansas 
City area markets. The elimination of this competition would likely 
have caused significant competitive harm, specifically higher prices 
and diminished quality and service levels in each of these markets. The 
proposed Consent Agreement would remedy the alleged violations by 
requiring a divestiture in the affected markets. The divestitures will 
establish a new independent competitor to Eldorado in each relevant 
area, replacing the competition that otherwise would be lost as a 
result of the Acquisition.

II. The Parties

    Eldorado is a publicly traded casino entertainment and hospitality 
services provider headquartered in Reno, Nevada. Founded in 1973, 
Eldorado operates 23 casino gaming properties in 11 states. Eldorado 
operates casinos under several brands, including Eldorado, Isle of 
Capri, and Tropicana. In the aggregate, Eldorado's properties feature 
approximately 23,900 slot machines, 660 table games, and more than 
11,300 hotel rooms. In the South Lake Tahoe area market, Eldorado 
operates the MontBleu casino in Stateline, Nevada. In the Bossier City-
Shreveport area market, Eldorado operates the Eldorado Shreveport 
casino in Shreveport, Louisiana. In the Kansas City area market, 
Eldorado operates the Isle of Capri casino in Kansas City, Missouri. 
Eldorado had approximately $2.5 billion in revenue in 2019.
    Caesars is a publicly traded casino entertainment and hospitality 
services provider headquartered in Las Vegas, Nevada. It operates 53 
properties in 14 states and five countries outside of the United 
States. Caesars' properties offer approximately 38,000 slot machines, 
2,700 table games, and more than 36,000 hotel rooms. Caesars' gaming 
properties operate primarily under the Harrah's, Caesars, and Horseshoe 
brand names. In the South Lake Tahoe area, Caesars operates two 
facilities offering casino services: Harrah's Lake Tahoe Hotel and 
Casino, and Harveys Lake Tahoe Hotel and Casino, both in Stateline, 
Nevada. In the Bossier City-Shreveport area, Caesars operates two 
facilities offering casino services: Horseshoe Bossier City Hotel and 
Casino in Bossier City, Louisiana, and Harrah's Louisiana Downs, a 
gaming and racetrack facility located eight miles east in Shreveport, 
Louisiana. In the Kansas City area market, Caesars operates Harrah's 
Kansas City Hotel and Casino in Kansas City, Missouri. Caesars had 
approximately $8.7 billion in revenue in 2019.
    Twin River is a publicly traded casino entertainment and 
hospitality services provider headquartered in Providence, Rhode 
Island. It operates eight properties in four states, including the Twin 
River Casino Hotel in Lincoln, Rhode Island. Twin River's properties 
feature approximately 9,130 slot machines, 267 table games, and 1,200 
hotel rooms. The company had approximately $524 million in revenue in 
2019.

III. Casino Services in South Lake Tahoe, Bossier City-Shreveport and 
Kansas City

    Eldorado's proposed acquisition of Caesars would likely result in 
substantial competitive harm in the markets for casino services in 
South Lake Tahoe, Bossier City-Shreveport and Kansas City. The relevant 
product market in which to assess the competitive effects of the 
proposed Acquisition is casino services. The casino services market 
consists of casino-based gaming services (e.g., slots and table games), 
as well as other amenities such as lodging, entertainment, and food and 
beverage services. Casino operators typically generate the vast 
majority of their revenues from gaming. Casino services differ 
significantly from other entertainment and leisure activities in a 
number of respects. For example, casinos are highly regulated, with a 
limited number of casinos licensed to operate in any given state and 
age restrictions on who can gamble. Consistent with prior Commission 
precedent, the evidence here supports a distinct relevant market 
consisting of casino services.
    Local geographic markets are appropriate to assess the competitive 
effects of the proposed Acquisition. There are three relevant 
geographic markets in which to analyze the merger's effects: (1) The 
South Lake Tahoe area, which approximately corresponds to the area in 
and around the cities of Stateline, Nevada, and South Lake Tahoe, 
California; (2) the Bossier City-Shreveport, Louisiana area, which 
approximately corresponds to the Bossier City-Shreveport, Louisiana 
metropolitan statistical area; and (3) the Kansas City area, which 
approximately corresponds to the Kansas City, Missouri metropolitan 
statistical area.
    Absent relief, the Acquisition would result in significant 
increases in concentration and lead to highly

