Going a-courting in Macau By Ken Adams, CDC Gaming Reports June 27, 2021 at 5:21 pm The Las Vegas Sands (LVS) is defending itself in court in Macau. Asian American Entertainment Corporation (AAEC) is suing for breach of contract. AAEC contends it had a contract with LVS to jointly pursue a gaming license in Macau. An LVS partnership was indeed awarded a gaming concession, but with Galaxy Entertainment as its partner, not AAEC. Calling it a breach of a valid and existing contract, AAEC would like $12 billion in compensation due to LVS’s replacing AAEC with Galaxy in the bid. So far, former members of the commission that awarded the license have testified as to the process. In general, they say LVS was chosen because of its gaming experience, not its partners. The local press is covering the case thoroughly. Every day, several articles recount the previous day’s testimony. In normal times, this would garner little media attention; it would not be seen as significant, with AAEC having little chance of succeeding. But these are not normal times in Macau. Its casino industry is still struggling with the impact of the pandemic. And it is nearly time for the Sands to reapply for that license. In exactly a year, the first of Macau’s gaming concession licenses expires, Wynn Macau. The government of Macau is calling it a re-tender, which implies that the casinos will have to submit a new proposal, exactly as they did for the original license. No one knows how operators will be judged or what might disqualify them. One Macau lawmaker has called for a two-year postponement. He says the government needs time to collect and evaluate public opinion. A headline in Macau Business stated, that “All That Is Left Is the Announcement.” The article said postponement was a forgone conclusion. According to the article, in 2001 it took nine months for the government to write and publish the rules for the public tenders. By that measure, the rules won’t be ready until next year and publishing rules would only trigger the beginning of the process. The Macau skyline, via Shutterstock The gathering of public opinion was not part of the process in 2001. However, this time the government has said on numerous occasions that it wishes to hold public meetings and gather public sentiment. That is modelled on the British “consultation” process. In England, officials frequently gather the opinions of interested parties and stakeholders when preparing a new law or a change in existing laws or regulations. One cynical observer in Macau wondered what the government hoped to accomplish by asking average citizens about casinos. The observer suggested that instead, the government would be better served by holding a series of consultations with the current concessionaires and, perhaps, some other would-be bidders. Whatever the process, time is running out on the existing licenses. In a world of conspiracy theories, one might ask what or who is holding up the process? Is the government waiting for the end of the pandemic, for instructions from Beijing, or the end of the Sands trial? Disregarding a conspiracy, the situation is complicated by two agendas at play in Macau. The first is the regulatory agenda, which is similar to those in other jurisdictions. Regulators want to ensure honest games, qualified operators, and adequate financing. As a witness in the LVS case said, “We (the committee reviewing the proposals) wanted to find the best solution for Macau.” The second agenda is that of China and Chinese President Xi Jinping. Xi wants Macau and its casinos to be a contributor in his vision for the Greater Bay Region and in the Belt and Road Initiative. China wants investment in world-class entertainment venues. China is indifferent to casino operations and profits. The casino companies are jumping through hoops, trying to find the right combination of investments and activities to please Macau and China. For example, after the meetings of the People’s Congress and the Chinese People’s Political Conference, the operators met with their employees, attempting to identify what individuals and the company could do to meet government objectives. Also, the casinos make frequent charity donations, hold vaccine drives, participate in national celebrations, and conduct cultural activities. The cultural series are meant to entertain customers, but they’re also intended to teach Macanese and Chinese culture to employees. Teaching love of country, along with Chinese culture, values, and patriotism, is a major objective of China — and the casinos are trying to do their part. On another front, with one eye on business and the other on China, the casinos have significantly increased their investment in the last few years. Investments of a billion dollars or more have been seen as mandatory for concessions seeking renewal. Most recently, Melco International announced a non-gaming, mixed-use, resort development in Zhongshan, Guangdong Province, the major population center of the Greater Bay Region. Melco was founded in 2004 by James Packer and Lawrence Ho’s companies to operate casinos; it is a casino company. Melco has casinos in Macau, the Philippines, and Cyprus. A non-gaming resort in China is a horse of a different color. It has no strategic value for operations in Macau, except of course to please President Xi and the Chinese Communist Party. Sociedade de Jogos de Macau changed its name to SJM. SJM was one of the original licensees and as its Portuguese names reflects, it is a gambling company. The name change is meant to reframe the company’s image. The company made that clear in its announcement. “The new name better reflects our prominent position in the tourism and leisure business and our dedication to the development and operation of integrated resorts in Macau, further underscoring our continued support to Macau’s role as a ‘world center of tourism and leisure,’” Chair Daisy Ho said. The language is clearly intended to show its willingness to please Xi and his agents. And that brings us back to the courtroom in Macau and LVS. LVS’s case seems quite solid and AAEC’s case an act of desperation. Except that in light of the pending licenses, it might not be so desperate. Is it not easier and politically more expedient to find a compromise and settle? The license might be or might not be hanging in the balance. That is what makes this situation so intriguing. No one knows the rules, except the Red Queen and she’s not telling. Like the other casino concessionaires in Macau, LVS is courting China. And the courtroom could be an essential piece of that courtship.