He said discipline, particularly late in the second half, and difficulty in coping with the Highlanders' kicking game led to a defeat in Dunedin which leaves the Lions with two wins and two losses after four games.
The loss against a Highlanders side missing seven players on global duty was a disappointment for Gatland's men, who were looking to build momentum after beating the Canterbury Crusaders on Saturday.
Captain Sam Warburton returns for the tourists as Warren Gatland continues to mull over who to pick for the first Test against the All Blacks a week Saturday.
And here referee Angus Gardner certainly felt the hosts had the upper hand in the decisive skirmish. The Highlanders were building pressure though, with the overlooked All Blacks centre Malakai Fekitoa and his global teammate Waisake Naholo beginning to make a serious impression on the Lions, and it soon told. Lawes left the field and Sopoaga made it 10-3 to the Highlanders with the simple conversion.
Gatland will have been pleased with the response as the Lions scored what was their third try of the tour just four minutes later.
The Lions were relieved indeed when, with an advantage being played, the ball was moved left and Joseph used the extra men outside him as decoys to slice through and score.
Both sides seized on the firm, dry track afforded by the roof in a pulsating first half.
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Banks stepped up and slotted it to give the side a one-point buffer.
"For this game we said we had to keep it to single figures and we didn't, for one reason or another".
Warburton then gave the tourists a third try after a dominant Lions scrum, only for Highlander Liam Coltman to retaliate from a lineout drive. The Lions had one final penalty, which they kicked to the home 22, but they couldn't conjure up the score they needed to win the match. Sopoaga's cross-kick within three minutes of the restart was snaffled by Seymour who raced in from 40 metres out and the Lions displayed more vigour all round.
No sooner was the danger clear, than the Lions heaped pressure straight back on themselves.
The Lions missed a late shot at goal and Marty Banks landed his match-winning penalty for the Highlanders with seven minutes remaining, "and that's the difference between the two teams", Gatland said.
British and Irish Lions: Jared Payne (Elliot Daly, 63); Jack Nowell, Jonathan Joseph, Robbie Henshaw, Tommy Seymour; Dan Biggar (Owen Farrell, 68), Rhys Webb (Grieg Laidlaw, 48); Joe Marler (Jack McxGrath, 55), Rory Best (Ken Owens, 49), Kyle Sinckler (Dan Cole, 49); Courtney Lawes (Alun Wyn Jones, 26), Iain Henderson; James Haskell, Sam Warburton (Justin Tipuric, 68), CJ Stander.
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