[[Page 40651]]

concentrated markets in all three markets, resulting in a presumption 
of the enhancement of market power under the Horizontal Merger 
Guidelines. Further, Eldorado and Caesars are close and vigorous 
competitors in the South Lake Tahoe, Bossier City-Shreveport, and 
Kansas City area markets. Absent relief, the Acquisition would 
substantially lessen the significant head-to-head competition between 
Eldorado and Caesars and would likely increase Eldorado's ability and 
incentive to raise prices post-Acquisition in the form of hold rates, 
rake rates, and table game rules and odds that are less favorable to 
customers, and lower player reinvestments. The proposed Acquisition 
also would likely diminish Eldorado's incentive to maintain or improve 
the quality of services and amenities to the detriment of casino 
customers in each of these markets.
    New entry or expansion is unlikely to deter or counteract the 
likely anticompetitive effects of the Acquisition in the South Lake 
Tahoe, Bossier City-Shreveport, and Kansas City area markets. The 
affected markets are insulated from new entry or expansion by 
significant regulatory barriers, including limitations on the number of 
casino licenses available and the ability to expand existing gaming 
operations. In the South Lake Tahoe area market, entry or expansion is 
unlikely to occur in a timely manner because of, among other things, 
the time and cost associated with acquiring the necessary state, 
county, and city approvals. In the Bossier City-Shreveport area market, 
Louisiana law limits the number of casino licenses and it has already 
issued all available licenses. Louisiana also has statutory 
restrictions that make significant expansion by current market 
participants unlikely absent legislative action. Similarly, in the 
Kansas City area market, Missouri and Kansas law limit the total number 
of casino licenses available and both states have already issued all 
available licenses. Expansion in Missouri is unlikely and only limited 
expansion in Kansas is possible. Entry or repositioning would be 
unlikely to be sufficient to deter or counteract the anticompetitive 
effects of the Acquisition.

IV. The Proposed Consent Agreement

    The proposed Consent Agreement remedies the likely anticompetitive 
effects in the South Lake Tahoe and Bossier City-Shreveport area 
markets by requiring divestitures of the MontBleu and Eldorado 
Shreveport casinos to Twin River by the earlier of (i) 12 months from 
the closing of the Acquisition; or (ii) 30 days from the date Twin 
River receives all regulatory approvals. Until the completion of each 
divestiture, the parties are required to abide by the Order to Hold 
Separate and Maintain Assets, which requires them to maintain the 
viability, marketability, and competitiveness of the divestiture assets 
until the divestitures are completed. The proposed Consent Agreement 
appoints a Monitor to ensure the parties' compliance with the Order to 
Hold Separate and Maintain Assets, Consent Agreement, and divestiture 
agreements between Eldorado and Twin River following the divestiture. 
The proposed Consent Agreement also remedies the likely anticompetitive 
effects in the Kansas City area market in the event that Eldorado's 
independent sale of the Isle of Capri casino does not close within 60 
days from the closing of the Acquisition. In the event the Isle of 
Capri sale does not timely close as required, the proposed Consent 
Agreement provides the Commission with the option (at its discretion) 
to require Eldorado to divest the Isle of Capri casino to a Commission-
approved acquirer within 12 months. Although these divestiture 
deadlines are longer than typically ordered by the Commission, they are 
appropriate in this matter to accommodate the lengthy state regulatory 
approval process, which may be subject to continued disruption from the 
COVID-19 pandemic.
    Additionally, the proposed Consent Agreement requires the parties 
to provide transitional services to the approved acquirer for up to 12 
months after the divestiture, as needed, to assist the acquirer with 
the transfer and operation of the divested assets. Finally, the 
proposed Consent Agreement contains standard terms regarding the 
acquirer's access to employees, protection of material confidential 
information, and compliance reporting requirements, among other things, 
to ensure the viability of the divested business.
A. South Lake Tahoe
    The proposed Consent Agreement remedies the likely anticompetitive 
effects of the proposed Acquisition in the South Lake Tahoe area market 
by requiring the divestiture of Eldorado's MontBleu. This remedy would 
preserve the status quo in the South Lake Tahoe area casino services 
market, maintaining three independent casino operators and resulting in 
no change in market concentration.
B. Bossier City-Shreveport
    The proposed Consent Agreement remedies the likely anticompetitive 
effects of the proposed Acquisition in the Bossier City-Shreveport area 
market by requiring Eldorado to divest the Eldorado Shreveport. This 
remedy would preserve four independent casino operators and result in 
no change in market concentration.
C. Kansas City
    In the Kansas City area market, the proposed Consent Agreement 
provides the Commission with the option (at its discretion) to require 
Eldorado to divest its Isle of Capri casino to a Commission-approved 
buyer within 12 months if its independent sale of the Isle of Capri 
fails to consummate within 60 days of closing the Acquisition. If a 
divestiture is required, the proposed Consent Agreement remedies the 
likely anticompetitive effects of the Acquisition by requiring Eldorado 
to divest the Isle of Capri. The proposed Consent Agreement would 
preserve four independent casino operators and result in no change in 
market concentration.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement to aid the Commission in determining whether 
it should make the proposed Consent Agreement final. This analysis is 
not an official interpretation of the proposed Consent Agreement and 
does not modify its terms in any way.

