HORSE RACE AGENCIES CONVENTION (Advisory opinion)
PRESS RELEASE
The Italian Competition Authority submitted an advisory opinion to the Minister for Agriculture and Forestry on Unire's (Italian National Organisation for the Promotion of Racehorses) resolution no. 723 of May 13th, 1996, which was submitted by the Unire's Commissioner to the same Ministry so as to approve it. In its advisory opinion the Authority considers it desirable that such a resolution is modified in order to ensure that the horse bet market can work effectively.
Resolution no. 723, in addition to the renewal for nine years of the horse race agencies convention, provides the development and the reorganisation of the external network of agencies collecting horse bets, by the identification of "Unire's areas", within which new outlets will have to be opened.
The increase in the number of outlets is, therefore, an important occasion to open the market of horse bets to new entrants. Resolution no. 723, by contrast, as it is formulated, can reduce competition substantially.
The main anticompetitive aspects seem to derive, first of all, from the fact that the parties currently delegated are entitled to open one or more branches without participating in tenders for their allocation. Indeed, resolution no. 723/96 gives the 230 horse race agencies a pre-emption right for the assignment of a concession concerning one or more outlets to be opened in the "Unire's area" where the agency is already present.
The Authority deems that the recognition of such a right, as well as the assignment of an exclusive area, can prevent substantially the entry of new operators into the horse bet market. In fact, rivals' entry into the areas where the agencies are already present, would be restricted to those "subareas" where the agencies do not feel it opportune to exercise their pre-emption right. Further, the horse race agencies, not only can open new outlets without participating in tenders, but also are not obliged to ensure a «minimum guaranteed» of bets, differently from what is provided for new entrants.
In this way, resolution no. 723/96 provides very favourable conditions for the old delegated parties in order to open new branches and to prevent rivals' entry. As a matter of fact, it is to be noted that the old delegated agencies will have to bear much less management expenses than the new ones who will be obliged to incur more burdensome debts, as to stipulate fidejussory contracts and to invest in new structures. Hence, the territorial exclusivity would seem to meet - more than the need of increasing the collection of bets, in accordance to Unire's institutional purposes - the delegated parties' requirements of dividing the market among them, in order to maintain customers and to eliminate any form of competition.
Finally the opening of the market that, in principle, might derive from the non-exercise of the pre-emption right on the "subareas", on behalf of the current horse race agencies, does not seem significant. This supposition, in fact, is unlikely, in the light of the advantages provided by resolution no. 723/96 in favour of the existing horse race agencies.