The FDJ must pay extra after EU decision on monopoly
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8 Nov 2024 •
Reading time: 2 minutes On October 31, the European Commission decided that La Française des Jeux (FDJ) does not receive unfair state aid for its monopoly on lottery games and sports betting in France. However, there is an additional price tag attached. The FDJ, which has been privatized since 2019, has to cough up an additional €97 million to retain these exclusive rights.
The decision of the European Commission ends an investigation that has been ongoing since July 2021. The investigation was launched after complaints that the FDJ may have paid too little for its monopoly position. This gives 25 years of exclusivity on lottery games and offline sports betting in France. The original price for those rights was €380 million but that has now been increased to €477 million.
The FDJ welcomes the judgment and accepts the additional costs
The FDJ responded positively to the decision and stated that the revision of the amount is in line with previous estimates.
“We are pleased that this investigation has been completed and that the European Commission, like the French Council of State in April 2023, confirms that the legal framework of our privatization is sound.”
In addition, the FDJ made it clear that the additional amount of €97 million will be recorded as an intangible asset in their financial results. This amount will be amortized over 25 years from May 2019, which will impact future dividend payments and net results. In the period from 2019 to 2023, this means an additional amortization of €17.9 million.
FDJ shares rise despite additional expenses
Although the FDJ has received a significant additional expense item, the company’s shares reacted surprisingly positively. On October 31, shares closed at €39.16, up 7.7% from their opening price. Investors appear to be reassured by the clarity provided by the ruling and confident in the FDJ’s growth plans.
Monopolies remain a sensitive topic in the gambling world, with many believing that established local brands have an unfair advantage. The French Competition Authority recently reminded the FDJ that it must keep products from its commercial and monopoly arms strictly separate. This was highlighted by the FDJ’s €2.45 billion acquisition of Kindred Group earlier in October.
Further growth for the FDJ following ruling and strong annual figures
For the FDJ, this ruling comes at a good time: its financial results for the first nine months of 2023 show strong growth. Revenues up to the end of September rose by 11.9% to €2.10 billion. Sports betting and online gambling in particular performed well, with digital revenues up 39.3% compared to last year.
If Kindred Group had been part of the group from the beginning of 2023, the FDJ’s turnover would have been an estimated €2.8 billion in the same period. This shows that the FDJ continues to invest heavily in growth despite the additional costs.