Online gaming and betting: Double blow against French legislation
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Both the French Competition Authority and the European Commission flag distortions with regards to the opening of the French market
The French Competition Authority, in an opinion published today (see link) echoes the numerous concerns raised by the European Gaming and Betting Association (EGBA) related to the controversial modalities of the opening of the online gaming and betting market in France.
EGBA takes note in particular of the following severe conclusions:
Sports betting right and high price
“Such barrier to entry could trigger exclusionary effects as grave as an exclusive contract between the sports organizer and the online betting operator, which could go against the objective of ensuring the effective opening of the relevant market as set out by the legislator” 1 - par. 123
“The Authority recommends ARJEL (the French regulator) to put together a reference list of the main costs incurred by the federations and organizers of sports events, in particular the costs linked to the detection and prevention of fraud (expenditures for monitoring the games, exchange of information with the operators, technical monitoring) in line with the legal and regulatory requirements imposed on the organizers” - par. 137
Use of FDJ and PMU customer base
“Two competition concerns can be identified in relation to the use of the customer base of FDJ and PMU in order to develop their activities for online gaming:
- The prohibition for alternative operators to use the customer accounts opened before being granted the license from ARJEL
- The use by FDJ and PMU of their existing customer base under their monopoly activities to prospect online customers” - par. 179
Risks of cross subsidization
“The availability of PMU and FDJ’s offline points of sale, under preferential conditions, to develop their online activities that are subject to competition could lead to a distortion at the expense of alternative operators that don’t have such opportunity” - par. 199
“Legal and operational separation of activities carried out in the form of a monopoly (offline) and those areas subject to competition (online)…constitute one of the remedies usually advocated by antitrust authorities in order to avoid abusive cross subsidization. Accounting separation as imposed by article 25 of the law of 12 May 2010 does not entirely respond to the need to prevent this risk” - par 201
Specific risks related to the horse-race betting sector
“The online horse-race betting activity is characterized by the important position of PMU, which is today the main horserace betting operator online, way ahead the alternative operators with 80-95% of the stakes for this kind of bets” - par.154
“The question of the vertical integration between the organizers of events subject to bets and online betting operators only arises in the horse race betting sector” - par. 157
“In order to avoid a competitive distortion to the detriment of new entrants, the Authority recommends PMU to use different signs and distinctive brands for its activity under monopoly and its activity subject to competition” - par 195
“In order to allow for the development of small horse-racing operators, the Authority recommends in the first place that the competitive disequilibrium for complex bets which is connected to the pooling of the stakes collected by PMU be corrected thanks to a compensation mechanism between races. If this line is not followed, it could be then envisaged to allow temporarily operators to offer fixed odds” - par 226
Ceiling on pay back ratio for horse race betting and sports betting
“The legal ceiling on the pay back ratio limits price competition” - par 101
According to Sigrid Ligné, Secretary General of the EGBA “The Authority’s opinion provides a much expected clarification on the dysfunctions of the French market and the numerous legal weaknesses of the legislation adopted in 2010. It confirms the real limitations of the opening as claimed by the Government”.
This opinion is an additional blow against the French legislation for online gaming and betting after the announcement on 14th January 2011 of the European Commission’s decision to launch a formal investigation against one of its key provisions: the levy to finance the horse racing companies. This provision is suspected by the European Commission to contain all the features of an illegal State aid (link to decision C 34/10).
According to Sigrid Ligné « The multiplication of criticisms and procedures against the French law should convince the Government of the need to amend urgently and substantially the market access modalities in line with Competition and Internal market rules ».
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Footnote:
1 Please be aware that all the quotes from the French Competition Authority are own EGBA translations. For exact wording please refer to the original French version of the FCA opinion (see link).
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For further information or comment please contact:
Sigrid Ligné: +32 2 554 08 90
About EGBA
The EGBA is an association of leading European gaming and betting operators Bet-at-home.com, BetClic, bwin, Digibet, Expekt, Interwetten, PartyGaming and Unibet. EGBA is a Brussels-based non-profit association. It promotes the right of private gaming and betting operators that are regulated and licensed in one Member State to a fair market access throughout the European Union. Online gaming and betting is a fast growing market, but will remain for the next decades a limited part of the overall European gaming market in which the traditional land based offer is expected to grow from € 79.6 Billion GGR in 2008 to € 83,7 Billion GGR in 2012, thus keeping the lion’s share with 87% of the market. Source: H2 Gambling Capital, April 2010.