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Forbidden games

par Xavier Méra
mardi 14 novembre 2006.

Article published exclusively on the Institut économique Molinari’s website.

Games of chance have often been associated with the most disreputable activities. However, the arrest and keeping in police custody of two chief executives of the gambling firm Bwin since September 15 seem to bear no relation to Mafia-like practices.

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Games of chance have often been associated with the most disreputable activities. However, the arrest and keeping in police custody of two chief executives of the gambling firm Bwin since September 15 seem to bear no relation to Mafia-like practices. Definitely not. The joint chief executives of this Austrian online firm were detained for questioning as part of a judicial probe relating to “the illegal operation of gambling games, illegal running of lotteries, prohibited advertising of lottery and illegal operation of horse-racing gambling.” They were arrested at the training facilities of the French football club AS Monaco located at La Turbie (Alpes-Maritimes) just before the start of a news conference called to outline a sponsorship deal between Bwin and the club.

What is at stake here is the size of the dent foreign online gambling firms such as Bwin are willing to make in the state monopoly enjoyed by La Française des Jeux and the PMU in France. The case against the Austrian firm was triggered by a complaint from these two national monopolies. Besides the arguments relating to the likely inconsistencies between French and European law that the defense attorney will probably put forward, it is the very principle of the monopoly which is called into question today.

If we were to go by what M. Philippe Vlaemminck, the lawyer hired by La Française des Jeux, says in Le Figaro (dated September 18, 2006), “the expansion of economic activities based upon luck is prejudicial to law and order.” What a fascinating statement ! If the mere fact of organizing a lottery and selling lottery-tickets goes against law and order, what grants the right to enjoy a monopoly in the operation of such games to La Française des Jeux and the PMU ?

If we are to assume that such an activity “based upon chance” should not be allowed to operate, shouldn’t La Française des Jeux, a state-owned company, and the PMU, a cartel of horse-racing betting companies, also be rendered inoperative and harmless ? And, if we believe that the services offered by these national monopolies are legal, on what grounds can we then claim that other firms selling the same type of services constitute a threat to law and order ?

Of course, we can also resort to a more narrowly defined idea of law and order. According to a report entitled “Games of chance and betting in France” published by the French Senate in 2002, “the inherent suspicion at work in the laws which regulate games and the attitude of authorities towards them”relates particularly to “rigging”, “cheating” and “fraud.” But, there is room for fraud in many activities which have nothing to do with gambling. Indeed, each and every activity is vulnerable to fraud. Should we then let legal monopolies mushroom in order to ascertain the probity of all these activities ?

In fact, this argument thoroughly snubs one of the virtues of free competition from the point of view of consumers. The more a given market is open to new competitors and entrants, the more existing firms on the market have every interest in being concerned with their reputation. Every blow played to consumers by a firm is all the more likely to elicit a pecuniary sanction than when consumers can choose to buy instead from competing firms or from firms which will seize this opportunity to enter the market.

It is therefore paradoxical that the legislator can condemn firms for abusing of their dominant position – regardless of whether they benefit or not from legal privileges –, while other firms which are shielded against competition by status are cloaked in all the republican virtues. It should indeed be obvious that their monopoly status, understood in the sense of exclusive privilege for selling a good, allows them to earn a rent at the expense of consumers that they would not be able to otherwise earn. And, the fact that La Française des Jeux is a state-owned company does not immunize it against such behaviors.

Xavier Méra, Institut économique Molinari




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