18.1.2014

EN

Official Journal of the European Union

L 14/17

(1)

By letter dated 13 April 2010 France notified the Commission of a proposal for a parafiscal levy on online horse-race betting in order to fund a public service mission entrusted to horse racing companies.

(2)

By letter dated 17 November 2010 the Commission notified France of its decision to initiate the procedure laid down in Article 108(2) TFEU (hereinafter referred to as 'the opening decision') regarding this aid.

(3)

The Commission's decision to initiate the procedure was published in the Official Journal of the European Union (3). The Commission invited interested third parties to submit their comments on the aid measure in question.

(4)

France submitted its comments on the opening decision on 18 January 2011.

(5)

The Commission received several comments from interested parties (see Table 1 below):

Table 1

Interested parties

(6)

The interested parties' comments were sent to France on 28 February 2011. France sent its comments on the interested parties' comments on 4 April 2011.

(7)

On 12 April 2011 the Commission sent a request for information to the French authorities.

(8)

On 4 May 2011 a working meeting took place between the Commission's departments and the French authorities.

(9)

By letter dated 11 May 2011 France requested that the time allocated to respond to the questions of 12 April 2011 be extended and this request was approved by the Commission by letter dated 16 May 2011. France answered these questions on 20 June 2011.

(10)

Working meetings between the Commission's departments and the French authorities were held on 11 July and 9 December 2011.

(11)

France submitted a draft amendment to its initial notification on 14 December 2011.

(12)

On 16 December 2011 the Commission sent questions to France regarding the new measure being put forward. The French authorities replied on 1 March 2012.

(13)

A working meeting between the Commission's departments and the French authorities was held on 30 March 2012, based on the new measure proposed by the French authorities.

(14)

Following requests from the Commission for adjustment of this new measure, the French authorities provided additional information on 6 December 2012 and 21 January and 27 February 2013.

(15)

On 29 April 2013, the French authorities officially submitted to the Commission an amendment to the notification of 13 April 2010 containing the new measure discussed with the Commission's departments.

(16)

France opened up the online gambling sector to competition by Law No 2010-476 of 12 May 2010 on the opening-up to competition and regulation of the online gambling sector (hereinafter referred to as 'the Law of 12 May 2010').

(17)

The purpose of the Law of 12 May 2010 was to put a stop to the growing illegal gambling offer on the Internet. Three types of game, chosen for their popularity with gamblers and reduced risk in terms of addiction, were opened up to competition: online horse-race betting, sports betting and poker games.

(18)

Online gambling and betting operators must be in possession of an authorisation, issued for a term of five years and under certain conditions by the French regulatory authority for online gambling (ARJEL), an independent administrative authority created by the Law of 12 May 2010.

(19)

Following the opening-up of online gambling to competition on 24 November 2010, the Commission brought to a close (4) the infringement proceedings instituted against France. These infringement proceedings (5) had been instituted in 2006 because the Commission considered that the restrictions imposed by France on the services provided by foreign operators were disproportionate. Within the context of these infringement proceedings, the Commission had issued a reasoned opinion in 2007 (6).

(20)

Prior to the opening-up to competition, the monopoly of horse-race betting conducted outside race courses was held by the PMU (Pari Mutuel Urbain), an economic interest grouping (7) formed by two horse racing parent companies (8) and 49 provincial horse racing companies (hereinafter jointly referred to as 'the horse racing companies'), both for online bets placed via the Internet and for brick-and-mortar bets placed in the PMU's sales network or bets placed at race courses.

(21)

At the time of the notification in 2010, the stakes collected on horse races by the PMU, the leading totalisator betting operator in Europe and the second largest in the world, came to EUR 9 342 million. 8,5 % (9) of the PMU's turnover came from online bets in 2010. Its entire net result is paid to the horse racing companies, amounting to EUR 790,9 million in 2010 (10). It is used to fund 80 % of the horse racing and equine industry (breeding, training centres, horse riding schools, etc.), which employs some 74 000 people and is present in every region with a total of 250 race courses.

(22)

Given the importance of the PMU in the financing of the horse racing and equine industry, the French authorities were concerned that the sustainability of the industry would be under threat if the opening-up to competition of the online gambling sector resulted in a significant drop in the PMU's revenues due to the following potential causes:

(23)

Consequently, France decided to introduce a parafiscal levy on online horse-race betting in favour of the horse racing and equine industry to prevent the economic destabilisation of the sector as a result of the opening-up to competition and its potentially harmful consequences. According to the French authorities, the parafiscal levy on online horse-race betting would finance a service of general economic interest (hereinafter referred to as 'SGEI') entrusted to the horse racing companies (see Chapter 2.3).

(24)

The entire revenue from the levy collected from all online horse-race betting stakes, including stakes placed on the PMU's website, would be paid to the horse racing parent companies (in proportion to the bets placed on each speciality: harness, flat and jump racing), which would then distribute the corresponding total among the various beneficiaries (11). The revenue would be in addition to the funding from bets placed in the PMU's physical network of sales outlets (hereinafter referred to as 'brick-and-mortar bets'). On the basis of the financial data for the year 2010, it was estimated that the levy could yield about EUR 64 million.

