State aid: Horserace betting levies must be fully compliant with EU state aid rules

Brussels, 19 June 2013: The industry bodies representing the leading European online betting operators are concerned about today’s European Commission decision (C 34/10) that confirms a French levy to fund ‘the improvement of the equine species and the promotion of horse breeding’ is in line with EU state aid rules.

According to the European Commission: ‘State aid is prohibited under the Treaty on the Functioning of the European Union. Nevertheless, some strict exceptions authorise aid justified by common interest objectives, i.e. for services of general economic interest, as long as they do not distort competition in such a way as to be against the public interest.’

Against that background, the RGA and EGBA would make the following points:

  • Under the EU Treaty, state aid remains as a matter of principle forbidden and exceptions can only be granted in well defined and limited circumstances
  • It is essential that when aspects of certain levies, such as the French horserace betting levy, are deemed by the European Commission to constitute justifiable state aid that the rationale for that decision is transparent and legally robust.
  • The Commission’s decision in the French horserace betting levy case has only just been made and will be reviewed thoroughly by the betting industry and other stakeholders. The industry will seek assurances from the Commission where it has cause for concern and subsequent legal challenges have not been ruled out. The industry will scrutinize previous Commission decisions and standing case-law to see if horse breeding can indeed be categorised as a service of general economic interest (SGEI).
  • In general terms, levies or parts of levies can only be justifiable if they are truly serving common interest objectives. That might, for instance, include veterinary research or treatment.
  • However, a clear distinction must be made between that and the funds being extracted by law from one industry and transferred to another industry for commercial or quasi-commercial purposes. This would distort competition between sectors and Member States and, as such, would be a breach of State Aid rules and liable to legal challenge.
  • In that respect, we take note of the fact that France proposed the introduction of this levy in 2010 because it feared that the opening to competition of the online horserace betting sector would threaten the sport’s revenues. In fact recently published figures show that not only has this not happened but that the overall stakes on online horserace betting increased by 9% between 2011 and 2012 from €1034 million to €1124 million (see link) and that the overall stakes bet online (see link) with the French incumbent operator (PMU) have increased by 11.1% between 2011 and 2012 totalling €971.1 million and so keeping an online market share of 86%. The French incumbent operator (PMU) still enjoys a monopoly in the retail market and competition in the online market remains limited due to the fact that only pool betting was allowed in 2010 which requires high financial liquidity to be competitive and hence constitutes a material market entry barrier.