Q&A: How Svenska Spel is responding to the rigours of the new Swedish market

Sweden’s former gambling monopoly Svenska Spel had enjoyed a privileged position in its native country for the past 20 years along with fellow ex-monopoly operator ATG. However, as the saying goes, all good things must come to an end. And when the Swedish government announced the commencement of a new regulatory process which ended the monopoly, allowing other operators to enter the Swedish market, many assumed Svenska Spel and ATG’s days as Sweden’s top dogs were numbered.

Svenska Spel CEO Patrik Hofbauer believes the monopoly guaranteed to it by the Swedish government was only a paper monopoly, as many international operators have been targeting the Swedish market for more than 10 years, albeit through the use of unlicensed sites.

In conforming to the new market, Svenska Spel has had to completely redefine its business model at the same time as dealing with the consequences of new regulatory standards. However, despite the significant impacts resulting from both changes, the business has prospered, retaining a significant share of the market despite the new entrants and increased requirements.

Svenska Spel CEO Patrik Hofbauer and chief compliance officer Helene Cedertorn talk to EGR Compliance about the demise of the monopoly, Swedish regulatory changes and how these changes have reached into every corner of the business.

Svenska Spel CEO Patrik Hofbauer

EGR Compliance: How has regulation changed the way that Svenska Spel does business?

Patrik Hofbauer (PH): The biggest change has been to adjust Svenska Spel to the new regulation and licensing system. This change has resulted in changes to the business, replacing one company with three business areas within the Svenska Spel Group. That has been a huge change and a huge workload during the last year for us.

Business wise, the biggest change is that Svenska Spel can offer customers new products such as online casino and horseracing for example. The third change is we can be more competitive on the pricing that we offer via our licensed company. That is a big change in our offering because there’s been competition in the Swedish market there for many years, it’s just the reregulation has allowed us to offer these products from 1 January, something which we could not do previously.

EGR Compliance: In your opinion, would a ban on advertising reduce channelisation to licensed operators?

PH: Of course, there is a risk of that. Although we have our new regulation in place to ensure channelisation, I think we need to have some patience as well. We are only four months into the new market and you must go back and look at the trends in Q4 2018 and look at how the whole industry spent money on advertising, then it is no surprise that there should be high spend during the first four months of the year. Everyone coming into the market wants to build a customer base and the ones that are already there want to defend the customer base they have so it’s natural there was a big spend. But I don’t see the big spending that we’re seeing now being sustainable in the future; it will go down. Operators cannot afford to put so much money into advertising.

The second thing to consider is that with everyone entering the market, it is so much harder to differentiate your offering from your competitors, so ROI will go down and you’ll need to look at how you can do this more efficiently which will result in a reduction in spend.

Helene Cedertorn (HC): Of course, there is a risk that channelisation may be affected if licensed operators are not allowed to market their products. They may choose not to uphold their licences and/or others that have no licence may find ways to market their products from abroad.

Helene Cedertorn, chief compliance officer, Svenska Spel

EGR Compliance: Has regulation ultimately benefited or hindered Svenska Spel?

PH: It has ultimately benefited Swedish consumers which is the biggest win. The new regulation has also shown that Svenska Spel can compete in the Swedish market and despite strong competition has delivered good results.

Results during the first quarter of business following re-regulation have been in line with our expectations and when it comes to consumer protection, which is an important part of the new regulation, we are very strong. All in all, I would say that the new regulations are very beneficial for us and beneficial for the Swedish consumer.

If you look at it in more general terms, the biggest change resulting from reregulation in terms of operators has been that at Svenska Spel we’ve put a lot of effort into changing the operating model of the group. Despite international operators entering the Swedish market through licensing, you must remember that they’ve been in the market already now for more than 10 years. They’ve just not been regulated.

Competition is nothing new for us and indeed Swedish punters could use international operator sites like Betsson, Unibet etc. without significant barriers for entry. The one thing that’s changed for international operators is that they are now required to follow the Swedish consumer protection measures and new regulations.

HC: There are challenges for us to ensure compliance with all the new regulations in the new market and still be customer focused, but we feel comfortable that we will be able to deliver, and all operators face these challenges.

EGR Compliance: What for you is the biggest challenge of the new regulated market?

PH: The biggest challenge for operators is not only getting used to the new regulations but dealing with the fact that an increased number of people have a negative attitude towards the gambling industry. We all must cooperate to achieve a change because the number of players is decreasing, and this presents an important challenge for the market as a whole.

HC: From a strictly compliance perspective, the biggest challenge has been timing. The new regulations and requirements came very late with little time to test new functionalities etc. The regulations are complicated, and there are still some question marks regarding the certification process that needs to be clarified.

Two additional areas of concern are how the prohibition of bonuses will be interpreted, and interpretation of the rule that marketing should be modest/moderate. It will take some time before we know exactly what is required, and it is tricky to know how to handle these questions in the meantime. We certainly do not wish to break any rules, but still we must be out there and market our products as any other company.

EGR Compliance: Will the regulation of the Swedish gambling market prove to be a positive or negative move in the long term and why?

PH: I think it’s a positive move in both the short term and the long term. The new gambling legislation means we have a proper marketplace and we finally have a level playing field between operators for the first time in the Swedish market. This enables increased revenues for the state and additionally provides clear rules to protect customers against gambling-related harm.

HC: From a consumer protection point of view, the position of the consumer is clearly strengthened, and we view that as very positive.

EGR Compliance: Do you think the new Swedish gambling law is fit for purpose?

HC: Overall, I would say yes, though we are struggling with the interpretation of the complicated and detailed regulations. Once we have dealt with this I think it will be good and ensure a high level of consumer protection and security in the gambling industry from a technical point of view. I hope the law will provide for better possibilities to combat match-fixing and other phenomena that are devastating for all sports as well as for the gambling industry. This all comes down to that the authorities also doing their part and ensuring that the potential of the law is fully used.      

EGR Compliance: What is the cornerstone of Svenska Spel’s approach to compliance?

HC: We put a lot of resources and energy into ensuring that we fully comply. Compliance provides guidance and expertise, but everyone at Svenska Spel knows that he or she is responsible within his or her area of responsibility. We would not be able to deliver without strong partnership between compliance, IT and the business operations.

EGR Compliance: How important is it that Svenska Spel has a good relationship with Spelinspektionen?

HC: It is of course important for the whole industry to have a competent and transparent supervisory authority, but we have no special relationship. It is a strictly professional relationship, and we expect Spelinspektionen to treat us like any other license holder, within the legal framework that applies to authorities in Sweden.

EGR Compliance: Svenska Spel and ATG have been reported to the Swedish Competition Authority over claims they used unfair marketing practices, how do you respond to these allegations?

HC: I’ll answer this question by quoting our general counsel Lena Lassenius who said: “In our opinion, there is no basis for the complaint. We have carefully considered all competition law rules that are mentioned in the complaint when we have adapted the Svenska Spel Group to the new gambling market. We feel confident with the assessments we have made, and the complaint does not change our assessment.”

EGR Compliance: Where is the biggest area of compliance and regulatory expansion for Svenska Spel in 2019?

HC: The technical regulations with requirements for certification of various components and processes are complicated, and this is the biggest challenge right now. There is an absolute deadline 1 July 2019 for the certification process and our attention on delivery is of course high.