1
Anticipated merger of Flutter Entertainment plc and
The Stars Group Inc.
Decision on relevant merger situation and
substantial lessening of competition
ME/6865/19
The CMA’s decision on reference under section 33(1) of the Enterprise Act 2002
given on 31 March 2020. Full text of the decision published on 21 April 2020.
Please note that [
] indicates figures or text which have been deleted or
replaced in ranges at the request of the parties or third parties for reasons of
commercial confidentiality.
SUMMARY
1. The proposed transaction (the Merger) relates to the purchase by Flutter
Entertainment plc (Flutter) of the whole of the issued share capital of The
Stars Group Inc. (Stars). Flutter and Stars are together referred to as the
Parties and, for statements referring to the future, the Merged Entity.
2. The Competition and Markets Authority (CMA) believes that it is or may be the
case that each of Flutter and Stars is an enterprise; that these enterprises will
cease to be distinct as a result of the Merger; and that the turnover test is met.
Accordingly, arrangements are in progress or in contemplation which, if
carried into effect, will result in the creation of a relevant merger situation.
3. The Parties overlap in the supply of online gambling services to customers in
the UK. Gambling services broadly fall into two categories: ‘betting’ (which
involves customers gambling on the outcome of various events such as horse
racing, greyhound races, football, etc), and ‘gaming’ (which involves
customers gambling on digitised versions of casino games or other games
such as bingo and poker). The Parties both have brands that are active in
sportsbook betting, where bets are made between a customer and a
bookmaker, where the customer ‘backs’ (bets that an outcome will occur) and
2
the bookmaker ‘lays’ (bets that the outcome will not occur). In addition, they
both have brands active in poker, casino and bingo.
4. Flutter owns the Paddy Power and Betfair brands through which it provides
online gambling services. Paddy Power also provides gambling services
through its retail estate.
5. Stars provides gambling services in the UK primarily through the Sky Bet
brand, in addition to several online gaming brands, including PokerStars, Sky
Poker and Sky Casino, among others. Stars only provides these services
online.
6. In addition:
Stars operates an odds comparison website, Oddschecker, which
displays the odds and promotions offered by a wide range of operators
across multiple sports and events;
Flutter operates a betting exchange via the Betfair brand, Betfair
Exchange, and supplies betting exchange data to other gambling
operators. Betfair Exchange also has affiliate partnerships with matched
betting websites.
1
7. The CMA has assessed the impact of the Merger in relation to the following
frames of reference:
The supply of online sportsbook betting services in the UK;
The supply of online poker services in the UK, a specialist subset of
gaming activities;
The supply of odds comparison services in the UK;
The supply of betting exchange data in the UK; and
The supply of matched betting services in the UK.
8. The Parties overlap in the supply of online betting and gaming services. In its
competitive assessment, the CMA considered whether, as a result of
horizontal unilateral effects, the Merger may lead to a substantial lessening of
competition (SLC), focusing in particular on effects in the supply of online
sportsbook betting and online poker services in the UK.
1
Matched betting websites are subscription-based websites that allow customers to place ‘matched bets’, ie bets
with different bookmakers on both outcomes of an event such that they cannot lose (see paragraph 63).
3
9. The Parties also operate at different levels of the supply chain. Stars provides
odds comparison services to competitors who are listed on Oddschecker’s
platform, allowing customers to see the odds and promotions offered by a
range of competing bookmakers. Flutter supplies betting exchange data to
competing online bookmakers to assist them with their pricing, as well as to
matched betting websites who in turn supply matched betting services to UK
customers. The CMA therefore considered whether, as a result of non-
horizontal effects in the supply of odds comparison services, exchange data
and matched betting services, the Merged Entity would have the ability and
incentive to raise its prices, refuse to supply or reduce the quality of its
services (ie engage in foreclosure) to harm rival online bookmakers or
matched betting websites.
10. In relation to the supply of online betting services, the Merged Entity would
have a share of supply of [30-40]% with an increment of [10-20]%. The CMA
considers that the Parties are one of a number of close competitors to one
another.
11. However, the CMA found, based on a broad range of evidence including the
Parties’ regular customer surveys, internal documents and third party
evidence, that there are a number of players in the market who would
continue to act as a strong constraint on the Merged Entity. In particular, the
CMA considers that, post-Merger, three prominent online sportsbook
operators, bet365, GVC/Ladbrokes Coral and William Hill, will continue to
compete strongly with the Merged Entity in terms of odds, promotions and
product offering. In addition, the CMA found that there are a number of
operators with a smaller presence in the UK (including Betway, Betfred,
BetVictor and others) who would provide a degree of constraint on the Merged
Entity.
12. Overall, the CMA found that online betting customers tend to have multiple
accounts with different operators, can switch between them easily and that
innovations are closely monitored and replicated amongst online sportsbook
operators to attract and retain customers.
13. In light of the above evidence, the CMA does not believe that the Merger
gives rise to a realistic prospect of an SLC as a result of horizontal unilateral
effects in the supply of online betting services.
14. In relation to the supply of online poker services, the Merged Entity would
have a high share of supply, with a small increment. The CMA considers that
Flutter has a minor presence in this market and that, based on evidence from
the Parties and third parties, Flutter does not compete closely with Stars’
4
primary poker brand, PokerStars.
2
Therefore, the CMA considers that the
Parties do not currently exercise a particularly strong competitive constraint on
one another, and that the Merged Entity would continue to face constraints
from a number of alternative providers of online poker, including
GVC/Ladbrokes Coral and 888. Accordingly, the CMA does not believe that
the Merger gives rise to a realistic prospect of an SLC as a result of horizontal
unilateral effects in the supply of online poker services.
15. In relation to the supply of odds comparison services in the UK, the CMA
considers that Stars’ Oddschecker has a degree of market power in the
provision of odds comparison services. The CMA found that Stars may have
the ability to harm competing online bookmakers by removing them from the
Oddschecker platform, raising fees charged to be on the platform or
displaying them less prominently than the Parties’ brands. However, the CMA
concluded that the Merged Entity will have no incentive to engage in this
strategy post-Merger because the potential increase in revenue resulting from
any customer diversion gained as a result of such a strategy would be
outweighed by the risk of a material loss of consumer traffic and associated
revenues made by Oddschecker. Accordingly, the CMA does not believe that
the Merger gives rise to a realistic prospect of an SLC as a result of vertical
effects in the supply of odds comparison services.
16. In relation to the supply of betting exchange data through Flutter’s Betfair
Exchange, the CMA found that the Merged Entity will have no ability to
foreclose competing online bookmakers either by refusing to supply Betfair’s
exchange data (total foreclosure), or by raising the price of such data (partial
foreclosure) because there are alternative sources of information available to
betting operators and, at present, very few bookmakers purchase Betfair’s
exchange data. Accordingly, the CMA does not believe that the Merger gives
rise to a realistic prospect of an SLC as a result of vertical effects in the supply
of betting exchange data.
17. In relation to the supply of matched betting services, the CMA considered
whether the Merged Entity would have the ability or incentive to foreclose
matched betting websites, either by terminating Betfair Exchange’s
relationship with them or by negotiating the removal of the Parties’
sportsbooks from these websites by threatening to terminate the Betfair
Exchange relationship. The CMA found that these websites create losses for
the Parties’ sportsbooks business, but that they are a [] source of
customers, liquidity and revenue for Flutter’s Betfair Exchange business. The
2
Stars also owns Sky Poker and Full Tilt, that are both active in poker but have a minor presence compared with
PokerStars.
5
CMA considers that the Merged Entity would have the ability to engage in
foreclosure of matched betting websites by terminating Betfair Exchange’s
partnerships with these websites. However, the available evidence indicates
that the revenue made by Betfair Exchange as a result of these partnerships
[], and that this strategy could also affect Betfair Exchange’s overall
competitiveness []. The CMA therefore considers that post-Merger, the
Merged Entity would not have the ability or incentive to engage in foreclosure
strategies in respect of matched betting websites. Accordingly, the CMA does
not believe that the Merger gives rise to a realistic prospect of an SLC as a
result of non-horizontal effects in the supply of matched betting services.
18. For these reasons, the CMA does not believe that the Merger gives rise to a
realistic prospect of an SLC in the UK as a result of horizontal unilateral or
non-horizontal effects in respect of any frame of reference.
19. The Merger will therefore not be referred under section 33(1) of the
Enterprise Act 2002 (the Act).
ASSESSMENT
Parties
20. Flutter is a global gambling operator providing online betting and gaming
services in the UK through its Paddy Power and Betfair brands. In addition,
Flutter operates an exchange betting platform via the Betfair brand, Betfair
Exchange, and sells exchange data to rival bookmakers. Flutter’s UK turnover
(measured in net gaming revenue) in 2018 was £868.2 million. Flutter is listed
on the London Stock Exchange and is a constituent of the FTSE 100 Index.
21. Stars is also a global gambling operator. Stars provides online betting and
gaming services in the UK through its BetStars, PokerStars, PokerStars
Casino, Full Tilt and Full Tilt Casino brands, as well as betting and gaming
brands acquired as part of its acquisition of the Sky Betting and Gaming
(SBG) Group. These are Sky Bet, Sky Vegas, Sky Casino, Sky Bingo and Sky
Poker. Stars is listed on the Nasdaq Stock Exchange and the Toronto Stock
Exchange.
22. Stars also owns live poker and events brands, including PokerStars Players
No Limit Hold’em Championship and the European Poker Tour. Through its
acquisition of the SBG Group, Stars operates odds comparison website
Oddschecker which offers users direct access to the odds, promotions and
free bets provided from bookmakers. Stars also owns Sporting Life, a website
offering content including news, scores, results, reviews and blogs to users
around the world.
6
23. Stars’ UK turnover (measured in net gaming revenue) in 2018 was []
million.
24. The Parties are both licensed by the Gambling Commission to operate in the
UK.
Transaction
25. Flutter and Stars have agreed to an all-share combination by which Stars’
shareholders will receive 0.2253 new Flutter shares for every one Stars share.
