On November 15, 2010, the Autorité de la Concurrence (the French Competition Authority) hosted a meeting on the theme of online gambling and the opening of the market to competition. The first debate concerned sports federations and betting rights.
FRENCH
Rapport bibliographique (Symposium): Symposium de l'Autorité de la Concurrence sur la régulation des jeux en ligne.
Le 15 novembre 2010, l'Autorité de la Concurrence a organisé un colloque sur le thème de la régulation des jeux en lignes et l'ouverture du marché à la concurrence. Le premier débat concernait les fédérations sportives et le droit au pari.
GERMAN
Bibliographischer Bericht (Symposium): Symposium der französischen Wettbewerbsbehörde über die Regulierung von Online-Wetten.
Am 15. November 2010 hat die Autorité de Concurrence (die französische Wettberwerbsbehörde) ein Symposium über die Regulierung von Online-Wetten und die Wettbewerseröffnung dieses Marktes veranstaltert. Im ersten Gespräch wurde das Thema Sportverbände und Wetterecht behandelt.
ITALIAN
Relazione bibliografica (Convegno): Il convegno dell’Autorità francese garante della concorrenza sulla regolazione delle scommesse on-line.
Informe bibliográfico (Simposio): El Simposio francés de la Autoridad de la competencia sobre la regulación del juego en la red.
El 15 de noviembre del 2010, la Autorité de la Concurrence (la Autoridad francesa de la competencia) organizó una reunión sobre el tema del juego en la red y el abrimiento de este mercado a la competencia. El primer debate se centraba en las federaciones deportivas y los derechos de juego.
In his introductory speech, Bruno Lasserre, President of the Autorité de la Concurrence, the French Competition Authority, emphasized the very particular nature of the opening of the gambling market to competition. Indeed, this market is at the crossroads between competition law and the opening to competition. Many issues are at stake in the gambling activity, which go beyond sole competition: the prevention of addiction, of criminality, of tax fraud, money laundering, the protection of underage consumers, etc. Therefore, the French regulatory system, implemented by France in order to comply with European Union legislation, endows the sector with a specific regulation authority, the ARJEL, which works in collaboration with the Competition Authority. Eighteen months after the implementation of the Act of May 2010, an assessment of its implementation will be made. The Competition Authority thus logically is only entrusted with the ex post tasks derived from the competition-related aspects of the law.
18 months after the May 2010 Act, the application of the law will be evaluated. Yet, a few months after the opening of the market, or rather the legalization of an online gambling offer that already existed illegally, the Competition Authority used its power of self-referral to elaborate an opinion on the contracts between organizers of sports' events and online betting operators. The 2010 Act gives both the ARJEL and the Competition Authority the jurisdiction to verify the drafts of contracts between organizers and operators and to issue an opinion within 15 days. Because of the very short deadline, the Authority decided to use its powers to elaborate general guidelines, which are due to be published at the end of November 2010. It should constitute an important indicator for operators, and so the Competition Authority also used this meeting to gather operator's advice and opinions.
This decision of the Competition Authority is explained by the need for the Authority to examine both horizontal and vertical competition problems that may occur. A proper examination of these contracts requires more time than the 15 days legally attributed, and the Authority considers it a better solution to issue general guidelines, which will give operators a sense of responsibility, providing a general and clear legal framework. In the same way as the European Commission does in the examination of merger projects, the Competition Authority will issue useful guidelines especially on topics such as the price of the right to bet, or on the respect of non-discrimination. This should be more efficient than simply issuing, in a very short deadline and following the stream, opinions, which might lack the necessary hindsight.
In his conclusion, the President recalled that the aim of the symposium is to gather information and opinions on the sector. This symposium, the fourth organized by the Competition Authority, will prove itself interesting, for it shows the great complementary work and the coordination between the ARJEL and the Competition Authority, which is essential on such complex markets, and is of course a national specificity, since at the European level, no such regulation authority exists. Also, this symposium is the first of its kind in a European country, since no study of the competition issues at stake in the gambling market has been performed, whether in Malta, in Ireland, Belgium or the United Kingdom. Therefore, this symposium might well inspire other countries.
