28 October 2013

German Highest Administrative Court Confirms Fantasy-League-Game Is Not Gambling

By Martin Arendts, Attorney-at-Law

The German Federal Administrative Court (Bundesverwaltungsgericht) decided that “Super-Manager”, a Fantasy-League-Game offered online, is not gambling within the sense of the German Interstate Treaty on Gaming (Glücksspielstaatsvertrag). With its decision of 16 October 2013 (file no. BVerwG 8 C 21.12), the Federal Administrative Court confirmed the appellate decision of the Baden-Wuerttemberg Administrative Court of Appeal.

The plaintiff, a media company in Berlin, offered online a Fantasy-League-Game called “Super-Manager”, based on the German Football Bundesliga. Participants had to pay a participation fee of EUR 7.99. They were then, within a fixed budget, allowed to put together a fictitious team of 18 Bundesliga players of the season 2009 - 2010. On the basis of a jury’s evaluation of the performance of the players, each Bundesliga day a new line up was submitted in three different fictitious leagues. A participant was allowed to submit a maximum of ten teams, from which every third was free of charge. The winners (top finishers) were prized with cash or other prizes. The overall winner, Super-Manager of the season 2009 - 2010, won EUR 100.000 in cash.

The Regional Authority of Karlsruhe (Regierungspräsidium Karlsruhe), acting on behalf of the State of Baden-Wuerttemberg, issued a prohibition order against the plaintiff, ordering him not to organize and not to advertise this or any other forms of gambling online. The media company filed an action against this prohibition order, but lost in the first instance. The Administrative Court of Karlsruhe rejected the arguments raised against the prohibition order. In the appellate procedure, the Baden-Wuerttemberg Administrative Court of Appeal overturned this decision and held that Super-Manager does not fall under the restrictive provisions of the German Interstate Treaty on Gambling.

The State of Baden-Wuerttemberg filed a further appeal, which was now rejected by the Federal Administrative Court. According to the Federal Administrative Court, Super-Manager is not to be classified in the sense of Section 3, Par. 1, sentence 1 Interstate Treaty on Gambling (§ 3 Abs. 1 Satz 1 GlüStV). In this provision those games are defined as gambling which depend on random chance of the gain and in which in context of the game a payment (consideration) for the acquisition of a chance of winning is required. In addition, the commitment in which the chance of winning is considered must be based on the criminal gambling term definition of gambling according to the German Criminal Code (section 284 et seq.). However it is not sufficient that a mere participation fee (admission fee) is required. With paying the participation fee, the participants obtain only the authorization for playing, without being associated with the chance of winning.

The payment for Super-Manager represents only such a participation fee. It only permits to participate in the game. It is only the composition of the team and the weekly list of the team, which is attached to the winning chance. A further interpretation of the gambling definition in the Interstate Treaty would also contradict the sense and purpose of the law and the constitutional principle of the proportionality. The far-reaching restrictions in the Interstate Treaty on gambling aims at ensuring youth protection, preventing fraud as well as gambling addiction, also channelling the population’s gambling desire to state controlled gaming operations. These are only constitutionally justified; so far their actions are suitably, necessarily and relatively strictly targeted towards these dangers. That is not the case with the games, whose danger is necessarily small and can be controlled by fewer drastic regulations. Thus it is situated after that - undisputed between the parties - statements of the Administrative Court with the Super-Manager game. In particular, the game rules did not permit the participants to at run time spend more money in expectations to compensate or adjust the suffered failures. The remaining risks can be met within the framework of the commercial law (Gewerberecht).

11 September 2013

Deutsche Telekom to enter the sports betting industry?

By Martin Arendts, Attorney-at-Law

Last Friday, the German Federal Cartel Office (Bundeskartellamt) reported the notification of an indirect acquisition of control project by Deutsche Telekom AG (file no. B6-72/13). With this notification, received on 4 September 2013 by the Federal Cartel Office, the telecommunications giant asks the authority to approve the takeover of Deutsche Sportwetten GmbH (DSW), Hannover.
DSW is a just recently founded corporation, as the articles of association were signed on 17 August 2012. It is registered at the District Court Hannover as a German limited company (registration no. HRB 208893). The establishment of this company was immediately after the public tender to grant up to 20 sports betting licenses, provided for by an “experimentation clause” in the new Interstate Treaty on Gambling 2012, was published in the Official Journal of the EU on 8 August 2012. Currently the sole shareholder of DSW, with a nominal capital of only EUR 25.000,- and two Austrian directors from Vienna, respectively Salzburg, is Österreichische Sportwetten G.m.b.H., Vienna. Österreichische Sportwetten is a subsidiary of Casinos Austria AG, which operates casinos in Austria and offers sports betting via Österreichische Sportwetten under the brand “Tipp3”.