    By direction of the Commission, Commissioner Chopra dissenting, 
Commissioner Slaughter not participating.
April J. Tabor,
Secretary.

Dissenting Statement of Commissioner Rohit Chopra Summary

     The Commission should not agree to merger settlements 
unless divestitures are completed promptly to a qualified buyer ready 
and willing to compete on day one.
     It is risky and makes little sense to propose a complex 
settlement with a prolonged divestiture period and unorthodox terms to 
justify a merger that has no meaningful benefits, particularly given 
the financial uncertainties stemming from the COVID-19 crisis.
     I am concerned that the Commission's standard process for 
vetting divestiture buyers minimizes or ignores major financial red 
flags. We should revamp our approach.
    Caesars Entertainment (NASDAQ: CZR) is selling itself to one of its 
smaller competitors, Eldorado Resorts (NASDAQ: ERI). The transaction 
has no noteworthy benefits to customers, workers, suppliers, or 
competition. If anything, the transaction is risky for everyone 
involved.

[[Page 40652]]

    The enormous amount of debt financing could materially increase the 
likelihood of financial distress of the combined casino conglomerate, 
and rating agencies have already started to downgrade Eldorado's 
debt.\1\ Given the major financial uncertainties looming over the 
gaming industry stemming from the pandemic, as well as the industry's 
past experiences with leveraged buyouts, the proposed transaction might 
make conditions even more fragile and precarious.
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    \1\ See e.g., Moody's downgrades Eldorado Resorts CFR to B2, 
rates new debt for Caesars acquisition; outlook, Moody's Investor 
Service (June 17, 2020), https://www.moodys.com/ngrades-Eldorado-Resorts-CFR-to-B2-rates-new-debt-PR_426702?cid=7QFRKQSZE021.
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    The agreement is subject to review by state gaming regulators and 
the Federal Trade Commission. In comparison to state regulators, who 
must weigh a number of public interest factors, the Federal Trade 
Commission's mandate is more specific: To determine whether the 
transaction violates U.S. antitrust laws. Based on the Commission's 
investigation, I agree that the transaction is illegal and I support 
the complaint.
    However, I have serious reservations about the terms of the 
settlement. As a policy matter, I disagree that the Commission should 
enter into risky, complicated settlements with delayed divestitures--
like the resolution proposed here.

The Proposed Buyer Will Not Immediately Restore Competitive Intensity

    To remedy an illegal transaction, the FTC should only agree to 
settlements when divestitures will quickly restore the competitive 
intensity killed off from a merger. It is not enough to have some of 
the competition restored; it must be fully restored. A new competitor 
should be able to step in on day one to compete.
    For example, in 2015, the FTC prevailed in its challenge of the 
merger of Sysco and US Foods, the nation's two largest food 
distributors, when divestitures could not cure the harmful merger on 
``day one.'' The companies proposed to divest a lengthy list of US 
Foods' assets to an entity controlled by the Blackstone Group. The FTC 
argued this was insufficient, and the court agreed that the new 
competitor could not replicate the same level of competitive intensity 
of US Foods.\2\
---------------------------------------------------------------------------

    \2\ Fed. Trade Comm'n v. Sysco Corp., 113 F. Supp. 3d 1, 73 
(D.D.C. 2015).
---------------------------------------------------------------------------

    The Commission's proposed remedy will definitely not cure this 
harmful casino merger on day one. Under the terms of the Commission's 
proposed settlement, Eldorado is required to divest one property in 
Nevada and another in Louisiana to Twin River Worldwide Holdings (NYSE: 
TRWH)--but after a prolonged period of time.\3\ Allowing a lengthy 
divestiture only compounds the problems with this settlement, as it 
necessitates the addition of other risky settlement provisions.
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    \3\ \3\ The divestitures must be complete by the earlier of 12 
months from the closing of the merger or within 30 days of state 
regulatory approval. In theory, the divestitures may be completed 
before 12 months. However, past experience suggests that the 
approval process requires significant due diligence over an extended 
period of time.
---------------------------------------------------------------------------

