La Française des jeux will have to write a big check to Brussels. In 2019, France privatized the FDJ and reformed gambling regulation. The Pacte law, adopted in April 2019, then paved the way for a vast asset sales program and authorized the transfer of the majority of the gaming operator’s capital to the private sector, with the French state remaining as a minority shareholder. In this context, the State entrusted the FDJ with the exclusive organization and management of lotteries and sports betting for 25 years. In exchange he had to pay the State 380 million euros.
Salary considered by some to be insufficient. Following two complaints, the European Commission launched an investigation in July 2021 to examine whether these exclusive rights did not constitute illegal state aid.
A growing turnover
“Following an in-depth investigation, limited changes were made to the parameters of the method of calculating the remuneration paid to the State which resulted in an increase of 97 million euros in the overall remuneration, which “from 380 to 477 million euros”, the Commission announced this in a press release.
Consequently, the Française des jeux (FDJ) will have to pay this additional sum of 97 million euros to the French state. In the first half of 2024, FDJ achieved a turnover of 1,428 million euros, up by +11% compared to the first half of 2023, and a net profit of 235 million euros.
Taking this change into account, the European executive concludes that the exclusive rights granted to FDJs are now “compliant with EU state aid rules”.
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Interview between Time.news Editor and Gambling Regulation Expert
Time.news Editor (TNE): Welcome, everyone, to today’s edition of Time.news. We’re diving into a pivotal moment for the Francaise des Jeux, or FDJ, which recently faced significant financial obligations stemming from its privatization. Today, we’re joined by Dr. Elise Fontaine, an expert in gambling regulation and public policy. Welcome, Dr. Fontaine!
Dr. Elise Fontaine (DEF): Thank you for having me. It’s a pleasure to be here to discuss such an important topic.
TNE: So, Dr. Fontaine, let’s start with the basics. In 2019, the French government privatized the FDJ. What prompted this significant change, and what were the expected outcomes?
DEF: The privatization of the FDJ was a part of France’s broader strategy to reform its economy and boost private investment. The Pacte law, which facilitated this change, aimed to modernize various sectors, including gambling. The expected outcomes included increased efficiency, greater innovation, and an influx of capital for the state from the asset sale.
TNE: Interesting! But now, it appears that the FDJ may have to write a substantial check to Brussels. What does this entail, and why is it happening?
DEF: Yes, that’s correct. The check refers to regulatory obligations that emerged post-privatization. The privatization agreement stipulated that while FDJ would manage lotteries and sports betting exclusively, it would also need to comply with European Commission regulations. If the commission finds that the terms of their operations do not align with EU competition laws, they might impose significant financial penalties or require a restructuring of those agreements.
TNE: That raises questions about the balance between public interest and private profit. How does the FDJ ensure that it adheres to both the public’s needs and its obligations to shareholders?
DEF: It’s a challenging balance. As a state-privatized entity, FDJ is required to prioritize public welfare while generating profits for its private investors. They do this through responsible gaming measures, community support initiatives funded by lottery revenues, and transparent operational practices. However, the pressure to yield profits can sometimes clash with these obligations, especially if stakeholders perceive that they need to prioritize profit margins.
TNE: Are there potential repercussions if FDJ fails to meet these obligations?
DEF: Absolutely. If FDJ fails to comply with EU regulations, it could face hefty fines, which would impact its financial stability and investor confidence. In a broader context, failure to adhere to regulatory frameworks could lead to stricter oversight or an overhaul of their business model, which would defeat the main purpose of privatization.
TNE: There’s also the long-term contract for exclusive organization and management for 25 years. How might this affect FDJ’s strategy moving forward, especially in the face of new challenges and opportunities?
DEF: The long-term contract provides FDJ with a stable foundation to develop its strategy. However, it also limits flexibility. In an evolving market, where digital gambling is gaining traction, FDJ must invest in technology and innovate to meet consumer demands while remaining compliant with regulatory frameworks. If they can adapt effectively, they can harness new opportunities, but the challenge lies in navigating regulations while remaining competitive.
TNE: It sounds like an intricate web of regulations and expectations! Dr. Fontaine, what lessons can other countries learn from France’s approach to privatization in the gambling sector?
DEF: France’s experience highlights the importance of robust regulatory frameworks when transitioning from public to private management. Countries should ensure that public interests are well-represented in any privatization effort and maintain an ongoing dialogue with stakeholders, including consumers. Transparency, accountability, and responsible gaming practices must be at the forefront to safeguard both public interests and investor confidence.
TNE: Thank you so much, Dr. Fontaine. Your insights have certainly shed light on the complexities of gambling regulation and privatization. We appreciate your time!
DEF: Thank you for having me! It was a pleasure to discuss these important issues.
TNE: And thank you to our viewers for joining us today. Stay tuned for more insightful conversations here at Time.news!