The Finnish government’s involvement in Veikkaus creates a conflict of interest

Finnish Gambling Consultants (FGC) partner Jari Vähänen has suggested that the Finnish government should sell its stake in the Veikkaus monopoly as its role in legislating for an open online market could pose a conflict of interest.

The Finnish government published draft legislation legalizing online gambling in June. It launched a consultation period, asking stakeholders for feedback until August 18.

The government, through its stake in Veikkaus, will also be responsible for establishing a gambling regulatory authority and creating a legal framework for an open gambling market.

“The Finnish state wants to maintain a dual role, being responsible for legislation and supervision of gambling activities, while at the same time being the owner of the company that is involved in gambling activities. In such a model, there is a high risk of conflict of interest,” the FGC wrote in its response.

Vähänen adds that this issue was also raised by the Chancellor of Justice of Finland and the Competition and Consumer Authority in their responses to the proposals.

“How can the regulator be sure this won’t happen?” iGB previously told Reuters.

In June, the Interior Minister suggested the possibility of selling his shares in Veikkaus.

“If in the future it were deemed justified in terms of developing the value of state shareholders. The proposed legislation would not automatically result in a reduction in state ownership,” it said at the time.

Will a licensed Veikkaus company have access to its legacy database?

Vähänen believes that Veikkaus’ existing player database and technology stack would give the company an unfair advantage over licensed online competitors that could enter the licensed Finnish gambling market in 2027.

Under the new rules, Veikkaus will be split into different parts, including its monopoly arm and its licensed internet and technology businesses. The structure will be similar to Sweden’s former monopoly operator Svenska Spel. It could even lead to the sale of some components, the interior ministry has suggested.

The monopoly will retain exclusivity over lotteries, toto games (lottery-based sports betting), slot machines in land-based casinos and scratch cards and will be required to pay an annual exclusivity fee.

However, there is a lack of clarity in the online business about how it will be separated from monopolistic operations, says Vähänen. He spent seven years in various positions at Veikkaus between 2013 and 2020.

His estimates suggest that Veikkaus’ customer base is worth hundreds of millions of euros. He called for a clear policy on whether current Veikkaus customers can be transferred to a licensed company.

“A company operating in a competitive market cannot use the same resources as a monopolistic company from the same group in a way that distorts competition,” Vähänen said.

Internet and monopoly companies should use different technologies

Veikkaus’ establishment of its own technology business could provide the company with another competitive advantage, given its omni-channel marketing capabilities spanning both retail and online players.

“These slot machines would be a significant marketing channel for the games in question, which would also give Veikkausa’s licensing company a significant competitive advantage,” Vähänen said.

“A monopoly shouldn’t be able to provide the same games as a licensed online business.”

Vähänen advised Veikkaus not to establish a monopoly on horse racing betting and digital instant transactions. No credible justifications were provided for this conclusion.

“Under the proposed law, the monopoly would mainly apply to those product groups that cause little or no gambling problems. The only exceptions in this regard are physical casinos and slot machines,” he said.

“The inclusion of lottery gaming activities within the scope of the monopoly cannot be credibly justified on these grounds.”

License to affiliates to increase channelization

Elsewhere in the proposal, it was advised against banning bonuses and affiliate programs, as set out in the draft, as this would negatively impact distribution rates.

Vähänen advised: “If affiliate activities were allowed in Finland, these companies would have to comply with the same marketing regulations as gambling operators and media companies. Affiliate activities should become much cleaner compared to the current, almost completely unregulated situation.

“An alternative that could be considered would be, for example, the Romanian model, where affiliated operators are required to have a separate business license that could be part of the proposed provider license.”