    To mitigate the anticompetitive harm from the prolonged divestiture 
schedule, the FTC's proposed settlement sets up a complex arrangement 
where some casinos will be operated separately by Commission-appointed 
casino property managers until a buyer is ready to take over the 
assets. I do not believe that the Commission should be in the business 
of appointing casino property managers here.\4\
---------------------------------------------------------------------------

    \4\ If the state gaming regulators had already approved the 
transaction (as well as the corresponding divestitures) and selected 
casino property managers, this would raise fewer concerns.
---------------------------------------------------------------------------

    The Commission will also appoint a monitor. It is particularly 
unclear how the Commission and the appointed monitor can remove or 
discipline the casino property managers. In addition, the casino 
property managers will operate under a similar compensation and bonus 
plan as provided by the prior owner, which could easily lead to 
anticompetitive distortions. The anticompetitive harms could grow if 
Twin River is rejected as a suitable buyer by state regulators.
    There may be rare circumstances where unusual settlement terms are 
warranted, but this isn't one of them. The proposed remedy is also a 
gamble on several other fronts.
    First, the Commission's due diligence on Twin River did not 
adequately analyze the role of new investors exerting enormous control. 
The FTC must always consider the incentives and plans for those in 
control of a divestiture buyer. Sometimes, new investors can help a 
stagnant company change strategic direction. But too often, new 
investors find ways to buy, strip, and flip, rather than create a 
strong, long-term competitor. This is particularly true for certain 
private equity and hedge fund investors, so careful due diligence is 
critical.
    In 2019, a Wall Street hedge fund, Standard General, accumulated a 
major ownership stake in Twin River. Standard General now has 
significant control over the company and is, by far, its largest 
shareholder. Its stake is roughly equivalent to the maximum amount 
allowable under state law.\5\ Another hedge fund, HG Vora, has also 
emerged as a major holder of Twin River.\6\ Standard General and 
similar funds often seek to accumulate board seats to implement their 
desired investment strategy. Indeed, just a few months ago, Twin 
River's longtime chairman ``reluctantly'' stepped down and was replaced 
by Standard General's managing partner, Soohyung Kim.\7\
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    \5\ In a recent Schedule 13D securities filing, Standard General 
revealed that it was managing its holdings of Twin River, given Twin 
River's share repurchase plan that could lead to Standard General 
violating the Rhode Island casino ownership cap of 39%. See Twin 
River Worldwide Holdings, Inc., Amendment No. 6 to Schedule 13D at 4 
(Feb. 20, 2020).
    \6\ Recent securities filings reveal significant ownership of 
Twin River by HG Vora Capital Management. See HG Vora Capital 
Management, LLC, Form 13F Information Table (Form 13F) (Aug. 8, 
2019). Standard General and HG Vora are currently on the same side 
of a major battle in another public company. See Svea Herbst-
Bayliss, EXCLUSIVE-Hedge fund HG Vora wants Tegna to consider a sale 
or merger--sources, Reuters (Jan. 21, 2020), https://www.reuters.com/article/tegna-hgvora/exclusive-hedge-fund-hg-vora-wants-tegna-to-consider-a-sale-or-merger-sources-idUKL1N29Q0KT.
    \7\ Ted Nesi, John Taylor out at Twin River, 12WPRI.com (Dec. 9, 
2019), https://www.wpri.com/business-news/john-taylor-out-at-twin-river/.
---------------------------------------------------------------------------

    By approving Twin River as the divestiture buyer, I am concerned 
that the Commission is relying on Twin River's past track record, 
rather than analyzing how changes in ownership and control of the 
company will impact their future business strategy.
    Second, buyers of divested assets need to prioritize competing on 
day one, but they cannot if other high-priority mergers and 
acquisitions distract them. In this matter, Twin River is in the midst 
of a string of other takeovers.
    In 2019, it completed an acquisition of Dover Downs Hotel and 
Casino in Delaware,\8\ and then in January of this year, Twin River 
acquired three casinos in Colorado.\9\ Several other acquisitions are 
pending: in the last twelve months, it has inked deals to purchase 
casinos in Missouri and Mississippi.\10\ Outside of

