SWEDISH MONOPOLIES ARE BEING CHIPPED AWAY

29 August 2008

It's not just gambling where the Swedish state is under siege


For seventy years the Swedish welfare state has imposed monopolies on gambling, alcohol and pharmacy products, but its membership of the European Union, and that body's policy of free movement of trade and services, has enabled entrepreneurs to chip away at the monolithic structure, reports an interesting article in the Financial Times Deutschland this week.

The piece uses online gambling group Betsson's defiance of the monopolistic policies on gambling as an example, recounting that the Malta and Swedish registered company challenged the authorities by opening a betting shop in Stockholm in May this year (see previous InfoPowa report). Despite official threats, it remains in operation.

"The Swedish welfare model is strange. Is it part of the Swedish model for the government to be the biggest marketer of gambling in the country?" Betsson's feisty CEO Pontus Lindwall asks. He points out that the European Union asked Sweden last year to amend its gambling laws or face possible referral to the European Court of Justice, and he calculates that the government does not want to pick a fight with the EU.

The state's response to the growing pressure on its monopolies has been to proclaim the reasons they were created in the first place, the FT article informs.

"It says alcohol is not just another commodity 'like rhubarb' and Systembolaget [the alcohol monopoly] exists to encourage responsible drinking, while Svenska Spel ensures prudent gambling," the article reports before going on to reveal that Svenska Spel reported a profit of SEK 5.2 billion (Euro 554 million) in 2007. SEK 3.6 billion of this went to the state Treasury and the remainder to areas such as the Swedish Sports Federation and youth programmes.

"It can sometimes seem that the role of Svenska Spel is not to keep gambling down, but to keep people gambling," Jörgen Hettne, director of the Swedish Institute of European Policy Studies, told the FT.

On the alcohol monopoly, Systembolaget is not run for profit, but the government benefits from high import taxes on alcohol. But this state business too is under pressure from consumers who are not prepared to pay artificially high prices from state outlets, and European Court of Justice free market rulings last year. These allow Systembolaget to retain its retail monopoly but permit consumers to buy alcohol online and have it delivered.

One Malta-registered company buys wine from around the world, stores it in Germany and pays Swedish taxes on behalf of customers. Registering in Malta allows it to be offshore from Sweden but EU-authorised. Its next move is an alliance with Konsum, a chain of food stores, that will offer customers access to the company's online service, allowing it to go head-to-head with Systembolaget on the high street.

The FT article opines that the monopoly system is starting to crack, and that entrepreneurs armed with ECJ rulings and European Commission enforcement initiatives are starting to undermine the state's stranglehold.

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