Affected market: Leisure
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.
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.
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.
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
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.
This merger will therefore not be referred to the Competition Commission
under section 33(1) of the Act.
- MMC report on the merger between Ladbroke Group plc and the Coral
betting business, September 1998 (Cm 4030).
- MMC report on the merger between London Clubs International plc and
Capital Corporation plc, August 1997 (Cm 3721).
- 'Drop' is the term for money exchanged for chips.