[[Page 40653]]

this settlement, it has also struck a deal to purchase Bally's, its 
first foray into the large Atlantic City market.\11\ These acquisitions 
will require significant management attention, and I did not find any 
compelling evidence that Twin River will prioritize the divested assets 
to fully restore competitive intensity in the markets that the 
Commission believes would suffer from killed-off competition.
---------------------------------------------------------------------------

    \8\ Press Release, Twin River Worldwide Holdings, Inc., Dover 
Downs Stockholders Approve Merger with Twin River; Merger Set to 
Close on March 28, 2019 (Mar. 26, 2019), https://investors.twinriverwwholdings.com/news/news-details/2019/Dover-Downs-Stockholders-Approve-Merger-with-Twin-River-Merger-Set-to-Close-on-March-28-2019/default.aspx.
    \9\ Press Release, Twin River Worldwide Holdings, Inc., Twin 
River Worldwide Holdings Completes Acquisition of Three Colorado 
Casinos (Jan. 24, 2020), https://investors.twinriverwwholdings.com/news/news-details/2020/Twin-River-Worldwide-Holdings-Completes-Acquisition-of-Three-Colorado-Casinos/default.aspx.
    \10\ Press Release, Twin River Worldwide Holdings, Inc., Twin 
River Worldwide Holdings Signs Definitive Agreement To Acquire Two 
Casinos From Eldorado Resorts (July 11, 2019), https://investors.twinriverwwholdings.com/news/news-details/2019/Twin-River-Worldwide-Holdings-Signs-Definitive-Agreement-To-Acquire-Two-Casinos-From-Eldorado-Resorts/default.aspx.
    \11\ Press Release, Twin River Worldwide Holdings, Inc., Twin 
River Worldwide Holdings to Acquire Three Casinos from Eldorado and 
Caesars (Apr. 24, 2020), https://investors.twinriverwwholdings.com/news/news-details/2020/Twin-River-Worldwide-Holdings-to-Acquire-Three-Casinos-from-Eldorado-and-Caesars/default.aspx.
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    Finally, the Commission should avoid acting without the benefit of 
a full review by the state gaming regulators. State regulatory agencies 
have unique insights and expertise into the industries they regulate; 
their findings inform the issues the Commission takes into 
consideration, and not just relating to the appointment of casino 
managers. Some states have a specific mandate to look at the ownership 
and financial conditions of the transacting firms, and we would benefit 
from that expertise. Their analysis is particularly important during 
this period of uncertainty, as the industry is roiling from closures 
due to the current COVID-19 pandemic. It is important that we consider 
all of the information and work across government bodies to protect 
competition. While the Commission does work with some of these 
authorities, I am not convinced that acting before state regulators 
have completed their analysis is the right approach.

Conclusion

    The proposed resolution in this transaction offers a unique window 
into the assumptions and philosophy of the Federal Trade Commission. 
The merger is clearly anticompetitive in the markets where the 
Commission alleged a violation, and offers no meaningful benefits to 
the public. Since the Commission would not need to go to trial to block 
the transaction because the state regulators have yet to act, there is 
no immediate concern about limiting FTC resources or weighing the 
litigation risk. Given these facts, why would the Commission put the 
public at risk with delayed divestitures to a questionable buyer that 
has no guarantee of obtaining a license?
    I am concerned that the Commission is rolling the dice with this 
complex settlement that will clearly not lead to an immediate 
restoration of lost competition. It is also clear that we must revamp 
our approach when it comes to vetting proposed divestiture buyers, 
particularly when a new financial investor is in charge in the 
boardroom.
    Our state partners will obviously need to scrutinize the financial 
aspects of the proposed transaction between Caesars and Eldorado, given 
the harms inflicted on the public and regional economies from past 
leveraged buyouts--and resulting bankruptcies--in the industry.\12\ 
They will also need to carefully assess whether the restoration of 
competition will come too late, and whether Twin River can guarantee 
that it will actually accomplish this goal. The stakes are high right 
now. For these reasons, I dissent.
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    \12\ See, e.g., Sujeet Indap, What happens in Vegas...the messy 
bankruptcy of Caesars Entertainment, THE FIN. TIMES (Sept. 16, 
2017), https://www.ft.com/content/a0ed27c6-a2d4-11e7-b797-b61809486fe2.

[FR Doc. 2020-14582 Filed 7-6-20; 8:45 am]
BILLING CODE 6750-01-P
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