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Case No COMP/M.4472 WILLIAM HILL / CODERE / JV

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 7 (3) Date: 28.11.2006

Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.

EUROPEAN COMMISSION

Brussels, 28.11.2006

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

MERGER PROCEDURE ARTICLE 7(3) DECISION

PUBLIC VERSION

To the notifying parties:

Dear Sir/Madam,

Subject: Case No COMP/M.4472 – William Hill / Codere / JV - Request for derogation pursuant to Article 7 (3) of Council Regulation No. 139/2004

I. INTRODUCTION

1.We refer to your letter and Briefing Memorandum of 8 November 2006, to the Addendum to the letter and the Briefing Memorandum of 14 November 2006 and to the notification of 17 November 2006, in which you request - pursuant to Article 17(3) of Council Regulation (EC) No 139/2004 (“the Merger Regulation”)- a derogation from the suspension obligation in Article 7(1) of the Merger Regulation concerning the notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertakings William Hill Organization Limited (“WHO”, UK) and Codere SA (“Codere”, Spain) acquire within the meaning of Article 3(1)(b) of the Council Regulation joint control of a newly incorporated company constituting a joint venture by way of purchase of shares.

II. THE PARTIES

2.WHO is a wholly-owned subsidiary of William Hill PLC, which is the ultimate parent company of the William Hill Group, which is listed at the London Stock Exchange. The William Hill Group is essentially a provider of fixed odds bookmaking services via licensed betting offices (LBOs) and over the telephone. The company also operates internet gambling sites (offering both betting and gaming products). The William Hill Group is mainly active in the UK.

1OJ L 24, 29.1.2004 p. 1

3.Codere is a privately owned Spanish company active in the gambling sector and focussed on the management of gaming machines, bingo halls and racetracks with presence in Spain, Italy and South America.

III. THE OPERATION

4.The proposed concentration involves the establishment of a full-function joint venture (JV) within the meaning of Article 3(4) of the Merger Regulation. The JV will be established by WHO directly or through its wholly-owned newly incorporated Italian subsidiary and by Codere’s Italian subsidiaries Codere Gaming Italia S.r.l. and Codere Network S.r.l. WHO and Codere will have joint control of the JV. The JV will become a full-functional entity active in the Italian gambling industry, in particular operating LBOs and internet gambling. The parties envisage a start-up phase of approximately eighteen months.

IV. THE DEROGATION REQUEST

5.On 28 August 2006, the Italian government body Amministrazione Autonoma dei Monopoli di Stato (“AAMS”) put out for tender 16,300 concessions to operate betting outlets in Italy. These concessions will be awarded for a duration of nine years starting from 1 January 2007.

6.On 20 October 2006, the parties submitted a joint bid for 359 concessions (approximately to 2% of the total number of concessions put out to tender). At the same time, the parties entered into an agreement according to which the parties would form a 50/50 full function JV. This company will be the formal assignee of any concession which may be awarded to the parties as a result of the tender.

7.The parties expect that the AAMS will publish the list of concessionaires before the end of November 2006. Within 15 days after publication (i.e. between 1 and 15 December 2006), the concessionaires must submit to the AAMS receipts of payment of the consideration for all concessions won. Within 30 days after publication (i.e. between 1 and 30 December 2006) the concessionaires must submit to the AAMS the performance bond and all documents proving that they meet the tender requirements. Also within 30 days (but probably before 20 December 2006) the concessionaires will be required to sign the concession agreement(s).

8.The parties argue that the tight time table for the tender procedure, the strict rules for the assignment of concessions – in particular the fact that all concessionaires must be existing legal entities – makes it necessary for the parties to take certain implementation measures before the Commission has adopted its decision concerning the compatibility of the concentration with the Merger Regulation.

9.The parties’ request for derogation according to article 7(3) of the Merger Regulation comprises the following measures:

-incorporation of the JV under Italian law,

-taking preliminary contacts and engaging in preliminary negotiations with possible operators of the LBOs and with technology providers,

-setting up the necessary IT-infrastructure in accordance with the specific technical conditions set out in the tender rules,

-submission of the performance bond and payment of the concession fee to the AAMS and

-signing of the concession agreement(s) with the AAMS.

