By Teagan Raffenbeul

Light & Wonder, a manufacturer of automated card-shuffling machines, recently found itself at the center of high-stakes antitrust disputes. With active cases in both New York and Chicago, these proceedings have the potential to reshape the antitrust and arbitration landscape.

Class Arbitration Approved in Case Against Light & Wonder

In 2021, more than 100 casinos filed claims alleging Light & Wonder attempted to monopolize the automated card shuffling market. The casinos allege Light & Wonder used fraudulent patent claims to establish a monopoly on automated card shufflers, thereby excluding competitors and maintaining market dominance. Since these casinos have arbitration agreements with Light & Wonder, they are required to resolve any disputes exclusively through arbitration. 

In a landmark decision, John Wilkinson, an arbitrator with the American Arbitration Association, certified the casinos as a class. This permits arbitration to resolve these antitrust lawsuits against Light & Wonder as a class-action. This move came after the recent U.S. Supreme Court decision in Lamps Plus, Inc. v. Varela, which held that class arbitration is permissible only when explicitly authorized in arbitration agreements. Despite Light & Wonder’s objection that the individual arbitration agreements lacked sufficient similarity, Wilkinson determined the language in the contracts was broad enough to permit class arbitration.

This certification marks a first of its kind development in the context of antitrust claims. Class arbitration offers a more streamlined and arguably fairer mechanism for resolving such disputes. Proceeding through individual arbitrations would not only be costly and time-consuming for the casinos but could also produce inconsistent outcomes – undermining arbitration’s intended efficiency. 

Light & Wonder sought to overturn Wilkinson’s decision, arguing the varying purchase histories and harm among the casinos necessitated individualized assessments. They also relied on Lamps Plus, Inc. v. Varela to assert that the variations in the casinos arbitration agreements precluded a class certification. Nonetheless, New York state trial and appellate courts upheld Wilkinson’s determination, allowing the class to proceed.

Defining the Market 

Light & Wonder faces similar antitrust claims in federal district court in Chicago. There, more than 1,000 casinos – none of which are bound by arbitration agreements – have filed suit over the same alleged conduct: fraudulent patent applications that enabled Light & Wonder to monopolize the automated card-shuffling market. These plaintiffs are also seeking class certification, but through traditional court proceedings.

In recent proceedings, an Illinois federal judge heard arguments in support of each party’s motion for summary judgment. Light & Wonder asked the court to dismiss the case before trial, arguing the casinos failed to define a valid antitrust market. Specifically, Light & Wonder claim the plaintiffs’ proposed market that includes four distinct types of card shufflers – single-deck, multi-deck, continuous, and other types  – is too broad.

In antitrust law, a valid product market (which is essential to proving the presence of a monopoly) requires functional interchangeability between products, and consideration of whether price changes in one product lead consumers to switch to another. Industry experts in this case agree that the various card shufflers are not functionally interchangeable. The choice of shuffler depends heavily on its specific use and features. 

To illustrate, one cannot place bicycles and trucks in the same product market. Although both serve the general purpose of transportation, a price increase in trucks does not impact bicycle demand, indicating they are not substitutes. The same reasoning applies to different types of card shufflers. Light & Wonder argue that because the products serve different functions and are not interchangeable, they cannot be grouped into a single market. Not a single case in antitrust law has found two products that were not interchangeable to be in the same product market. 

Although plaintiffs present compelling evidence that Light & Wonder controls nearly 100% of the card shuffler industry, Light & Wonder maintains the claims should fail due to an overly broad and inaccurate market definition.

Conclusion

The legal challenges facing Light & Wonder may mark pivotal moments in both antitrust enforcement and arbitration. The certification of a class in a complex antitrust context might indicate greater willingness to allow collective redress, despite an absence of explicit class arbitration clauses. Meanwhile, across the country, the litigation in Illinois highlights how critical product market definition remains in antitrust law. The court’s decision on whether the plaintiffs’ market definition holds could shape how narrowly, or broadly, future markets are defined in similar cases.

As these cases unfold, the outcomes may not only determine Light & Wonder’s legal fate but also influence the future landscape of both arbitration and antitrust law. Beyond these legal ramifications, the results could also reshape how patent fraud and market monopolization are addressed in niche tech industries, such as automated card shufflers. Ultimately, these cases could set the course for key legal and industry standards for years to come.

#wjlta #casinos #cardshufflers #antitrust