The Merger will result in Stars’ shareholders owning approximately 45.36%
and Flutter’s shareholders owning approximately 54.64% of the Merged
Entity.
26. The Merger is conditional on shareholder, merger control, foreign investment
and gaming-related approvals being obtained.
27. The Merger is also the subject of review by the Irish competition authority, and
the competition authorities of Austria, Bulgaria, Germany, Malta, Romania,
Spain, the US and Australia identified no competition concerns with the
Merger.
28. The Parties submitted that the Merger will create a diversified business both
from a geographic and product perspective, accelerate the Merged Entity’s
international growth, create value through cost synergies and drive revenue
growth through cross-selling opportunities (particularly with regard to cross-
selling Stars’ gaming customers sports betting).
3
The Parties also submitted
that the Merger will allow the Merged Entity to enhance its product offering
while driving efficiencies through its cost base, including through continued
investment in technology, product innovation, data analytics, brands and
responsible gambling.
4
29. The CMA considers that the Parties’ stated rationale is broadly consistent with
internal documents; with the overarching rationale to become a global leader
in online sports betting and gaming.
5
The Merged Entity’s cross-selling
capabilities appear to be an important component of the Merger, having
already been a successful strategy for Stars in cross-selling poker into gaming
to grow its position in this segment.
6
Internal documents also note the Merger
will give rise to value creation for shareholders and allow the Merged Entity to
3
Paragraph 54 of the Parties’ Merger Notice dated 31 January 2020 (the Merger Notice).
4
Paragraphs 55 and 56 of the Merger Notice.
5
See Flutter internal documents: [].
6
See for example Flutter internal document: [].
7
be more resilient to changes in the regulatory and tax environment and
economic shocks.
7
Procedure
30. The Merger was considered at a Case Review Meeting.
8
Jurisdiction
31. Each of Flutter and Stars is an enterprise. As a result of the Merger, these
enterprises will cease to be distinct. The UK turnover of Stars exceeds £70
million, so the turnover test in section 23(1)(b) of the Act is satisfied. The CMA
therefore 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.
32. The initial period for consideration of the Merger under section 34ZA(3) of the
Act started on 5 February 2020 and the statutory 40 working day deadline for
a decision is therefore 31 March 2020.
Counterfactual
33. The CMA assesses a merger’s impact relative to the situation that would
prevail absent the merger (ie the counterfactual). For anticipated mergers the
CMA generally adopts the prevailing conditions of competition as the
counterfactual against which to assess the impact of the merger. However,
the CMA will assess the merger against an alternative counterfactual where,
based on the evidence available to it, it believes that, in the absence of the
merger, the prospect of these conditions continuing is not realistic, or there is
a realistic prospect of a counterfactual that is more competitive than these
conditions.
9
34. The Parties submitted that the current competitive situation is the appropriate
counterfactual. In this case, the CMA received no evidence to support a
different counterfactual. Therefore, the CMA believes the prevailing conditions
of competition to be the relevant counterfactual.
7
See for example Flutter internal document: [].
8
See Mergers: Guidance on the CMA’s jurisdiction and procedure (CMA2), January 2014, from paragraph 7.34.
9
Merger Assessment Guidelines (OFT1254/CC2), September 2010, from paragraph 4.3.5. The Merger
Assessment Guidelines have been adopted by the CMA (see Mergers: Guidance on the CMA’s jurisdiction and
procedure (CMA2), January 2014, Annex D).
8
Background
35. Betting involves the staking of money on the outcome of a specific event
(mostly sporting events).
10
The industry distinguishes between pool betting,
where the size of the winnings is determined by reference to the aggregate of
the stakes paid and the number of winners, and fixed odds betting, where the
winnings are fixed according to odds set in advance. Within fixed odds betting,
the odds are either determined by the bookmaker (sportsbook betting) or
derived from a betting exchange, where customers set their own odds and bet
against each other (exchange betting). The Parties offer fixed odds betting via
their sportsbooks and Betfair Exchange.
36. Gaming involves playing a game with some element of chance for a prize.
Most games are played against a random number generator (eg slots, bingo
and casino games). The exception is poker, where customers play against
each other (ie peer-to-peer).
37. The Gambling Act 2005, which came into force on 1 September 2007, sets
out a comprehensive regime for the regulation of gambling. It also created the
Gambling Commission as a unified regulator for commercial gambling.
38. The Gambling (Licensing and Advertising) Act 2014 requires any operator
advertising remote gambling or providing online gambling facilities in the UK
to have an operating licence from the Gambling Commission. It also prohibits
unlicensed operators from promoting their products in the UK.
Frame of reference
39. Market definition provides a framework for assessing the competitive effects
of a merger and involves an element of judgement. The boundaries of the
market do not determine the outcome of the analysis of the competitive effects
of the merger, as it is recognised that there can be constraints on merging
parties from outside the relevant market, segmentation within the relevant
market, or other ways in which some constraints are more important than
others. The CMA will take these factors into account in its competitive
assessment.
11
10
Under the Gambling Act 2005, betting is defined as ‘making or accepting a bet on: (a) the outcome of a race,
competition or other event or process; (b) the likelihood of anything occurring or not occurring; or (c) whether
anything is or is not true’. Accordingly, it includes betting on sporting and non-sporting events and numbers
betting.
11
Merger Assessment Guidelines, paragraph 5.2.2.
9
Product scope
40. The Parties overlap in the supply of online betting and gaming services, with
brands that are active in sportsbook betting, poker, casino and bingo.
Flutter owns the Paddy Power and Betfair brands through which it
provides online betting and gaming services. In addition to its sportsbook
offering, Flutter operates a betting exchange and provides exchange data
via Betfair Exchange.
Stars provides betting services in the UK through its BetStars brand and
the Sky Bet brand. In respect of gaming, it provides online poker through
its PokerStars, Full Tilt and Sky Poker brands, and online casino services
through PokerStars Casino, Full Tilt Casino, Sky Casino, Sky Vegas and
Sky Bingo. Stars also operates Oddschecker, an odds comparison site
that allows customers to compare odds in the market.
41. While the Parties overlap in online casino and online bingo, the CMA did not
find evidence of competition concerns in relation to these services given the
Parties’ relatively minor presence and the number of alternative providers
available. The CMA has therefore not considered online casino and online
bingo further in this decision.
42. As set out below, in relation to the CMA’s assessment of horizontal unilateral
effects, the CMA has considered:
Whether online betting and online gaming should be considered as a
single frame of reference;
Within online betting, whether different types of online betting should be
considered as different frames of reference; and
Within online gaming, whether different types of online gaming should be
considered as different frames of reference.
43. In relation to the CMA’s assessment of non-horizontal effects, the CMA has
considered:
Whether odds comparison websites and matched betting websites should
be considered as a single frame of reference; and
Whether the supply of betting exchange data should be considered as a
separate frame of reference.
10
Betting vs gaming
Parties’ submission
44. The Parties submitted that the appropriate frame of reference for the
assessment of the Merger should be online gambling, including online betting
and gaming. However, the Parties recognised that the CMA has recently
analysed the gambling market on the basis of narrower segments.
Accordingly, the Parties provided information in relation to: (i) online betting;
(ii) online gaming; and (iii) within online gaming, online poker, in the UK.
12
45. Further, the Parties submitted that betting services are distributed in various
ways – via retail outlets, by telephone, and online (via desktop, tablet and
mobile) – but that they only overlap in the online distribution channel.
13
The CMA’s assessment
46. In previous decisions, the CMA and its predecessors distinguished between
betting and gaming, mainly based on limited demand-side substitutability.
14
47. The CMA found no evidence to suggest that it is appropriate to depart from
the conclusion that there is limited demand-side substitutability between
betting and gaming. While many consumers engage in both activities, the
CMA does not consider this to indicate that betting and gaming are demand
substitutes. The CMA notes that consumers may wish to bet on some
occasions and game on others, and that some consumers engage only in
betting or gaming.
15
This is supported by third party evidence provided to the
CMA during its merger investigation, which indicated that competitors
generally focused on the markets for online betting and gaming separately.
48. With regards to the supply-side substitutability of online betting and gaming,
both Parties and most other market players offer both online betting and
gaming. However, the CMA found that shares of supply and market structures
vary significantly across different activities, indicating that competitive
conditions are different.
16
For example, while bet365 is the largest online
sports betting operator by share of supply with a share of [20-30]% (see Table
1 below), it has limited presence in online gaming (with a share of less than
[0-5]%) based on the Parties’ data. In addition, while the majority of providers
12
Paragraph 5 of the Merger Notice.
13
Paragraph 112 and 113 of the Merger Notice.
14
See for example Stars/SkyBet (2018), paragraph 29, GVC/Ladbrokes Coral (2017), paragraph 43, and Paddy
Power/Betfair (2015), paragraph 33.
15
See also Flutter internal document: [], which considers the online gaming market participation dynamics and
notes differences between gaming and betting customers.
16
See Tables 9 and 10 of the Merger Notice.
11
offer both betting and gaming services, the CMA identified a small number of
gaming-only specialists who do not operate in the online betting market, such
as Jackpotjoy and Tombola.
49. Further, the Parties’ internal documents indicate that they monitor competitive
conditions, customer views, and acquisition channels for different product
types separately; often in entirely separate documents.
17
Accordingly, the
CMA considers that online betting and online gaming should not be treated as
a single frame of reference in this case.
Types of online betting
50. Within online betting, the Parties offer online betting via their sportsbooks and
Betfair Exchange. On a sportsbook, bets are made between a customer and a
bookmaker, whilst a betting exchange facilitates the making or acceptance of
bets between individuals on an internet-based forum.
18
The Parties submitted
that these services are different ways of satisfying the same demand (that is,
to gamble by placing a bet), but they may be of varying appeal to different
types of customers.
19
51. While there are similarities between betting on an exchange and betting
through an online sportsbook,
20
evidence from third parties provided to the
CMA as part of its merger investigation indicates that sportsbook and
exchange betting appeal to different types of customers.
21
For instance, one
competitor observed that it has proven difficult to convert traditional sports
betting customers to exchange betting.