(25)

The proposed rate of the levy for the year 2010 was 8 % of the stakes placed in online horse-race betting calculated using the financial data from the year 2008, and corresponded to the ratio between the costs of the public service obligations and the total of all online and brick-and-mortar horse-race betting stakes. The aim of the tax rate was therefore to place the same financial burden for the funding of the public service activities on the PMU and the other horse-race betting operators. The rate of the levy could be reviewed in the light of changes in the costs of the public service obligations and the bets placed on horse races using the following formula as a rule:

However, the notification specified that this rate should remain between 7 % and 9 %. The above formula would result in a rate of 8 % for the year 2012 based on the financial data from the year 2010 (see recital (113)).

(26)

In addition to the revenue from bets collected in the PMU's physical network and from the parafiscal levy, it should be noted that the horse racing companies also benefit from the revenue generated by online sports and poker betting, for which the PMU also received an authorisation following the opening-up to competition of the online gambling sector.

(27)

When the measure was notified, this parafiscal levy on online horse-race betting was to be added to the ordinary general taxation that applied to all brick-and-mortar and online horse-race betting. In this regard, the French general tax code specified that horse-race betting operators had to pay a levy of 5,7 % on stakes (13).

(28)

According to the notification by the French authorities, the horse racing companies provided a public service made up of the following elements:

(29)

This mission entrusted generally to the horse racing companies conferred a special role on the horse racing parent companies, which played a central part in organising races and in the entire horse racing and equine industry (14). In particular, Le Cheval Français and France Galop had key responsibilities in the following areas:

(30)

In practice, the performance of the public service mission entrusted to the horse racing companies was fulfilled by the following activities:

(31)

The total net cost of this public service mission came to approximately EUR 747 million in 2010 (15) (see recital (113)). The chart below shows the proportion of this total cost accounted for by each of the abovementioned activities.

Figure 1

Breakdown of the costs of the public service mission (2010 figures)

(32)

In 2010, the lion's share of the ‘榩ublic service‘�costs mentioned in the notification (see Figure 1) was accounted for by premiums and allowances paid to breeders, owners and jockeys (EUR 493 million, corresponding to approximately 63,6 % of the total cost). The second-largest cost item was horse-race organisation costs (EUR 244 million, corresponding to approximately 31,48 % of the total cost).

(33)

The total cost of the public service mission described by France in the notification was said to be fully funded by the horse racing companies' revenues from online bets collected by the PMU via the Internet, brick-and-mortar bets collected in the PMU's sales network, bets collected at race courses, and other own resources of the horse racing companies (such as admission charges to race courses).

(34)

The Commission considered that the aid measure had all the constituent elements of state aid. Having examined the options allowed by the applicable rules, the Commission did not identify a clear way forward for establishing the compatibility of the notified measure with the internal market.

(35)

In particular, the Commission expressed serious doubts about the SGEI status cited by France for the mission entrusted to the horse racing companies and, consequently, about the possibility of treating the proposed aid measure as public service compensation and basing its compatibility on Article 106(2) TFEU and on the Community framework for State aid in the form of public service compensation (16).

(36)

Moreover, following the preliminary investigation conducted by the Commission, no clear way forward in terms of compatibility emerged. In the light of the information available to the Commission, the proposed aid seemed to meet neither the general compatibility conditions set out in Article 107(3)(c) TFEU nor the special conditions laid down by instruments such as the guidelines on regional aid (17) or the agricultural guidelines (18).

(37)

Furthermore, given the close link between the aid measure and the collection of the parafiscal levy, the compliance of the levy with some of the other principles of the Treaty should also have been fulfilled and the Commission continued to have doubts about the compatibility of the parafiscal levy with the principle of freedom to provide services set out in Article 56 TFEU and the principle of non-discrimination set out in Article 110 TFEU.

(38)

Pending the Commission's decision, France adopted a transitional measure on 20 October 2010 by which it collects the 8 % levy on online horse-race betting retroactively from 3 August 2010. However, the income from this levy is not allocated to the horse racing companies but flows into the general budget of the French State.

(39)

In parallel with the introduction of this transitional measure, France reduced the level of general taxation on all online and brick-and-mortar horse-race betting. The rate of this tax was reduced from 5,7 % to 4,6 % of stakes.

(40)

The French authorities sent their comments on the opening decision by letter dated 18 January 2011.

(41)

While the French authorities did not dispute the classification as state aid, being as it was in keeping with their notification, they did question the following points:

(42)

The French authorities questioned whether the measure could provide an advantage for the horse racing companies compared with the situation prior to the opening-up to competition of the online horse-race betting market. The measure was simply an adjustment needed in the light of the new situation in which there was now not just one gambling operator but several. The burden on the PMU prior to the change would simply be spread over all operators. The French authorities also considered that the PMU could not gain any advantage from the measure because it would pay the entire proceeds from the levy to the horse racing companies.

(43)

The French authorities considered that there was no potential distortion of competition in the online horse-race betting market because the levy applied uniformly to all online horse-race betting operators, nor was there any distortion of competition at the level of the organisation of the horse races themselves because the horse racing companies did not compete but worked together at the European, and indeed, global level (for example, the racing calendar was optimised to avoid conflicting dates).

(44)

The French authorities insisted on the margin of discretion granted to Member States in defining and organising SGEIs.

(45)

On several occasions, the Court of Justice of the European Union had found that, when Member States defined the services of general economic interest which they entrusted to certain enterprises, they could take into account ‘objectives pertaining to their national policy‘�a href="#ntr19-L_2014014EN.01001701-E0019" id="ntc19-L_2014014EN.01001701-E0019" shape="rect"> (19)