A proposed class action alleges Scientific Games Corporation, SHFL Entertainment and Bally Technologies have unlawfully monopolized the market for automatic card shufflers used at casinos.
Filed by two riverboat casinos with an array of table card games, the 40-page antitrust lawsuit alleges the defendants have taken control of the automatic card shuffler market by way of abusing both the patent system and judicial process as a means to “exclude and drive out competitors” seeking entry. Automated card shufflers are important in the casino business in that the machines are designed to produce reliably random shuffles to ensure fairness and increase game speed, profitability and security, the case says.
In many jurisdictions, card shuffling by hand is illegal, which necessitates the use of machines for the process, the suit adds.
The complaint in Illinois federal court alleges Scientific Games, SHFL Entertainment and Bally Technologies, who manufacture and sell fully automated card shufflers under the Shuffle Master, DeckMate and Bally names, have fraudulently procured patents and then asserted those patents in “sham lawsuits” against competitors, which has effectively kept competing entities out of the market while causing proposed class members to pay more for the products than they otherwise would have in a competitive market.
According to the complaint, the market for automated card shufflers and related services is valued at roughly $100 million per year. The defendants, the plaintiff alleges, “now control virtually 100% of that market as a result of their misconduct.”
Law360 reports that the proposed class action marks the third antitrust suit filed against Scientific Games Corp. since 2015 over allegations of monopolistic conduct in the automated card shuffler market. The first case was ultimately settled for $151 million, and the second lawsuit is still pending.
Demand for automatic card shufflers is driven by casino and card clubs in part because the machines minimize the amount of labor and time spent on shuffling while reducing the opportunity for cheating and collusion, among other factors, the lawsuit says. Per the suit, there exist no reasonable substitutes for automated shufflers, and the only alternative, aside from manual shuffling, is to use pre-shuffled cards provided by a card manufacturer. An issue, however, is that pre-shuffled cards can only be used for one hand, after which an additional pack of pre-shuffled cards must be opened or the used cards will need to be shuffled by hand or machine, the case relays. Factors against using means other than an automated shuffler include security, with the aim of eliminating cheating; expense; and time, according to the suit.
“In other words, because the demand for automatic card shufflers is inelastic, sellers of automatic card shufflers—like the Defendants—can raise the prices of these shufflers above competitive levels without seeing a decline in sales revenue,” the case reads. “It also means that entities like Plaintiffs and others similarly situated have no alternatives to use as substitutes for these machines to be able to avoid any supra-competitive prices charged by Defendants.”
Aside from the myriad regulations that control the casino industry, would-be competitors looking to enter the automatic card shuffler market are forced to contend with the defendants’ multitude of patents, which the companies, the lawsuit claims, have “historically used to keep out any and all would-be competitors, including through the use of patent fraud and sham litigation.”
The suit alleges the defendants’ anti-competitive conduct dates back to litigation that kicked off in 2003, when Casinos Austria Research Development, GmbH (CARD) and its U.S. subsidiary sued in search of declaratory judgment of non-infringement for the company’s shuffler in light of certain patents held by SHFL Entertainment, who filed a counterclaim for infringement several months later.
“SHFL’s counterclaim was the start of a pattern of litigation and threatening of litigation to secure Defendants’ dominance and monopoly,” the lawsuit says, alleging the defendants’ attitude, “[t]hen and now,” was that “no competition and no alternatives to its shufflers would be permitted in the relevant market.”
Less than six months after the CARD litigation was finalized, when SHFL acquired CARD amid what the case calls a “sue-and-acquire strategy,” the company then sued VendingData a day after the competitor announced the availability of its automatic shuffler machine, the lawsuit goes on. In that suit, SHFL alleged VendingData infringed upon a child patent in the same patent family that CARD had previously claimed was obtained through fraud, per the complaint.
These events kicked off a string of what the proposed class action alleges to be “sham litigation” on the part of the defendants, a “pattern of suing would-be competitors to enforce patents Defendant knew would not have issued had they not concealed the prior art from the [U.S. Patent and Trademark Office].”
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