22
The CMA has previously found that
betting on an exchange typically attracts a more professional or sophisticated
consumer than betting via a sportsbook.
23
52. From a supply-side perspective, the CMA considers there may be some
barriers to gambling operators moving between the operation of sportsbooks
and exchanges as these services require different types of systems and skills,
and entry into the supply of exchange betting is not straightforward given, for
instance, the need to attract a large number of customers in order to benefit
17
See for example, Parties’ internal documents: [].
18
A betting exchange (including Flutter’s Betfair Exchange brand) allows customers to place bets that an
outcome will happen (as is the case for sportsbook betting), or to take on the other side of a bet by offering odds
on an outcome not happening. Exchange operators generate revenue by charging winning customers a
commission.
19
Paragraph 101 of the Merger Notice
20
[].
21
[].
22
[].
23
Paddy Power/Betfair decision, paragraph 34.
12
from network effects.
24
The CMA found that few online betting companies offer
both sportsbook and exchange betting. Further, Flutter generally monitors its
sportsbook and exchange in separate documents (or in separate sections
within the same documents), and has separate teams for exchange,
sportsbook and gaming.
25
One internal document notes that [].
26
Accordingly, while there are some competitive interactions between
sportsbooks and exchanges, the evidence indicates that sportsbook and
exchange betting do not compete particularly closely with one another,
relative to the competition between sportsbooks.
53. Accordingly, the CMA has assessed the Merger on the basis of separate
frames of reference for:
The supply of online sportsbook betting; and
Online exchange betting.
54. However, it has not been necessary for the CMA to reach a definitive
conclusion since no competition concerns arise on any plausible basis.
Different types of sportsbooks
55. The Parties submitted that it was not necessary to consider individual sports
(eg horse racing, football, etc) as separate product frames of reference.
27
56. In GVC/Ladbrokes Coral, the CMA considered looking at the impact of the
merger on a more granular basis by looking at the provision of betting
services for individual sports. The CMA concluded, however, that such a
distinction is not necessary to reach a conclusion on the appropriate frame of
reference.
28
57. Evidence received by the CMA from the Gambling Commission during its
merger investigation indicates that shares of supply for online betting by sport
are similar to aggregate shares of supply. The CMA also notes that, in their
internal documents, the Parties generally appear to analyse competitive
conditions and customer behaviour for different sports at an aggregate level
and in the same documents. For the purpose of assessing competitive effects
in this case, the CMA has not assessed the Merger on a narrower frame of
reference than online sportsbook betting.
24
Paddy Power/Betfair decision, paragraph 35.
25
For example, Flutter produces []. See Flutter internal documents: [].
26
Parties’ internal document: [].
27
Paragraph 109 of the Merger Notice.
28
See GVC/Ladbrokes Coral, paragraphs 6 and 47.
13
Types of online gaming
58. The Parties submitted that further segmentation within online gaming by game
type would be inappropriate. They referred to the existence of both demand
and supply side substitutability between different types of online games
(casino, bingo and poker). In particular, the Parties submitted that the product
offering behind the different gaming categories offered by providers is largely
the same and that customers can easily switch between them. The Parties
also submitted that there are no material barriers to supply-side
substitutability, as it is not difficult to develop online games in-house or to buy
them from third party developers.
29
59. The CMA considers, however, that customers have preferences for different
types of games and that poker players in particular require specific skills and
knowledge as distinct from consumers playing random number generated
casino games or bingo.
30
One third party that responded to the CMA’s merger
investigation submitted that customers also tend to have different preferences
for different types of games.
31
The Parties’ internal documents show that
bingo appeals to specific demographics, which indicates that these customers
may be less likely to consider other games as substitutes.
32
Further, an
internal document notes that very few [] have any affinity with poker.
33
The
available evidence indicates that while some customers may play all games,
they typically have a preference for one type and do not consider casino
games, bingo and poker as substitutes for each other.
60. The CMA further notes that shares of supply and market structures vary
significantly across different games, indicating that competitive conditions are
different. For example, while Stars has the largest market share in online
poker, Tombola has the highest share in bingo and GVC/Ladbrokes Coral has
the highest share in online casino.
34
Moreover, entry into the supply of online
poker may not be as straightforward as in relation to other online games,
given the need to attract a large number of customers in order to benefit from
network effects. Finally, internal documents demonstrate that the Parties
consider different games separately, and poker in particular is usually
considered in separate documents.
35
29
Paragraphs 116, 117 and 120 of the Merger Notice.
30
The CMA notes that in Stars/SkyBet (2018), the CMA considered different types of online games and found
that customers often have preferences for different types of game they wish to play (paragraph 34).
31
[].
32
Stars internal document: [].
33
Stars internal document: [].
34
Table 25 of the Merger Notice.
35
For example, see Parties’ internal documents: [].
14
61. Accordingly, the available evidence indicates that conditions for competition
between online poker and other types of online games are different and the
CMA has not aggregated different games based on supply-side
substitutability. The CMA has therefore assessed this Merger on the basis of a
separate frame of reference for the supply of online poker services, where the
Parties have a material overlap. Given the Parties’ relatively minor presence
in online casino and bingo, the CMA did not consider these other types of
games further as no competition concerns would arise on any plausible basis.
Odds comparison websites and matched betting websites
62. Stars supplies odds comparison services via its Oddschecker brand, which
allows end users (ie bettors) to compare odds and promotional offers for
different betting events across a number of different sportsbook operators.
Oddschecker is free-to-use for individual consumers. It generates revenue
from sportsbook operators through commission from affiliated customers,
tenancy fees for being listed on the platform, and advertising.
63. Flutter’s Betfair Exchange supplies data on odds and promotions to matched
betting websites. Matched betting websites use their own software and tools
to source ‘matched bets’, ie bets from different bookmakers where bettors
cannot lose as they bet on both outcomes, but still make some profit. These
websites often scrape freely available pricing data from betting operators’
websites without a commercial agreement and generate subscription
revenues from end consumers.
64. The Parties’ submissions in relation to matched betting websites indicate that
they consider it appropriate to consider matched betting websites in the same
product frame of reference as odds comparison websites.
65. The CMA received mixed evidence from third parties on whether matched
betting websites and odds comparison websites could be considered
substitutes.
36
Odds comparison websites are generally a free-to-use service
that bettors use to view the odds and promotions on offer from a wide range of
bookmakers, while matched betting websites are subscription-based services
offering bettors low-risk betting opportunities. The CMA considers that these
are not necessarily substitutable for end consumers.
66. In previous decisions, the CMA has considered shares of supply on the basis
of odds comparison websites.
37
36
[].
37
See Stars/SkyBet (2018), paragraph 24, fn 88.
15
67. The CMA has therefore assessed this Merger on the basis of separate frames
of reference for:
The provision of odds comparison services; and
The provision of matched betting services (for both online sportsbook
betting and online exchange betting).
38
68. However, it does not consider it necessary to conclude on this frame of
reference as no competition concerns arise on any plausible basis.
Betting exchange data
69. Flutter provides exchange data to other betting operators for odds compilation
and risk management activities via its Betfair brand.
39
The Parties did not
make a submission in relation to the appropriate product frame of reference in
this regard.
70. Consistent with previous decisions of the CMA
40
, the CMA assessed this
Merger on the basis of a separate frame of reference for the supply of betting
exchange data. However, it does not consider it necessary to conclude on this
frame of reference as no competition concerns arise on any plausible basis.
Geographic scope
Parties’ submission
71. The Parties submitted that the relevant market is at least EEA-wide, if not
worldwide, noting the following reasons: (i) there are no barriers to non-UK
websites competing for UK consumers; (ii) non-UK websites advertise to UK
consumers and offer betting on UK sports, and non-UK consumers can
access UK-based betting and gaming websites; (iii) the Parties and their
competitors have global reach; (iv) internet penetration continues to improve,
particularly in developing countries; (v) popular betting events are global in
nature and attract gamblers worldwide; and (vi) gaming rules are
homogeneous worldwide.
41
38
On the basis that matched betting websites display odds (and promotions) of both sportsbook operators and
online betting exchange operators.
39
Exchange data refers to pricing and volume data generated on a betting exchange, which is used to assist
bookmakers with their own sportsbook pricing and customer risk management.
40
Paddy Power/Betfair (2015), paragraph 40.
41
Paragraph 125 of the Merger Notice.
16
72. The CMA has previously considered that the relevant geographic frame of
reference in relation to various segments within online gambling is the UK (ie
the supply to UK customers).
42
This is on the basis that different regulatory
requirements exist across different jurisdictions, with the Gambling
Commission responsible for regulating commercial gambling in the UK.
Online betting and gaming
73. The Parties’ internal documents generally analyse the UK separately to other
geographic areas.
43
This demonstrates that the competitor set and the
Parties’ market position varies to some degree from country to country.
44
Further, regulatory requirements and taxation systems differ significantly
across different jurisdictions, and gambling providers require licences to
operate in the UK, issued by the Gambling Commission.
74. For these reasons, and consistent with previous practice as outlined in
paragraph 72, the CMA has assessed the impact of this Merger in relation to
the supply of online betting (including sportsbook betting and exchange
betting) and online gaming (in particular, online poker) in the UK.
Odds comparison websites
75. In relation to the provision of odds comparison services, the CMA notes that
Stars’ Oddschecker brand supplies odds comparison services to sportsbook
operators, which in turn supply UK customers. The CMA therefore assessed
the impact of this Merger on a UK-wide basis. However, it has not been
necessary to reach a definitive conclusion on this frame of reference given
that no competition concerns arise on any plausible basis.
Matched betting websites
76. In relation to the provision of matched betting services, the CMA notes that
matched betting websites list online betting operators who are licensed in the
UK. The CMA therefore assessed the impact of this Merger in relation to the
supply of matched betting websites on a UK-wide basis. However, it has not
been necessary to reach a definitive conclusion on this frame of reference
given that no competition concerns arise on any plausible basis.
42
See for example Stars/SkyBet (2018), paragraph 41, GVC/Ladbrokes Coral (2017), paragraph 56, and Paddy
Power/Betfair (2015), paragraph 44.
43
Parties’ internal documents: [].
