Online gaming and betting: Commission raises serious doubts about the compliance of German gambling regime with EU law

Brussels, 7 December 2012: EU online gambling operators welcome the European Commission’s ‘detailed opinion’ against the Draft Act amending acts pertaining to gambling law of the land of Schleswig-Holstein (Gaming Amendment Act S-H) which is seeking to replace its existing legislation with the controversial German State Treaty on gambling (GST). The detailed opinion confirms that there are real concerns with Schleswig-Holstein’s proposed switch from a transparent licensing model to one that is restrictive and opaque, raising further doubts about the overall compliance and consistency of the German gambling regime with EU law. Under Directive 98/34/EC, Schleswig-Holstein must not adopt its draft legislation before January 2013.

Schleswig-Holstein notified its proposed legislation to the Commission on 6 September 2012 (see link). Today’s detailed opinion (see link), which has also received the support (see link) of Malta (detailed opinion) and the U.K (comments), extends the standstill period until 7 January 2013.

The proposed alignment of Schleswig-Holstein’s gambling legislation with the GST marks an abrupt policy reversal. If confirmed, Schleswig-Holstein would move from a sustainable and EU-compliant licensing model introduced in 2011 (see link) to a prohibitive and restrictive model which bans online poker and casino, imposes an uncompetitive tax regime, and restricts the online sports betting offering to 20 licenses.

Sigrid Ligné, Secretary General of the EGBA, commented: “Schleswig-Holstein’s proposed move from a sustainable and EU compliant licensing system to an inconsistent and unjustifiably restrictive regime would be a significant step backwards, one that - as confirmed today - the European Commission cannot approve”.

The European Commission already confirmed its concerns about the non-compliance of the German gambling legislation with EU law in July 2011 (see link). Today’s detailed opinion shows the consistent position of the Commission towards Germany’s gambling reform. 

The tendering procedure for the allocation of the 20 online betting concessions under the GST is currently managed by the state of Hessen and has already resulted in more than 100 applications but fails to provide the applicants with clear, transparent and reliable information on the criteria which will be used for allocating the 20 concessions.

Sigrid Ligné added “The European Commission’s detailed opinion against Schleswig-Holstein sends a clear message that Member States are no longer going to be allowed to impose gaming regulations that fail to meet the tests set by the CJEU. The German states cannot continue to ignore the warnings coming from Brussels and the growing criticism evidenced by the multiplication of complaints and litigation even before the new legislation is introduced. This creates an extreme level of legal uncertainty which is a damaging for all parties and German consumers in particular. At this stage, only the EC can restore legal security by acting on the many complaints it has received, not only against Germany, but also against Greece, Belgium and several other Member States.”  

The European Commission confirmed on 23 October 2012 in its Communication on online gambling that “ensuring compliance of national law with the Treaty is […] a prerequisite of a successful EU policy on online gambling”¹ and that it would take action against all Member States whose legislation does not comply with EU law.

For further information or comment please contact:
Sigrid Ligné: +32 2 554 08 90
sigrid.ligne@egba.eu

Licensing procedure in Germany: A never-ending story

By Attorney-at-law Martin Arendts, M.B.L.-HSG

Under the new Interstate Treaty on Gambling 2012, 20 sports betting licenses will be awarded. When this might eventually happen, remains still open. The deadline for the first step has been prolonged once. The deadline for the second step has now been prolonged for the second time (and the end is not near). Applicants which survived the first step are now required to send in their concepts and other documents until 21 January 2013. If more than 20 applicants fulfill the (confidential) minimum requirements, the 20 best will be chosen by the Hessian Ministry of the Interior and for Sports. The information memorandum (which explains the procedure) and the selection criteria (a maximum of 5000 points can be awarded) have not been published yet (as required under EU law). So, the whole procedure might be declared null and void.

EGBA: EUROPEAN COMMISSION’S NEW POLICY PAPER ON ONLINE GAMBLING

EU operators call for ‘hard’ action from the Commission to curb market fragmentation and protect consumers - EU operators lodge formal complaint with the Commission against the new German gambling régime.

