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EU Commission investigating on exclusivity rights granted by French Government

The European Commission, earlier this month of July, opened an extensive investigation into State aid supposedly granted by the French Government to that country’s lottery operator, Française des Jeux (“FDJ”), in order to evaluate whether the French Government breached the European Union’s state-aid and fair market competition rules.

The facts are that, after its partial privatization by the French Government, in 2019 FDJ was granted by France an exclusive right to run lottery and sports betting for a period of 25 years, in consideration for the payment by FDJ to the French State Euro 380 million, defined as “remuneration for exclusive rights granted’.

After having received some written complaints, the EU Commission has raised the concern that France has granted preferential treatment to FDJ, which previously was a former state monopoly.

According to a statement from Brussels: “the Commission will verify the compliance of the remuneration with market conditions and does not exclude at this stage that the measure may provide an undue economic advantage to Française des Jeux”.

According to a press release from FDJ, “Fdj reiterates that as part of its privatization and under the Frech Pact Law, the French State secured, for a period of 25 years, the exclusive rights that the Group had previously held for an unlimited period. In exchange for securing these rights, FDJ paid the French State Euro 380 million, following compliance approval by the French Holdings and Transfers Commission. FDJ is available, along with the French State, to answer any questions from the European and French Authorities over the course of these proceedings to provide any information necessary to demonstrate the compliance of this legal framework with French and European Law”.

It is worth, on top of the foregoing, to note that the French Competition Authority had already remarked in the past some exclusionary and foreclosure strategies implemented by incumbent operators or former state monopolists who may leverage their dominant position on the offline market across the online-market.

Such opinion released by the French Authority was relating to the online gambling sector, and just involved La Française des Jeux (Opinion no. 11-A-02 of 20 January 2011 regarding the online gambling sector), though similar opinions were issued concerning the horse-race betting company PMU and the rail operator SNCF.

In 2019 FDJ- which had previously held the national lottery rights for an unlimited period as a State-owned enterprise – was granted the exclusivity on this business for a period of 25 years upon being privatized by the Government, in order to allow FDJ to continue to operate the national lottery as a private enterprise. Such contract with the Government was then approved also by the France’s Securities and Trading Commission.

This case is very interesting and deserves quite a close scrutiny on whether the EU Commission investigation will, as an outcome, bring to sanctions imposed upon FDJ (inclusive of the possible shortening or invalidation of the lottery contract), because it can show a strong change from a weaker and softer approach by the EU Commission, which in the last couple years – because of the COVID-19 emergency crisis – has evidently closed an eye when other big European companies (in particular, in the aviation sector) have received billions of Euro of subsidies from their respective Governments, in order to cover losses and help with financial troubles allegedly caused by COVID. Alitalia-ITA may be also affected by such EU Commission’s recent change of approach to State Aid and Subsidies.

Prof. Avv. Salvatore Vitale

This article is not a legal advice, but it has an informative function only. For personalized legal advice, contact us by e-mail or by phone +39 06 916505710. © Dong & Partners International Law Firm, All rights reserved

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