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Articles

ACM granted clearance for lottery merger after Phase II investigation

ACM granted clearance for lottery merger after Phase II investigation

ACM granted clearance for lottery merger after Phase II investigation

05.01.2016 NL law

On 8 December 2015, the Netherlands Authority for Consumers and Markets ("ACM") granted clearance to the merger between Stichting Exploitatie Nederlandse Staatsloterij ("SENS") and  Stichting Nationale Sporttotalisator ("SNS") after a Phase II investigation.

 SENS and SNS are two Dutch companies offering games of chance (lotteries and lottos). According to the ACM, the companies were not, or almost not, effectively competing with each other on the offline market, and for that reason, it cleared the merger. Post-merger, there will be two parties left on the highly regulated market for lotteries and lottos, both having a market share of approximately fifty percent.

In its Phase I decision of 18 August 2015, the ACM concluded that the concentration could lead to a significant impediment to effective competition on the Dutch market or part thereof. The ACM came to this preliminary conclusion because it considered likely that SENS and SNS were in competition with each other, and even were near competitors. For this reason, a license was required for the concentration, which could be requested in a Phase II procedure.

In the Phase II investigation, the ACM came to a different conclusion. The ACM described that competition in the games of chance market is limited by strict regulations, with specific licenses for every market segment. As a consequence, every license-holder on the market is operating in its own market segment, with its own range of games and target audience, and there are limited incentives to compete with other segments. According to the ACM, due to these strict regulations, the games of chance market is very differentiated, and could not be compared to other markets. 

The ACM's investigation, involving economic experts, distributors and potential competitors, confirmed that competition between the merging parties is very limited and end customers do not easily switch from one party to the other in case of a change of conditions for one of them. For these reasons, the ACM concluded that the merger would not have significant unilateral effects on the offline market. The ACM considered coordinated effects unlikely as well, as the parties are, on the basis of the regulations, active in different market segments with differentiated products. This would make coordination very difficult.

The ACM also assessed what the consequence of the merger would be on the potentially-to-be-legalized online gambling market. The ACM found it possible that the merged entity would be able to leverage its name and reputation on the offline market upon entering the online market. Nevertheless, experiences in other countries led to the conclusion that this effect would be limited, even more so as there will be numerous international competitors and offline gamblers strongly differ from online gamblers.

For these reasons, the ACM concluded that the envisaged merger will not have a significant effect on competition on both the lotteries and lottos market, and the potential online market. Therefore, the merger was cleared.

This article was published in the Competition Law Newsletter of January 2016. Other articles in this newsletter:

Team

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