Jean-François Villotte, President of the Autorité de Régulation des Jeux en Ligne (ARJEL- the French online gambling regulation authority) gave an introductory speech in which he drew up a report of the changes in the gambling market since the Act of May 12th, 2010[1]. He reminded that the gambling market entails several public interest issues: the fight against fraud, criminality, money laundering, the protection of the consumer against addiction, unethical behaviours, etc. Regulation of this sector must be quality-oriented. The European Court of Justice recognized in the Santa Casa case[2] that the principle of mutual recognition did not apply to the gambling sector, and that Member States must apply the principle of proportionality to their national gambling regulatory systems. In the Engelmann case, it also ruled that Member States cannot require that operators be established in their country.[3]
In France, the ARJEL delivers agreements for gambling operators. They are valid for five years without a numerus clausus and are not transferrable. 45 have already been issued, to 32 operators, 8 of which are not established in France, but mostly in Malta, the United Kingdom and Ireland. The shift from an illegal to a legal offer has been fluid, and there has not been an explosion of demand.
As a whole, 2,5 million player accounts have opened since May 2010, 500.000 are active every week. The average amount a week that is played per player is 110 Euros. A distinction exists between sport betting, horse betting, and other types of games such as poker, which involve the participation of several players competing with one another. As for sport betting, the ARJEL issues a list of authorised sports, which is evolving and consultative. This part of the sector represents 350 million Euros, 57% being bet on football games - but exceptional demand due to the recent World Cup must be accounted for- 25% on tennis and 4% on volleyball. M. Villotte underlined that the utilisation of images from the competition plays an important role in driving player demand, so the use of these image will play an important role. The ARJEL issued 18 opinions on contracts between organizers and online betting operators on sports. It has been observed that the organizers do not sufficiently anticipate the consequences of transferring betting rights , and that their preliminary examinations were too limited in scope. Also, the security measures implemented to fight fraud or criminality are still too weak. As for horse betting, the market does not fluctuate significantly and consumption is rather stable. 120.000 players are active and bet around 150 Euros a week. And for poker games, two types of games exist: "cash games" and tournaments. 260.000 players are active, and they bet around 1.000 Euros a week. 2.5 billion Euros have already been bet since July 2010, and the trend is towards growth. Tournaments currently represent 239 million Euros paid in admission fees.
18 months after the May 2010 Act, the application of the law will be evaluated. Yet, as the Vice-President of the French Competition Authority Patrick Spilliaert noted, a few months after the opening of the market, or rather the legalisation of an online gambling offer that already existed illegally, the Competition Authority used its power of self-referral to elaborate an opinion on the contracts between organisers of sports' events and online betting operators. In this framework, the expected opinion should constitute an important indicator for operators, and so the Competition Authority will attentively take note of the advices and remarks of the operators invited to this meeting.
The other Vice-President of the French Competition Authority, Anne Perrot also noted that the question of the contractual relations between operators and organisers could be either apprehended ex ante or ex post. However, the 2010 Act forbade tender bids, so the conditions for these contracts are to be approached ex post. Sports organisers, such as sports federations, possess betting rights, which they contractually licence out against fees paid by the betting operators. This fee is now habitually 1% of the total amount of bets, and should pay for the necessary investments in sports infrastructures or in the organizer’s network. This amount of 1% can vary (and go up to almost 1,8%), but a certain parallelism of prices has appeared since May 2010. The transfer of betting rights must be non-exclusive and non-discriminatory, and the organisers must provide sufficient information and transparency. A few months after the implementation of the law, the Competition Authority is looking forward to knowing whether or not the conditions of price fixation are fluid enough, and understanding how the market works.
The Chief Executive of the French Tennis Federation, Gilbert Ysern, stated briefly that all contracts his association signs with betting operators are identical, and that the question of the charges they pay is an important one. In the case of the Tennis Federation, this amount is judged too low for all the investments that the Federations faces, in terms of branding, networks, infrastructures but also in terms of the fight against corruption, which is expected to cost 100.000 Euros a year. Two recent charges on Davis' Cup's matches have only resulted in 3.000 Euros for the Tennis Federation. Mr. Ysern also noted that the negotiations were hard but fair, and that he believes the resulting agreements are transparent and competitive. However, it is a “learning by doing” process, since the market’s opening to competition was quite abrupt.
