REGULATION - the story so far...

The French online gambling law brings more competition to innovation-driven markets.

IT HAS ALREADY BEEN SIX MONTHS since the first licenses were granted by the ARJEL (the NRA entrusted with the task of regulating the online gambling market in France), and despite the thirty-five operators who now share the official online gambling market, it seems that new operators are beginning to emerge.

Yet, despite the multiplicity of actors, the leeway in terms of game offerings and advertising available to them is not so obvious. Compliance with the specifications, the provisions of the Act of May 12, 2010, and its implementing decrees implicitly invites licensed operators to some creativity in marketing terms, but also some legal creativity through the Trademark Law, Betting and Competition Law, and Taxation law.

Thus, Unibet (sportsbetting, horserace betting, poker) recently secured a significant victory through the decision of the Paris CFI to annul the registration of the trademarks filed by the PMU - 'couple', 'trio', 'third ', 'quarters +', 'quinte +', '2sur4', 'Multi' and 'simple' - on November 23, 2010 (the PMU had filed a complaint against Unibet for its use of names to identify horseracing bets via the above mentioned terms, in violation of trademarks registered by the French company).

Since these names were known and used by bettors as representing a type of bet, the Paris CFI held that their deposit by the PMU held no other purpose than to interfere with any potential competitor by an illegitimate legal obstacle and, thus, diverted trademark law from its purpose.

On December 3, 2010, in the wake of the above mentioned, the European Gaming and Betting Association (EGBA) filed a complaint with the Council of State on the 'right to bet'. This complaint was to ensure legal certainty for operators licensed in France in clarifying the objectives of the right to bet. According to the EGBA, the right to bet has been created with the aim of ensuring the respect of sports ethics by allowing some compensation for federations and organisers of sporting events to cover expenses incurred by them for the detection and prevention of fraud. This objective was put forward by the French legislator to respond to the European Commission's detailed opinion of June 8,2009, stating that the funding of voluntary or general interest activities such as sports is not an acceptable basis for restricting the freedom to provide services.

However, the decree specifying the right to bet did evolve towards "a logic of profit", according to the organisation, by introducing a notion of "price to pay" paid by operators whose amount is estimated by proportion of players' bets and by a profit-sharing with the organisers of sporting events on the proceeds of the bet. According to the EGBA, an unacceptable contradiction would be born by the diversion of the right to bet from its original purpose.

It cannot be ruled out that a new entrant to the French market may denounce, through traditional means (that is to say before the Paris CFI - the National Court empowered to enforce national competition rules, or before the French Competition Authority which, in its decision of September 15, 2010, held that the market for gambling constitutes a priority in terms of competition policy), the uses of cross-subsidies from monopolistic income and practices that would result in tariff abuses (rebates, discounts) or predatory pricing abuses to eliminate competitors in the online gambling market.

From another perspective, the likelihood of foreign online gaming companies rushing to house themselves in the French market is by no means an inevitability. Indeed, companies established in other EU countries currently only represent 22 percent of the market. There exist many 'creative' tax incentives for operators to take advantage of in offshore regions, namely, for the purposes of avoiding VAT charged on the net proceeds of the games and also, importantly, corporate tax.

However, the current French legislation is set for revision some 18 months from inception. Article 69 of the Act provides, in effect, an evaluation report on the conditions and effects of the iGaming market opening to be sent to the Parliament by the government in order to advocate necessary adaptations.

Therefore, some lobbying is being carried out with the aim of garnering what seems to be unanimity among licensed operators, reducing the tax burden, directing this adaptation of the law to the mobile channel, opening online poker tournaments to international players (which has been proposed recently in Denmark) or the possible involvement of French players in international tournaments, and even offering variations of casino games.

In summary, the future adaptation of the law for tax and the diversification of supply could finally meet the aspirations of licensed operators and consumers.
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