Finnish government faces conflict of interest with Veikkaus

Finland is preparing for a major transformation of its online gambling market with legalisation planned for 2027. However, this opening raises many questions, including the role of the state and the preservation of a fair competitive environment.

Competitive advantage for Veikkaus

At the heart of this debate is Veikkaus, the Finnish incumbent. The Finnish government currently owns 100% of Veikkaus’s capital. As a state-owned company, it has considerable assets: an extensive customer database, a solid technological infrastructure and a well-established brand recognition.

However, this situation could create a serious conflict of interest when the market opens up to competition. This is the opinion of Jari Vähänen, a consultant for Finnish Gambling Consultants (FGC), who warns against the risk of Veikkaus gaining an unfair competitive advantage.

“Veikkaus could have a significant competitive advantage over licensed operators once the Finnish online gambling market is legalised in 2027. Its existing customer database and technological infrastructure would give it a head start.”

Jari Vähänen, consultant for Finnish Gambling Consultants (FGC)

To address this risk, the consultant proposes that the government partially or completely divest from Veikkaus. This suggestion echoes the concerns expressed by the Chancellor of Justice and the Finnish Competition and Consumer Authority.

The government also hinted at this possibility when it published the draft regulations last June. However, no final decision has been made yet.

The Finnish government’s dilemma

The Finnish government is facing a dilemma: how to open the market while ensuring fair competition and protecting consumers’ interests? The Ministry of Finance is considering creating a new regulator for the online gambling market, but this solution is not enough to allay concerns.

“The Finnish government wants to maintain a dual role, both as a legislator and supervisor of gambling activities, while at the same time owning the company involved in these activities. This model presents a high risk of conflict of interest.”

Jari Vähänen

To remedy this situation, Vähänen suggests several options:

• Partial or full privatisation of Veikkaus: This solution would reduce the conflict of interest and create a more competitive environment.
• Strict separation of Veikkaus’ activities: The different entities of Veikkaus (monopoly, B2B, online gambling) must be strictly separated in order to avoid any illegal transfer of resources.
• Clear regulation of customer transfer: It is essential to define the conditions under which Veikkaus customers can be transferred to its new online entity.
• Prohibition of the use of customer data for competitive purposes: Veikkaus must not be able to use its existing customer data to target players of its new online entity.

The bill already provides for the division of Veikkaus into several separate entities: a monopoly for lotteries, sports betting, land-based slot machines and scratch cards, a B2B subsidiary and a licensed online gaming business.

Despite this separation, Vähänen believes that clarifications are necessary to avoid any unfair competitive advantage. In particular, he stresses the importance of clearly defining the terms of the transfer of Veikkaus customers to its new online entity.

Dangers of unfair competition

The integration of a technology business within Veikkaus could also create a competitive imbalance. Indeed, this would allow the company to benefit from synergy effects between its land-based and online activities, particularly in terms of marketing.

Furthermore, Vähänen questions the relevance of maintaining the monopoly on horse racing betting and digital instant games. According to him, there is no solid justification for maintaining this under state control.

Bonuses and Affiliates

Finally, the consultant opposes the ban on bonuses and affiliates, proposed in the bill. He believes that this measure could harm the rate of channeling players to the legal market.

Vähänen suggests instead strictly regulating the activities of affiliates, by imposing on them obligations similar to those of online gaming operators and the media.

The decisions taken by the Finnish government will have significant consequences for the future of the online gaming market in the country. Too lax regulation could lead to Veikkaus dominating and a reduction in the diversity of the offer. Conversely, overly restrictive regulation could discourage investment and slow down market development.