European Commission rules FDJ must pay additional €97m for lottery and betting exclusivity

The European Commission ruled on 31 October that La Française des Jeux (FDJ) did not receive unfair state aid for its lottery game and sports betting monopoly in France, in an investigation dating back to July 2021.

FDJ was privatised in 2019 as part of France’s re-regulation of gambling. This process provided the monopoly with exclusivity over offline and online lottery games and the operation of offline sports betting, for 25 years.

But the operator faced questions over how much it spends to run the French monopoly. Two separate complainants told the EC that FDJ was benefiting from an unfair level of state aid. Another complaint suggested that the amount it paid (€380m) for the rights to exclusively provide lottery and retail betting was too little.

In its assessment the European Commission delivered a mixed verdict. While it ruled FDJ has not been receiving unfair state aid, it said the group must pay more to continue its lottery and point-of-sale sports betting monopoly.

The recalculated “equalisation” sum is €477 million (£402 million/$519 million), up from €380 million that was previously set. This means that FDJ must pay an additional €97 million to retain its monopoly privileges.

The ruling ends a European Commission investigation that began in July 2021, to consider the question of whether the amount FDJ was paying for a 25-lottery term was fair.

FDJ welcomes European Commission ruling

In a statement confirming the decision, FDJ said it welcomed the ruling. It also said that the restated amount is in line with earlier figures provided to FDJ.

“We welcome the closure of this investigation and the European Commission’s confirmation, in line with the French Council of State’s decision of 14 April 2023, that the legal framework adopted when the group was privatised was robust,” FDJ said.

“FDJ has also taken note of the additional equalisation amount, valued by the European Commission at €97 million. The equalisation payment re-evaluated at €477 million is within the range established by the Participation and Transfer Commission in October 2019.”

FDJ notes that the equalisation payment will be recognised as an intangible asset within its financial results. It will be amortised over 25 years, starting from May 2019.

It also said future dividend payments will be based on the adjusted net profit resulting from this change. For the period from 2019 to 2023, it will be incurring an additional €17.9 million in amortisation.

Total amortisation of exclusive operating rights will be €37.0 million in 2024 and €19.1 million in 2025. As for 2023, this will stand at €15.2 million.

Yesterday (31 October) FDJ shares closed at €39.16, up 7.7% on opening price as news of the decision filtered through.

Monopolies are a seemingly sore subject among industry stakeholders as many believe their role in the competitive and commercial online gambling sector is largely unfair, as long-standing local brands and vast monopoly customer databases provide them with unfair advantages.

The French Competition Authority warned FDJ before it completed its acquisition of Kindred Group for €2.45 billion on 4 October that it must not cross-sell products between the commercial and monopoly businesses and should keep them separate.

Further reasons for celebration at FDJ amid year-to-date growth

The ruling comes just a couple of weeks after FDJ released financial data for its year-to-date. In the nine months to the end of September, revenue increased 11.9% to €2.10 billion.

FDJ reported growth across all areas, although the largest rise came within its sports betting and igaming segments. Digital revenue was 39.3% higher year-on-year.

Setting out the impact the Kindred deal will have on the business, FDJ said that if Kindred had been part of its group since the start of the current year, revenue in the nine months to September would have been €2.8 billion.