Online gambling in France

Many people agree that France is a conservative country which likes to protect its own industries against foreign competition. One such example is that for a long time the online gambling market remained out of bounds for the French citizen wanting to play on foreign internet sites because this was blocked by state-owned monopolies such as La Francaise des Jeux and the PMU.

Following numerous warnings by the European Commission cautioning France that its ways were infringing the Treaty rules of free competition and freedom of establishment, now under pressure and during its rotating presidency of the EU France feels itself compelled to gradually open its market for foreign operators offering online gambling. Nevertheless, observers feel reform will be gradual and the chances of a complete deregulation will remain doubtful. The signs now look good and the ice is melting, albeit slowly.

Why has France taken such a protective stance towards its state gambling monopolies in the past, and why has it resisted so long before conceding to ease its grip on the French online gambling market? The answer may be in the political changes that have taken place under Nicolas Sarkozy's regime. Quoting the budget ministry report, it aims to reorganise the gambling market in France, trying to tackle the conflict of conflicting interests who are potentially affected by the opening of the market. In fact, there is no law in France which defines the modalities of the market regulation, and to add to the confusion the European laws on the services directive do not cover gambling.

Suddenly we hear declarations that France will open its online gambling market next year. Given that France has assumed the European presidency, it looks opportune to align its infringements on a number of protectionist stances such as the incarceration of visiting executives from foreign betting sites and the opening of a court case against the horsebetting company Zeturf (a Malta-licensed company offering bets to French punters). In view of all this procrastination, the French budget minister Eric Woerth has proposed a revised legal framework towards the end of 2008.

Critics agree that the French punter has endured the limitations of online gambling products while being somewhat dissatisfied with the duopoly of the PMU and La Francaise des Jeux. The PMU in France is a leisure company whose pivotal role is to conceive, promote, market and totalise bets on horse races for the account of the French Horseracing Associations. La Francaise des Jeux is a public company which has for its main object the organisation and exploitation of the lottery games and sports forecasts within France. Soon, these two companies will face the open competition but in order to concede their grip on the market they demand a fair playing field. For example, the PMU wants the new online gambling companies to pay the same taxes as it did when it commenced its trading activities. On the other hand, the French land-based casinos demand a priority status once the poker games are liberalised. Evidently there is a tug of war which is not easy to solve as each sector wants to safeguard its interests when and if deregulation starts.

Moreover, critics lamented that rushing to deregulate should not lower the defences against gambling addiction, particularly among the under-age, and reduce the protection of minors. Everyone wants to ensure fair play. All agree that as a pre-condition of the opening of the market no effort should be spared to tighten up on regulations. Emphasis is placed on the need to instil professional staff who can vet applications from operators to protect the French market against any type of frauds, like money laundering, and to protect the players from addiction. Furthermore the liberalisation of online gambling would be limited to equestrian bets, sports bets and also the games of poker; slot machines and video lottery games would not be sanctioned for the moment. For the sport bets, it is expected that prior authorisation will be required from competition organisers before launching games.

So far it appears that there will not be a reciprocal facility for EU-licensed operators to automatically be allowed access to French territory. Thus, it appears that only the operators who have successfully applied for licence in France will be permitted to offer bets. Licences will be granted in France by a high-calibre authority which specialises in games regulation. Only it will have the power to deliver these concessions to the eligible foreign and French operators following a very stringent assessment of the probity of each applicant. This authorisation would impose an obligation to strictly adhere to the terms of the licence. As in the UK and Malta, two types of licences could be conceded by the national regulator - operational licences and personal licences. Based on the Maltese model, it is expected to issue a temporary authorisation of six months which will be followed by a definitive licence for a limited duration of five years; it is also probable that the first licence will cover a shorter period of three years only.

The French market would thus be a fertile field for prospective bona fide operators who pass the rigid test of probity. Considering that at the moment there are a variety of online gaming sites which are illegal, these can be given the possibility to regularise their operation and access the French market under a regulated regime. Criticism is rife among illegal operators that it appears a long hurdle to obtain a valid licence.

This process is not easy and it seems very complicated, given that the number of licences is not infinite. Moreover, the plot thickens when one considers that the most interesting part of the puzzle is missing - taxation is still a mystery. The Durieux report highlights that it will be less attractive than in other jurisdictions but the difference in tax is reflective of the risks taken. It will be fixed by sectors.

As a rough guide, in Malta a sports betting licence carries an ad valorem tax of 0.5 per cent of the stakes made for bets, which by comparison represents a rate of levy 40 times lower than the applicable average rate in equestrian bets in France. A crucial point to be considered before deciding where to locate! Also, the rate of the return to the players would be less attractive once the government reasons that as a result of higher taxation this measure on its own will reduce the risk of pathological players.

One hopes that 2008 will see some progress towards a preliminary draft of the legislation. Before this happens, the duopoly reigns supreme and one is forbidden to advertise in France. Once the floodgates open watch this space for the strong interest to be shown by existing land-based operators. These will stand to gain most as they know the market and can easily infiltrate the lucrative sector of poker and sports betting. It goes without saying that on the list of first comers one would expect to see the group Partouche and the group Barrière, two big casino groups in France.

• Ms Maillot is senior researcher at PKF (Malta).

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