France assesses its law, Belgium defends its model
By Sophie Mosca and Tanguy Verhoosel | Thursday 30 June 2011
Two countries – France and Belgium – adopted within months of each other a model of ring-fenced market opening with certain differences related to licensing conditions. The European Commission subsequently voiced concerns about both laws, prompting France to amend its law, which it is now assessing, while Belgium stands its ground in spite of a complaint by the European Gaming and Betting Association (EGBA).
France is assessing its new legislation that regulates online gambling and opens it up to competition. Since June 2010, it has given approved French and foreign operators the chance to enter this market, dominated until then by two monopolies, la Française des jeux, for numbers games and sports betting, and Pari Mutuel Urbain (PMU) for horserace betting. The French law is meant to be exemplary and “balanced” between the development of recreational gambling and respect for the goals of tackling under-age gambling, addiction and money laundering, and protecting the ethics of sports competitions. France therefore limited this openness to competition to horserace betting, sports betting and poker, and maintained its model of paying part of the gains (no ceiling on the amount) to the horse racing sector and sports federations to ensure the integrity of sport.
The brand new online gambling regulator (Autorité de régulation des jeux en ligne – ARJEL) issues licences and supervises the market with instruments ranging from the blocking of sites to criminal sanctions. Thirty-five operators currently hold 48 authorisations (25 for poker, 15 for sports betting and eight for horserace betting).
Until November this year, a review is underway under the relevant legislation. It obliges the National Assembly to report to the government on the economic model of online gambling and the financial interests of operators; on the effectiveness of protection of security and public order; and on the need for adaptations where appropriate.
The review presents two findings: the development of online gambling has not wronged gaming establishments, and the big winners are the former monopolies. This is a consistent feature of attempts to open up markets in Europe.
In terms of marketing, advertising is reserved to legal operators, which has contributed to the aim of shifting activity from illegal sites to approved sites, according to François Villote of the ARJEL.
He welcomes that the means being used to tackle illegal gambling activity have proved dissuasive. The assessment is less positive for addiction, because only prevention is being addressed, according to doctors, researchers and other experts who demand resources for research and treatment and greater clarity on the use of restrictive measures.
PRIVATE OPERATORS SLAM NEW LAW
For new entrants, implementation of the French law has involved considerable red tape and constitutes only minimal openness, too strict in scope, particularly for sports betting limited to certain sports (15) and certain types of results, as well as corresponding gambling phases considered “less subject to manipulation”. They argue for a wider range of sports betting, in particular the authorisation of handicap betting, the most widespread type before the market was opened up and authorised only in establishments. They also call for wider access to casino and table games.
In addition to the limited offer, the operators mainly denounce taxation on their activities. The French system taxes bids, which makes the offer less attractive than the system of gross gambling proceeds, used by the majority of member states that have regulated the sector. Another recurring criticism is the ceiling on the player return rate, which also affects gambling proceeds in France by making the activity less attractive than in other countries like Belgium, which has a minimum of 84%.
The very principle of the right to organise betting, a French innovation, is called into question because the charge paid to the organisers of sports events, which is not capped, is said to be excessive (from 25% to 40% of the proceeds of online betting) and to impact on costs, thus making the activity less attractive than elsewhere.
Other horserace betting operators demand a strict separation between offline and online activities and call for a level playing field between public and private operators (see separate article).
Casino operators, faced with a decline in business, challenge the opening up of online poker, saying it is more addictive than other still prohibited casino games. Georges Tranchant, founding president of the casino group of the same name, proposes to open the online casino game market only to operators who have proven themselves as operators of casino establishments, as in Belgium.
BELGIAN MARKET OPENING
Belgium justifies its refusal to amend its liberalisation law on the grounds of protection of the general interest, to the consternation of the European Commission. The new law was adopted by its parliament, on 3 December 2009.
The legislation creates a common framework for all games of chance (apart from lottery games, run by the Lotterie Nationale in Belgium and governed by specific regulations). It entered into force in January 2011. The implementing decrees are not expected to be fully in force until summer 2011, however.
The Belgian model, based on the protection of players, provides for ‘ring-fenced opening’ of the online gaming market to private operators, explains Etienne Marique, chair of the Gaming Commission, the national regulator.
The operators of nine casinos, 180 gaming halls and 34 betting agencies licensed in Belgium will now be able to obtain a ‘license +’ authorising them to offer online games of chance to their customers, under strict conditions. The server, for instance, will have to be located in Belgium. The taxation rate has been set at 11% of operators’ gross gaming proceeds.
In July 2009, the European Commission issued a “detailed opinion” on the Belgian bill. It had concerns in particular about its compatibility with EU law, since only companies licensed to run establishments (whose numbers are also capped legally and which must have their registered office in the EU, apart from Gibraltar and the Channel Islands), can obtain a ‘licence +’ for online gambling.
“The Belgian government responded to these criticisms. It produced material proof that there is no protection for players in the current system and that illegal sites allow money laundering,” said Marique. “Since then, we have not had any particular remarks from the Commission”.
In this case, as in many others related to the liberalisation of gambling, the Commission in fact makes do – for now, at least – with leaving it up to discontent private operators to challenge the Belgian law.
The EGBA, which represents them at European level, has taken the initiative. “The opening of the Belgian market to competition is purely virtual. We have lodged a complaint and the Commission is reviewing it,” declared Sigrid Ligné, the association’s secretary-general.
Marique is not worried. “Belgium is convinced of the validity of its legislation and of the fact that it will survive a complaint or legal action.”
A MODEL FOR EUROPE?
In fact, the Belgians are convinced that their new system of ‘liberalisation in a protected environment’ could serve as a model at European level. This is borne out, in their view, by the interest a major online private operator, PokerStars, based in Malta, has already shown in it.
Adapting its business mode, PokerStars has concluded a joint venture agreement with the Belgian group Circus, which runs casinos in the Walloon Region, for the creation of a legal online poker site.