44
For example, one internal document notes that markets can be segmented by their regulatory status and that
the competitive dynamic and intensity varies from country to country. See Flutter internal documents: [].
17
Betting exchange data
77. Consistent with previous practice, the CMA considers that Betfair supplies
betting exchange data to other gambling operators, which in turn supply UK
customers.
45
Therefore, the CMA assessed this Merger in relation to the
supply of exchange data on a UK-wide basis. As the CMA noted in Paddy
Power/Betfair, however, betting exchange data is not subject to regulatory
restrictions that limit where it can be supplied (unlike gambling operators who
must be licensed in the UK to supply to UK customers) and therefore the
market might be wider than the UK.
78. It has not been necessary to reach a definitive conclusion on the geographic
frame of reference given that no competition concerns arise on any plausible
basis.
Conclusion on frame of reference
79. For the reasons set out above, the CMA has considered the impact of the
Merger in the following frames of reference:
The supply of online sportsbook betting services in the UK;
The supply of online poker services in the UK;
The supply of odds comparison services in the UK;
The supply of betting exchange data in the UK; and
The supply of matched betting services in the UK.
Competitive assessment
Horizontal unilateral effects
80. Horizontal unilateral effects may arise when one firm merges with a
competitor that previously provided a competitive constraint, allowing the
merged firm profitably to raise prices or to degrade quality on its own and
without needing to coordinate with its rivals.
46
Horizontal unilateral effects are
more likely when the merging parties are close competitors. The CMA
assessed whether it is or may be the case that the Merger may be expected
45
Paddy Power/Betfair (2015), paragraph 45.
46
Merger Assessment Guidelines, from paragraph 5.4.1.
18
to result in an SLC in relation to horizontal unilateral effects in the supply of
online sportsbook betting and in the supply of online poker in the UK.
81. The concern under these theories of harm is that the removal of one party as
a competitor could allow the Merged Entity to increase prices (in terms of
odds and/or promotions), lower quality and/or reduce innovation. After the
Merger, it may be less costly for the Merged Entity to raise prices (or lower
quality) because it would recoup the profit on recaptured sales from those
customers who would have switched to the offer of the other merging firm.
Horizontal unilateral effects in the supply of online sportsbook betting
82. In assessing whether the Merger will lead to an SLC in relation to the supply
of online sportsbook betting, the CMA considered: (i) shares of supply; (ii)
closeness of competition between the Parties; and (iii) the degree of
constraint from rivals. In conducting its analysis, the CMA has considered the
following evidence:
Gambling Commission data in relation to shares of supply;
The Parties’ submissions;
The Parties’ internal documents; and
Third party views.
Shares of supply
83. Table 1 below sets out the CMA’s estimates of shares of supply based on the
Gambling Commission’s 2018/19 Gross Gambling Yield data.
47
47
The Parties’ estimates of shares of supply are based on Regulus Partners’ net gaming revenues data. The
Parties’ estimates are very similar to those in Table 1, although less recent (2018) – see Table 9 of the Merger
Notice.
19
Table 1: Estimated shares of supply of online sportsbook betting in the UK
Provider
Online sportsbook betting share (2018/2019)
Stars
[10-20]%
Flutter
[10-20]%
Merged entity
[30-40]%
bet365
[20-30]%
William Hill
[10-20]%
GVC/Ladbrokes Coral
[10-20]%
Betway
[0-5]%
Betfred
[0-5]%
BetVictor
[0-5]%
Others
[10-20]%
Total
100%
Source: CMA estimates based on Gambling Commission Gross Gambling Yield data.
48
84. Post-Merger, the Parties will become the largest supplier of online sportsbook
betting in the UK, with a combined share of supply of [30-40]% and an
increment of [10-20]%. There are a number of other competitors in the market
who hold material shares, in particular bet365, William Hill and
GVC/Ladbrokes Coral. These three main groups, together with the Parties,
account for around [70-80]% of the market. There is also a long tail of
competitors with a smaller presence in the UK (including Betway, Betfred,
BetVictor and others). While these competitors do not account for a large
share of the market, as set out further below, evidence available to the CMA
suggests that they nonetheless represent a competitive constraint on the
Parties.
49
Closeness of competition
Parties’ submissions
85. The Parties submitted that they are not each other’s closest competitors and
that this is supported by internal documents, survey evidence and multi-
homing data. In particular, they submitted that there is a high rate of churn,
multi-homing and switching among betting customers (particularly given the
ease of opening a new account and promotions offered to attract customers).
The Parties submitted that all larger operators are close competitors, and to
the extent there is greater closeness, bet365 is considerably closer to the
Parties than they are to each other.
50
The Parties also submitted that they are
not closer to one another than they are to other major brands, both generally
48
Gross Gambling Yield (GGY) is defined as the amount retained by operators after the payment of winnings but
before the deductions of the costs of the operation. The CMA has previously analysed GGY data provided by the
Gambling Commission in its share of supply analysis (see Stars/SkyBet (2018), paragraph 44 and
GVC/Ladbrokes Coral (2017), paragraph 65).
49
See from paragraph 104.
50
Parties’ Issues Meeting presentation.
20
and in relation to their targeted audience, with all players generally serving a
recreational customer base.
86. The CMA analysed a broad range of evidence in order to assess the
closeness of competition between the Parties, including the Parties’ internal
documents, the Parties’ internal customer survey data, evidence of innovation
and advertising expenditure among online sportsbook operators. The CMA
also assessed each Party’s spend on Google AdWords and gathered
feedback from third parties.
Internal documents
87. The CMA considered the extent to which the Parties view each other as close
competitors based on its review of a large number of the Parties’ internal
documents.
88. The CMA considers that the Parties’ internal documents indicate that they are
among each other’s close competitors, but that they also compete closely with
other large online betting operators. Moreover, the Parties’ internal documents
show that they actively monitor a wide range of sportsbook operators,
indicating that they consider all these players to represent a competitive
constraint on the Parties. For example, the CMA analysed 99 weekly betting
market reports produced by Sky Bet from November 2017 to November 2019
and observed that it regularly monitors online metrics for the following
competitors: bet365, William Hill, Paddy Power, Betfair, GVC/Ladbrokes
Coral, Betway, Betfred and BetVictor.
51
Similarly, Flutter’s internal documents
indicate that it regularly monitors a range of operators, tracking the number of
‘markets’,
52
pricing and promotions being offered on certain events by players
including bet365, Sky Bet, GVC/Ladbrokes Coral, William Hill, BetVictor,
Betway, Betfred and BoyleSports.
53
Survey evidence
89. The CMA considered survey evidence that is regularly produced and analysed
by the Parties in relation to:
Customer switching (lapsed customers); and
Multi-homing (customer cross-over and share of competitive wallet).
51
A few more competitors are monitored in the earliest market reports (eg Marathon Bet), but not in the latest
reports. For example, see Stars internal document: [].
52
A betting market is a specific type or category of bet on a particular event.
53
Flutter internal documents: [].
21
90. Overall, the survey data confirms that each Party is among the other Party’s
close competitors but also confirms that the Parties compete closely with
other large online betting operators, as set out below.
• Customer switching
91. Evidence analysed by the CMA indicates that the online betting market is
characterised by relatively high levels of customer churn. This churn is driven
by generous sign-up offers, which often mean customers face negative
switching costs, the use of odds comparison sites and the ease (including
speed) of opening new accounts with alternative providers. This dynamic
enhances competitive rivalry between sportsbook operators as they must
strive to acquire, retain and reacquire customers through promotional
strategies, a strong product offering and website/app quality.
92. Switching data analysed by the CMA indicates that each Party faces strong
constraints from competing online bookmakers, with bet365 being the
preferred bookmaker of both Flutter’s and Stars’ lapsed customers, followed
by each of the larger operators (including the other Party, William Hill and
GVC/Ladbrokes Coral) who take a considerable share of these customers.
The CMA identified some switching to competitors with a smaller presence in
the UK, including Betway, Betfred and BetVictor, indicating some degree of
competitive rivalry from numerous sportsbook operators.
• Multi-homing
93. The CMA assessed data provided by the Parties relating to multi-homing:
Cross-over data: Quarterly customer survey data analysed by the CMA
shows the extent to which Paddy Power’s, Betfair’s and Sky Bet’s
customers use other online betting brands on a regular basis. This
illustrates which other online betting brands are most used by customers
of the Parties’ brands;
54
and
Share of wallet data: The consumer’s share of wallet uses a customer’s
ranking of each competitor to determine the relative use of that brand as
compared to competing brands. The resulting value provides an estimate
of the percentage of total spend a customer is allocating to the brand in
question. While this is a common approach used to estimate share of
wallet across many sectors, the measure is based on brand usage rather
than a customer’s actual spend.
55
54
Paragraphs 306-310 of the Merger Notice and corresponding Figures and Annexes.
55
Footnote 185 of the Merger Notice.
22
94. Customer cross-over data measures when a consumer uses two or more
brands, while share of wallet estimates how much of their total budget a
consumer allocates to each brand.
95. The Parties’ customer cross-over data and share of wallet data indicates that
betting customers tend to multi-home across a wide range of online
bookmakers. The evidence indicates that around [] of Flutter’s and Sky
Bet’s sportsbook revenues are generated from customers with more than one
betting account. The CMA notes, however, that the prevalence of customers
holding multiple accounts does not itself, necessarily indicate that customers
are actively spending their money with several operators. Nonetheless, survey
data on the use of other brands by Flutter’s regular customers shows that
bet365 and Sky Bet are their most used alternative brands, and that
Ladbrokes, Coral and William Hill are also commonly used.
Innovation
96. Online bookmakers that responded to the CMA’s merger investigation
indicated that innovation is one of the key competitive parameters in online
sportsbook betting.
56
97. The Parties listed a number of key innovations introduced in online betting in
the last few years and, for each innovation, specified who was the first
operator to pioneer it.
57
Examples of such innovations include in-play betting,
live streaming and face ID login.
98. The CMA analysed this information on the number of new innovations
introduced by online sportsbook operators in recent years. This analysis
indicates that the Parties are not more innovative than other large operators.
