Inside Asian Gaming

October 2008 | INSIDE ASIAN GAMING 47 Regulation regulators would have told the partners, “It’s your problem, work it out yourselves.” But since concessions were not limited to a single casino, the Macau government allowed Galaxy to have the concession and created a new law, creating a sub- concession for LVS. Since one concession had this right, the other concessions were also given the right. Wynn Resorts, for example, sold its newly created sub-concession to Melco-PBL for $900 million. Everyone won: Wynn got a $900 million windfall and Melco-PBL got the right to open casinos in Macau. Of course, the three concessions had now turned into six,with no fixed limit on the number of actual casinos. There is only one part of China, the largest market in the world, with legal casinos: Macau. And capitalism, even in a Marxist nation, is a dynamic force. Allowing competition in Macau created an explosion of construction. There are now about 30 casinos in the territory, and the number keeps growing. Growth has been so explosive that when Macau’s Chief Executive announced a freeze on new casinos and casino expansions on April 22, 2008, after the initial shock, there was a general sigh of relief. Everyone agreed it was the right decision. No one complained that this is not the way to run a casino jurisdiction. The Macau government, without hearings, votes or any public input, simply said these are the new rules. And no one is sureexactlywhattheserulesare. Concessions and subs are frozen at six“for the foreseeable future.” No new land for casinos, although current construction, and“negotiations,”can proceed. Expansions of existing tables, and maybe slot, will be “tightly restricted.” Would you invest $2 billion to build a new casino if you didn’t know how many competitors you could face,or even what the law will be? You would if your table games would make five times what they make on the Las Vegas Strip. The old Macau casino regime had, for many years, allowed the then-monopoly concession to enter into revenue-sharing partnershipdealswithunlicensedindividuals and companies. Continuing a practice that would never be tolerated by a new casino regulator, Macau allowed the three concessions, and the three sub-concessions, to get funding through revenue “franchises” with unlicensed outsiders. Macau is finally looking at getting a handle on this, including possibly licensing key casino employees, as a result of warnings from the leading government lawyer Jorge Oliveira. Similar problems exist with the casino tax rates. Like many jurisdictions, Macau has piled on a myriad of separate fees and taxes. But unlike others, Macau taxes concessions at different rates. And the details of the agreements between the casino owners and operators have not all been made public. Theeffectivetaxrateisabout40%ofgross gaming revenue. Not only is this high, it is obviously too high. The Macau government is sending a check for MOP$5,000 (about US$672) to every resident. This isn’t the old communist “from each according to his ability, to each according to his need.” No one is checking for need. Even Stanley Ho, owner of one of the concessions and one of the richest men in the world, will get his MOP$5,000. I wonder if hewill write a thank you note. © Copyright 2008. Gambling and the Law is a registered trademark of Professor I Nelson Rose. Professor I NelsonRose is recognizedas one of the world’s leading experts on gambling law and teaches International Gaming Law at the UniversityofMacaueveryJune.Hislatestbooks, “Internet Gaming Law” and “Gaming Law: Cases and Materials”, are available through his website: www.gamblingandthelaw.com The Venetian Macao is the highest exponent of the surge of the post-monopoly operators into the territory