French competition authority and EC flag "distortions" in French market

The European Gaming and Betting Association, which includes most of Europe’s leading online gambling groups among its members, has highlighted recent official opinions from the French Competition Authority and the European Commission regarding the liberalised French internet gambling market.
Sigrid Ligné, secretary general of EGBA, noted in a statement this week that both organisations have exercised their obligation to flag “distortions” with regards to the opening up of the French market in 2010.
The French Competition Authority, in an opinion published earlier this week regarding “controversial modalities of the opening of the online gaming and betting market in France” was critical on issues that included sports betting right and high price; the use of the FDJ and PMU customer bases; risks of cross subsidisation; specific risks related to the horse-race betting sector; and the ceiling on pay back ratio for horse race betting and sports betting.
Ligné provided a translated EGBA summary of the observations:
* Sports betting right and high price
“Such barrier to entry could trigger exclusionary effects as grave as an exclusive contract between the sports organiser 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 that ARJEL (the French regulator) put together a reference list of the main costs incurred by the federations and organisers 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 organisers” – 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 licence 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 subsidisation
“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 do not have such an 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 subsidisation. 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 characterised by the important position of PMU, which is today the main horserace betting operator online, way ahead [of] the alternative operators with 80-95 percent of the stakes for this kind of bet” – par.154
“The question of the vertical integration between the organisers 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 that PMU 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 then be 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
Commenting on the opinions, Ligné said:  “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 illegal State aid (EC decision C 34/10).”
Ligné concluded that these critical opinions on French gambling law by official bodies “…should convince the government of the need to amend urgently and substantially the market access modalities in line with [EU] Competition and Internal market rules.”

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