In particular, the analysis indicates that bet365 has introduced the most
innovations to the market in recent years. The CMA also notes that
innovations can be, and are, replicated quickly therefore limiting any first-
mover advantage achieved by those who introduce them. Further, the CMA
notes that the evidence shows that operators with a smaller presence in the
UK also compete on innovation, often bringing out new products and features
to bettors.
56
[]. The other key competition parameters most valued by competitors were: website/app quality; promotions;
brand; odds; and range of markets covered. The CMA notes that a number of competitors told the CMA that most
brands have relatively similar odds and that having the best odds is not as important as in the past.
57
Paragraphs 289-290 and Table 21.A of the Merger Notice.
23
99. The CMA considers that, given the trend of frequent innovation and its
importance as a competitive parameter in the online betting market,
innovation will continue to occur across the market.
Advertising
100. The CMA also gathered evidence from the Parties and competitors on their
spend on advertising and on Google AdWords search terms. The CMA notes
that views from online bookmakers provided to the CMA suggests that
advertising may be particularly important, since brand trust and recognition is
one of the key competitive parameters.
58
101. The CMA looked at 2019 advertising expenditure by online sportsbook
operators. The CMA found that the Parties’ brands’ advertising budgets are
similar to each other’s and to those of other large operators. Further, the CMA
found that the Parties’ Google AdWords spend is distributed across multiple
operators and is not concentrated on each other more than on other large
competitors. In addition, while, like Sky Bet, Flutter directs the majority of its
spend to the other four main online betting groups, it also directs a portion of
its Google AdWords spend to competitors with a smaller presence in the UK
(including Betway, Betfred, BetVictor and others).
Third party views
102. The CMA gathered feedback from competing online bookmakers to determine
the brands that are considered the closest competitors to the Parties’ brands.
Third parties indicated that, while Flutter and Stars are close competitors,
bet365, William Hill and GVC/Ladbrokes Coral are also among both Parties’
close competitors. Further, the feedback also suggested that players with a
smaller presence in the UK, such as Betway and BetVictor, are competitors of
the Parties, albeit they are considered more remote than bet365,
GVC/Ladbrokes Coral and William Hill. Third parties also identified Betfred,
Smarkets, Kindred and BoyleSports as competitors.
Conclusion on closeness of competition
103. Based on a range of evidence sources available to it, the CMA considers that,
taking the evidence in the round, the Parties are close competitors but also
compete closely with other large online bookmakers: bet365, GVC/Ladbrokes
Coral and William Hill. In addition, the Parties compete, albeit less closely,
with operators with a smaller presence in the UK, including Betway, Betfred
58
[].
24
and BetVictor, who are regularly monitored by the Parties, are present in
survey data and are actively competing on innovation.
Competitive constraints
Alternative suppliers
104. Based on the Parties’ internal documents, the CMA considers that there are a
number of large online betting operators with whom the Parties compete
closely. In particular, the Parties’ internal documents refer regularly to bet365,
William Hill, and GVC/Ladbrokes Coral. They also refer, albeit to a lesser
extent, to operators with a smaller presence in the UK such as Betway,
Betfred and BetVictor and to a long tail of other competitors.
105. Accordingly, the CMA assessed the constraint from:
bet365;
GVC/Ladbrokes Coral;
William Hill; and
Other online bookmakers (including Betway, Betfred, BetVictor and
others).
• bet365
106. bet365 is currently the largest operator in the market (with a [20-30]% share of
supply) and would become the second largest after the Merger, with Stars and
Flutter having a combined share of [30-40]% (see Table 1 above).
107. The Parties’ internal documents and survey data confirm that bet365 is seen
by Sky Bet as its closest competitor and by Flutter as its closest competitor
together with Sky Bet. In addition, bet365 is the most prominent innovator in
the market and []. Third party responses also suggest that competitors
consider bet365 to be Sky Bet’s and Betfair’s closest competitor and the
second closest in the case of Paddy Power.
• GVC/Ladbrokes Coral
108. GVC/Ladbrokes Coral is one of the five largest operators in the market and it
will be one of the four largest after the Merger, with an estimated [10-20]%
share (see Table 1 above).
109. The Parties’ internal documents and survey data suggest that GVC/Ladbrokes
Coral is viewed by each Party as one of its close competitors. Third party
25
evidence suggests that even though GVC’s integration process following its
acquisition of Ladbrokes Coral may have slowed its growth in the UK for a
short period, GVC is expected to continue to grow in the online betting market
in the UK now that it has completed the Ladbrokes Coral integration.
59
Further, feedback from the Parties’ competitors indicates that GVC/Ladbrokes
Coral is considered to be a close competitor of both Parties.
• William Hill
110. William Hill is one of the five largest operators on the market and it will be one
of the four largest after the Merger, with an estimated [10-20]% share (see
Table 1 above).
111. The Parties’ internal documents and survey data indicate that William Hill is
viewed by each Party as one of its close competitors and third party feedback
also supports this view.
112. The CMA notes that William Hill’s share of supply in the UK online sportsbook
market has declined from 18% in 2014
60
to [10-20%] in 2019, and the
constraint it poses on the Parties may therefore become more limited.
However, William Hill has made public statements explaining that its UK
online business maintained market share in 2019 and returned to growth, and
that, going forward, it is focusing on strengthening the brand and enhancing
its product offering.
61
Moreover, the Parties submitted that recent regulatory
change, including in relation to maximum stakes on fixed odds betting
terminals and increased know your customer checks, affected William Hill to a
greater extent than other operators, but that now that these issues have been
resolved, William Hill will continue to compete strongly.
113. William Hill told the CMA that [].
62
114. The Parties’ survey evidence on customer multi-homing indicates that William
Hill continues to pose a strong constraint on the Parties’ brands. Further,
based on evidence available from the Parties and third party feedback, the
CMA believes that William Hill is a relatively innovative player and continues
to have strong brand recognition. As such, the CMA considers that William Hill
will continue to constitute a strong constraint on the Parties post-Merger.
59
[].
60
Regulus Partners’ data provided by the Parties.
61
William Hill presentation ‘2019 final results’, 26 February 2020,
62
[].
26
• Betway, Betfred and BetVictor
115. Betway, Betfred and BetVictor each have an estimated share of [0-5]% in the
online sportsbook betting market (see Table 1 above).
63
116. The Parties’ internal documents confirm that each Party frequently monitors
the competitive activity of Betway, Betfred and BetVictor (see paragraph 88).
64
Further, survey evidence indicates that the Parties’ customers multi-home with
these players in addition to the larger sportsbook operators (albeit to a lesser
extent), and that Betway, Betfred and BetVictor tend to take at least some
portion of lapsed customers from the Parties’ brands. Further, feedback from
third parties indicated that these players are competitors of the Parties,
although they are generally considered more remote than bet365,
GVC/Ladbrokes Coral and William Hill.
117. The CMA notes that, given that odds are easily comparable, and customers
can and do move between different operators quickly and easily, sportsbook
operators offer competitive odds within a narrow range. Evidence provided by
the Parties based on Oddschecker data indicates that operators with a smaller
presence in the UK in particular tend to set aggressive pricing and offer some
of the best odds of competing bookmakers on popular selections (eg major
football and horse racing events).
65
118. Finally, evidence based on app download data and Oddschecker data further
indicates that Betway, Betfred and BetVictor represent a competitive
constraint on the Parties, offering attractive app experiences and capturing a
material proportion of app downloads, Oddschecker click share and
registrations in recent years.
66
119. As such, the CMA considers Betway, Betfred and BetVictor represent a
competitive constraint on the Parties and will continue to do so post-Merger.
• Other competitors
120. The Parties submitted that a large number of smaller operators (including
Kindred, 888, BoyleSports, MoPlay,
67
10Bet, Fansbet, Virgin Bet and
SportPesa) are active in the UK and can compete effectively with the Parties.
63
The CMA notes that Betfred has a growing retail presence in the UK with over 1600 shops and that Betway
and BetVictor are global operators with significant activities outside of the UK.
64
See also Flutter internal documents: [].
65
Paragraph 270-272 of the Merger Notice.
66
Flutter internal document: []; Parties’ Issues Meeting presentation.
67
The CMA notes that MoPlay’s license is currently suspended, see
https://secure.gamblingcommission.gov.uk/PublicRegister/Search/Detail/50970.
27
121. These smaller operators together only account for around [10-20]% of the
market (see Table 1 above);
122. The Parties’ internal documents and survey data confirm that they monitor
these smaller operators less frequently than the larger ones and that they are
not among their closest competitors, but still constitute some degree of
competitive constraint on the Parties. Third party evidence also indicates that
smaller operators are relatively remote competitors of the Parties.
Conclusion on alternative competitive constraints
123. Based on this evidence, the CMA considers that:
Both Parties compete closely with bet365 in the online sportsbook betting
market and that bet365 will continue to constitute the strongest
competitive constraint on the Merged Entity;
Both Parties compete closely with GVC/Ladbrokes Coral and William Hill
and that both competitors will constitute a strong competitive constraint on
the Merged Entity;
Betway, Betfred and BetVictor currently constitute a competitive constraint
on the Parties, although this is not as strong as that of larger operators,
and that they will continue to constitute a competitive constraint on the
Merged Entity; and
Smaller competitors are likely to constitute at least some constraint.
Third party views regarding impact of the Merger on online sportsbook betting
124. Some competitors raised concerns in relation to the large combined share of
supply of the Parties, particularly with respect to recreational customers,
potential increases in costs due to the Merged Entity’s ability to price other
players out of advertising opportunities and media packages, and the impact
of the Merger on the ability of smaller betting operators to compete in an
increasingly consolidated industry.
68
125. In addition, one third party raised concerns that the Merger would lead to the
Merged Entity gaining significant buyer power in relation to video and data
feeds supplied to betting operators from racecourses and three consumers
68
[].
28
submitted that the Merger could lead to a reduction in choice and/or a
deterioration of quality or service levels.
