European Commission formally opens in-depth state aid investigation into Belgian virtual betting 

On 2 September 2020, the European Commission (“Commission”) formally opened an in-depth investigation into whether Belgium’s grant of a licence to Ladbrokes to operate virtual betting in Belgium breached EU State Aid rules.

Background

Upon request by Ladbrokes, in February 2014 the Belgian Gaming Commission (the federal regulator controlling the gambling industry) authorised Ladbrokes to operate virtual betting in its betting shops, followed by authorising it to operate online in March 2015.

The Belgian Gaming Commission later refused to grant the same authorisation to other operators on several occasions between 2014 and 2016, citing its ongoing review of the appropriate regulatory framework. However, it did not rescind Ladbrokes’ authorisation during that time, allowing it to continue operating as the sole provider of virtual betting in Belgium.

Concerns

In March 2019, two operators lodged a complaint to the Commission alleging that Belgium granted incompatible State Aid to Ladbrokes in the form of an exclusive right to operate betting. EU State Aid rules, under Articles 107 to 109 of the Treaty on the Functioning of the European Union (“TFEU”), prohibit Member States and their authorities from granting state aid that distorts competition and trade in the EU by favouring certain undertakings or the production of certain goods.

The notion of State Aid has been interpreted very widely by both the Commission and the European Court of Justice (“ECJ”), so as to include a broad range of advantages or assistance. These include direct state grants, tax exemptions, preferential loans, debt write-offs, and forgiveness of liabilities.

In 2012, the Commission held that the Greek state’s grant of an exclusive licence to operate video lottery terminals (in exchange for a lump sum and percentage levy on gross gaming revenues) to the Greek operator (“OPAP”) did not constitute state aid within the meaning of Article 107(1) TFEU. The Commission held that in granting the exclusive right, OPAP was only left with the minimum return needed to cover its capital and operational costs. In 2016, the ECJ confirmed that there was no state aid involved in the grant of the exclusive right.

In this case, the Commission has, at this stage, expressed concerns that the authorisation granted to Ladbrokes may have resulted in Ladbrokes receiving a de facto exclusive right to operate virtual betting in Belgium since 2014, without any remuneration from Ladbrokes to the Belgian state in return.

Next Steps

A non-confidential version of the Commission’s decision to open proceedings is set to be published. In the context of the Commission’s investigation, the state of Belgium, the complainants, and interested third parties will be invited to comment on the subject matter in the coming months.