72/12    20 August 2012

The Office of Fair Trading (OFT) today referred the Rank Group PLC's (Rank's) anticipated acquisition of Gala Casinos Limited (Gala) to the Competition Commission for further investigation, due to the OFT's concerns 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.

The OFT is concerned that the merger would reduce competition both at a national level and in nine local areas. A reduction in competition in the casino sector could result 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.

NOTES

1. 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. 
2. The Reference Test - the OFT has a duty to make a reference to the Competition Commission if the OFT 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 and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. 
3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 
4. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it.
5. The Competition Commission may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
6. The text of this decision will be placed in the mergers section as soon as is reasonably practicable.