69
126. The CMA considered the concerns raised by third parties as part of its
investigation. The CMA did not consider that, when viewed in the round, these
concerns were consistent with the other sources of evidence available to it
(including the Parties’ internal documents and survey evidence).
70
Conclusion on horizontal unilateral effects in online sportsbook betting
127. As set out above, the CMA considers that although the Parties are among
each other’s close competitors, they will continue to face competitive
constraints from other large and closely competing online betting operators.
Further, the CMA considers that operators with a smaller presence in the UK,
including Betway, Betfred and BetVictor, among others, represent a more
limited but material competitive constraint on the Parties.
128. Accordingly, the CMA does not believe that the Merger gives rise to a realistic
prospect of an SLC as a result of horizontal unilateral effects in relation to the
supply of online betting services in the UK.
Horizontal unilateral effects in the supply of online poker
129. In assessing whether the Merger will lead to an SLC in relation to the supply
of online poker, the CMA considered the following evidence in relation to the
closeness of competition between the Parties and the degree of constraint
from rivals:
The Parties’ and Gambling Commission data in relation to shares of
supply;
The Parties’ submissions;
The Parties’ internal documents; and
Third party views.
69
Responses to the CMA’s Invitation to comment.
70
With regard specifically to the concern raised by one third party that the Merger would lead to the Merged
Entity gaining significant buyer power in relation to video and data feeds supplied to betting operators from
racecourses, the CMA found that the Merged Entity would have no ability to foreclose other bookmakers by
demanding exclusive access to these services because (i) there are only two providers of such services, each
holding significant market power ([]); and (ii) any threat by the Merged Entity to stop purchasing these services
unless exclusivity was granted would not be credible as they are an important part of the Parties’ competitive
offering.
29
130. Table 2 below sets out the CMA’s estimates of shares of supply based on
2018 Regulus Partners’ data (provided by the Parties)
71
and 2018/19
Gambling Commission data.
Table 2: Estimated shares of supply of online poker in the UK
Provider
Share (Regulus Partners, 2018)
Share (Gambling Commission, 2018/19)
Stars
[40-50]%
[50-60]%
PokerStars
[30-40]%
Full Tilt
[0-5]%
Sky Poker
[5-10]%
Flutter
[0-5]%
[0-5]%
Paddy Power
[0-5]%
Betfair
[0-5]%
Merged entity
[40-50]%
[50-60]%
GVC/Ladbrokes Coral
[20-30]%
[10-20]%
888
[10-20]%
[10-20]%
William Hill
[0-5]%
[0-5]%
bet365
[0-5]%
[0-5]%
Others
[5-10]%
[5-10]%
Total
100%
100%
Source: CMA analysis of Regulus Partners’ (net gaming revenue) and Gambling Commission’s data (gross gambling yield).
131. Stars is the largest operator in online poker, followed by GVC/Ladbrokes
Coral and 888, and by long a tail of smaller competitors including William Hill,
bet365 and others. Flutter only has a minor presence in online poker, with a
share of supply of [0-5]%.
72
132. The Parties submitted that the increment which would result from the Merger
is de minimis ([0-5]%) with a negligible effect on competition, and that Flutter
invests minimal resources in the online poker market.
73
Moreover, the Parties
submitted that they do not compete closely in online poker, as evidenced by:
Their differentiated products - PokerStars offers significantly more poker
variants and tournaments in the UK than Flutter and Sky Poker;
74
Their distinct customer bases - PokerStars tends to attract more ‘serious’
poker players who spend a greater share of wallet on poker;
75
71
Table 28 of the Merger Notice.
72
In the following analysis, due to its very small market share, the CMA has considered Full Tilt as part of
PokerStars.
73
Paragraph 367 of the Merger Notice.
74
Paragraph 376 of the Merger Notice.
75
Paragraph 374 and Tables 31-32 of the Merger Notice.
30
The differences in customer acquisition channels - Flutter and Sky Poker
acquire very few customers through poker, in contrast to PokerStars who
acquires customers mainly through poker;
76
The relatively limited overlap between the Parties’ brands’ customer
bases.
77
133. Additionally, the Parties submitted that there is a number of strong
alternatives in the online poker market and barriers to entry and expansion
are low.
78
134. The CMA focused its assessment on the potential loss of competition
between Flutter and Sky Poker, as the Parties appear to compete most
closely in respect of these brands.
135. PokerStars’ internal documents rarely (if at all) mention Flutter’s brands as
competitors, while they suggest that 888 and GVC/Ladbrokes Coral are
PokerStars’ closest competitors.
79
Sky Poker’s internal documents suggest
that it competes closely with 888 and GVC/Ladbrokes Coral.
80
136. Market research and detailed customer reports on online poker are in general
absent from Flutter’s internal documents and it is often the case that its
revenues from online poker, which are relatively minor compared to total
gaming revenue, are pooled together with revenues from online casino and
bingo in financial statements.
81
Assessed in the round, the Parties’ internal
documents indicate that Flutter has a minor presence in and limited focus on
online poker, does not exert a strong competitive constraint in online poker
generally, and is not a particularly close competitor of either of the Stars
online poker brands.
137. Competitors in online poker that responded to the CMA’s merger investigation
generally confirmed that Flutter competes more closely with Sky Poker than
PokerStars, noting significant differences in Flutter’s and PokerStars’
customer bases. Additionally, competitors’ responses indicate that PokerStars
competes more closely with GVC/Ladbrokes Coral and 888, who generally
target more ‘serious’ poker players compared to the other operators.
82
Finally,
it has been noted that Flutter and Sky Poker rely on cross-selling their poker
76
Paragraphs 385-386 and Table 33 of the Merger Notice.
77
Paragraphs 387-392 of the Merger Notice.
78
Paragraph 410 of the Merger Notice.
79
See Stars internal document: [].
80
See Stars internal documents: [].
81
See Flutter internal document: [].
82
[].
31
products to sportsbook betting customers, therefore they do not actively
compete with each other in terms of new poker acquisitions.
83
138. A small number of competitors told the CMA that the Merger could have
adverse effects on the iPoker network,
84
which could reduce the ability of
other online poker operators sharing the network to compete. These
competitors submitted that such effects could arise either because the
Merged Entity could withdraw from the network, reducing its customer
liquidity, or because the Merged Entity could influence iPoker’s pricing. With
respect to these arguments, the CMA notes the following:
Only Flutter operates in the network (Stars does not) and its market share
is small (both within the network and in the whole market).
There are several other brands currently operating through iPoker, such
as [].
139. Therefore, the CMA considers that the Merger would not have a significant
adverse effect on the iPoker network, or on the ability of users of the network
to compete.
Conclusion on horizontal unilateral effects in online poker
140. The CMA found that Flutter has a minor presence in, and limited focus on,
online poker, and that the Parties do not compete closely. Accordingly, the
CMA does not believe that the Merger gives rise to a realistic prospect of an
SLC as a result of horizontal unilateral effects in relation to online poker in the
UK.
Non-horizontal effects - vertical effects
141. Vertical effects may arise when a merger involves firms at different levels of
the supply chain, for example a merger between an upstream supplier and a
downstream customer or downstream competitor of the supplier’s customers.
142. Vertical mergers may be competitively benign or even efficiency-enhancing,
but in certain circumstances can weaken rivalry, for example when they result
in foreclosure of the merged firm’s competitors. The CMA only regards such
foreclosure to be anticompetitive where it results in an SLC in the foreclosed
83
[].
84
iPoker is a network shared by several online poker operators and operated by Playtech. The CMA notes that
PokerStars and Sky Poker are not part of this network.
32
market(s), not merely where it disadvantages one or more competitors.
85
In
the present case, the CMA has considered whether vertical effects may arise
as a result of the Merger in relation to the supply of odds comparison services
through Oddschecker and in relation to the supply of betting exchange data
through Betfair Exchange.
86
143. The CMA’s approach to assessing vertical theories of harm is to analyse: (i)
the ability of the merged entity to foreclose competitors; (ii) the incentive of it
to do so; and (iii) the overall effect of the strategy on competition.
87
This is
discussed below.
Vertical effects in the supply of odds comparison services
144. As explained in paragraph 62 above, Stars owns Oddschecker, an odds
comparison website allowing consumers to compare odds and promotions for
different betting events and multiple sports across a wide range of online
bookmakers. Users can click through from Oddschecker to place a bet with a
particular bookmaker (or go to the bookmaker directly). Oddschecker is free-
to-use for individual consumers.
145. Oddschecker has contractual arrangements in place with each online betting
operator listed on its platform. It generates revenue by charging operators a
fee for each customer that clicks through from Oddschecker and opens an
account with that operator (a “cost per acquisition”), as well as through
revenue share agreements with the operators. Oddschecker charges
operators a tenancy fee for being listed on the platform, which can vary
according to the operator’s placement on the Oddschecker grid (eg an
operator might pay a higher fee for a more prominent position). Oddschecker
also generates revenue from betting operators through the sale of advertising
on the platform.
88
146. The CMA considered vertical effects arising from the foreclosure by the
Merged Entity of competing online bookmakers through Oddschecker.
89
In
85
In relation to this theory of harm ‘foreclosure’ means either foreclosure of a rival or to substantially
competitively weaken a rival.
86
The CMA notes that the Parties also have vertically-related activities in the provision of affiliate digital
marketing services, horse racing and football data, and gaming development services. Given the Parties’ limited
presence in the supply of these services, and the availability of alternatives, the CMA did not find evidence of
competition concerns in relation to these gambling-related services.
87
Merger Assessment Guidelines, paragraph 5.6.6.
88
Paragraph 433 of the Merger Notice.
89
The CMA also considered vertical effects arising from the foreclosure by the Merged Entity of competing odds
comparison services (for example, by not providing them with the Parties’ odds and promotions data or by
lowering or refusing to pay their fees). However, based on evidence from the Parties and third parties, the CMA
found that the potential gain from engaging in such a strategy to foreclose competing odds comparison websites
in order to attract customers to Oddschecker would be significantly outweighed by potential losses in the online
betting market. Therefore, the CMA does not consider that vertical competition concerns arise from the Merger in
relation to foreclosure of odds comparison websites and this is not considered further in this decision.