Antonio Costanzo, Public Affairs and Regulated Markets at Bwin, strongly advocated the cause of new operators on the market by stating that the existence of betting rights was neither justified nor efficient. Indeed, this right is supposed to guarantee the financing of sport activities, and help the Federations to fight corruption, money laundering, etc. Yet, these rights are a French exception on the European level and it is not proved that betting rights help fight fraud. On the European level, the major online sports book operators created the European Sports Security Association (EUSSA) in order to fight fraud. The French system creates a new local system, which might be counterproductive, considering the transnational dimension of fraud. He also contested the basis on which the 1% charge is calculated. In fact, the operators must pay 1% on the gross sum of all bets, even on the money that the brokers must spend on winning bets. They thus pay a charge on lost money. He also pointed the fact that the charge always tends to revolve around 1%, and that for latecomers to the market, price negotiations are so limited that they often result in the signing of what resembles a standardized contract, with practically no margin for negotiation. He also underlined that in his view, the charge system did not help "small" sports and so did not fulfil the aim of helping the smaller French Federations. In Italy, the money is distributed to the Olympic Committee, which redistributes it to Federations. In M. Constanzo's view, this ensures a fairer financing of every sport. And finally, the French system could create competition distortions, since the amount of the charge could disadvantage small operators, whereas former monopolistic operators can use their financial strength to continue providing a wide range of products.
Pierre Pagès, General Secretary of the PMU (Paris Mutuel Urbain, the former French monopoly on horse betting), defended another point of view. Indeed, in his opinion, later shared by the Assistant General Manager of the Française des Jeux Charles Lantieri, the PMU is both a former monopoly on horse betting and a new operator in the fields of online betting, and betting in other sports. He believes that the existence of betting rights and the resulting charge are completely legitimate, especially since they contribute to financing the fight against fraud. He reminded that in horse betting, consumer trust in both the support and the operator are crucial, and that the PMU always showed a great concern to this issue. Therefore, the amount of the charge is reasonable in his view. He also highlighted the usefulness of the ARJEL's opinions in elaborating proper contracts.
The Chief Executive of Zeturf France, Emmanuel de Rohan-Chabot, his direct competitor (Zeturf is an online horse betting company), also expressed his approval of the French mechanism of betting rights. He underlined that the method used to calculate the charge is the best one for it prevents the organizers of events’ having to deal with significant conflicts of interests. Indeed, the basis on which the charge is calculated is the total of bets, and not the amount of gains earned by the operators, which prevents organisers from even considering influencing the outcome of the competition.
As another representative of a former monopoly, Charles Lantieri, Assistant General Manager of the Française des Jeux, the former French monopoly on games of chance, pointed out that his firm is also both a former monopoly and a new competitor. He insisted on the fairness of the existing system, since it creates partnerships between sports federations and betting operators. However, the opening to competition was somehow abrupt, so the compensations for the charge are, in his opinion, not sufficient yet. Furthermore, the charge is rather high, since it can vary between 1% and 1,8%, and the gross product of games generates less than 5% of the total bets. So in the end, 20% to 25% of the gross products of bets are paid with the charge.
As a conclusion, Anne Perrot reminded that the Competition Authority is familiar with the question regarding the notion of reasonable price in competition. This should indeed be studied. She also noted that horse betting seems to be a separated segment of the market, and thus underlined that it might be important to know whether or not different bets, on different sports or competitions are substitutable. Testing for price elasticity also is one of the Competition Authority’s responsibilities. However, one should note the lack of hindsight in properly evaluating the implementation of the Act.
[1][1] Loi n° 2010-476 du 12 mai 2010 relative à l'ouverture à la concurrence et à la régulation du secteur des jeux d'argent et de hasard en ligne, article 1, accessible on http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022204510&dateTexte=&categorieLien=id
[2][2] ECJ, Santa Casa, September 8th, 2009, C-42/07
[3][3] ECJ, Engelmann, September 9th, 2010, C64-08, See II-8.2 : The European Court of Justice handed down a judgement on September 9th 2010 in which it ruled that two criteria of the Austrian Glücksspielgesetz (the Federal Law on Games of Chance) violated articles 43 and 49 EC, that is to say the freedom of establishment and the freedom to provide services, The Journal of Regulation.
http://www.thejournalofregulation.com/III-3-8-The-French-Competition.html
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