Exclusivity in the provision of public services is not the rule, but it may occur in the event of technical or economic unfeasibility, whose justifications must accompany the act of granting the concession. There are many cases in which the difficulties of promoting the exploitation of services in a competitive environment are shown in plan - typical for monopoly scenarios.
There are activities, such as lottery services, in which the legislation appears to rule out exclusivity. This is what is envisaged in Federal Law nº 13.756/2018 on sports betting, by prescribing that the modality “will be explored exclusively in a competitive environment.” Attaching to the literalness of this isolated provision of the law, state models are being questioned when considering granting lottery modalities, including sports betting, to a single operator, on an exclusive basis.
This is what is extracted from the interventions carried out during the public hearing that dealt with the modeling of lottery services in the State of Sao Paulo. In addition to invoking the legal basis as an impediment, they claim that it goes against the Union's proposal, which aims to grant authorizations to multiple operators to exploit sports betting, as well as implying loss of revenue for the State and inhibiting the generation of jobs.
In fact, the criticisms make use of rhetorical arguments, detached from the reality of the States that today face intramodal competitive inflows, considering the direct competition with the modalities that are and will still be explored by the Union, as well as intermodal, considering similar services, in particular, the games of chance. This fact, which appears to be ignored in the fight against exclusivity, matters to the market, even more so in the face of the challenge of some States, to restore activities from scratch (green field).
Apparently, the attachment to the federal model, with multiple authorizations and without a bidding process - which is similar to the proposal to replace Bill 442/91, which removes the character of a lottery from sports betting - reflects an attempt to maintain the status quo, of exploring activities in the regulatory vacuum.
To this end, the critics consider effects of unquestionable relevance (fall in revenue, inhibition of jobs), precisely to raise doubts about the regulatory option put to the State, or to place it in a questionable position before the population, without any incentive to change of the precarious scenario that remains due to the inertia of the Union.
Leaving aside speculations: there are risks inherent to the delegation of services in a competitive environment, and which can worsen depending on the regulatory paths to be outlined at the federal level. These risks constitute sufficient reasons to support the decision of States in choosing the exclusivity model.
First, betting integrity is one of the pillars for the development of lottery services. Once weakened, regular punters will migrate to similar services while potential punters will abandon their expectations of entering the market altogether. Hence the importance of standardization of services and products, which will demand robust requirements for certification of procedures and equipment used by the future operator.
In addition, sports betting represents a significant modality in terms of volume of betting collection around the world (30 to 40%). If the exploration of state lotteries by different operators on the same territorial basis is considered, the less profitable categories may be neglected (cream skimming effect), precisely because, today, they are already subject to competitive pressure from the Union.
On the other hand, sports betting - one of the most profitable modalities - will attract numerous operators, implying an increase in fixed costs and a reduction in revenue, in addition to incentives for irregularities or the migration of companies to informality. State collection for social purposes will remain frustrated, another fundamental pillar of the activity.
One cannot lose sight of the risk of suppression of lottery modalities by the Union over state lotteries. And the impact on the exclusivity model, in this case, is mitigated. This is because the early termination of the grant - and the corresponding indemnification - tends to be inevitable in the event of a multiplicity of operators, whose gains in scale and scope are smaller than those of the exclusive operator. There is almost a cross-subsidy between the modalities.
Finally, it is worth facing the argument that federal law requires the exploitation of sports betting in a competitive environment. It happens that the market is already in this exact situation, considering the sports betting conducted by international sites and without any type of grant (cross border). And nothing has changed in the formal market, as the Union has been signaling that it intends to explore the services this year. Thus, even if the States come to delegate services exclusively on their territorial base, the situation posed would be sufficient for compliance with the law.
In short, several factors can compromise the economic viability of state lotteries, which cannot be left to chance. Such factors, which reveal the practical difficulties of competition, justify exceptional regulatory measures to achieve the intended regulatory results. Let us leave the field of betting only to the recipients of the services.
Caio Figueiroa
Master's student in Public Law and specialist in Administrative Law at Fundação Getulio Vargas (FGV), member of the Special Committee on Administrative Law at OAB-SP and partner in Infrastructure and Regulation at Cordeiro, Lima e Advogados
Source: Valor Economico