33
particular, the CMA considered: (i) the ability of the Merged Entity to engage
in such a strategy; and (ii) its incentive to do so.
Ability
147. The CMA considered whether the Merged Entity would have the ability to
foreclose competing online bookmakers either by delisting them from
Oddschecker (total foreclosure), or by showing them less prominently and/or
by raising Oddschecker’s fees (partial foreclosure). In doing so, the CMA has
considered:
The importance of Oddschecker for online bookmakers; and
Whether Oddschecker has market power in relation to the provision of
odds comparison services.
The importance of Oddschecker for online bookmakers
148. Third party evidence received by the CMA during its merger investigation
indicated that the proportion of new customers acquired through odds
comparison websites can vary from [0-5]% to [5-10]% of all customer
acquisitions and the proportion of revenues made from these customers can
vary from [0-5]% to [20-30]%.
90
In addition, third parties told the CMA that
customers acquired through odds comparison websites are not particularly
profitable, as they are likely to multi-home and switch betting provider
frequently.
91
Nonetheless, odds comparison websites are viewed by online
bookmakers as an important channel through which online bookmakers
(particularly smaller operators) can promote their brand, promotions and odds,
and are an important advertising channel.
92
149. Similarly, third party evidence received by the CMA during its merger
investigation indicated that the importance of Oddschecker, in particular as a
customer acquisition tool, can vary significantly between online bookmakers,
with the proportion of new customers acquired through Oddschecker ranging
from [0-5]% to [5-10]% of all customer acquisitions and the proportion of
revenues ranging from [0-5]% to [20-30]%.
93
150. Third parties that responded to the CMA’s merger investigation confirmed that
Oddschecker is the largest and most important odds comparison website in
90
Third party responses to CMA questionnaire.
91
[].
92
[].
93
Third party responses to CMA questionnaire.
34
the UK and that being listed on this platform offers visibility and a degree of
legitimacy to bookmakers generally, and particularly for smaller operators
focused on building brand recognition.
94
151. The CMA notes that, notwithstanding third-party views above, the majority of
UK bettors do not visit Oddschecker regularly, based on the number of
Oddschecker visitors recorded from February 2019 and January 2020.
95
152. The majority of online bookmakers that responded to the CMA’s merger
investigation explained that, should the Merged Entity delist them from the
Oddschecker platform, this would have a negative impact on their business,
given the importance of Oddschecker for the reasons outlined above. Some
competitors raised concerns about the Merged Entity’s ability to delist them
from the platform, or to give preferential treatment to its own brands.
96
Oddschecker’s market power in the provision of odds comparison services
153. The Parties submitted that there are a number of strong alternative odds
comparison websites that compete with Oddschecker.
97
The Parties also
submitted share of supply estimates based on page visits by consumers. The
Parties submitted that this data shows that Oddschecker’s share of supply for
UK odds comparison websites is below that of Racing Post, At The Races
and Flash Score, and that there is a long tail of smaller odds comparison
websites. The CMA does not consider these estimates to be reliable. First, the
CMA considers that the total page visits of odds comparison websites
identified by the Parties as competitors is unlikely to reflect their importance
as a provider of odds comparison services because odds comparison is a
small part of the overall offering of many of these websites. Further, Racing
Post and At The Races only offer odds comparison for horse racing, and
several websites identified by the Parties as competitors are in fact matched
betting websites. The CMA has therefore placed limited weight on this data.
While third party evidence from online bookmakers and odds comparison
websites confirmed the existence of several competing odds comparison
websites (including most notably Racing Post), it also indicated that
Oddschecker is the market leader. One bookmaker noted that Oddschecker
accounts for the large majority ([80-90]%) of all the stakes derived from odds
comparison websites.
98
Competing odds comparison websites also told the
94
[].
95
CMA analysis based on the Parties’ response to RFI 10. Oddschecker had an average of [] unique UK-
based visitors each month over this time period, equating to approximately [10-20]% of UK online bettors.
96
[].
97
Paragraph 428 of the Merger Notice.
98
[].
35
CMA that Oddschecker represents the most significant competitive constraint
on their businesses.
99
154. Lastly, the CMA notes that Oddschecker []. However, the CMA also notes
that Oddschecker has not delisted any online bookmakers from its platform in
the last five years, except where that bookmaker was unable to pay fees,
exited the market, or did not accept a commercial agreement.
100
Conclusion on the Merged Entity’s ability to foreclose competing online
bookmakers through Oddschecker
155. In the round, the CMA considers that Oddschecker has a considerable degree
of market power in the provision of odds comparison services and may have
the ability to harm competing online bookmakers by foreclosing them through
Oddschecker, owing to the importance of Oddschecker to their business.
Incentive
156. The CMA has considered the Merged Entity’s incentive to engage in a total or
partial foreclosure strategy through Oddschecker in order to harm competing
online bookmakers.
Total foreclosure
157. The CMA considers that the act of delisting one or more online bookmakers
from Oddschecker would reduce the revenues that the Merged Entity would
otherwise earn from providing odds comparison services. The Merged Entity
would lose tenancy fees and risk a potential reduction in traffic to the
Oddschecker website.
158. The Parties submitted that Oddschecker needs to display the odds and
promotions of a wide range of bookmakers to attract bettors to the site, and in
particular that delisting one of the main online bookmakers would undermine
Oddschecker’s credibility for providing market-wide transparency, reducing
consumer use of the website.
101
159. Competing odds comparison websites that responded to the CMA’s merger
investigation confirmed that these odds comparison websites have an
incentive to display all the main online bookmakers in order to attract web-
traffic, and that delisting two or more main brands would have a materially
99
[].
100
Parties’ response to RFI 5.
101
Parties’ response to RFI 10.
36
negative impact on an odds comparison business. The CMA received mixed
evidence in relation to whether the loss of only one main bookmaker would
have a material impact on odds comparison websites.
102
160. The CMA considers that the feasibility of a foreclosure strategy by the Merged
Entity may differ depending on whether large or smaller operators were the
target. In particular, the CMA expects that the extent of customer diversion to
the Parties’ brands if the Merged Entity delisted one of the main online
bookmakers would be higher than if it were to delist a smaller player.
However, by contrast, the CMA considers that the potential loss to
Oddschecker in customer traffic and associated revenues from delisting a
main brand can be expected to be greater than for a smaller brand. The
Parties submitted that the reduction in web-traffic to Oddschecker caused by
delisting smaller brands would be material, as these competitors often offer
attractive odds and made up approximately 30% of Oddschecker’s click-
throughs in 2019.
161. The CMA notes that, in this case, it has not been possible to predict the exact
extent of customer diversion to the Parties’ brands that could result from a
foreclosure strategy. However, based on click share data submitted by the
Parties, the CMA considers that the potential revenue gain for the Merged
Entity from diverting some online betting customers to the Parties’ brands is
likely to be outweighed by the risk of losses caused by the reduced consumer
traffic and the reduction in associated revenues made by Oddschecker.
162. Considering the available evidence set out above in the round, the CMA
considers that the Merged Entity would have no incentive to engage in a total
foreclosure strategy by delisting a competing online bookmaker from
Oddschecker because there is a risk that the significant losses associated
with such a strategy would be likely to outweigh any potential gain.
Partial foreclosure
163. The CMA considered whether the Merged Entity would have an incentive to
engage in a partial foreclosure strategy to harm competing online bookmakers
by increasing Oddschecker’s fees or displaying the Parties’ brands more
prominently than their rivals.
164. The CMA notes that a majority of UK bettors do not use Oddschecker
regularly
103
and competing bookmakers’ views indicated that these bettors are
low value customers to online betting brands by virtue of their limited brand
102
Third party responses to CMA questionnaire.
103
Based on CMA analysis of Stars’ data.
37
loyalty. Therefore, while being listed on the Oddschecker platform is important
for brand recognition, the CMA considers that most competitors are unlikely to
be materially impacted by selective fee increases or less prominent
positioning. The CMA further notes that if the Merged Entity were to raise fees
or position rivals less prominently, there would be a risk that online
bookmakers would terminate their agreement with Oddschecker, resulting in
potentially significant loss of customer traffic and associated revenues. A
partial foreclosure strategy is therefore likely to lead to less diversion to the
Merged Entity’s betting brands than a full foreclosure strategy while risking the
same negative impacts on revenues and traffic.
165. For these reasons, the CMA considers that the Merged Entity would have no
incentive to engage in a partial foreclosure strategy through degrading the
Oddschecker offer to rival online bookmakers.
Conclusion on vertical effects in the supply of odds comparison services
166. For the reasons set out above, the CMA considers that the Merged Entity will
have no incentive to foreclose competing online bookmakers through
Oddschecker. As the CMA considers that there is no incentive to foreclose,
the CMA did not consider the effect of foreclosure.
167. Accordingly, the CMA does not believe that the Merger gives rise to a realistic
prospect of an SLC as a result of vertical effects in relation to odds
comparison services in the UK.
Vertical effects in the supply of exchange data
168. Flutter provides exchange data to other betting operators for odds compilation
and risk management activities via its Betfair brand.
104
169. The CMA considered whether the Merged Entity would have the ability to
foreclose competing online bookmakers either by refusing to supply Betfair’s
exchange data (total foreclosure), or by raising the price of such data (partial
foreclosure).
Ability
170. In Paddy Power/Betfair, the CMA found that although Betfair’s exchange data
appeared to be of particular value due to its liquidity, there were other sources
104
Exchange data refers to pricing and volume data generated on a betting exchange, which is used to assist
bookmakers with their own sportsbook pricing and customer risk management.
38
of information available to betting operators for the management of their
sportsbook, such as from odds comparison websites or third party odds
providers, and that large betting operators traded and offered competitive
odds without Betfair’s exchange data.
105
171. The Parties submitted that there have been no material changes since Paddy
Power/Betfair. In particular, the Parties submitted that there are various
alternative sources of information to assist with pricing, and that even if a
sportsbook operator wishes to purchase exchange data there are several
other exchanges from which to obtain this data, including Betdaq, Matchbook
and Smarkets. The Parties further submitted that several operators are not
currently purchasing Betfair’s exchange data.