The EGBA today outlined its expectations for the European Commission’s Communication and Action Plan on online gambling, currently scheduled for mid to late October. This initiative, which flows from the Commission’s commitments to the European Parliament last November, will be a key test:

• Will the current fragmentation of the EU online gambling market continue?
• Will consumers therefore continue to suffer different levels of protection throughout the EU?
• Will some consumers, and in particular children and the vulnerable, continue to suffer no protection at all, where a Member State closes the door to EU-regulated operators, thus encouraging consumers to look for non-regulated websites?

As Commissioner Barnier has said: “[It is] important for legal operators to be able to offer sufficiently attractive products for them to be a credible alternative to the illicit sites”

 

Sigrid Ligné, Secretary General of EGBA said: “We deplore the situation today where we see 27 ‘mini-markets’ for gambling in Europe. We are calling for the introduction of European rules to ensure proper protection for consumers and maintain a crime-free environment throughout the EU, while affording open, fair and transparent licensing conditions for EU-regulated operators.”

The EGBA also today announced that, together with other industry partners, it is lodging a formal complaint with the Commission against the new German gambling regime on grounds of incompatibility with the EU treaty.

 

Sigrid Ligné added: "Together with other industry partners, EGBA this week lodges an official complaint with the Commission against the revised German gambling law. We urge the European Commission to handle our complaint urgently as Germany is in the process of allocating licenses on the basis of a highly contentious tendering procedure which appears, on the basis of a cumulation of evidence, not to be designed to pursue the declared purpose of conducting an open, fair and transparent Europe-wide call for bids."

 

Infringements:

In his June 2012 speech to the European Parliament Commissioner Barnier made a clear commitment that the Commission will assume its responsibility and ensure that national regimes are in conformity with the Treaty. Unfortunately, the situation is worsening in a number of jurisdictions. Several Member States have decided to move forward with legislation that is - at best - highly questionable under EU law. Some have even gone a step further. If the Commission fails to provide a timetable for reactivating these dormant procedures, and to take rapid action against new offenders, certain Member States will continue to consider that they have “carte blanche” to do as they please. They will also be exposing consumers to potentially unsafe operators.

 

Sigrid Ligné said: “Action from the Commission on European gambling markets is more justified and urgent than ever. The normal course of EU justice – infringement procedures – can no longer be put on hold. There are 9 infringement procedures suspended for the moment, and many more new complaints lodged with the Commission."

 

EU legislative framework:

What is ultimately needed is overarching EU legislation for online gambling, as there is for virtually all other online services. The objective is to have EU wide sector specific legislation that regulates both market access and consumer protection issues. But a first practical step should be made by the Commission in its action plan next week by announcing it will take the initiative by developing;

• Common consumer protection standards, ideally based on the existing workshop agreement published in 2011 by the CEN (European Committee for Standardization).
• Common technical standards and reporting tools
• Common licensing requirements

Sigrid Ligné added: “The Commission wants the online single market to work as effectively as the offline market in promoting economic growth. Can the Commission therefore afford to sit back and ignore an online industry which is set to grow from €8.5 billion in 2010 to €13 billion in 2015?”

Bavarian Administrative Court of Appeal: Internet ban not coherent and disproportionate

By Martin Arendts, M.B.L.-HSG

The Bavarian Administrative Court of Appeal (Bayerischer Verwaltungsgerichtshof), in its recently published decision of 26 June 2012, file no. 10 BV 09.2259, held that the Internet ban with regard to gambling advertising was not enforceable. Section 5 par. 3 of the German Interstate Treaty on Gambling states that advertising public gambling over the Internet is prohibited.

The court rescinded a prohibition order against an Internet portal (offering sport news), which advertised a private bookmaker. It argued that there was a serious “structural enforcement deficit”. All state operators were continuously and systematically breaking the law, advertising their services over the Internet. The Internet ban was not adequate and not coherent and, therefore, not enforceable. Apart from that, the Internet ban was also not proportionate, as the authorities were issuing prohibition orders only with regard to private operators. As the ban was not enforced against state operators, the regulation was obviously not taken seriously (and, in truth, fiscal reasons were decisive).

