Published on November 24th, 2005 5:42 pm EST

Why is Empire Poker suing Party Poker? What happened to cause takeover talks between Party Poker and Empire Poker to break down so quickly?

First off, let's start from the beginning. Empire Poker licenses Party Poker's software, so that in exchange for a hefty fee, Empire Poker can utilize Party Poker's network. When an Empire Poker player logs in, they are logging in to Party Poker's network, but under an Empire Poker "skin."

Everything seemed to be fine. Empire Poker and Party Poker were both doing tremendously, both companies went public. Sportingbet was in talks to buy out Empire Poker for something in the area of 800 million pounds, but pulled out of the deal. Why did they pull out? It is my guess that they reviewed the language of Party Poker's agreement with Empire Poker, and didn't like what they saw. My guess is that Party Poker has language in their agreement with Empire Poker and any other affiliate that says, we can terminate our agreement at a moment's notice. So then why would Sportingbet want to buy Empire Poker if at a moment's notice, Party Poker could pull the plug?

So Sportingbet calls off the deal. A few months later, Party Poker announces that it is indeed pulling the plug on all of its skins. Sorry everyone, Party Poker says, but you can't use our network anymore. According to various reports, people report that these skins become ghost towns, and people are moving back to the mothership, Party Poker. Why? Cause that's where the action is.

The question is, why would Party Poker do this? In my opinion, it was to combat an epidemic which was eroding their business, and that was rakeback. Party Poker was actively trying to stifle the practise of rakeback, and their skins weren't doing all they could to stop it. So what was Party's response? If you aren't going to abide by our rules, then you can't use our network. Party Poker has an anti-rakeback program in place, and they (correctly) figured that people would come back to Party Poker if the skins were terminated.

After this happened (and after Empire Poker's stock was trampled), Party Poker announced that they were in negotiations to purchase Empire Poker. Empire Poker still had a user base, even though it was dwindling. The company though was still worth something. According to reports I have heard, Party Poker offered 60p per share to purchase Empire Poker, and Empire Poker balked at this deal.

So the deal broke down, and Empire Poker sued Party Poker. My guess is that Party Poker is bulletproof in this dispute, and has ample language in its contracts with its skins to allow for them to terminate agreements whereever and whenever they want. My guess is that Empire Poker is probably out of luck.


Filed Under: Poker Legal Issues

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