106
172. Third party evidence and internal documents indicated that Betfair’s data is
superior to that of alternative betting exchanges. However, the CMA found
that []. Evidence provided to the CMA by competing online bookmakers
indicated that there are a number of alternative sources of data available,
including third party odds data providers, the Asian betting markets and other
betting exchanges.
107
173. The CMA also found that []. The CMA notes that these customers diverted
to, or have since relied more on, other sources of data.
108
174. For these reasons, the CMA considers that there are alternative means by
which competing online bookers can, and do, get odds data and therefore the
Merged Entity will have no ability to foreclose competing online bookmakers
by foreclosing access to Betfair’s exchange data.
Conclusion on vertical effects in the supply of exchange data
175. The CMA considers that the Merged Entity will not have the ability to foreclose
competing online bookmakers as a result of vertical effects in the supply of
exchange data. As the CMA considers that there is no ability to foreclose, the
CMA did not consider the incentive or effect of this foreclosure strategy.
176. Accordingly, the CMA does not believe that the Merger gives rise to a realistic
prospect of an SLC as a result of vertical effects in relation to the supply of
exchange data in the UK.
105
Paddy Power/Betfair (2015), paragraphs 67-82.
106
Paragraph 478-479 of the Merger Notice.
107
Third party responses to CMA questionnaire.
108
The CMA also notes that [].
39
Non-horizontal effects in related markets - foreclosure of matched betting
websites
177. Non-horizontal effects may arise when a merger has an effect on a market
related to those in which the merging entities are active. Non-horizontal
mergers may be competitively benign, but in certain circumstances they can
weaken rivalry in a related market or result in the possible foreclosure of the
merging firms’ competitors or firms in upstream or downstream markets.
109
In
the present case, the CMA has considered whether the Merged Entity would
have the ability or incentive to foreclose matched betting websites by
terminating Betfair Exchange’s partnerships with, or by removing some of the
Merged Entity’s sportsbook brands from, matched betting websites.
178. The CMA’s approach to assessing non-horizonal theories of harm is to
analyse: (i) the ability of the merged entity to foreclose; (ii) the incentive of it to
do so; and (iii) the overall effect of the strategy on competition.
110
This is
discussed below.
179. As explained in paragraph 63 above, matched betting websites are websites
that use their own software and tools to source ‘matched bets’, ie bets from
different bookmakers whereby bettors cannot lose as they bet on both
outcomes of an event, but they still make profits. Matched bets often also
involve taking advantage of free bets and other bookmakers’ offers.
Consumers normally pay monthly or yearly subscription fees to use matched
betting websites.
180. There is generally no contractual relationship between online sportsbooks and
matched betting websites. However, there are partnerships between matched
betting websites and betting exchanges (eg Betfair Exchange). Betting
exchanges often provide matched betting websites with their odds data via an
application programming interface
111
and pay fees/commissions to matched
betting websites for the customers acquired through them.
Ability
181. The CMA considered whether the Merged Entity would have the ability to
foreclose matched betting websites by engaging in either of two strategies:
109
Merger Assessment Guidelines, paragraphs 4.1.6 and 5.6.1.
110
Merger Assessment Guidelines, paragraph 5.6.6.
111
A set of functions and procedures allowing the creation of applications that access the features or data of an
operating system, application, or other service.
40
Terminating Betfair Exchange’s partnerships with matched betting
websites (and the associated fees/commissions); or
Negotiating the removal of some of its sportsbook brands (including
Paddy Power and Sky Bet) from matched betting websites by threatening
to terminate Betfair Exchange’s partnerships with such sites.
Terminating Betfair Exchange’s partnerships with matched betting websites
182. The Parties told the CMA that Betfair Exchange is not an essential source of
revenues for matched betting websites, which have partnerships with other
exchanges and receive subscription revenues from customers.
112
183. However, the CMA found that the proportion of matched betting websites’
revenues represented by Betfair Exchange’s fees ranges between [5-10]%
and [20-30]%. Moreover, the CMA found that the loss of Betfair Exchange’s
revenues would substantially reduce matched betting websites’ profits (up to
around [50-60]%) []. Further, while matched betting websites indicated a
number of options may exist to compensate for the loss of Betfair Exchange’s
fees (eg an increase in the fees paid by consumers and/or other betting
exchanges, and cost and/or personnel reduction), these options would not be
sufficient to cover the loss entirely and/or would cause a material reduction in
the quality of the matched betting product offered to consumers.
113
184. For these reasons, the CMA considers that the Merged Entity would have the
ability to foreclose matched betting websites through a total withdrawal
strategy.
Negotiating the removal of some of its sportsbook brands
185. One matched betting website told the CMA that it had concerns that the
Merged Entity would have the ability to degrade the services it was able to
provide by negotiating the removal of some of its sportsbook brands (including
Paddy Power and Sky Bet) from matched betting websites by threatening to
terminate Betfair Exchange’s partnerships with such sites. Moreover, the CMA
found that [].
114
186. The CMA notes that, even if such negotiations were to succeed, it has not
found any evidence that such a strategy would reduce competition between
112
Parties’ Issues Meeting presentation.
113
[].
114
[].
41
matched betting websites (even if each site was only able to offer a reduced
service as a result of the removal of certain brands).
187. Further, the CMA considers that a threat to terminate Betfair Exchange’s
partnerships with matched betting websites if they did not remove the Merged
Entity’s sportsbook brands is not credible because the Merged Entity would
have no ability to stop matched betting websites from listing the Parties’ online
sportsbooks. Matched betting websites already obtain online sportsbooks’
odds and promotions data via web-scraping and would continue to be able to
do so post-Merger.
115
188. For these reasons, the CMA considers that the Merged Entity would have no
ability to foreclose matched betting websites through negotiating the removal
of its sportsbook brands from matched betting websites.
Incentive
189. The CMA considered the incentive of the Merged Entity to terminate Betfair
Exchange’s partnerships with matched betting websites.
190. One third party told the CMA that sportsbook providers do not benefit from
being included on matched betting websites because matched betting
customers are loss-making for sportsbooks (as they take advantage of
misaligned odds and heavily use free bets and other promotions).
116
By
contrast, betting exchanges benefit from being included on matched betting
websites as they earn commissions on every bet placed by matched betting
customers acquired through these websites. [].
117
191. The Parties submitted estimates of the revenues and losses made on
matched betting customers by Betfair Exchange and by their online
sportsbook brands.
118
192. Flutter estimated that:
The net revenues made on customers that click through from matched
betting websites to Betfair Exchange and Betfair Sportsbook were around
£[] in 2019, but the total revenues from all matched betting customers
(including matched bettors who place their bets on Betfair Exchange
without clicking through a matched betting website) were around £[];
115
Parties’ Issues Meeting presentation. [].
116
[].
117
Parties’ response to RFI 8.
118
Parties’ responses to RFI 8, RFI 9 and RFI 11.
42
The losses made by Paddy Power on matched betting customers were
around £[].
193. Stars submitted that the losses made by Sky Bet on matched betting
customers were likely to be £[] or more.
194. The CMA considers that the lack of exact data means that it is difficult to
assess the overall impact of matched betting customers on the Parties’ total
revenues pre-Merger and on the Merged Entity’s total revenues after the
Merger. However, the figures indicate that matched betting websites are a
valuable source of customers and revenues for Betfair Exchange.
119
These
findings are confirmed by an internal document dated June 2017, which
shows that Flutter estimated that Betfair Exchange’s revenues from matched
betting customers were £[] but noted that the exact revenues were difficult
to estimate.
120
195. Flutter also submitted that at least [5-10]% of Betfair Exchange’s customers
are acquired through matched betting websites.
121
The CMA considers that,
as third parties submitted that liquidity is a key competition parameter for
betting exchanges, losing partnerships with matched betting websites could
affect Betfair Exchange’s overall competitiveness beyond the direct loss of
revenues.
196. Finally, Flutter submitted that the fact that Betfair Exchange values its
partnerships with matched betting websites is also demonstrated by its recent
promotions run with [] (two matched betting websites).
122
197. In light of the above evidence, the CMA considers that the material and likely
risk of such a strategy outweighs the more modest and considerably less
certain gains that could be made by terminating Betfair Exchange’s
partnerships with matched betting websites.
Conclusion on non-horizontal effects in relation to matched betting websites
198. For the reasons set out above, the CMA considers that the Merged Entity will
not have the ability or incentive to foreclose matched betting websites. As the
CMA considers that there is no ability or incentive to foreclose, the CMA did
not consider the competitive effect of foreclosure.
119
The CMA also notes that the Merged Entity could not prevent losses on its sportsbooks because, as noted in
paragraph 187 above, matched betting websites can web-scrape bookmakers’ odds and promotions without their
consent.
120
Parties’ internal document: [].
121
Parties’ response to RFI 10.
122
Parties’ internal document: [].
43
199. Accordingly, the CMA does not believe that the Merger gives rise to a realistic
prospect of an SLC as a result of non-horizontal effects in relation to matched
betting websites in the UK.
Barriers to entry and expansion
200. Entry, or expansion of existing firms, can mitigate the initial effect of the
acquisition on competition, and in some cases may mean that there is no
SLC. In assessing whether entry or expansion might prevent a substantial
lessening of competition, the CMA considers whether such entry or expansion
would be timely, likely and sufficient.
123
However, the CMA has not had to
conclude on barriers to entry or expansion as the Merger does not give rise to
competition concerns on any basis.
Third party views
201. The CMA contacted the Parties’ competitors and customers of exchange
data. The CMA also contacted odds comparison websites and matched
betting websites. Third party comments have been taken into account and
have been set out where appropriate in the competitive assessment above.
Decision
202. Consequently, the CMA does not believe that it is or may be the case that the
Merger may be expected to result in an SLC within a market or markets in the
UK.
203. The Merger will therefore not be referred under section 33(1) of the Act.
Andrea Gomes da Silva
Executive Director, Markets and Mergers
Competition and Markets Authority
31 March 2020
123
Merger Assessment Guidelines, paragraph 5.8.3.
