On September 2, 2021,[1] the Paris Court of Appeals annulled in its entirety a decision issued by the FCA in April 2020, which fined betting operator Pari Mutuel Urbain (“PMU”) for non-compliance with unbundling commitments that had been made mandatory in 2014[2]. The Court held that, contrary to the FCA’s findings, PMU had been consistently complying with its commitments. The 900 million euros fine imposed on PMU was consequently annulled.

Background

PMU is a French betting operator which, until 2010, enjoyed a legal monopoly on both online and offline horse race betting. In 2010, French law opened the markets for horse race and sports betting to competition, but only with respect to bets placed online. Consequently, while companies such as Betclic emerged to offer online betting services in sports and horse racing, PMU kept a legal monopoly on offline horse race betting.

In 2012, Betclic filed a complaint with the FCA, alleging that PMU was taking advantage of its legal monopoly on offline bets by pooling these bets together with online bets, which allowed it to offer more attractive rewards to its winning customers. Following a two-year investigation, the FCA found that PMU’s behavior indeed raised competition concerns, as PMU was relying on an advantage that its competitors could not replicate, and had the ability to use that advantage to capture demand, hinder new market entries and more generally exclude existing competitors.

To address these competition concerns, PMU offered commitments, which the FCA accepted and made mandatory. In particular, PMU offered to hold separate its online and offline bets (the “First Commitment”).

In April 2020, following a complaint lodged in December 2017 by two online betting companies (Betclic and Zeturf France), the FCA imposed a 900 million euros fine on PMU for non-compliance with the First Commitment on the grounds that as far as foreign horse races were concerned, PMU still pooled online and offline bets. According to the FCA, the First Commitment was phrased in general terms and consequently applied to all the races for which PMU collected bets, whether these races took place in France or abroad. As a result, the FCA took the view that PMU had knowingly breached the First Commitment.

Assessment of the Paris Court of Appeals

In a ruling issued on September 2, 2021, the Paris Court of Appeal annulled the FCA’s decision in its entirety on the main grounds that the First Commitment was designed to achieve a determined outcome and that, similar to any binding obligation, it must be interpreted strictly and in favor of the company offering the commitment. The Court added that commitment decisions must define the scope of the competition concerns at stake in a sufficiently precise and unambiguous manner so as to enable the monitoring of the proper implementation of these commitments.

Having recalled these principles, the Court acknowledged that the First Commitment was phrased in general terms. However, the Court also stressed that the Commitment compelled PMU to “effectively separate its single pool of stakes” between online and offline bets. In light of such wording and taking into account other parts of the FCA’s 2014 decision, the Court construed the First Commitment as applying to bets that PMU was collecting, managing and distributing itself. Conversely, when bets are collected by PMU pursuant to an agreement with a foreign operator, it is the latter who is in charge of distributing the winnings between successful bettors and of splitting the profits between itself and all of its partners.

Furthermore, the Paris Court of Appeals found that the competition concerns raised and analyzed by the FCA in the 2014 decision did not cover PMU’s international activities. First, the geographic scope of the market defined by the FCA was national and limited to France. Second, the decision did not contain any competitive analysis of the importance of bets on foreign horse races in the French market, and no foreign operator was actually involved in the FCA’s investigation. Third, the FCA’s findings relied on the non-replicable nature of the advantages that PMU drew from its legal monopoly on offline bets. However, when it came to foreign races and foreign betting operators, PMU’s competitors could enter into agreements similar to those concluded by PMU (in fact, one of the plaintiffs had done so).

Based on these observations, the Court of Appeals held that the First Commitment could not be interpreted as covering foreign races since their impact on the market had not been assessed. The Court moreover noted that between April 2014 and January 2016, the FCA had received eight reports from the Trustee describing the implementation of the commitments, yet had not raised any concerns. The Court thus concluded that the FCA could “not rely on its own shortcomings to deplore the fact that the issue [of pooling bets placed on foreign races] has never been raised”.

While the FCA’s decision fining PMU for non- compliance with antitrust commitments was only the fourth since 2015,[3] the Court of Appeals’ decision is more unusual still, as FCA sanction decisions are very rarely quashed. The Court thus appears to be sending a strong signal, reminding the FCA that while commitments do not amount to a sanction, they should nevertheless remain precise and proportionate to the competition concerns at stake.

[1] Paris commercial court, ruling of September 2, 2021, no. 2009358.

[2] FCA Decision no. 20-D-17 of April 7, 2020 relating to compliance with the commitments contained in FCA Decision no. 14-D-04 of February 25, 2014 relating to practices implemented in the online horse race betting sector

[3] Over the same period, the FCA issued 16 antitrust commitments decisions.