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Marketing Isn't for Problem Gamblers

By Jeff Hwang - Updated Nov 16, 2016 at 4:48PM

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Harrah's, "the leader in responsible gaming," gets fined for mailing marketing materials to known problem gamblers.

If you've been watching the weekly coverage of Harrah's Entertainment's (NYSE:HET) World Series of Poker on Disney's (NYSE:DIS) ESPN, you've surely noticed the ads featuring Harrah's CEO Gary Loveman. In them, Loveman relates the company's commitment as "the leader in responsible gaming" -- or knowing "when to stop before you start." Harrah's offers a number for problem gamblers to call, proclaiming that the person telling you not to gamble may be the person you'd least expect.

But in a sad tale of irony, it was a Harrah's casino that was hit with a fine for mailing marketing packages to known problem gamblers.

On Wednesday, the Missouri Gaming Commission slapped a $25,000 fine on Harrah's North Kansas City. The casino had acquired the names of 29,000 potential customers from a pair of marketing firms. However, the casino had failed to cross-reference the list with the names of some 7,000-plus problem gamblers who had placed themselves on the state's casino exclusion list. As a result, as many as 260 known problem gamblers in Missouri have received marketing materials -- typically a monthly mailing packet that includes things such as events notices, buffet coupons, match play tickets, or even offers for plain cash -- from Harrah's North Kansas City.

Putting your name on the exclusion list gives Missouri casinos both the right and the obligation to bar you from their properties, and perhaps go as far as arrest you for trespassing. It also means that casinos cannot send you mail. According to an Associated Press report, at least six people on the exclusion list complained about receiving such materials from Harrah's.

As a result of the fiasco, Harrah's marketing director and its database manager -- both named in the commission's complaint -- have apparently resigned.

Problem gambling is the key argument against the expansion of gaming, a hindrance to the growth aspirations of casino operators such as Harrah's, Argosy Gaming (NYSE:AGY), MGM Mirage (NYSE:MGG), and Mandalay Resort Group (NYSE:MBG), as well as slot makers International Game Technology (NYSE:IGT) and WMS Industries (NYSE:WMS). In fact, last week's controversial compact between California Gov. Arnold Schwarzenegger and the Lytton Band of Pomo Indians to place a six-to-eight story, 600,000-square-foot casino with 4,000 to 5,000 slots in an urban area near San Francisco (see California's Casino Boom) has already been cut in half due to such concerns, and any decision has been delayed to at least the end of the year.

Now I'll be the first to venture that Harrah's claim as a leader in responsible gaming is true: Harrah's has a page on its website dedicated to help address social issues created by the presence of its casinos, namely problem gambling and underage gambling. But I still find it amazing that a company known and praised for its marketing prowess and industry leadership in information technology could commit such a boneheaded mistake. And while it may be an isolated incident, such an error will hardly ease any reservations one may have about the expansion of gaming.

For more Fool coverage on casinos, see:

Fool contributor Jeff Hwang owns shares of International Game Technology.

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