On 31 March 2020 the CMA cleared Flutter Entertainment plc’s (“Flutter”) merger with The Stars Group Inc (“Stars”). The parties both operate in the UK’s thriving online gambling industry and the full decision published on 21 April 2020 sheds light on the CMA’s present view of the competitive landscape of the sector in the UK.
The CMA looked at the merger’s impact in various areas of the sector in which the parties overlapped or were otherwise linked before concluding that the merger would not raise any concerns. In particular, the CMA considered there would not be a substantial lessening of competition on services for online sportsbook betting, online poker, odds comparison, matched betting and betting exchange data.
Notable in the decision are the CMA’s “frames of reference”, segments of the market where it carries out its assessment of the effects of the merger, where the CMA’s approach was largely in keeping with its approach in previous decisions. In particular:
- Online betting distinct from online gaming. The CMA found it appropriate to retain the distinction between online betting (gambling on the outcome of events, principally sports) and online gaming (gambling based on digitised versions of casino or other games). The CMA maintained its finding that consumers did not treat online betting and online gaming as substitutable, echoing its earlier findings in Stars/SkyBet, GVC/LadbrokesCoral, and Paddy Power/Betfair.
- Online exchange betting distinct from online sportsbook betting. Consistently with Paddy Power/Betfair, the CMA retained its view that various factors, such as the professionalism or sophistication of consumers using exchanges, distinguished exchange betting from sportsbook betting.
- Online poker distinct from other online games. The CMA considered various demand and supply side evidence and found, in particular, in view of consumers’ preferences for different types of games and the specific knowledge and skills required, that poker was distinct from other games, consistent with its findings in Stars/SkyBet.
- Odds comparison websites distinct from matched betting websites. Also consistent with Stars/SkyBet, the CMA considered odds comparison websites had specific characteristics, such as being free-to-use and displaying odds and promotions from a wide range of bookmakers, distinguishing them from matched betting websites, which are subscription-based services offering betters low-risk betting opportunities.
- Betting exchange data. The CMA assessed the merger on the basis of a separate frame of reference for the supply of betting exchange data, as it had done in Paddy Power/Betfair. In particular, the CMA assessed whether the merged entity could foreclose competing online bookmakers in relation to the supply of Flutter’s Betfair exchange data.
The CMA relied, as is its practice in mergers in this sector, on evidence from the Gambling Commission when assessing the effects of the merger. In particular, the CMA considered estimated shares of supply based on the Gambling Commission’s Gross Gambling Yield data, as in previous assessments in Stars/SkyBet and GVC/Ladbrokes Coral.
The CMA was satisfied that post-merger there would remain a number of other large players including bet365, GVC/Ladbrokes Coral, William Hill and 888, as well as smaller operators, such as Betway, Betfred, BetVictor, which would continue to compete strongly with the merged entity. The CMA also noted that multiple accounts held by online betting customers enabled them to switch between providers with ease and there was a strong tendency for innovations to be replicated among competitors, which were considered further factors pointing towards competitiveness in the industry.
The gambling sector has been characterised by a series of consolidating transactions in recent years. This desire for increasing scale has been prompted, in particular, by increasing costs of taxation and regulatory compliance. Covid-19 is likely to provide another catalyst for further consolidation and the CMA’s analysis provides a useful guide to how future transactions will be assessed.