Proximity plays role in assessment of big casino merger

Genesis was appointed jointly by Sun International and Peermont Global in May 2015 to provide an expert economic report as part of a submission to the Competition Commission, which had received notice of a large merger between these two major casino groups.

The commission had recommended the prohibition of the merger, anticipating a significant lessening of competition in the central Gauteng market should it go through.

The project team was tasked with assessing the proposed merger and its anticipated impact on competition, particularly on the dynamics of the central Gauteng casino market.

Its specific concern was with the proximity of two large casino complexes in the region, Sun International's Carnival City and Peermont's Emperors Palace, which are situated about 20 kilometres apart. The commission was of the opinion that competition between the two could be harmed by the merger.

The team assessed the market using the merging parties’ data, and was able to provide insight into customer behaviour, pricing dynamics, and other points of competition between casino complexes, as well as into how these were expected to be affected post-merger. It was determined that the casinos are collectively constrained by a host of different leisure and entertainment offerings across the province.

Proximity is also an important determinant in influencing how different categories of gamblers behave. This evidence informed the nuanced definition of the market for casino complexes that was proposed by Genesis, as well as its finding that the merger would not result in a change to competitive dynamics that would harm customers.

The parties were unable to negotiate an extension to the commercial terms of the transaction before the matter could be heard before the Competition Tribunal and the merger was abandoned. The framework provided by Genesis for considering the competitive dynamics of casinos is nevertheless an important reference for future matters.