Spreadex acquired the B2C arm of Sporting Index from Sporting Group Holding last year. Both companies provide online fixed odds betting and sports spread betting to customers based in the UK. Spreadex also operates across financial spread betting and casino betting.
However, concerns were raised over the merger shortly after completion in terms of how it could reduce market competition. In response to this the CMA announced an investigation, launching the probe in February this year.
After reviewing feedback from a period of comment within the Phase 1 investigation, the CMA said it may be the case the merger results in a substantial lessening of competition within a UK market or markets.
Has the merger created a monopoly?
In a statement confirming the ruling, the CMA said the Phase 1 investigation focused on how Spreadex and Sporting Index are the only licensed sports spread betting providers in the UK. As such, the merger may have created a monopoly by removing the only other licensed provider.
Both Spreadex and Sporting Index argued they would be constrained by fixed-odds betting providers after the merger. However, the CMA said it has not received sufficient evidence to support this.
“The CMA believes the merger could substantially lessen competition in the supply of licensed online sports spread betting services in the UK,” the CMA said. “Without a competitor, the incentive for Spreadex to offer competitive odds for customers could be lost.”
What next for Spreadex?
The ruling will come as a blow for the enlarged business, but the case is not yet closed.
Both Spreadex and Sporting Index now have five working days from 4 April to respond with “meaningful solutions”. Should they not satisfy such demands, the deal will be referred to a Phase 2 investigation.
Naomi Burgoyne, Phase 1 decision maker for the case at the CMA, said a Phase 2 probe is more in-depth and could flag further concerns.
“We believe that this deal could remove competition for sports spread betting services and give Spreadex a monopoly in this market,” explained Burgoyne. “It is important that customers can rely on competition in the market to keep odds competitive.”
History of regulatory issues for Spreadex
This is not the first time Spreadex has faced regulatory issues in the UK. In August 2022, the Gambling Commission ordered Spreadex to pay £1.4m (€1.6m/$1.8m) after it was ruled to have breached social responsibility and anti-money laundering (AML) regulations.
Between January 2020 and May 2021, Spreadex breached the Licence Conditions and Codes of Practice (LCCP). It also failed to comply with the Social Responsibility Code.
Social responsibility failings identified included Spreadex having financial alerts in place that were ineffective. It was also found to have allowed customers to lose significant amounts over a short period of time.
Original article: https://igamingbusiness.com/legal-compliance/spreadex-sporting-index-merger-faces-questions-over-competition/
