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Swedish Monopolies carving their niche in the Market

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The second part of Daniel O’Boyle’s in-depth look at the role that Sweden’s gambling monopolies have played has Hasse Lord Skarploth, ATG’s CEO and Svenska Spel’s CEO Patrik Höbauer discussing how their companies’ businesses have changed since reregulation.

Svenska Spel (Svenska Spel) and AB Trav och Galopp(ATG), which were previously licensed online, will now face competition from other companies when the new Gambling Act comes into effect in 2019. The companies themselves underwent a lot of changes.

A new era of Swedish gambling regulations in 2019

Svenska Spel’s changes were primarily designed to prevent the company from abusing its monopoly position in order to unfairly gain an advantage over other online gaming and betting companies.

Sweden has launched its gambling regulated market since January 2019.

Hofbauer was able to recall that this required major changes.

The biggest adjustment was to align the entire organisation with the new gambling laws. Svenska Spel is now a business group that has three distinct areas of operation.

Cross-subsidisation was a key factor, and it involved a business unit – Sport & Casino – as well as the rest of our business units. This was important, and was the reason we divided our customer system into 3 parts.

The operator had to prepare for the new regulations in 2018. This included updating ID systems and logins.

Hofbauer says, “I would call it careful planning. And dedicated co-workers here helped us succeed without any major issues.” It was an enormous challenge. Imagine turning one company into 3 different ones.

Build from the ground up

Sport & Casino could not use the existing database of customers for marketing. It had to create a new database just like grey-market operators who entered the licensed market.

Svenska Spel CEO Patrik Hofbauer

Hofbauer claims that it was like “starting over” again.

ATG gained more freedom with the new system. The company was also able to offer sports betting, gaming and other services alongside its racing offerings.

Skarploth claims that the company quickly gained a leading position within the new industry verticals, thanks to the marketing ability of existing customers.

He says, “We have launched online sportsbook and casino without any prior experience and are quite successful.”

We are the largest operator on the Swedish gambling market.

How was this possible? We had an established customer base due to our history of horse betting, but worked very hard on content and the betting experience.

Special treatment for Svenska Spel?

Svenska Spel may have made some changes but many still believe it holds an unfair position. Some still believe that the government shouldn’t own businesses in sectors it regulates.

Critics include Branschforeningen For Onlinespel, which represents the licensed private sector.

BOS, and secretary-general Gustaf Hoffstedt, have advocated for the former monopolies to lose their privileged position in the Swedish market

It is inappropriate for the state to run a gambling company. “A state should set up rules for gambling businesses and ensure that they comply with them, instead of being an active participant on the market,” Gustaf Hofstedt, Secretary-General of BOS said in June.

Hofbauer, it is not surprising that he does see the world differently.

He says, “I’m not at all in agreement.” Svenska Spel operates under the same regulations as all other gambling companies.

We don’t receive any special treatment just because we are owned by the state. We are subject to the same audits, by the same regulatory authorities and other operators.

Hofbauer notes that BOS filed a complaint against Svenska Spel with the Competition Authorities. The case was dropped without any sanction.

We received feedback that the division of the company was a good thing and that we were acting in accordance with the regulations. The market is a fair place for competition. “I don’t really agree with you at all.”

It is difficult to break up.

Those who are against the government owning an online gambling company have naturally called for change. This means that in this instance, the call is for the government to sell the Sport & Casino division to a private firm and break up Svenska Spel.

Hofbauer said the operator had communicated a few times why they believe it’s better to work together. One of the main reasons was the chance to implement stronger policies on responsible gambling.

He says that “in connection with the investigations the government initiated in the past years, we’ve clearly explained why Svenska Spel would be better off as a company that brings all parts of all business areas together.”

We can lead the way in consumer protection, responsible gambling and other areas. We are willing to go beyond the legal requirements to protect our customers.

We started early with 10,000 calls per year [for responsible gambling]. Now that we started this, more companies are following suit.

ATG’s unique status

ATG is owned and operated by the horse racing authorities of the country. All profits are returned to the sport. The Swedish government selects the other half of the board including the chair.

Thanks to re-regulation, ATG has expanded beyond its core horse racing product

The business occupies a middle ground between Svenska Spel, owned by the government, and private businesses, as it is neither run under state control nor a state entity.

BOS claims that the operator is receiving preferential treatment. It hasn’t been subjected to the same demands for change.

Skarploth argues that every company has similar goals.

He says, “As a CEO, you have no control over the kind of background or competency you bring to the board.” ATG is focused on making money for its owners, and on making our customers love us. It would surprise me if there were any operators who had a focus other than this. From one perspective, we’re all the same.”

He adds that his company has placed a greater emphasis on sustainability compared to the rest of commercial industry.

He continues, “I believe that our focus is more on sustainability than the licensed private industry at least to date.”

No agenda

Skarploth, as the leader of ATG (a state-owned but non-affiliated company), does he think Svenska Spel needs to be split up?

He says, “It makes sense.” Svenska Spel actually consists of three separate business sectors, one of which is fully licensed. It is strange to be the person who creates the laws and is responsible for the authority and yet you are also competing with your company.

He also states that the matter isn’t high on his list of priorities.

The new Swedish government is also not interested in this issue. The centre-right Moderate Party had called for the dissolution of Svenska Spel before the recent elections.

As part of the new coalition it formed, its role as a government in relation to gambling would change dramatically.

Hofbauer claims that two months after the election, there are few signs of the government taking a different stance from the centre-left coalition.

Hofbauer explains that “all state-owned businesses have an owner dialogue and get directives. We are not exceptions to this.”

In response to an immediate question from the press, the government stated that selling state-owned businesses is not the priority at this time. We don’t know any further information.

If the Swedish government is considering a change in its role within the gambling industry, the visible actions of the two operators affiliated with the state could be a valuable data point.

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