Completed acquisition by Ladbrokes plc, through North West Bookmakers Ltd, of McCartan Bookmakers

Affected market: Licensed betting offices

No. ME/3627/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 1 August 2008. Full text of decision published 6 August 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

North West Bookmakers Limited is a subsidiary of Ladbrokes plc (Ladbrokes). Ladbrokes operates retail betting shops in the UK, the Channel Islands, Ireland and Belgium. Ladbrokes operates 2,170 licensed betting offices (LBOs) in the UK, offering a selection of betting services for sporting and non-sporting related activities. Ladbrokes also offers remote betting services through its telephone and internet services.

McCartan Bookmakers (McCartan) is a small family run business, operating six licensed betting offices in West Belfast, which together generated turnover (based on gross win) of £[ ] (for the 12 months to 31 December 2007) attributable to over-the-counter revenues, with a further £[ ] from poker machines. McCartan has no telephone or Internet betting business.

TRANSACTION

Ladbrokes acquired the business and relevant operating assets of McCartan through an Asset Purchase Agreement on 1 April 2008 and notified the transaction to the OFT on 18 April 2008.

The (extended) administrative deadline for the OFT's decision in this case is 1 August 2008, and the extended statutory deadline is 1 September 2008.

JURISDICTION

As a result of this transaction Ladbrokes and McCartan will cease to be distinct. The parties overlap in the supply of off-course betting services, and together Ladbrokes and McCartans will account for over 25 per cent by gross win of all off-course betting services in the UK. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is therefore met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

Third party comments received by the OFT were mixed. Two out of four competitors raised concerns, however these were not merger specific and related to the size of Ladbrokes and its ability to fund promotions. Other third parties were unconcerned.

ASSESSMENT
 
The parties overlap in the supply of off-course betting services in the UK. In accordance with previous cases, the OFT has considered the effect on competition at national, regional and local levels. At both national and regional levels, Ladbrokes' share, on the basis of shop count, remains less than 25 per cent, with increments of less than one and two per cent respectively. Ladbrokes will also continue to face competition from other large chains (one with a higher national share) at the national and regional levels, and from a substantial number of small chains and independents at the regional level. Consequently the OFT does not have any competition concerns regarding national and regional competition.

With regards to local competition, none of the acquisitions in this case involved instances where the parties' LBOs overlapped within the 400 metre and 800 metre radii established previously by the MMC in Ladbrokes/Coral. However, some of the evidence in this case indicates that, within Northern Ireland in particular, there is potential for LBOs that are further than 800 metres apart to provide some competitive constraint on each other. In addition, other survey evidence presented to the OFT shows that the percentage of customers travelling less than 800 metres to an LBO was below the 80 per cent mark normally considered by the OFT to delineate a local market. The OFT therefore considered the specific effect on local competition of each location, using the 400 and 800 metre radii as a starting point for analysis rather than any form of safe harbour.

In this case, the OFT did not consider that the available evidence regarding the acquisition of LBOs on Mountview Street, Oldpark Road, Falls Road, Shaws Road, and Andersonstown Road indicated competition concerns.

However, in the case of Norglen Gardens, the presence of a Ladbrokes LBO (Whiterock Road) just outside the 800 metre radius, in particular the fact that Norglen Gardens was the geographically closest LBO to the Whiterock Road LBO, indicated the potential for a reduction in competition. The data obtained from a customer survey at both sites indicated that there might be some competition between the two stores and that a number of customers (between [20–30] percent) from each would regard the other as the second choice in the event that their chosen LBO were to close. However, there was little evidence to suggest a significant level of competition existing pre-merger, given the propensity of customers to stick to the LBO seen as servicing their housing estate, the absence of any competitor monitoring by the Norglen Gardens LBO and its lack of a competitive response to the takeover by Ladbrokes of the Whiterock Road LBO. The presence of two Sean Graham LBOs in the area will continue to provide limited competition materially to the same level to that which existed pre-merger. As such, any reduction in competition would be limited in scope.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or 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 22(1) of the Act.

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