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How close is France to opening up of its gambling market? – Legal Gaming Special

March 25, 2009 2009

French Budget Minister Eric Woerth has said that the gambling market in France would be expanded to adapt “to Internet reality” and help France “get out of an unsustainable situation in which the state is losing a growing part of the betting market”.

All this may sound positive, but is the real “opening” of the market is still a long way to go?

ULYS’s partner Thibault Verbiest certaily thinks so.

“The presentation of the draft bill on 5th of March is a first step towards the opening of the French market but the harder part will have to be achieved within the next few weeks,” Verbiest told Bulletbusiness.com.

“The draft bill first has to be submitted to the Conseil d’Etat for an opinion, then presented to the French Cabinet, afterwards be notified to the European Commission in application of Directive 98/34 in (standstill procedure) and finally be discussed and voted by the French Parliament. Once the bill is enacted, the new administrative authority, in charge of enforcing the regulation of online gambling market, will need another few months to be efficient and begin to grant licences. In saying that France will start to grant online betting licences in the beginning of 2010, Eric Woerth was very optimistic,” shared Verbiest.

In an interview, Verbiest also spoke about the sort of legal access the private operators are expected to have, the possibility of a new legal battle regarding lotteries and slot machines monopoly in future and much more.

Woerth has said that illegal gambling generates €7 billion a year, and said that there were 25,000 illegal gambling websites in France, representing 75 percent of the market. Rather than banning 25000 websites, he said we’d rather give licences to those who will respect public and social order. What sort of legal access do you think private operators are expected to have in the French market considering the sign of opening up of the sector?

Since the announcement of the liberalisation last summer, Eric Woerth has repeated several times that the opening of the online gambling market will be controlled. In other words, it means that the opening will be limited and that gambling operators will have to satisfy a large number of specifications to obtain a licence. In the name of public order, operators will be required to give guarantees concerning their experience in the gambling industry, the transparency of their shareholding, the measures they will take against fraud and money laundering, and the security measures to certify online payment, protect children or process personal data, etc.

It seems that companies without experience in the gambling industry will have more difficulties to receive an agreement in France. The specifications required to obtain a licence will exclude a lot of operators.

It is being said that online operators, including non-France-based companies, will be granted five-year licences to take bets from French residents on sport and poker. Lotteries and slot machines will remain under state control. How do you assess this selective opening?

According to the draft bill, lotteries will remain under the Française des jeux monopoly and slot machines only available in terrestrial casinos. Moreover, spread betting, betting exchange or bets on virtual competitions will be forbidden. These games are known to be more risky (addiction and lack of control to avoid fraud and money laundering) than others and consequently are excluded from the opening.

Officially the European Commission has never criticised lotteries and slot machines state’s monopoly. The reasoned opinion sent to the French Government on October 2006 only concerned sports betting services. Therefore, the Government has decided to limit the opening of the market.

This restriction is not satisfying for gambling operators. Indeed, a lot of them operate sports betting services, online poker and lottery or virtual slot machines. Excluding lotteries and virtual slot machines to protect consumers, the Governmenent is being incoherent. If the Government wishes to ensure consumers’ protection, it should prohibit these games in general for both, public and private operators.

In application of EU law, the measures taken by Member States to restrict the free movement of gambling services have to be necessary, proportionate and non-discriminatory which is not the case when the market is closed in favour of public companies that do not particularly have consumers’ interests at heart. A new legal battle on the field of lotteries and slot machines monopoly could be declared by private operators in the next few months.

Industry leaders however have predicted the caveats in the bill would put off many operators. Woerth said he was proposing to impose a 7.5 percent tax on operators taking sport bets to maintain the €5bn a year it gets in receipts from the industry. He also intends to set limits on the ratio of bets that can be paid out to players in winnings. But according to the European Gaming and Betting Association, this raises questions about how economically viable the whole project will be for operators. What’s your opinion regarding the same?

The project will certainly not be economically viable for all operators as France gives priority to public and social order above all.

In theory, only operators located in uncooperative tax havens will be put off. Nonetheless, for practical purposes, in the draft law, especially the tax system and the limitations of wagers, winnings and the ratio of bets that can be paid out to players in winnings, we can infer that the liberalisation will only be profitable to gambling industry leaders.

The French Government has never hidden its objectives. The goal of the opening is not to authorise every operators to provide their services in France but to legalise the activity of honest companies offering financial and legal gurantees to ensure the respect of public and social order. The consequence is that many average operators will be excluded.

Recently, you had mentioned that according to the ongoing discussion within the French government, the draft bill requires that all operators should obtain a licence in France, without respect to the fact they may already have one in another Member State. Still how do you think online gaming companies especially ones from other countries can take realistic and swift action in terms of identifying opportunities and then acting in accordance with to the local licencing regimes?

European institutions promotes a principle of mutual recognition between Member states. It means that a licencee in a Member state could obtain automatically an agreement in France. Eric Woerth has explicitly rejected this principle. Nevertheless, once the regulation of the French market will be effective and consolidate, we can expect bilateral agreement between Member states to simplify proceedings to obtain a licence.

What do you recommend as far as the gambling tax issue is concerned? France has moved to open its gambling market, but insists all licenced Internet gambling sites will pay French tax, regardless of base location. How do you think this whole issue needs to be tackled?

It is impossible to give recommendations for the moment because decrees which will specify the content of the law have not been published yet and we still do not know how exactly the rules will be enforced.


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