OFFICE OF THE ATTORNEY GENERAL . STATE OF TEXAS 

JOHN CORNYN 

January 14,2002 

The Honorable Eddie Lucia, Jr. 

Chair, Committee on Border Affairs 

Texas State Senate 

P.O. Box 12068 

Austin, Texas 78711 

Opinion No. JC-0450 

Re: Whether section 2001.556 ofthe Occupations 

Code prohibits a revenue-share leasing agreement 

between a manufacturer of bingo equipment and 

a distributor of bingo equipment (RQ-0417-JC) 

Dear Senator Lucia: 

You ask whether section 2001.556 of the Occupations Code prohibits a revenue-share leasing 

agreement between a manufacturer of bingo equipment and a distributor of bingo equipment.’ 

Section 2001.556 prohibits price fixing by manufacturers, distributors, and suppliers of bingo 

equipment and provides that the price of bingo equipment “in the competitive marketplace shall be 

established by the manufacturer, distributor, or supplier and may not be established in concert with 

another manufacturer, distributor, or supplier.” TEX. Oct. CODE ANN. 5 2001.556(b) (Vernon 2002). 

If under a revenue-share leasing agreement the manufacturer controls the price the distributor 

charges to bingo-game conductors for leased equipment, the agreement violates section 2001.556. 

Section 2001.556, a provision of the Bingo Enabling Act, id. ch. 2001, provides: 

(a) A manufacturer, distributor, or supplier may not by express or 

implied agreement with another manufacturer or distributor fix the 

price at which bingo equipment or supplies used or intended to be 

used in connection with bingo conducted under this chapter may be 

sold. 

(b) The price of bingo supplies and equipment in the competitive 

marketplace shall be established by the manufacturer, distributor, or 

supplier and may not be established in concert with another 

manufacturer, distributor, or supplier. 

‘Letter from Honorable Eddie Lucia, Jr., Chair, Committee on Border Affairs, Texas State Senate, to Honorable 

John Comyn, Texas Attorney General (Aug. 13,200l) (on file with Opinion Committee) [hereinafter Request Letter]. 
The Honorable Eddie Lucia, Jr. - Page 2 (JC-0450) 

Id. fj 2001.556. 

This office addressed this provision at length in Attorney General Opinion JC-0269, in which 

we were asked whether under section 2001.556 a manufacturer of bingo equipment and a distributor 

of bingo equipment could agree as to the price at which the distributor would sell bingo equipment 

to a charity. We were also asked whether our answer would change if the bingo equipment were 

leased rather than sold. 

Relying on the express language of the statute, particularly the wording of subsection (a) of 

section 2001.556, and the overarching purpose of the Bingo Enabling Act to regulate relationships 

between interests in the bingo industry, we concluded that the statute prohibits a vertical price-fixing 

agreement between a manufacturer and a distributor as well as horizontal price-fixing agreements 

between two or more manufacturers or between two or more distributors. See Tex. Att’y Gen. Op. 

No. JC-0296 (2000) at 3-6; see also id. at 5 (“section 2001.556 appears to have a different purpose 

than antitrust law . . . . [I]t appears that this provision is concerned less with free enterprise and 

competitive pricing than with strict regulation of manufacturers and distributors of bingo equipment 

and their relationships with persons who conduct bingo.“). We also concluded that section 2001.556 

does not distinguish between bingo-equipment sales and leases, relying particularly upon the broad 

language of subsection (b): 

[Slubsection (b) of [section 2001.5561 states more broadly that “[t]he 

price ofbingo supplies and equipment in the competitive marketplace 

shall be established by the manufacturer, distributor, or supplier and 

may not be established in concert with another manufacturer, 

distributor, or supplier.” TEX. Oct. CODE ANN. 5 2001.556(b) 

(Vernon 2000). Based on the broad language of subsection (b), 

which is not limited to sales, we conclude that the section 2001.556 

prohibition on price fixing applies to pricing of bingo equipment 

generally, and applies to the pricing of leases as well as sales. 

Id. at 6. Your request letter indicates that you disagree with our construction of section 2001.556, 

as do two briefs we received on this matter2 However, neither the request letter nor the briefs raise 

authorities we did not consider in our earlier opinion nor do they point to any subsequent 

developments in the law. Thus, rather than extensively reanalyze the statute or our prior opinion 

here, we simply apply section 2001.556 as we construed it in Attorney General Opinion JC-0296. 

*See Brief from Brian J. O’Toole, Kasling, O’Toole & Hemphill, L.L.P., to Honorable John Comyn, Texas 

Attorney General (Oct. 12, 2001) (on behalf of Trend Gaming Systems, L.L.C., and GameTech International); Brief 

from Jane Thompson, Thompson Allstate Bingo Supply, Inc., to Susan D. Gusky, Chair, Opinion Committee, Office 

of Texas Attorney General (Oct. 8,200l) (on file with Opinion Committee). 
The Honorable Eddie Lucia, Jr. - Page 3 (JC-0450) 

You ask about the legality under section 2001.556 of a “revenue-share leasing agreement” 

between a manufacturer and a distributor, which you describe as follows: 

Several manufacturers of bingo cardminding equipment 

operate through “revenue share” leasing arrangements with their 

distributors. Under a typical revenue share arrangement, a 

manufacturer leases equipment to the distributor in exchange for a 

percentage of the revenues that the distributor earns by subleasing the 

equipment. The distributor leases the equipment to conducting 

organizations at a particular bingo hall, in exchange for a portion of 

the revenues that the conductors receive from their bingo customers. 

