The new elephant in the room

With freedom to provide services and the freedom of establishment tried and tested, the new “elephant in the room” is competition law.

France is the first to get a real taste of these new challenges, with the European Commission, the European Court of Justice and the French Competition Authority raising competition law and state aid concerns.

The arguments brought against Pari Mutuel Urbain (PMU), which continues to hold a monopoly on the land-based market for horse race betting while being allowed to compete on the newly liberalised online market as well, may also have consequences on other EU member states. The main arguments include:

• PMU’s land-based monopoly gives it a significant advantage on the online market, where it represents more than 80% of the bets placed online. In comparison, the new Belgian law requires its existing land-based monopoly to set up a separate online company which will have to qualify and apply for a separate online gambling licence as well
• In addition, the European Commission queries the inconsistency between liberalising the online market (which apparently bears a higher risk on consumers than land based gambling) while maintaining a land-based monopoly for the same betting product, bearing in mind that land- based gambling is supposed to be less risky
• The thorny issue of illegal state aid, after the French government announced a 8% horse race betting right applicable to all online operators. This online tax does not appear to affect PMU’s land-based betting activities, making PMU therefore even more dominant in the online sector, where it can “digest” the heavy tax through its land-based entities. On this note, one should not forget the UK’s unresolved debate on its horse race betting levy which will surely generate much anticipated headaches in the near future.

In a way, the move away from the freedom to provide services into competition law and state aid territory is a natural consequence of “emerging” markets, where previous monopolies have to compete in a newly liberalised online gambling market. The following lessons can be applied to various EU member states, where similar scenarios will be raised as well.

• First, once member states liberalise their gambling markets (whether through national licensing regimes or otherwise), the remaining monopolies will doubtlessly be in a dominant position which may in itself lead to anti-competitive behaviour
• Second, if online gambling and land based gambling have very different taxation regimes, this may give rise to further anti-competition claims by either party
• Third, with the ongoing debate on sports rights, coupled with the introduction of a new IP right for sports bodies, this may in fact be construed as a type of state aid, which in turn be in breach of EU state aid rules and competition law.

This new phenomenon is already manifesting itself, with the European Commission and the ECJ this time having to look at the behaviour of previous state monopolies and not at the “legality” of online gambling operators.

Competition is a new way to look at gambling markets and gambling regulations across EU member states. Any future EU consensus on gambling regulation will increasingly need to recognise the importance of competition concerns in newly regulated markets. If the EU Green Paper results in an EU ‘minimum harmonisation directive’, then in due course the Directorate General of Competition will issue guidelines of competition rules for the gambling sector on a European level.