FDJ’s ambitious expansion, a monopoly under scrutiny

Lea Hogg September 17, 2024

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FDJ’s ambitious expansion, a monopoly under scrutiny

France’s lottery monopoly, La Fran?aise des Jeux (FDJ), has received regulatory approval from the French Competition Authority for its acquisition of Kindred Group, despite concerns about cross-selling practices. The deal, valued at €2.45 billion, is FDJ’s bold move to expand its reach into the online betting market. But it comes with significant conditions and industry-wide apprehension.

Regulating monopoly cross-selling

The French Competition Authority’s primary concern was the risk of FDJ leveraging its monopoly position to cross-sell Kindred’s products to its lottery customers. Cross-selling, a common practice where a company promotes additional services to its existing customer base, could give FDJ an unfair advantage in France’s commercial gambling sector. This could potentially increase the risk of problem gambling among players who primarily engage with FDJ’s state-backed lotteries.

FDJ’s past acquisitions—such as ZEturf’s French operations—faced similar scrutiny. In response, FDJ promised strict separation of its monopoly and commercial brands, going so far as to ensure separate websites, databases, and marketing strategies. FDJ reiterated this commitment with Kindred, vowing not to display its branding on Kindred’s commercial platforms, such as Unibet.

Monopoly issues, a broader European problem

France’s gambling monopolies, including Pari-Mutuel Urbain (PMU), have long faced accusations of unfair competition. FDJ has yet to fully separate its land-based monopoly operations from its digital ventures, a point of contention as the operator has been accused of using its dominant position to crowd out private competitors. Additionally, the European Commission is investigating whether a €380 million payment to FDJ in exchange for a 25-year monopoly on lotteries and retail betting constitutes illegal state aid.

Beyond France, Finland’s state monopoly Veikkaus faces similar scrutiny as the country opens its online gambling market to private operators. Concerns have been raised that Veikkaus could exploit its existing monopoly customer base to gain an unfair foothold in the newly liberalized market.

Building a European powerhouse

For FDJ, acquiring Kindred is part of a larger strategy to diversify beyond lotteries and assert its presence in the broader European online gambling market. By adding Kindred to its portfolio, FDJ is positioning itself as a major player in Europe, despite the regulatory hurdles. While the acquisition has the potential to boost earnings and growth, FDJ’s monopoly status will remain under close watch from both French and European authorities.

This deal sheds some light on the tension between state-backed monopolies and the liberalisation of gambling markets in Europe.