OFT Mulls Local Betting Shop Divestments in Betfred/Tote Merger
The OFT is considering an offer from Betfred to divest a betting shop in each of 25 local areas to resolve competition concerns raised by its acquisition of the Tote.
The parties overlap in the supply of betting and gaming services in the UK including through betting shops. At the time of the acquisition in July 2011, Betfred owned 840 betting shops while the Tote owned 517.
On 13 July 2011 the Secretary of State for Culture, Media and Sport sold Tote (Successor Company) Limited, formerly the Horserace Totalisator Board, to Lightcatch Limited, the parent company of Done Brothers (Cash Betting) Limited trading as Betfred.
An OFT investigation confirmed that the acquisition did not give rise to competition concerns at a national level in relation to betting shops, telephone betting or online gambling. In each of these channels, Betfred will continue to face competition from several competing bookmakers including from the three major bookmakers, William Hill, Ladbrokes and Coral.
Total UK betting shop turnover was around £2.7 billion in 2010 according to the Gambling Commission’s figures on gross gambling yield in betting shops, which is the amount retained by bookmakers after the payment of winnings but before the deduction of the costs of the operation.
The OFT’s investigation did, however, find that the completed transaction would result in a significant reduction in choice and competition for customers who choose to place bets at betting shops in certain towns and cities across the UK.
In these local areas, the investigation found that there was no, or limited, existing competition from alternative suppliers and little prospect for entry of new suppliers to compete with the merged company.
As a result of the OFT’s concerns, Betfred has offered to divest a betting shop in each of the 25 local areas where the transaction gives rise to competition concerns. In this case, given the reasonably small number of potential purchasers, the OFT requires an up-front buyer to be identified before accepting undertakings from Betfred to divest these betting shops.
The OFT is suspending its duty to refer the merger to the Competition Commission to consider this offer of undertakings. The form of the proposed divestments will be the subject of public consultation prior to the OFT accepting them.
The OFT further concluded that Betfred’s acquisition of the Tote’s seven year exclusive licence to provide pool betting services did not give rise to competition concerns.
Ali Nikpay, OFT Senior Director and Decision Maker in this case, said: “Betfred’s acquisition of the Tote did not raise competition concerns at a national level. However, there are some local areas where it has resulted in the elimination of or a significant reduction in choice of betting shops for consumers. The OFT is now considering Betfred’s offer to divest one of its betting shops in each area to remove the OFT’s competition concerns.”