April 17 - South African gaming operator, Tsogo Sun, has bid for a stake in rival Sun International assets. The Tsogo Sun bid for Sun International assets takes the form of 40 percent stake in two casinos owned by Sun International
- Grand West Casino in Goodwood and
Golden Valley Casino in Worcester.
The two companies have now joined forces in an attempt to persuade the Competition Tribunal to ignore the recommendations of the Competition Commission and to allow the market-share agreement to go forward.
The Competition Commission Objection
The Competition Commission has recommended that the Competition Tribunal prohibit the deal with the commission's chief economist, Liberty Mncube stating that it would not
"be good for competition" as it would provide Tsogo Sun with a stake in all five gambling licenses in the Western Cape.
Mncube stated that the deal would result in higher prices and reduced quality of services. The commission further argues that the profit realized by Tsogo Sun from the two casinos would surpass its earnings from its
Mykonos casinos, eliminating any incentive for it to employ aggressive competition.
Rafik Bhana, the commission's advocate, claimed that the true reason behind the deal is
"the need to curtail greater competition, which is on the horizon as a result of
certain regulatory changes."
Two Rivals Join Forces
Sun International and Tsogo Sun, major rivals in the South African gambling market, have joined forces to persuade the tribunal to allow their deal to go forward. There has been some speculation about why Sun International would allow its major competition to gain considerable exposure to the Western Cape market.
This became clearer last week when a commission expert suggested that Tsogo Sun is planning to sell a 25 percent stake in its Caledon Casino license to Sun International once it has relocated the casino to the Cape metro area.
The Western Cape government recommended that the casino be moved into the city where 80 percent of the province's gamblers live, in order to increase competition. Previously, the five casinos in the Western Cape had exclusivity which allowed them to operate in a specific area without competition. This exclusivity deal has essentially ended (except for Golden Valley), making it possible for rival casinos to open.
This deal appears to be an attempt to prevent serious competition. The tribunal hearing began this week and will continue through next week with closing arguments planned for May 13.
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