Two Midwest riverboat casinos are suing Scientific Games (SG) over claims the gaming supply giant fraudulently monopolized the market in automated card shufflers. The suit claims they did so by strangling competition with “sham lawsuits.”
Casino Queen, of East St Louis, Ill., which trades as DraftKings at Casino Queen, and Casino Queen Marquette, of Marquette, Iowa, are both docked on the Mississippi River. They allege SG’s behavior allowed it to set prices without fear of being undercut.
The lawsuit argues direct purchasers of shufflers, like the plaintiffs, have been damaged financially as a result, and seeks appropriate financial relief. It wants other operators to join the class-action lawsuit against SG and demands a jury trial.
The suit also names SG subsidiaries Bally Technologies and Bally Gaming as defendants.
In 2018, a federal judge ordered SG to pay $315 million to Shuffletech, a manufacturer that SG forced out of the market with legal threats, despite allegedly knowing that its patents were invalid and unenforceable. The settlement was reduced to $151.5 million on appeal.
SG was found to have misled the patent office and to have engaged in “sham patent litigation against any competitor that dared to market competitive card shufflers,” according to the judge in that case.
The Casino Queen suit notes that many gaming facilities have no option but to purchase SG’s machines, because shuffling by hand is illegal in many jurisdictions. But operators are forced to pay “supracompetitive prices” because of the SG monopoly.
The market in automated card shufflers is valued at approximately $100 million per year.
SG controls an effective 100 percent share of the market, according to the suit. But this has not been achieved by “superior acumen, innovation, skill, foresight, or industry, or by the proper functioning of the market,” but by “purposeful abuse of the patent system and the judicial process.”
“There are no reasonable substitutes or alternatives for automatic card shufflers for casino table games that use physical playing cards, meaning that demand is inelastic for these products. Inelastic demand means that increases in price result in limited declines in quantity sold in the market,” continues the lawsuit.
The lawsuit lists several rivals who have been driven out of the market by the defendants’ so-called sham litigation. In some cases, the defendants acquired their rivals’ assets at a discount after they had been weakened by legal action.
SG acquired its automated shuffling technology when it bought out Bally Technology in 2014 for $5.1 billion. A year earlier, Bally had acquired SHFL Entertainment, which invented the Shuffle Master machine.