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Who Regulates the Gambling Regulators?

The current phase of regulation of the gambling market in EU jurisdictions is now almost over. Following the Spanish Gambling Regulation Act reaching the statute book, there is only one big jurisdiction left which has not yet regulated its gambling industry according to the EU legislation and European Commission (EC) directives – Germany. Other jurisdictions, such as Greece and Denmark, have yet to complete their journey to regulation, but they are not that far from the finishing line.

It is no secret that many countries were pushed into changing their legislation by court cases brought by commercial operators and infringements proceedings started by the EC. It is not too much of an exaggeration to say that some governments had to be dragged kicking and screaming to allow private operators into the national gambling market. Many countries did the minimum amount that was sufficient to stop EU infringement proceedings and designed regulatory frameworks that favoured, if not outright protected, their state-owned gambling monopolies. Additionally, just to make sure that commercial operators are not too successful, these same governments also imposed a high tax rate. France is a classic case study of this course of action and to a certain extent Spain and Greece are following French footsteps. Germany cannot bring itself to walk even that far.

Within this mix, regulators are given a wide remit to keep a check on commercial operators. ARJEL in France is fairly aggressive in making sure that commercial operators do not infringe the regulations, and even more aggressive with those who do not obtain a French licence but who continue to operate in France. baccarat

The role of regulators has up to now not been sufficiently analysed. Are they independent entities who regulate the market, similar to a Financial Services Authority or a Central Bank for the financial sector? Or are regulators in the gambling industry solely an arm of the country’s executive?

So far, the pattern of behaviour of gambling regulators leads observers to think that they act more like the arm of governments than independent referees.

Where state-owned gambling operators have a large market share and are protected by law from competition in certain sectors like lotteries, the behaviour of regulators tends to be important, not only as a matter of fairness, but from the point of view of enabling a truly competitive market. There is something wrong when the state controls the biggest firm or firms in the market and at the same time makes the rules through the regulator.

France is the case in point. The state controlled PMU and FDJ’s dominant position in land-based gambling activities (where they are protected by law) allowed them to gain a competitive advantage in online activities, even thought the law states they have to separate their land-based and online businesses. It took the European Gaming and Betting Association’s complaint to the French Competition Authority (FCA), and the subsequent non-binding opinion of the FCA stating that PMU and FDJ behaviour distorts the market to raise the issue. This is a classic case where the regulator should have intervened. One of ARJEL’s declared missions, after all, is to ensure compliance by operators.

One has to wonder if the reluctance, or frustration, of certain governments in allowing commercial gambling operators to trade is being reproduced in the actions of regulatory bodies.

 

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