Earlier this year, the UK gambling giant, Rank, made a bid to purchase its rival group, Gala Coral, which would make it the biggest casino operator in the United Kingdom. The deal was all but finalized and the only thing standing in the way of an official closure was final permission by the Competition Commission. Gala Coral made no indication throughout the process that it expected any problems from the commission, and so it must have been a hard blow for the group when it was told this week that the Office of Fair Trading had decided to refer the bid to the UK Competition Committee.
The Office of Fair Trading has raised concerns that merger between Rank and Gala Coral would significantly competition reduce in the British casino industry since the two groups are among the top three operators in the country. The third company is Genting, a Malaysian company.
The OFT said that if only two big companies controlled the British casino industry, the ultimate loser would be the consumer as the loss of competition ultimately leads to higher prices and worse deals for customers.
The senior director of OFT, Ali Nikpay, said that the merger between Rank and Gala Coral would represent a major consolidation which would probably reduce competition, locally and nationally. He also said that the high barriers to entry and expansion in the casino sector by third parties, meant that the loss of competition could be potentially irreversible.
Rank has offered a number of concessions, such as the divestment of a number of casinos in certain areas around Britain, in return for the OFT to reverse its decision about sending the case to the UK Competition Commission.
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