On June 13, 2003, the United States Department of Justice filed a formal complaint alleging that the National Council on Problem Gambling (NCPG) has violated the Sherman Antitrust Act. The NCPG allegedly advocated an unlawful territorial allocation among its 34 state affiliates, prohibiting them from offering services across state lines and "depriving customers of the benefits of free competition."
The NCPG, a not-for-profit trade organization with a main office in Washington, D.C., performs a number of functions to alleviate gambling problems. It conducts annual conferences, lobbies Congress for funding, and produces books, videos, and other publications. The Council has 34 state affiliates that operate as separately incorporated entities and function independently of one another. Each affiliate offers customers its own unique products and services. For example, one affiliate might provide services specifically for college gamblers, while another may have no such program but might offer exceptional horse-race gambling services. No state has more than one affiliate.
The NCPG has allegedly violated the Sherman Act by mandating an agreement among its affiliates whereby no affiliate may provide services to customers in another state. According to the complaint, "Beginning in 1995, the state affiliates, concerned about emerging competition within their borders from out-of-state affiliates, met and agreed with the defendant to adopt, publish, and enforce resolutions, policies, guidelines, and certification standards to limit the provision of problem gambling services by its affiliates across state lines. The territorial allocation was enforced by threats of sanctions, including fines and revocation of NCPG membership, and threats to deny national certification to counselors trained by out-of-state affiliates. These actions reduced competition among problem gambling service providers."
As an example of the territorial allocation, the complaint provides the actions of the Minnesota affiliate and its repercussions. The Minnesota affiliate, despite the agreement, made a few attempts to provide services to outside customers. When the Minnesota affiliate sought a contract in Nebraska, the NCPG asked the affiliate to withdraw its bid. The Minnesota affiliate also offered a gambling counselor training program to customers in Missouri, but the NCPG warned that it would not grant credits to the students. And when the Minnesota affiliate won a contract with the Arizona State lottery, the Arizona affiliate reported the incursion to the NCPG, which resulted in a hearing of sanctions against the Minnesota affiliate.
As a result of the NCPG agreement, "Customers have been deprived of the benefits of free and open competition in the purchase of problem gambling services, including the benefit of choosing among a variety of problem gambling services offered by different state affiliates." Further, the quality of products and services has been diminished and innovation has been stifled since the affiliates have restricted any competitive pressure that would have encouraged improvement.
Betty George, CEO of the North American Training Institute, said the NCPG may have known that its actions might be in violation of U.S. Antitrust Law.
"The North American Training Institute over the course of a couple years sent three letters to officials of the NCPG, advising them that their activities appeared to violate antitrust laws," George explained. And of those three letters, we never received a response. I also know that a similar letter was sent to NCPG officials by a very prominent, internationally recognized institute of higher learning, and it also received no response."
The NCPG, acknowledges that a territorial agreement had been in place, but Executive Director Keith Whyte said it "had been suspended by the board of directors more than two years before the complaint was even filed."
Whyte added that the NCPG and Department of Justice have also signed a consent decree, stating that the parties have agreed to settle. He also said it's important to note that the NCPG does not admit to doing anything wrong and that the NCPG settled only because doing so is easier than battling in court. All of the documents, he said, reflect a view that is favorable to the Justice Department.
"We absolutely don't stipulate or agree with their allegations, and furthermore, by the consent decree we agree not to engage in that conduct," Whyte stressed. "The resolution set forth in no manner reflects a finding or admission of any violation of law."
Accompanying the Justice Department's complaint and consent decree is a proposed final judgment and a stipulation stating that the judgment may take effect after a period of 60 days in which the court will review public commentary.
The proposed final Judgment contains a long passage that, in summary, would prohibit the NCPG from maintaining any agreement among its affiliates to restrict any problem gambling service provider from offering its services across state lines.
The judgment would also require the NCPG to establish an Antitrust Compliance Officer to be responsible for maintaining an Antitrust Compliance Program. The officer would be responsible for reviewing NCPG actions, meetings, resolutions, and documents to ensure that they are in accordance with the court’s final judgment. The policies explained in the final judgment would last for 10 years.
In most antitrust cases, the proposed final judgment does pass after the 60-day period. If this case follows suit, by mid August the NCPG may be required to cease its territorial allocation agreement among affiliates and implement the policies defined in the court’s final judgment.
The official U.S. Department of Justice documents may be viewed at www.usdoj.gov/atr/cases/gamble.htm.