2009.07.10 Opening of the French market to on-line betting and gaming
A bill relating to “the opening and the regulation of the on-line betting and gaming sector”, was presented to the French National Assembly on 25th March 2009. If it is adopted the law will come into effect on 1st January 2010.
This bill aims at making the national law compatible with the European Union rules on freedom of establishment and on free provision of services, by removing the monopoly on horse betting and lotteries created by the Government nearly a century ago in order to ensure social and public order. This monopoly was granted to two closely controlled organizations: the “Pari Mutuel Urbain” (hereinafter PMU) and the “Française des Jeux” (hereinafter FDJ), responsible respectively for the organization of horse-races and the national lottery. (I).
Being the result of a compromise, this bill whose aim is to reconcile two a priori contradictory objectives raises questions and is not supported by everyone (II).
I. Presentation of the bill.
1. An imperfect opening to competition
The field of application of the announced opening to competition is limited to the following activities:
Betting:
The PMU, looses its monopoly on horse betting. From now on, horse and sports betting relating to official competitions : parimutuel betting on horse and sporting events as well as fixed odds on sporting events (the fixed odds being the expression of an anticipated evaluation of the probabilities of success of such or such a competitor) are authorized through the intervention of various private operators, provided that the players are made aware of the maximum amount of their potential loss at the time of placing their bet.
Gaming:
For the time being, the Française des Jeux will retain its monopoly over games of pure chance. The only on-line games that are proposed are based on both chance and skill of the players. At this stage, only the authorization of poker is contemplated.
2. Supervision of the opening to competition
The bill establishes the creation of an Independent Administrative Authority: the Autorité de Régulation des Jeux en Ligne (hereinafter ARJEL) - Authority for the Regulation of On-Line Gaming - responsible for supervising these new regulations.
The ARJEL issues the on-line gaming or betting operators with a renewable five years license. This licence is mandatory, cannot be transferred, and a single one must be granted for each gaming category.
This licence can only be granted to gaming and betting operators who have a registered office in a Member State or in a State that is party to the Agreement on European Economic Area and that has concluded Cooperation and Mutual Administrative Assistance Agreements with France to fight against tax fraud and tax evasion.
In order to obtain this licence, the gaming operator must provide justifications of his financial situation and liability, of the details of the games, his ability to obtain the identity of the players, and the identification of his methods of payment.
3. The operators’ obligations
One of the operators’ main obligation is to open separate accounts for each of the proposed games. Each of these accounts must be opened in a Bank located in a Member States of the European Union.
In addition, an on-line player account must be allocated to each new player. It must recount the bets and the profits associated with the games and the bets, the banking movements associated thereto, as well as the balance of the players’ assets.
The operators must prevent the participation of minors or of anyone prohibited from playing. They must prevent addictive behaviour, in particular through the intervention of moderators on their sites.
They must provide ARJEL with some personal information about the players.
The operators must pay a fixed fee as follows : an amount within the range of 2,000 € to 15,000 € at the time of their application and an amount within the range of 10,000 € to 40,000 € on the 1st January of each year following the issuance of the licence.
Moreover, a tax will be payable annually by the operators on the sums placed by the players or punters including the reinvested earnings, and this, calculated through the application of variable rates according to the type of betting or gaming (rate of 5.7% for horse and sports betting, and of 1.8% for gaming). National insurance contributions will also be payable (rate of 1,8% for horse and sport betting, and of 0,2% for gaming).
The ARJEL and the Tax authorities will work together in the fight against fraud and money laundering by sharing data concerning the players and the gaming operators.
The operators who do not satisfy the above obligations will incur various penalties including the withdrawal of their licence or fines (up to 5%-10% of the turnover), possibly coupled with the publication of the condemnation.
Illegal operators will incur a sentence of 3 years of imprisonment and a 45,000 € fine (and a sentence of 7 years of imprisonment plus 100.000 € fine if they operate through an organised gang). Anyone who issues or broadcasts advertising material on behalf of unauthorized gaming sites could face a 30,000 € fine.
II. Reactions
From a legal point of view, some are already contending that the obligation placed on the operators wishing to gain a foothold in the French market to obtain a licence in France and to pay French taxes, would not conform to the rules of international trade and to the European Union Regulations.
The fact that the Française des Jeux is keeping its monopoly on the lotteries also seem to contradict the principle of free competition, even if the bill indicates that it is necessary in order to fight efficiently against players’ addiction. Naysayers see this as a pretext hiding the true objective which would be to allow the Government to continue to benefit from the tax revenues generated by gambling.
As for the impact of the law on the market, future operators, and in particular the owners of French casinos expect to face competition from foreign sites. They are incensed by the fact that the opening to competition is only limited to the poker game.
Their concern is all the more justified since some foreign operators have not hesitated to profit from this announced opening to competition to pre-empt a share of this new market by broadcasting an abundance of advertisements on the radio. Such advertising practices have been condemned as illegal by the Treasury Minister.
Some operators also contend that the fiscal constraints will be much stricter in France than in other European countries. UNIBET, for example, already established in these other countries had indicated in first place that it would probably not apply for a licence in France for this very reason, but it seems that it has recently changed its mind.
Others, such as the PMU, remain optimistic because they hope to compensate for the loss of their monopoly on horse betting, through the promotion of other sports betting.
However it seems that it will be even more difficult than before to fight against the proliferation of illegal sites, due to the lack of adequate methods.
In that respect, the bill anticipates that in order to fight against fraud and money laundering, records on the operators and especially on the players could be created by the ARJEL, by the tax authorities and by the police.
A question deserves to be asked : will the creation of these records, whose legitimacy is suspect in the eyes of civil liberties advocates, constitute a proportionate and appropriate method to fight illegal gambling ?
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In conclusion, this law, if it is adopted, risks causing more confusion than clarity in the consumers’ minds, confusion from which the illegal operators have already started to benefit. Clearly it promises to be the subject of bitter parliamentary debate next spring.
