Further scrutiny of the proposed merger between Spreadex and Sporting Index by the Competition and Markets Authority (CMA)
A Fresh Take on the Spread Betting Merger Scrutiny
The acquisition of the spread betting operator, Sports Index, by Spreadex has bewildered many, catchings the attention of the UK's Competition and Markets Authority (CMA). The deal, first announced in November, saw La Française des jeux (FDJ) sell Sports Index to Spreadex, a rival in the same industry. Details regarding the financial aspect of the acquisition are yet to surface.
Initially, the CMA indicated its intention to investigate the merger in January. By April, the Authority revealed that the merger between Spreadex and Sports Index may have created a monopoly. The CMA expressed concern that the merger might lead to a substantial lessening of competition.
Currently, the CMA's probe into the merger continues. This week, the Authority confirmed that the "completed acquisition" warranted further in-depth investigation. The primary reason for this examination is the potential "substantial lessening of competition" within the UK market.
"The CMA has referred the completed acquisition by Spreadex Limited of the B2C business of Sporting Index Limited for an in-depth investigation, on the basis that, on the information currently available to it, it is or may be the case that this Merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom,"
Intensified Investigation: Fears of a Spread Betting Services Monopoly
The more detailed investigation marks phase 2 of the Authority's investigation into the merger between Sporting Index and Spreadex. Earlier this month, the CMA stated that the merger would be subjected to phase 2 scrutiny "unless the parties offer acceptable undertakings to address these competition concerns."
"We believe that this deal could remove competition for sports spread betting services and give Spreadex a monopoly in this market. It is important that customers can rely on competition in the market to keep odds competitive."
Naomi Burgoyne, CMA's phase 1 decision maker for the case, confirmed that the merger raises potential competition concerns. Spreadex was granted five days to share their perspective on the matter. Failure to address the concerns would result in the second phase of the inquiry into the deal.
According to Burgoyne, the merger eliminates competition, transforming Spreadex into a monopoly within the sports spread betting services market. She also emphasized the importance of a competitive market to ensure competitive odds.
Contextual Insights:
- The CMA investigation: The Competition and Markets Authority (CMA) investigation into the completed acquisition by Spreadex Limited of the B2C business of Sporting Index Limited, potentially highlights gaps in the CMA's Phase II procedure, which involves a more detailed examination of mergers to assess their potential impact on competition.
- Competition concerns: In mergers of this nature, competition concerns might include issues such as reduced competition, potential price increases, or possible barriers to entry for new firms. The exact nature of these concerns would depend on the specific market dynamics and the overlap of services between Spreadex and Sporting Index.
In light of the CMA's investigation, concerns about a potential monopoly in the sports spread betting services market are growing. This would eliminate competition and possibly lead to increased prices for customers. The CMA believes this deal, if unchallenged, could give Spreadex a monopoly, and emphasizes the importance of competition to ensure competitive odds. The CMA's probe has progressed to phase 2, which involves a deeper examination of the merger between Spreadex and Sporting Index to assess its impact on competition in the UK market.
