UK CMA not to investigate theory that Playtech might favor merged Ladbrokes/Coral business

The UK Competition & Markets Authority (CMA) today published an Issues Statement as a part of its review of the anticipated merger between Ladbrokes PLC (LON:LAD) and certain businesses of Gala Coral Group Limited.

Several paragraphs of the statement are dedicated to Playtech PLC (LON:PTEC), which provides Ladbrokes and Gala Coral, as well as other betting and gaming operators with betting and gaming software and services.

A third party has raised the concern that, as a result of its increased shareholding in Ladbrokes and the plans to raise its stake in the Merged Entity, Playtech might have an incentive to favor the Merged Entity in the supply of betting and gaming software and services at the expense of other betting and gaming operators.

The CMA says in its statement that it will not investigate this theory further.

“We are not currently minded to investigate this theory of harm further, as it would appear that, irrespective of whether Playtech may have the ability to completely or partially foreclose other betting and gaming operators, Playtech currently has no incentive to do so and its increased shareholding in Ladbrokes does not appear likely to change its incentives.

More specifically, based on the increased dividend revenue Playtech would achieve from an increased shareholding in Ladbrokes and the revenue it achieves from UK- based licensees other than the Parties, it would appear unlikely that an increased shareholding (and increased dividends flowing from that shareholding) would provide Playtech with a sufficient incentive to engage in a foreclosure strategy in favour of the Merged Entity and to the detriment of its other UK customers.”

Pending the anticipated merger completion, Playtech is about to receive £75 million, under a marketing services agreement between PTTS and the Ladbrokes Group dated March 2013.

To view the full Issues Statement from the CMA, click here.

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