The French Competition Authority clears the acquisition of Kindred Group by La Française des Jeux, subject to brand separation and other commitments to address conglomerate concerns

By Anita Magraner Oliver, Maud Lesaffre & Louise Caffrey on September 13, 2024

On September 13, 2024, the French Competition Authority (“FCA”) approved the acquisition of Kindred Group (“Kindred”) by La Française des Jeux (“FDJ”, the “Transaction”) in the gambling sector, subject to behavioural commitments, including brand separation, to address conglomerate concerns.[1]

Background

FDJ holds exclusive rights for lottery games (both online and at points of sale) and sports betting at points-of-sale under the “Parions Sport Point de Vente” brand. It also operates in online sports betting, poker and, more recently, online horse race betting, all of which are regulated by the Autorité nationale des jeux (“ANJ”), the French national gaming authority. Additionally, FDJ manages a pool that consolidates stakes from several online horse race betting operators and provides services to point-of-sale and international gambling operators.

Kindred, based in Switzerland, operates mainly in Europe and offers online horse race betting, sports betting, and poker games in France under the brand “Unibet”.

Before the Transaction, FDJ and Kindred’s activities overlapped in three online gaming markets in France: (i) online horse race betting, (ii) online sports betting, and (iii) online poker.

FDJ’s previous acquisition of ZEturf

This decision comes nearly a year after the FCA cleared FDJ’s acquisition of ZEturf,[2] which allowed FDJ to enter the online horse race betting market. The FCA cleared the transaction in September 2023, subject to various behavioural commitments to address potential conglomerate effects between FDJ’s monopoly position in French lottery and sports betting and ZEturf’s online horse race and sports betting services, as well as potential foreclosure risks.

Notably, these commitments include restrictions preventing FDJ from leveraging its monopoly position to expand in the online horse race and sports betting markets. For example, FDJ must: (i) manage these activities (i.e., online and point-of-sale lottery, and point-of-sale sports betting on the one hand, and online horse race and sports betting on the other hand) through separate websites, (ii) promote them via separate social media accounts, (iii) maintain separate player accounts for each activity, (iv) refrain from combining customer databases for these activities, and (v) implement a training program for teams promoting both monopoly and competitive activities to ensure compliance with the commitments.

Additionally, in order to address potential foreclosure risks on the horse race betting market, (vi) FDJ must grant access to its shared pool of online horse race betting stakes to any operator licensed in France to offer online horse race betting that requests it. With the transaction, FDJ would become the only operator offering pooled stakes in online horse race betting which allow it to potentially offer higher winnings, making it a key operator for those unable to pool stakes on their own (i.e. all operators except PMU). The FCA found that the FDJ would have had the capacity and incentive to foreclose competitors by removing their access to its shared pool: given its financial strength, its reputation and its wide range of gambling services, the FDJ would be able to capture new online horse race betting players, significantly increasing its pool of online horse betting stakes and allowing it to operate its pool alone. According to the FCA, FDJ would therefore have had significantly less interest in continuing to pool its bets with its competitors.

The FCA’s analysis of the Transaction

Market definition

In line with its past decisional practice,[3] the FCA segmented the gambling markets by type of gambling activities (i.e., distinguishing games of chance, such as lotteries, from skill-based games, which were further sub-segmented into sports betting, horse race betting and poker) and by distribution channel (i.e., distinguishing services offered online from those offered at points of sale). The FCA considered the gambling markets to be national in scope, due to the national scope of exclusive rights and the ANJ’s regulation.[4]

Absence of horizontal effects

The FCA concluded that the Transaction would not result in unilateral effects, as the combined market share of the new entity would be below 25% in all relevant markets, which is below the threshold where market power is presumed absent.[5] Although the Transaction would strengthen FDJ’s position in the various overlapping markets, enabling it to become the second or third largest player in each market, the new entity would still lag behind the leading players, namely, Winamax and Betclic in online sports betting and poker, and PMU, the by-far leader in horse race betting.

The FCA also found no evidence of coordinated effects on any of the markets analysed. In particular, in the online sports betting market, the FCA set aside the risk of coordinated effects in light of (i) the lack of homogeneity in the market, given the diverse betting strategies and formulas offered daily by various operators for each sporting event, and (ii) the absence of entry barriers, as evidenced by recent new entrants licensed by the ANJ.

