04/23/2008 11:00PM

Churchill sues horsemen over signals

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Churchill Downs Inc. has filed a lawsuit against the Florida Horsemen's Benevolent and Protective Association and the Thoroughbred Horsemen's Group, alleging that the two groups are in violation of the Sherman Antitrust Act by withholding their consent for Churchill's tracks to send their signals to out-of-state locations, the company announced late on Thursday.

The lawsuit, filed in U.S. District Court for the Western District of Kentucky, raises the stakes in an ongoing dispute between Churchill and the horsemen's groups, which have so far successfully blocked Churchill and its simulcast-marketing partnership from sending the signal from Lone Star Park in Texas to account-wagering operations and from sending the signal from Churchill's Calder Race Course in Florida to nearly every out-of-state betting location, including account-wagering operations.

In the lawsuit, Churchill alleges that the individual horsemen's associations that have joined the Thoroughbred Horsemen's Group have "entered into a contract, combination, and conspiracy to raise and stabilize the price for [simulcast] signals, and to coerce acceptance of their demands by a joint boycott of sellers of signals."

The lawsuit also alleges that the Florida Horsemen's Benevolent and Protective Association has conspired with the Thoroughbred Horsemen's Group by assigning its rights over the export of Calder's signal to account-wagering companies in a "conscious commitment to the scheme to raise prices."

The Thoroughbred Horsemen's Group was formed last year to negotiate simulcasting contracts with racetracks on behalf of individual horsemen's groups. The group has pushed Churchill's simulcast-marketing partnership, TrackNet Media, to give horsemen one-third of the revenue from betting through account-wagering operations. So far, the horsemen's group and TrackNet have not reached an agreement on a single contract.

TrackNet was formed last year by Churchill Downs Inc. and another large publicly traded racetrack company, Magna Entertainment Corp. The company negotiates simulcasting contracts with offtrack betting locations by aggregating the signals controlled by the two companies. Among Magna's one dozen properties is Lone Star Park. Both Churchill and Magna operate separate account-wagering operations.

The percentage of each bet that horsemen's groups receive through account-wagering operations varies widely, but typically, a horsemen's group gets approximately one-quarter of the revenue through a combination of direct payments and source-market fees.

Horsemen have the right to approve the export of a racetrack's signal to simulcasting locations under a federal law, the Interstate Horseracing Act. That law has never been challenged.

The filing of the lawsuit opens up the possibility that Churchill will ask the District Court to issue a preliminary injunction that would temporarily block members of the Thoroughbred Horsemen's Group from withholding consent for the export of signals until the case can be heard. TrackNet and the horsemen's group are also currently in a stalemate over the export of the Churchill Downs signal to account-wagering operations. Churchill's spring meet begins on Saturday.