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Sun International faces regulatory roadblock on Peermont acquisition
The Competition Commission has recommended the Competition Tribunal block Sun International Limited’s (SISA) proposed acquisition of Peermont Holdings, as both companies operate in the casino gambling sector.
Source: unsplash.com
The Commission found that the proposed merger is likely to substantially prevent and/or lessen competition in the provision of casino (gambling) services in South Africa and in central Gauteng.
The merger significantly changes the structure of the national market by reducing the number of national casino operators from three to two.
Post-merger, 92% of the casinos operating in South Africa would be owned by only two firms, further increasing concentration in an already highly concentrated market.
Limited availability of casino licences
New entry into this market is unlikely due to the limited availability of casino licences.
In central Gauteng in particular, there are no unallocated casino licenses.
In addition, the merger will result in SISA owning and operating several casinos located in prime locations, which will give SISA a significant competitive advantage over its competitors.
Dampening competitive rivalry
In central Gauteng, the merger will reduce the number of casino operators from three to two and will remove Emperors Palace (currently owned by Peermont) as an effective competitor to SISA’s Time Square and Carnival City, as well as Tsogo Sun’s Montecasino.
This may result in SISA being able to retain a greater proportion of bets staked by gamblers as a result of weakened competitive constraints, thus dampening competitive rivalry in central Gauteng.
The Commission is also concerned that the merger is likely to result in the two remaining casino operators (SISA and Tsogo Sun) in central Gauteng behaving cooperatively instead of competing with each other.
For instance, the two remaining casino operators in central Gauteng can reduce the level of winnings and reduce promotions in the knowledge that there will be no competitive response.
Having considered the remedies tendered by the merging parties, the Commission is of the view that the remedies do not adequately restore competition that would be lost due to the proposed merger.
The Tribunal will make a final decision on the matter.
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