Potential conglomerate effects

Given Kindred’s activities in online horse race betting, online sports betting and online poker, the FCA identified potential conglomerate effects similar to those found in the ZEturf Decision.[6] It found that the new entity could have both the ability and the incentive to link FDJ’s monopoly activities (online and point-of-sale lottery and point-of-sale sports betting services) with Kindred’s online horse race betting, sports betting, and poker services. This could involve (i) merging of customer bases, for example by offering a single player account for all games, (ii) launching promotional offers to encourage monopoly game players to try online horse race betting, sports betting, and poker, or (iii) creating confusion between the customer journeys of monopoly game players and those of online horse race betting, sports betting, and poker players. According to the FCA, the leveraging of FDJ’s monopoly position could hinder its competitors’ access and development on the online horse race and sports betting markets, potentially significantly reducing their sales and leading to fewer available competitive offers. The FCA also raised concerns about the potential foreclosure of competitors in horse race betting, either by limiting or denying their access to the shared pool of horse race betting stakes or by withdrawing stakes collected by the new entity from the pool.

The commitments: expanding previous commitments and adding brand separation

The FCA considered that the commitments imposed in the ZEturf Decision were insufficient to address the present concerns, as they would not prevent FDJ from leveraging its monopoly position in relation to Kindred’s activities.

As a result, FDJ agreed to broaden the scope of all existing ZEturf commitments to encompass Kindred’s online horse race betting, sports betting, and poker activities and to extend some of the implementation timelines. The commitments include the following:

Maintaining pooling agreements with third-party online horse race betting operators (i.e., providing other licensed horse race betting operators with non-discriminatory access to FDJ’s pool of online bets) for five years starting from the closing of the Transaction,[7] with an option for one renewal;
Committing not to leverage FDJ’s monopoly in lottery games (both online and at points of sale) and sports betting (at points of sale) to expand in competitive markets, i.e., online horse race betting, sports betting, and poker activities by: (i) refraining from promoting these competitive activities by targeting players of its monopoly activities (and vice versa); (ii) maintaining distinct customer journeys by offering its competitive activities on separate websites and applications from its monopoly activities; and (iii) ensuring separate player accounts for its monopoly activities and competitive activities.
Spinning off of all competitive activities (including Kindred’s competitive activities) into one or more dedicated subsidiaries (separate from FDJ’s monopoly activities) by June 30, 2025; and
Training FDJ’s commercial teams within three months of the Transaction’s closure to ensure compliance with the other commitments, notably in relation to the promotion of competitive activities and monopoly activities.[8]

Additionally, in response to comments made by third parties during the market tests, FDJ committed to marketing its competitive gambling activities under separate brands, distinct from its monopoly activities’ brands like “Parions Sport Point de Vente”. This commitment must be fully implemented by March 31, 2026, allowing time for the launch of new brands and migration processes.

Takeaways

This decision confirms the FCA’s openness to accept behavioural commitments, at least in response to non-horizontal concerns.

The FCA’s decision is currently under appeal before the Conseil d’État (the French Council of State).[9]

[1] FCA, Decision 24-DCC-197 of September 13, 2024 on the acquisition of exclusive control of Kindred Group by La Française des jeux (the “Kindred Decision”).

[2] FCA, Decision 23-DCC-191 of September 15, 2023 on the acquisition of exclusive control of the ZEturf group by La Française des jeux (the “ZEturf Decision”).

[3] See ZEturf Decision, paras. 7 to 23. See also FCA, Opinion No. 11-A-02 of January 20, 2011, concerning the online gambling and betting sector, paras. 67 to 69; FCA, Decision No. 14-D-04 of February 25, 2014, concerning practices implemented in the online horse race betting sector by PMU, para. 41.

[4] See Kindred Decision, paras. 8 to 14. See also FCA, Decision No. 22-DCC-219 of November 14, 2022, regarding the exclusive control of Aleda by Française des Jeux, para. 24.

[5] FCA, Merger Control Guidelines, para. 624.

[6] See Kindred Decision, paras. 30 to 32, referring to the ZEturf Decision.

[7] The Transaction closed on 18 October 2024. See FDJ, Press Release, October 21, 2024, available at: www.groupefdj.com/presse/a-lissue-de-lextension-de-son-offre-publique-dachat-fdj-detiendra-9860-du-capital-de-kindred/.

[8] See Kindred Decision, paras. 46 et seq.

[9] See FCA Press Release of September 13, 2024 on Kindred Decision, available at: https://www.autoritedelaconcurrence.fr/fr/decision/relative-des-pratiques-mises-en-oeuvre-dans-le-secteur-de-la-distribution-des-jeux-de.