NO MAGINOT LINE FOR RACING

France is a very protectionist country and that translates into artificially high prices to its inhabitants and to a lack of product choice. For example, in 1981, France instituted a law intended to shield small, independent bookstores from chains. The blatantly anti-consumer law mandates that books cannot be sold for more than 5 percent below the cover price. This means that chains cannot pass on to consumers cost savings owing to economies of scale.

France is a prime example of how technology has outpaced the ability of regulators to do their jobs. The 1981 French law pertained to “printed matter,” meaning that e-books from the likes of Amazon.com and Apple are not affected. In 1981, the Internet was virtually unheard of by the general population and e-books were not yet invented. Now, online companies such as Amazon are selling books in France at up to 25 percent below their cover prices. This is damaging both chains and independent bookstores.

France is also protective of its horse racing industry; the country has over 200 racetracks and a large breeding industry. A government organization, Le Pari Mutuel Urbain (PMU) controls wagering on horse racing. As recently as the beginning of the 21st century, off-track-betting parlors were forced to close once live racing in France began. This since-abandoned policy was meant to ensure attendance at the racetracks. Now, racetracks account for about 20 percent of wagering and 8,000 licensed kiosks and bars accept the other 80 percent. Revenue flows entirely to horse racing associations and PMU funds 80 percent of the French equine industry.

On May 13, 2010, the French parliament put into effect a law that prevents any access from within France to Betfair.

Previously, France stopped a Maltese company from offering online sportsbook services within the country and then the edict was challenged legally. When France’s top court received the case, the judges overturned the ban. Moreover, the European Union has pressured France to open up the country’s state-run betting monopolies. In June of 2010, France complied by awarding licenses to 11 private gambling operators to take online bets on horse racing, soccer, and poker.

The small bookstores in France are living on borrowed time. Even if France regulates e-books, there will be an easy way to circumvent it in this digital age where international borders are increasingly meaningless so far as e-commerce is concerned. It is not that difficult to audit the prices of books in physical stores but it is next to impossible to stop the flow of text to an e-book.

The same goes for wagers on horse races. Betfair may not accept wagers from France, but some other company outside the French jurisdiction will do so.

A few people in the United States have grasped at straws by persistently calling for what amounts to a government-sanctioned cartel to control the price of the horse-racing simulcasting signal and to allocate much more of the split to racetracks and purses. A racetrack now receiving three percent for its signal would receive half.

Rather than scheme as to how to save racing by hunkering down and putting up monopolistic fronts–that the federal courts are apt to strike down anyway–it is far better to spend time planning on how to revitalize racing through strong marketing, reduced takeout, and innovations like exchange wagering.

Before World War II, the French constructed the Maginot Line, which was comprised of fortifications along the German and Italian boundaries. Strategically, the Maginot Line was ineffective and the Germans circumvented it and conquered France.

Anti-consumer protection proposals in horse racing, if implemented, would have the same result in the age of borderless e-commerce. Horse racing cannot afford to waste valuable time and effort on a 21st century Maginot Line. Regulation cannot keep pace with the technologies that inevitably allow money to flow where its owners desires.

Copyright © 2010 Horse Racing Business

Comments

  1. Concerned observer says

    Does the NFL, MLB, Nascar,Rock concerts, prize fights or anyone for that matter sell their viewing rights for less than the cost of production? Yours is a weak argument at best.
    Intellectual and artistic property should be protected. Only the Chinese believe all ideas are there for the taking.

  2. Oh, Bill, you are way off the mark on this one. Because of its protectionist defenses, France is the only country in Europe, and one of the few in the world, where it makes economic sense to own a racehorse. I hear comments nearly every day from English trainers and owners jumping the Channel. Americans are starting to catch on, too. It seems the French government has opened the market in a way that assures funding for the sport, unlike the hash of bookmakers/Betfair that has decimated purses in other countries. Whether they can pull it off remains to be seen, but as long as I’m a horse owner and trainer here, I’ll be helping add boulders to the Maginot Line.

  3. Bill, Bill, Bill,

    You’ve been brainwashed by the criminal mother-ship of Betfair. There are so many negatives associated with bedding down with Betfair there’s inadequate space to list them all.

    Racing needs to maintain proper return to the Sport for the production costs of the product. Betfair does neither. For years and years BF pirated North American signal only to later plead guilty and apologize. Let’s embrace exchanges if they hold promise but let’s look for a better option for our long-term relationship than the common street whore called Betfair.

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