The Competition Commission has recommended that the Competition Tribunal prohibit JSE-listed Sun International’s proposed acquisition of Peermont Holdings.

The commission said on October 28 that it found that the proposed merger between the two casino owners would likely substantially prevent and/or lessen competition in the provision of casino gambling services in South Africa and in central Gauteng.

According to the commission, the merger would significantly change the structure of the national market by reducing the number of national casino operators from three to two.

Sun International owns 11 casino complexes across South Africa, while Peermont operates eight.

If the merger were to go ahead, 92% of the casinos operating in South Africa would be owned by only two firms, further increasing concentration in an already highly concentrated market.

As such, new entry into this market would be unlikely owing to the limited availability of casino licences. In central Gauteng in particular, there are no unallocated casino licences.

In addition, the commission asserted that the merger would result in Sun International owning and operating several casinos located in prime locations, which would give the company a significant competitive advantage over its competitors.

In central Gauteng, the merger would reduce the number of casino operators from three to two and would remove Emperors Palace, currently owned by Peermont, as an effective competitor to Sun International’s Time Square and Carnival City, as well as Tsogo Sun’s Montecasino.

The commission said this may result in Sun International being able to retain a greater proportion of bets staked by gamblers as a result of weakened competitive constraints, thereby dampening competitive rivalry in central Gauteng.

The commission said it was also concerned that the merger would likely result in the two remaining casino operators, Sun International and Tsogo Sun, in central Gauteng, behaving cooperatively instead of competitively.

For instance, the two remaining casino operators in central Gauteng could effectively reduce the level of winnings and reduce promotions in the knowledge that there would be no competitive response, the commission noted.

Having considered the remedies tendered by the merging parties, the commission said it was of the view that the remedies did not adequately restore competition that would be lost from the proposed merger.

The tribunal will make a final decision on the matter in due course.