OFT Refers Casino Merger to Competition Commission

Jack Humphrey, Regulatory journalist
August 21, 2012 /

The Office of Fair Trading (OFT) yesterday referred the Rank Group PLC’s (Rank’s) impending takeover of Gala Casinos Limited (Gala) to the Competition Commission for further investigation, amid concerns that the merger will substantially reduce competition in the casino sector.

The OFT’s investigation found that Rank and Gala are two of the three large national casino operators in the UK. Following the merger, there would be only two large national casino operators, Rank and Genting.

Rank operates 34 casinos in the United Kingdom under brands including Grosvenor and GCasino. The Gala business being acquired operates 23 casinos, most of which currently operate under the Gala brand. In order to operate a casino it is necessary to hold a licence granted under the Gambling Act 1968 or the Gambling Act 2005.

The OFT is concerned that the merger would reduce competition both at a national level and in nine local areas, resulting in a worse deal for consumers.

Additionally, the OFT found that there are high barriers to entry and expansion in the casino sector due, among other things, to the licensing regime, which would severely limit the ability of third parties to enter or expand to replace the loss of competition caused by the merger.

Given the realistic prospect of this merger resulting in a substantial lessening of competition, the OFT considers it appropriate to refer the merger to the Competition Commission for an in-depth review.

Rank offered to provide undertakings in lieu of reference to the Competition Commission, including the divestment of casinos in a number of local areas. The OFT welcomes the parties’ willingness to resolve the concerns in local areas, however, the undertakings were not considered sufficiently clear-cut to address all of the concerns raised by this merger.

Ali Nikpay, OFT Senior Director and Decision Maker in this case said: “Rank and Gala are two of only three large national casino operators in the UK. This merger would represent a major consolidation which could be expected to reduce competition, both locally and nationally. The high barriers to entry and expansion in the casino sector mean the loss of competition could potentially be irreversible.

“As such, we believe it is appropriate that the Competition Commission reviews this merger in detail to ensure that the interests of consumers are protected.”

The Competition Commission is expected to report by 3 February 2013.

 

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