Parent company of FOBT supplier loses over $315 million in anti-monopoly lawsuit

Posted On: 
10th August 2018

Derek Webb, the Campaign for Fairer Gambling's founder, provides insight into the gambling supply sector and reports on a legal case in the USA involving one of the two UK suppliers of fixed odds betting terminals.

Fixed odds betting terminals (FOBTs) in a betting shop
Credit: 
PA

“Man behind FOBT curb wins case against machine manufacturer”, the Guardian reported yesterday. The story related to Scientific Games, the owner of SG Gaming – one of only two UK suppliers of FOBTs – being the defendant in the Chicago Northern District of Illinois Federal Court. The plaintiffs were Shuffle Tech et al, a group of a creator of a new casino card shuffling machine, a manufacturer, a distributor and a finance source.

This group suffered from a lawsuit filed by ShuffleMaster in 2012, claiming its machine infringed ShuffleMaster patents. Over the next few years ShuffleMaster was acquired by Bally’s Gaming which was then acquired by Scientific Games, which therefore acquired not just the assets, but also the liabilities. ShuffleMaster became the US monopolist in the shuffling machine market through both litigating against or purchasing market rivals, also giving it international dominance.

In 2007 my US intellectual property lawyers – the Washington DC firm of Nixon & Vanderhye (N&V) - proved that PGIC used fraudulent patents and sham litigation in a monopolization attempt to cause financial harm to me in 1998. Shuffle Tech researched that case and in 2014 reached out to N&V and myself to try to put a new case together. N&V had also acted for me against ShuffleMaster in 2008, on a variety of matters which were settled in 2010.

We knew that ShuffleMaster was a monopolistic bad actor, and believed that the 2012 action was a sham litigation based on fraudulent patents. N&V agreed to take a piece of the action, as did I as a litigation funder and trial consultant. The plaintiff manufacturer forfeited its equity to the group and went into bankruptcy and our complaint was filed in 2015.

A Scientific Games US SEC filing refers to settlement failure, as mentioned in open court in one of many pre-trial hearings. How could the defendant be so complacent, ignorant and arrogant that it could not find a way to offer a reasonable settlement to this bunch of “nobodies”?

The 12 jury members unanimously awarded damages of $105 million, but as we were acting on behalf of the US government in helping to enforce anti-trust laws this was automatically trebled to $315. Also, the majority of legal expenses are automatically recoverable, which will add over $10 million.  

Scientific Games has notified that it will apply for a judicial reversal and proceed to appeal if necessary. Exactly the direction that PGIC took prior to settling then going bankrupt. Wanting a do-over and trying to delay implementation of a negative result – does this remind anyone of the bookies and FOBTs? Unsolicited offers from investors in pending litigation awards suggests the verdict is very likely to be upheld.  

This verdict follows a recent hearing in the High Court in a libel case brought by Matt Zarb-Cousin against Malcolm George, CEO of the Association of British Bookmakers (ABB), and the ABB itself. Campaign consultant Matt prevailed at that preliminary hearing and that case continues.

At least the Guardian did quote something from me on this subject “It is evil of them to make this assertion” [bookies implying that the Campaign has a commercial motive] “It’s dog-whistle code for saying there is something wrong with the Campaign. Their willingness to continue with that nonsense means nobody should listen to them about anything they ever say”. 

On the day the US trial started the market capitalisation of Scientific Games was over $4.6 billion, but by the time of the verdict it had declined to under $3.4 billion. The primary investor is Ronald Perelman, through his investment vehicle MacAndrews & Forbes. According to the Forbes rich list, Mr. Perelman is worth $9.9 billion. In a lunch with the Financial Times, Mr. Perelman explained his attitude towards litigation - he “didn’t like to be F’d around”.

Scientific Games witnesses lied to the court in order to try to avoid compensating the plaintiffs for damages caused. FOBT losers and addicts have generated around £25 billion for the FOBT suppliers and the bookies. They will not have any chance of compensation - not even if they were underage and not even if the content had been deliberately designed to be addictive. They have been F’d by Mr. Perelman and others.

Will the suitability of Scientific Games to continue to enjoy the privilege of a British gaming supply license now be investigated by the Gambling Commission?