Casino sales could be on the cards
18 Dec 2012
Rank Group plc (Rank) could be required to find buyers for a number of casinos, or be prohibited from buying these casinos, before its acquisition of Gala Casinos Limited (Gala) can go ahead, after the Competition Commission (CC) provisionally found that the merger could damage competition in six areas of the UK.
In May 2012, Rank announced a deal to acquire from Gala 23 casinos and three ‘cold’ licences (where the operator holds the right to operate a casino in a particular area but does not currently have an operating casino there). The Office of Fair Trading (OFT) referred the case to the CC in August, and although the deal subsequently lapsed, the parties have confirmed that they are still pursuing the merger. 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.
In its provisional findings published today, the CC has identified five areas where customers could suffer from a substantial lessening of competition (SLC) as a result of Rank taking ownership of previously competing casinos. The five areas are Aberdeen, Liverpool/New Brighton, Stockton-on-Tees, Bristol and Cardiff. In addition the CC has identified an SLC in one area (Edinburgh) where Rank holds a cold licence which would likely be developed into a competing casino in the absence of the merger.
The CC has also found that casinos compete mainly at a local level for customers, particularly on elements such as customer service and promotions.
As well as the provisional findings, the CC has published a notice of possible remedies, which sets out ways in which the CC might address the loss of competition in the areas concerned. The options identified include requiring Rank to find buyers for casinos in the five areas identified—as well as for the Edinburgh cold licence—before being allowed to complete the deal. The notice also includes the possibility of the casinos in affected areas being excluded from the transaction or the whole deal being blocked.
Chairman of the Rank/Gala Inquiry Group and CC Deputy Chairman, Professor Martin Cave said:
‘We have found that casinos vary their offer in response to local competitive conditions and while there is limited scope to compete on price, casinos try to attract customers through customer service, promotions, events and the range of games available.
‘Our concern is that with two of the national players merging, this will leave a number of areas with much reduced competition where casino customers could consequently lose out through a poorer casino offer.
‘We are now going to look at the most effective way to preserve competition in these areas and whether this can be achieved in a way that allows an amended version of the deal to go ahead.’
The CC is expected to publish its final report by 20 February 2013.
Any interested party is invited to respond to the provisional findings by 11 January 2013 and to the notice of possible remedies by 7 January 2013. To submit evidence, please email Rank-Gala@cc.gsi.gov.uk or write to:
Inquiry Manager
Rank/Gala inquiry
Competition Commission
Victoria House
Southampton Row
LONDON
WC1B 4AD
Notes for editors
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.
2. The members of the Rank/Gala Inquiry Group are: Professor Martin Cave (CC Deputy Chairman and Chairman of the Inquiry Group), Professor John Cubbin, Peter Jones and Richard Taylor.
3. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.
4. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
5. Further information on this inquiry, including the terms of reference and other key documents, as well as on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from the CC website at: www.competition-commission.org.uk.
6. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.