From my point of view, it is a very important decision, as it points to the fact that the treatment of state operators and private operators is clearly discriminatory and disproportionate. According to the court, the state operators (in Bavaria, it is the state itself who operates casinos, lotteries, scratch cards and sports betting) were systematically breaking the law (without any enforcement by the authorities). Last year, the Federal Court of Justice (Bundesgerichtshof), ignored this fact and upheld the Internet ban in several unfair competition cases. The Bavarian Administrative Court of Appeal now comes to the conclusion that the whole regulatory system is not working properly. So, I do not follow the state attorney (Landesanwaltschaft) who argued that the decision was only relevant with regard to the situation before 1 July 2012 (when the Amendment Treaty to the Interstate Treaty became effective).

newsletter "Sportwettenrecht aktuell" no. 127: licensing procedure in Germany

Sportwettenrecht127 from Martin Arendts

New newsletter "Sporwettenrecht aktuell" no.128

Sportwettenrecht aktuell Nr. 128 from Martin Arendts

INTRALOT ENTERS THE GERMAN SPORTS BETTING MARKET

press release of 16 July 2012

THE GERMAN STATE LOTTERIES SELECT SGI & INTRALOT FOR RETAIL AND ONLINE SPORTS BETTING

Following a competitive process, ‘ODS ODDSET Deutschland Sportwetten GmbH’ (ODDSET) has awarded Scientific Games International (SGI) in cooperation with INTRALOT with a contract for the operation of sports betting in Germany both in the retail and the interactive space. Under the agreement with SGI, INTRALOT will provide the new generation of its renowned INTRALOT Betting Platform, fully supporting the retail and the interactive operational modes, together with complete Risk Management Services and Interactive Operational Services. ODDSET is the newly established entity that will modernize and develop the existing sports betting operations in Germany, through the national retail network of the Deutsche Lotto und Toto Block lotteries, which is comprised of 23,000 points of sale.

Germany’s betting market is among Europe’s largest and is currently undergoing regulatory reforms. As many as 15 of the country’s 16 regions signed the Interstate Treaty at the end of 2011 and most of these regions have already ratified it in their local parliaments. The new Treaty is in force since beginning of July 2012. Aiming to become the leader of Germany’s betting market, ODDSET will apply for one of the twenty upcoming national concessions to be issued for the organization and brokerage of sports betting for an initial period of seven (7) years.

Mr. Constantinos Antonopoulos, INTRALOT Group CEO, stated: “We are very pleased to become part of this great opening of the German market, one of the most important markets in Europe and worldwide. SGI’s considerable experience and knowledge of the local market together with INTRALOT’s extensive know-how of sports betting operations and the powerful market position of the German State Lotteries create the synergy to address the challenges of the newly regulated German market. Our common objective is to establish through ODDSET a modern, attractive and competitive product portfolio in the German market enabling ODDSET to become the market leader in sports betting in the Federal Republic of Germany over the medium term.”

The Parties have the common objective of supporting ODDSET to launch first in Germany’s regulated sports betting market, which is estimated to take place before the end of 2012.

About INTRALOT
INTRALOT, a public listed company, is the leading supplier of integrated gaming and transaction processing systems, innovative game content, sports betting management and interactive gaming services to state-licensed gaming organizations worldwide. Its broad portfolio of products & services, its know-how of Lottery, Betting, Racing & Video Lottery operations and its leading-edge technology, give INTRALOT a competitive advantage which contributes directly to customers’ efficiency, profitability and growth. With presence in more than 53 countries, with approximately 5.500 people and revenues of €1.2 billion for 2011, INTRALOT has established its presence on all 5 continents.

First sports betting licenses in Schleswig-Holstein

by Martin Arendts, M.B.L.-HSG The German state of Schleswig-Holstein has issued several sports betting licenses to private operators. Licenses have been issued inter alia to Polco Limited, a subsidiary of Betfair, and to Personal Exchange International, a subsidiary of JAXX SE. A license was also granted to the former monopoly operator, Nordwestlotto. 23 more applications are pending. 14 applicants want to offer casino games (which also can be licensed under the Gambling Act of Schleswig-Holstein).