FCCA: Finnish gambling monopoly Veikkaus’ returns should be transferred to the state budget

17.2.2021 Press release

The Finnish Competition and Consumer Authority (FCCA) states that negative effects of gambling could be reduced if Veikkaus’ returns were transferred to the state budget. So far Veikkaus has not been sufficiently steered to prevent negative effects of gambling, even though recently significant improvements have been made.

On the February 17^th 2021, the FCCA published its last interim report and its final report on its extensive investigation of gambling. The reports are part of an extensive project by the FCCA, examining gambling industry in Finland with its benefits and harm. According to the reports now published, keeping the current monopoly-based gambling system requires that there is a greater goal-orientation in reducing the negative effects of gambling.

However, the reform of the Finnish gambling system is on the right track and legislative reforms under preparation are going to the right direction. But there is still room for improvement.

In the FCCA’s view, Veikkaus’ returns should be transferred to the state budget. This would support the steering system which should weigh both the benefits and disadvantages of gambling at the level of the economy. If the returns were part of the national budget, the funding of the current beneficiaries would not depend on how much Finns lose in gambling. Budget funding would also be more predictable and stable for the current beneficiaries.

– If the negative effects of gambling were actively targeted, the current beneficiaries of Veikkaus returns will not be able to correctly anticipate their funding, as the total funding is likely to fall. On the other hand, if the gambling monopoly does not actively strive to reduce the negative effects, the monopoly does not meet the objectives laid down in legislation. These conflicting objectives have hampered social debate on Veikkaus’ responsibility, says Research Professor Mika Maliranta from the FCCA.

The second proposal that the FCCA makes in its report, is to transfer the main responsibility for owner steering of Veikkaus Oy to the Ministry of Social Affairs and Health (STM) rather than the Prime Minister’s Office. The Ministry of Social Affairs and Health already has the responsibility for research, monitoring, evaluation and development of the prevention and treatment of gambling-related harm. Thus, the Ministry of Social Affairs and Health would be best placed to steer the company’s operations to the direction where gambling causes less harm to individuals and society than it does today. This is also in line with the principles of state ownership steering. The solution would be the same as with the alcohol policy, as the Ministry of Social Affairs and Health is also responsible for the ownership steering of Alko Oy.

Regular weighing of benefits and negative effects of the gambling system is needed

A monopoly on gambling is allowed in the EU, on the condition that it effectively prevents and reduces the negative effects of gambling. Finland has the world’s most comprehensive gambling monopoly, but at the same time, the fourth highest level of gambling margin per resident. Gambling margin refers to the net loss of gamblers to Veikkaus. In 2019, the company’s margin was EUR 1.7 billion.

– Finns gamble a great deal. Both margins and problems are concentrated on a small number of gamblers. Furthermore, many of them are probably people with a relatively low income. It is clear that the monopoly structure alone does not solve gambling problems; instead, there is a need for measures that can be taken by a monopoly – such as restricting the supply of games or offering tools to personally control gambling, says Lasse Pöyry, economist at the FCCA’s Research and Advocacy Unit.

In its previously published reports on the gambling system, the FCCA recommended that measures to reduce the negative effects of gambling should be introduced. These measures include increasing the number of responsibility tools, such as identification at gambling machines and renewing the marketing of gambling games. The measures proposed by the FCCA have been commendably taken into account in the reform of the lottery legislation. However, this alone is not enough, as the effectiveness of the measures must be assessed.

For this reason, the FCCA proposes that the gambling policy steering system should be cyclical, one in which the effective means to prevent harm and ensure benefits can be actively sought through experimentation. In order to assess when changes in the regulation need to be made, it is vital for Veikkaus to make its extensive gambling data available to the research community in a manner that simultaneously ensures data protection.

– Cyclical planning is needed because combinations of benefits and negative effects of gambling are changing due to technological development and globalisation. In addition, the social understanding of how much gambling-related harm the society is prepared to tolerate, changes. The monopoly system and, in particular, a more extensive use of gambling data enables measures to reduce gambling-related harm and to assess the success of the measures. Furthermore, it would be essential to transfer Veikkaus’ returns to the state budget so that the pursuit of revenue from gambling would not interfere with the reduction of gambling’s negative effects, Pöyry says.

Further reading:

Inquiries:

Research Professor Mika Maliranta, tel. +358 050 369 8054
Economist Lasse Pöyry, tel. + 358 29 505 3374
firstname.lastname@kkv.fi