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
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
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
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
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)
- 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.