FCA: no spin-offs for PMU and FDJ
French Competition Authority's report on advantages afforded to ex monopolies avoids the most problematic points raised by their competitors, says consultant Quentin Toulemonde.
The French situation regarding sports betting is paradoxical. Whereas online betting is now regulated and open to competition, land-based shops are still under control of the monopolies: Pari Mutuel Urbain for horse racing and Française des Jeux for other sports.
As has been frequently raised by competitors such as Bwin and BetClic, the tax burden coupled with the unfair advantage lent to the monopolies by their land-based presence has made it difficult for new entrants to the online sports betting sector to gain a foothold in France.
Therefore, the French Competition Authority (FCA) decided to look at these issues more closely, on 20 January finally releasing its conclusions. While the report dealt with a wide array of important issues such as the negotiation of betting rights, to which I shall return later, four broad concerns were raised by PMU and FDJ’s competitors with regard to market conditions in France.
- PMU and FDJ could use their existing customer database for marketing purposes, whereas new entrants had to start from scratch
- PMU and FDJ could benefit from their existing land-based brand image to attract more customers
- PMU and FDJ could subsidise their online activity thanks to funds generated by land bets, which are more profitable
- PMU could take advantage of its size to make pari mutuel bets more attractive to customers, as the more players, the bigger the pot – and the lower your probability to win it. But studies proved that punters are fascinated by huge amounts and tend to completely omit the odds beneath it
I will only deal with the first three points, which are fixed-odds related. The FCA’s answers to these concerns are pretty enlightening as they could set legal precedents for future decisions, recommending that:
- Both PMU and FDJ create separate databases for their land and online activities
- PMU should use a different brand name for its online activities
Thus this long-awaited report intentionally avoids the most problematic points raised by competitors to PMU and FDJ. Its recommendations are far weaker than the full separation of offline and online businesses that some journalists hastily reported were contained within the report.
With regard to PMU’s potential “spin-off “, the FCA protected itself by asserting that the current legal framework – mostly relying on the 12 May 2010 law establishing the regulatory framework – is not strong enough to enforce this full separation of the horse racing monopoly’s online business from its offline activities. Therefore, the FCA stated, “illegal funding”, defined as using land-based revenues to fund the expansion of its online arm, could only be examined on a de facto – and therefore a posteriori – basis. Thus PMU can thus keep on running its activities with no major change – only a small rebranding, which PMU will make as discreet as possible to retain its customer base.
The implications for FDJ arising from this report are even more insignificant, as it had already taken steps in this direction ahead of the opening of the market to competition, creating ParionsWeb in November 2009.
So, the political hot potato thus fires back to the ultimate law-formulator, namely regulator ARJEL. That explains why Nicolas Béraud, BetClic Everest CEO, immediately called following the publication of the FCA report for ARJEL to intervene on behalf of ensuring a level playing field for all competitors in the French market.