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Industry News

18th October, 2010

France‘s Slow Start Gives Rise To Awkward Questions

Extract from GamblingCompliance : Graham Wood

With initial figures indicating that the French betting market has so far not developed as hoped, competition watchdogs are busy gathering operator feedback as the regime faces up to further legal challenges. Since June, when the new online gaming regime came into force, the first four months of activity have, according to media reports, produced a turnover of around € 1bn.

Jean-François Vilotte, president of gaming authority ARJEL recently confirmed that spend on sports betting amounted to € 262m in the period from June 8 to October 8, € 151m of which was related to betting on football (of which € 65m was staked on the World Cup) and € 63m on tennis.

Volleyball generated stakes of € 10m, basketball € 7m and rugby just below € 4m. Horseracing, during the same period, turned over € 230m, and poker approximately € 500m. The level of interest in sports betting is certainly less than could have been expected, particularly with the South Africa World Cup providing a unique springboard for the launch, but spend on horseracing is encouraging, whilst data for poker is so far insufficient for further analysis. For some French commentators the liberalisation looks to be shaping up like that of the ‘118’ directory enquiry services that saw dozens of new operators early on but only enough business for a few to remain in profit after a year or two.

And while regulators recently breathed a sigh of relief at clearing their first legal hurdle, resulting from a challenge by operator Betclic over the legality of payments to sports rights holders, scrutiny is still ongoing with the sector‘s regulators being stress tested by both operators and the Competition Authority.

Certainly, the French competition authority appears to have already taken seriously the concerns expressed by many operators that there are distortions in the market to be addressed. A questionnaire sent to the newly licensed companies includes some telling requests such as: "Have you entered into agreements providing betting rights with sports federations or sporting events organizers? If so, which federations or organizers?" and "What compensation (percentage of stakes) do these sports federations or sporting events organizers seek for the betting right? Do you consider the price level for the betting right is reasonable? Do you consider it may give rise to competitive distortions?"

For Betclic, following their legal challenge related to the issue, the answer would be that the need to enter into agreements with the sporting federations is totally unnecessary.

However, in the second week of October the French High Court threw out the bookmaker‘s request for this element of the legislation - that also requires operators to pay over one percent of turnover for the rights - to be scrapped.
The authority is also seeking verification over concerns that the incumbent monopolies (PMU and FdJ) have an automatic advantage. Question 9 in the document asks operators "Could vertical integration between a betting organizer and the holder of a betting right give rise to competition issues? If so, which ones?"

ZEturf, under fire from ARJEL for, inadvertently or not, paying back too much in winnings to its punters, will also be keen to respond to questions like: "Do you consider that the payout rate limited to 85 percent is justified for public order reasons, notably to fight against addiction? Are there any other means to reach this goal? Which ones?" and "Does the payout rate prevent operators from differentiating themselves from their competitors? Are there other means of differentiation?"

The question to which operators will likely be most keen to give their comment on is the last on the list: "Does the asymmetry existing between new operators and incumbent operators, remaining in a monopolistic situation regarding offline activities, give rise to competition issues in this sector? For instance: (i) pooling off-line betting stakes and online betting stakes for totalizor betting ; (ii) terms and conditions of use regarding client files obtained in the course of a monopolistic activity; or (iii) operators‘ pricing policy (bundling discount, loyalty discount, etc)".

As Stanleybet and ZEturf await news of their own legal challenges, and many bookmakers hold fire on their applications for fresh licences, few would bet on the French market‘s ‘controlled opening’ progressing without revision, and possibly at the hands of the country‘s judges.