10.According to the parties, these measures are indispensable for being awarded the relevant betting concessions by the AAMS. If the parties are prevented from taking these measures, the parties risk being formally incapable of signing any concession awarded to them by the AAMS.

V. ASSESSMENT OF THE CONDITIONS FOR A DEROGATION PURSUANT TO ARTICLE 7(3) OF THE MERGER REGULATION

11.According to Article 7(1) of the Merger Regulation, a concentration falling under that Regulation shall not be implemented either before its notification or until it has been declared compatible with the common market. Article 7(3) of the Merger Regulation stipulates that the Commission may, upon reasoned request, grant a derogation from the suspension obligation in Article 7(1). Before granting such a derogation, the Commission must assess, inter alia, the effects of the suspension on the undertakings concerned by the concentration or on third parties and the threat to competition posed by the concentration.

A. The operation falls under the suspension obligation in Article 7(1) of the Merger Regulation

12.The operation involves the establishment by WHO and Codere of a full-function JV within the meaning of Article 3(4) of the Merger Regulation.

13.The parties have a combined aggregate worldwide turnover in excess of € 5,000 million (WH group € 15,715 million, Codere € 739 million), and each has a Community-wide turnover in excess of € 250 million (WH group € […] million, Codere € […] million). Only one of the parties achieves more than two thirds of its Community-wide turnover in one and the same Member State. The transaction therefore has a Community dimension pursuant to Article 1(2) of the Merger Regulation.

14.The operation falls under the suspension obligation in Article 7(1) of the Merger Regulation.

3This measure comprises the formalisation and signing of the articles of corporation and by-laws of the JV under Italian law as well as the registration of the company with the competent companies registrar in Italy.

B. The effects of the suspension on the undertakings concerned and on third parties

15.A complete suspension of the operation could lead to the rejection by AAMS of the parties’ joint bid. A rejection of the request for derogation is therefore likely to have negative effects on the undertakings concerned.

16.The parties submit that the granting of a derogation would not have any adverse effects on third parties. The public tender procedure allowed any company to apply for a concession. If the parties are awarded with a concession (through the JV), such an award will be by virtue of a public tendering procedure and not by virtue of the derogation.

C. The threat to competition posed by the concentration

17.In previous Commission decisions concerning the gambling sector, the Commission has left open the precise definition of the product market. The Commission concluded that all games would belong to the same market but indicated that different games have different characteristics which could attract different consumers. As regards the relevant geographic market, the Commission has previously considered the geographic scope to be national, due to the specificity of demand for the services in question and due to the existence of national regulations and concession systems.

18.Codere’s activities in the Italian gambling market are limited to the operation of 10 bingo halls, the operation of gaming machines and acting as a concessionaire for the installation and operation of networks for the remote operation of gaming machines. The William Hill Group is currently not active on the Italian gambling market. The parties combined share of the Italian gambling market would be less than 1%.

19.According to the information currently available to the Commission, the operation does not seem to give rise to a threat to competition.

D. Balance of interests

20.The suspension obligation could negatively affect the financial interests of the William Hill Group and Codere and a derogation does not seem to have any adverse effects on the undertakings concerned or third parties. No threats to competition caused by the concentration have been identified at this stage. On balance and considering the exceptional circumstances created by the rules for the tendering procedure (in particular the requirement that only existing legal entities may receive concessions), the Commission finds that a derogation can be granted in accordance with the application and to the extent requested by the William Hill Group and Codere.

VI. CONCLUSION

21.Based on the above considerations the Commission has decided, by way of a derogation from the obligation imposed by Article 7(1) of the Merger Regulation, to authorise the William Hill Group and Codere to take the following measures:

(a.) to incorporate the JV under Italian law,

(b.) to take preliminary contacts and engage in preliminary negotiations with possible operators of LBOs and with technology providers,

(c.) to set up the necessary IT-infrastructure in accordance with the specific technical conditions set out in the tender rules,

(d.) to submit the performance bond and pay the concession fee to the AAMS, and

(e.) to sign the concession agreement(s) with the AAMS.

22.The transaction was notified on 17 November 2006 under the simplified procedure and the legal deadline is 22 December 2006. It should be noted that any concession possibly awarded to the parties will be valid as of 1 January 2007.

23.This decision is adopted in application of Article 7(3) of the Merger Regulation.

For the Commission, (signed) Neelie KROES Member of the Commission

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