The conductor retains the ability to set the prices to the end customer, 

which results in fluctuation of the conductor’s lease payment to the 

distributor, and in turn the distributor’s lease payment to the 

manufacturer. This arrangement reduces the financial risk to the 

charity in a lease with the distributor. 

Obviously, the amount of money the manufacturer receives is 

dependent on the amount of money the distributor receives from the 

conductors. Therefore, it is common in the industry for the 

manufacturer to have the right to approve the terms of the 

distributor’s contract with the conductors. If the distributor proposed 

to lease the equipment to conductors at, for example, 5% of the 

conductors’ revenue, the transaction likely would not make economic 

sense to the manufacturer and the manufacturer could refuse to lease 

equipment at that rate to its distributor. 

Request Letter, supra note 1, at 1 (emphasis added). Although you have not expressly stated 

whether these agreements control the price at which the distributor leases equipment to bingo-game 

conductors, we assume this to be the case, based on your statement that the manufacturer has “the 

right to approve the terms of the distributor’s contract with the conductors.” Id.; see also id. at 3-4 

(“[T]he revenue share lease necessarily requires some sort of agreement or approval from the 

manufacturer regarding the distributor’s contract with the conductor.“). As we understand it, under 

a revenue-share leasing agreement, the bingo-game conductor leases equipment from a distributor 

for a percentage of the conductor’s revenue rather than a fixed monetary price. This percentage 

share is in fact the price the distributor charges the conductor for the use of the equipment. An 

agreement that allows a manufacturer to dictate the percentage of revenue the distributor will take 

from the conductor, controls the price the conductor pays the distributor. If these agreements do 

indeed control the price at which the distributor leases equipment to bingo-game conductors, then 

they involve price fixing between a manufacturer and distributor and are prohibited by section 

2001.556. 
The Honorable Eddie Lucia, Jr. - Page 4 (JC-0450) 

You suggest that even if section 2001.556 applies to leases in general, it does not apply to 

revenue-share leases, citing section 2001.405 of the Occupations Code. That statute provides as 

follows: 

Bingo may not be conducted at a leased premises if rental 

under the lease is to be paid, in whole or part, on the basis of a 

percentage of the receipts or net proceeds derived from the operation 

of the game or by reference to the number of people attending a 

game. 

TEX. OCC. CODE ANN. 8 2001.405 (Vernon 2002). You argue that it is significant that “[tlhere is no 

similar prohibition against setting an equipment lease payment based on the amount of revenue 

derived from the use of the equipment,” because “[hlad the Legislature or the Lottery Commission 

sought to prevent percentage leases for cardminding equipment, certainly they could have done so.” 

Request Letter, supra note 1, at 3. We disagree. The legislature’s express prohibition of certain 

kinds of rental arrangements in section 2001.401, which essentially precludes the landlord of a game 

from having an economic stake in the game, has no bearing on what is and is not permissible in 

contractual relationships between bingo-equipment manufacturers and distributors under section 

2001.556. Moreover, we do not necessarily conclude that section 2001.556 prohibits all revenueshare leasing agreements, which would involve consideration of provisions beyond the scope of your 

request. See, e.g., TEX. OCC. CODE ANN. § 200 1.407 (Vernon 2002) (generally governing equipment 

and supply transactions). Rather, we conclude that section 2001.556 prohibits revenue-share leasing 

agreements in which the manufacturer and the distributor agree on the price that the distributor will 

charge the conductor. 

In sum, if under a revenue-share leasing agreement the manufacturer controls the price that 

the distributor charges to bingo-game conductors for leasing equipment, the agreement violates 

section 2001.556. As this office does not review or construe specific contracts,3 we answer your 

question generally and do not express any opinion with respect to any particular contract. 

3See, e.g., Tex. Att’y Gen. Op. Nos. JC-0032 (1999) at 4 (contract interpretation beyond purview ofthis office); 

DM-383 (1996) at 2 (interpretation of contract not appropriate function for opinion process); DM-192 (1992) at 10 

(“This office, in the exercise of its authority to issue legal opinions, does not construe contracts.“); JM-697 (1987) at 

6 (“review of contracts is not an appropriate function for the opinion process”). 
The Honorable Eddie Lucia, Jr. - Page 5 (JC-0450) 

SUMMARY 

A revenue-share leasing agreement violates section 2001.556 

of the Occupations Code, which precludes a bingo-equipment 

manufacturer, distributor, or supplier from agreeing to fix the price of 

bingo equipment, if under the agreement the manufacturer controls 

the price that the distributor charges to bingo-game conductors for 

leasing equipment. 

Attorney General of Texas 

HOWARD G. BALDWIN, JR. 

First Assistant Attorney General 

NANCY FULLER 

Deputy Attorney General - General Counsel 

SUSAN DENMON GUSKY 

Chair, Opinion Committee 

Mary R. Crouter 

Assistant Attorney General, Opinion Committee