The landmark acquisition of Sporting Index’s B2C arm by Spreadex, which took place last year, is now under intense scrutiny. Spreadex, a multifaceted operator offering online fixed odds betting, sports spread betting, financial spread betting, and casino betting, extended its portfolio by incorporating services from Sporting Index, previously owned by Sporting Group Holding. The deal effectively consolidated the offerings of the two largest players in the UK’s sports spread betting landscape.
However, the merger didn’t go unnoticed and raised immediate concern regarding market competition. In a decisive move, the UK’s Competition and Markets Authority (CMA) initiated an investigation into the merger, signaling their wariness with a February probe launch.
During the preliminary Phase 1 investigation, the CMA meticulously gathered feedback, which indicated potentially adverse effects on market competition. A consequent statement from the CMA highlighted the monopoly fears, emphasizing that Spreadex and Sporting Index had been the only licensed sporting spread betting providers in the nation. The merger therefore risked eliminating crucial competition from the ecosystem.
Spreadex and Sporting Index did put forth an argument, suggesting that the post-merger landscape would still face healthy constraint from fixed-odds betting providers, but the CMA remained unpersuaded due to a lack of substantial evidence backing this claim.
In an official statement, the CMA raised the specter of a reduced competitive framework in the realm of licensed online sports spread betting services within the UK, citing concerns that Spreadex, left without a direct rival, may no longer be incentivized to maintain competitive odds for its customers.
This potentially unfavorable ruling has cast a shadow over the ambitions of the newly enlarged entity. Yet, the final chapter of this business saga has not been written. In response to the CMA’s findings, both Spreadex and Sporting Index have been given five workdays from the 4th of April to propose “meaningful solutions” that might allay the concerns raised. Failure to do so would propel the merger into a more rigorous Phase 2 investigation.
Naomi Burgoyne, who played a pivotal role in the Phase 1 decision-making at the CMA, underscored the gravity of launching a Phase 2 probe, which could unearth further market complexities and competitive concerns. She reiterated the importance of market competition in ensuring the maintenance of competitive odds for consumers.
Spreadex is not unacquainted with regulatory hurdles in the UK, having faced a significant setback in August 2022. The UK Gambling Commission had imposed a fine of £1.4 million on the company for transgressions relating to social responsibility and anti-money laundering regulations. Between January 2020 and May 2021, Spreadex was found to have violated the Licence Conditions and Codes of Practice and the Social Responsibility Code. The company had insufficient financial alerts and was also held accountable for allowing customers to incur substantial losses within short periods.
The ongoing developments in the Spreadex-Sporting Index merger case are a testament to the UK authorities’ commitment to preserving market integrity and protecting consumer interests. Whether the firms will be able to convince the regulator with their upcoming proposals or will have to navigate the tumultuous waters of a Phase 2 inquiry remains a subject of keen interest to both industry insiders and market watchdogs alike.
