European Commission to investigate FDJ over €380m state betting contract
Regulator to examine loan awarded to FDJ for payment that secured 25-year exclusive lottery and betting deal
The European Commission (EC) has instigated an in-depth investigation into French lottery games and sports betting operator Française des Jeux (FDJ) over alleged breaches of EU state aid rules.
The body, which monitors compliance with European laws by EU member states, received two separate complaints against the French operator, resulting in the need to commence formal proceedings.
Complaints centre on the payment of €380m in April 2020 made by FDJ to secure a new 25-year exclusive rights agreement to operate lottery games at point of sale and online, as well as sports betting at the point of sale.
Under the PACTE Act, which came into law in May 2019, FDJ’s right to operate these verticals exclusively was fixed at a term of 25 years. To receive these rights under the act, a requirement was introduced for a payment to be made to the French state in return.
The payment amount was set at €380m in October 2019.
To finance the deal, FDJ took out a €380m floating-rate loan from five leading French banks, which it is now in the process of repaying over a 20-year period.
At the time, FDJ revealed it had explored various financing methods but eventually decided to take the syndicated loan route due to a favourable interest rate environment and a repayment schedule that aligned with the new rights period.
FDJ, which was formerly owned by the French state, was privatised in a public listing at the end of 2019. EC regulators will now look at whether this payment gave the firm an unfair advantage over its competitors.
Under EU rules, it is illegal for member states to give financial help to some companies and not others in a way that distorts fair competition.
If the EC finds rules have been violated, it has the option to start a ‘recovery case’ which aims to remove the undue advantage granted to a company (or companies) and to restore the market to its state before the aforementioned aid was granted.
There is a limitation period of 10 years for the recovery.
“The commission will verify the conformity of the remuneration with market conditions and will not exclude at this stage that the measure could provide an undue economic advantage to FDJ,” the EC said in a statement.
“The opening of an in-depth investigation gives France and all interested parties the opportunity to comment on the measure at issue.
“It does not prejudge in any way the outcome of the investigation,” the EC added.
Responding to the inquiry, FDJ noted that it had received necessary approval for the €380m deal from the French Holdings and Transfers Commission, which had externally assessed the agreement.
The operator also cited prior instances where FDJ itself had highlighted the potential for legal appeals arising from the application of the PACTE Law.
In addition, FDJ referenced a prior French Council of State dismissal, made in August 2020, of proposals to refer the matter to the French Constitutional Court as a Priority Constitutional Issue.
“FDJ is available, along with the French State, to answer any questions from the European and French authorities over the course of these proceedings to provide any information necessary to demonstrate the compliance of this legal framework with French and European law,” FDJ added.