Affected market: Gambling and betting
The OFT’s decision on reference under section 22 given on 10 January 2006. Full text of decision published on 20 January 2006.
Gala Group (Gala) is principally active in the UK gambling industry through the ownership and management of bingo clubs and casinos and the operation of various types of gaming machines on these premises. Gala is controlled by three private equity firms, namely Candover, Cinven and Permira.
Coral Eurobet Group (Coral) operates licensed betting offices (LBOs) in the UK, offering off course betting on sporting and non-sporting events; it also has a telephone betting operation, greyhound racing stadia and an online betting business, online casinos and online gaming and poker facilities. Eurobet.com offers betting opportunities on a range of international sports events and operates an international online casino, gaming website and online poker site. Coral’s UK turnover for the financial year ended 30 September 2004 was £5,360 million.
On 27 October 2005, Gala, through its wholly-owned subsidiary, Gala Group Finance Limited, and a series of acquisition vehicles acquired the entire share capital of Coral. The administrative deadline in this case expires on 16 February 2006.
As a result of this transaction Coral and each of Cinven, Permira and Candover have ceased to be distinct. The UK turnover of Coral exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.
The parties have submitted that there is no horizontal overlap between the activities of Gala (including those of Cinven, Permira and Candover) and Coral, since Gala is active in the ownership and management of bingo clubs and casinos and Coral operates LBOs and provides online betting/gambling facilities (see [Note 1]). The Competition Commission (CC) has previously concluded that bingo and betting on horse racing are not within the relevant product market for casinos (see [Note 2]). More recently the CC noted that the betting industry is part of the leisure sector, which includes other forms of gambling, but concluded that betting is best seen as a separate activity and as a separate market, and that betting is not closely constrained by other forms of gambling (such as casinos and bingo) or other leisure activities (see [Note 3]). Evidence available to the OFT in recent mergers in the sector indicates that this conclusion remains valid (see [Note 4]).
In view of the above, and given the fact that prior to this acquisition Gala was not active in LBO's, there is no horizontal overlap between the parties in this regard.
Coral is active in the operation of online betting/gambling facilities; turnover attributable to this part of the business constituted approximately seven per cent of Coral's total turnover. However, there is no horizontal overlap in the operation of online betting/gambling facilities because in September 2003, Gala sold its on-line gaming business, which is now run by Enodoc (owned by St. Minver PLC) (see [Note 5]).
We have considered whether the overlap between Coral's online casinos (and other online activities) and Gala’s real casinos and bingo halls could raise competition concerns. The parties were unable to provide documentary evidence of the nature of the competitive interaction between these two segments. However, according to the parties there are a number of factors which indicate that supply and demand side substitution are limited.
In terms of demand side substitution, in order to engage in online gambling a customer must have access to a PC and the internet and is required to set up a credit account. Access to real casinos generally requires a customer to apply for membership in advance (in the case of Gala, 24 hours in advance), or to be a guest of a member. Secondly, real casinos offer a package of services in a social setting with a particular atmosphere, whereas online gambling is generally a solitary activity. In terms of supply side substitution, opening a real casino requires substantial capital and resources in order to invest in premises, licences, etc. By contrast, the provision of online gambling facilities requires lower levels of investment and different expertise, and the proliferation of undertakings active in the provision of online gambling facilities is indicative of the low barriers to entry in this market.
In light of the above, the combination of Coral’s relatively small presence in the online segment (see [Note 6]) and Gala’s presence in real bingo halls and casinos does not raise competition concerns.
Both parties provide gaming machines at their respective premises. The European Commission considered that gaming machines may constitute a separate product market, but may also be regarded as part of the gambling package on offer at the particular location where they are found, i.e. casinos, bingo clubs, arcades, pubs, LBOs, etc. (see [Note 7]). However, in this case there is no need to conclude on the appropriate market definition, since competition concerns do not arise in any event. According to independent market research, there are around 250,000 gaming machines in the UK (see [Note 8]); the parties estimate that this number is considerably higher. The parties’ combined share of all gaming machines in the UK is in the region of four to six per cent, depending on which total number is used.
There are no vertical links between the parties. There is also no risk of any conglomerate effects arising. Third parties did not raise any concerns. Therefore the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
- The context of the wider leisure sector, Permira has a controlling interest in Holmes Place, a UK health and fitness club, and Travelodge, a travel accommodation business.
- MMC on the merger between London Clubs International plc and Capital Corporation PLC, August 1997 (Cm 3721).
- MMC re on the merger between Ladbroke Group PLC and the Coral betting business, September 1998 (Cm 4030).
- OFT decin of 2 August 2005 on the completed acquisition by William Hill plc of the licensed betting office business of Stanley plc and OFT decision of 5 October 2005 on the completed acquisition by Hilton Group plc through Ladbroke Racing (Reading) Limited of Jack Brown (Bookmaker) Limited.
- As part of the s, Enodoc acquired the license to use the Gala name and Gala has limited rights to protect its trade mark.
- The parties have esed that in 2004 the total worldwide revenue for online betting and gambling amounted to US$8.2 billion; Coral's estimated turnover in the online casino segment was around £21 million; its total online gambling activities accounted for around £408 million.
- Case No COMP/M.3109 - Caer/Cinven/Gala, 14 March 2003.
- Source: Key Note Market Rrt 2004, Betting and Gaming, p.22.