Double blow against French legislation on online gaming and betting

European Gaming and Betting Association (EGBA) takes note in particular of the following severe conclusions:

Sports betting right and high price
In paragraph 123, the association states that “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”.

“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”.

Use of FDJ and PMU customer base
It also points that 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.

Risks of cross subsidization
In paragraph 199, it states that: “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”.

With regards to this matter, it adds, in paragraph 201, that “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”.

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”, it comments in paragraph 154, and adds, in paragraph 157, that 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.

“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”, assures in paragraph 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” says in paragraph 226.

Ceiling on pay back ratio for horse race betting and sports betting
In paragraph 101, it states that “The legal ceiling on the pay back ratio limits price competition”.

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”.