Harrah's Entertainment Inc / London Clubs International plc

OFT closed case: Anticipated acquisition by Harrah's Entertainment Inc of London Clubs International plc.

Affected market: Leisure

No. ME/2629/06

The OFT’s decision on reference under section 33 of the Enterprise Act given on 2 October 2006. Full text of decision published 5 October 2006.

PARTIES

Harrah’s Entertainment Inc. (Harrah) is a US based company which owns and manages 37 casinos, primarily in the US (but none in Europe). Although it is not currently active in the UK, Harrah has expressed an interest in acquiring one or more of the forthcoming licences for a number of regional casinos in the UK.

London Clubs International plc (LCI) is listed on the London Stock Exchange and active in the gambling sector. In the UK, it owns and operates six casinos, mainly in London and has secured licenses to operate a further six casinos throughout the UK. LCI also has casinos in Egypt, South Africa and Lebanon. LCI’s UK turnover in the financial year to 31 March 2006 was £79.2 million.

TRANSACTION

On 31 August 2006, Harrah announced that it proposed to acquire the entire issued and to be issued share capital of LCI by way of a recommended cash offer. Harrah submitted a Merger Notice on 4 September 2006; the 20-working day statutory deadline expires on 2 October 2006.

JURISDICTION

As a result of this transaction Harrah and LCI will cease to be distinct. The UK turnover of LCI 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 arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

FRAME OF REFERENCE

Harrah and LCI are active in the leisure sector. Both companies own and operate casinos on an international basis. 

The then Monopolies and Mergers Commission (MMC) noted in its 1998 report (see [Note 1]) that different forms of gambling such as betting, bingo or casinos and other leisure activities are part of the leisure sector but concluded that betting was not constrained by other forms of gambling. In 1997, the MMC had concluded that ‘casino gaming was a separate market from other forms of gambling and that London was a separate market from other parts of the UK,’ (see [Note 2]) It was also noted that London casinos could be segmented on the basis of factors such as location, quality of facilities and drop per head. (see [Note 3]) However, as any conclusion on this point does not impact on the competition assessment of this case, it is not necessary to conclude on the appropriate product or geographic scope of the frame of reference.

THIRD PARTY VIEWS

No competition concerns were raised by third parties during the OFT’s investigation.

ASSESSMENT

The merging parties own and operate casinos in various locations internationally. There is no overlap between the parties in the UK as Harrah does not own or operate any casinos in the UK. As such the merger does not alter the competitive structure in the UK in the ownership and operation of casinos. 

The transaction does not raise any vertical competition issues. Third parties did not raise any competition concerns.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

  1. MMC report on the merger between Ladbroke Group plc and the Coral betting business, September 1998 (Cm 4030).
  2. MMC report on the merger between London Clubs International plc and Capital Corporation plc, August 1997 (Cm 3721).
  3. 'Drop' is the term for money exchanged for chips.

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