French closing in on Internet gambling

As reported by the Guardian News

Party Gaming, the online gambling group, quietly closed its website to French customers last Friday without telling investors, the Guardian has learned. Just three days later one of the firm’s largest shareholders sold 123 million shares.

Rival 888 Holdings and others are also believed to have frozen efforts to target the French market. Meanwhile, authorities in Paris have requested interviews with executives from an estimated 20 companies – said not to include Party Gaming, over the legality of their marketing activities in France.

Party Gaming, which reports its full-year results tomorrow, refused to comment on its reasons for the move. The toughening French stance raises the prospect of a co-coordinated crackdown on offshore-licensed gambling groups similar to that launched by the US department of justice last year.

France’s position appears to be at odds with European competition rules on gambling, which many offshore operators hope will be strengthened next week with publication of a landmark judgment from the European court of justice.

But industry insiders are wary that France has stepped up lobbying efforts in Brussels, fearing that open competition – particularly from online firms based in offshore tax havens – could destroy the PMU French monopoly on which domestic horse racing relies for funding.

One industry source estimated that France could generate between 5% and 10% of Party Gaming’s continuing revenues following the closure of its US business last autumn. Another suggested France must contribute less than 5% to revenues or Party Gaming would have been forced to make a stock market announcement. The company was one of the first online operators to provide betting services via a French language website. Last summer it acquired sports betting site Game bookers, a well-established brand in France. Industry insiders said Party Gaming’s French business had been viewed as having huge potential for growth.

The company’s closure to French customers came on the day letters were received by online operators requesting executives attend interviews in France. Those contacted are believed to include Unibet, which has targeted the French market through its Mr. Bookmaker business. The letters invite executives for interview, but the authorities are understood to have made clear an alternative approach might be to issue arrest warrants.

Last September the founders of Bwin, Manfred Bonder and Norbert Teufelberger, were arrested by the French authorities at a press conference they had called to publicize a shirt sponsorship deal with AC Monaco. They were bailed days later but told they could face up to three years in jail if found to have contravened laws on gambling advertising.

Afterwards, French football league officials placed a ban on online gambling firms offering shirt sponsorship. As a result, AC Monaco was forced to drop its shirt deal with Bwin. Similar tie-ups linking 888 with the Toulouse team and Game bookers with Nantes were also dissolved.

London-listed 888 Holdings confirmed Guardian reports that non-executive John Anderson, who was chief executive of the business until the end of December, had received a request from the French authorities.

Mr. Anderson is expected to attend a meeting on March 13 to put the company’s case. Industry insiders were concerned to see inquiries extending beyond sports betting – which 888 does not offer – to online poker or casino games.

Party Gaming insisted no letter requesting an interview had been received. Nevertheless its shares fell 9.4% yesterday. It is unclear which Party Gaming shareholder was behind Monday’s share placing but the company must announce it this week.