Obviously, Deutsche Telekom AG sees chances that the up to 20 sports betting licenses will be granted soon, despite the heavily criticized licensing procedure being well behind schedule (which will eventually end up in a year-long legal battle). DSW is apparently still in the race for the 20 licenses. With the acquisition of DSW, Deutsche Telekom could ultimately secure a license, after the term of application ran out last September. Last Friday a spokesman for Deutsche Telekom conceded: “It is not yet certain, if an operative business will come out of the project.”

According to the news agency APA, the Austrians have spoken with several major German companies, with which they wanted to work together in case of a successful bid for a German license.
It is interesting to see that non-gambling companies (with huge financial resources) are trying to enter the sports betting market and are not satisfied with the role of a minority shareholder. This might change the rules of the game in the (not so) long run.

02 July 2013

AGM of Tipp24 SE votes in favour of UK relocation

Key step in strategic move towards international business

(Hamburg, 28 June 2013) At the Annual General Meeting of Tipp24 SE, a large majority of shareholders voted in favour of relocating the company's registered office to the UK. 97.4 percent of represented share capital followed the corresponding recommendation of the company's Executive Board and Supervisory Board. The shareholders thus laid the foundation for the company's further international expansion, which will be driven from its future base in London. Tipp24 SE is the first listed German company to relocate its registered office to another European country.

Dr Hans Cornehl, CEO of Tipp24 SE, stated:

'The vote in favour of moving our head office to the UK paves the way for the accelerated international expansion of Tipp24 SE. It creates ideal conditions for the further development of our company going forward. The UK is recognised as being the European centre of the online gaming industry and offers an excellent environment for future profitable growth. We will now swiftly initiate the next formal steps for our relocation in order to complete the process in the second half of the current year. I would like to thank our shareholders, who once again supported a landmark decision for Tipp24 SE with an overwhelming majority.'

The relocation of the company's registered office is a logical consequence of the strategic realignment of Tipp24 SE. It will focus in future on its international business, mainly in the UK and North America, which it plans to develop from its future base in the UK. The company intends to maintain its legal form as an SE after the relocation and also retain its listing in the Prime Standard segment of the Frankfurt Stock Exchange. The company's Executive Board and Supervisory Board will maintain their functions, whereby the Executive Board will work primarily in the UK in future. The current holding company functions in Germany are to be gradually relocated to the UK over a longer period and in a socially compatible manner.

Today's AGM also saw Andreas de Maizière, Oliver Jaster and Jens Schumann confirmed as members of the Supervisory Board. Thorsten Hehl, Bernd Schiphorst and Peter Steiner were elected as new members of the Supervisory Board. All other resolutions on the agenda were also accepted by the shareholders with large majorities. Approximately 54.3 percent of voting capital was represented at the AGM

About Tipp24 SE: Tipp24 SE was founded in September 1999 and holds equity interests in a number of companies in Spain and the UK, which enable participation in lottery-based games via the Internet, especially via the websites www.ventura24.es, www.mylotto24.co.uk, www.tipp24.com and www.geosweep.com. From its foundation to the end of 2008, Tipp24 SE brokered tickets worth over 1.5 billion euros to the state lottery companies - in the latter years over 330 million euros annually. Following its successful IPO in 2005 (Prime Standard), the company was admitted to the SDAX index in June 2009. In July 2012, German online brokerage activities were successfully spun off from Tipp24 SE in the form of the company Lotto24 AG, which is listed separately on the stock exchange. With the acquisition of a stake in the UK-based company Geonomics Global Games Limited in December 2012, Tipp24 SE laid the foundation for the expansion of its international business.

Press contact:
Tipp24 SE
Andrea Fratini, Head of Media and Public Relations
Tel.: +49 (0)40 32 55 33 660
E-Mail: presse@tipp24.de
Internet: www.tipp24-se.de/press/

01 July 2013

One year of the amended Interstate Treaty on Gambling in Germany: restrictive market opening looks set to fail

Press release of EGBA
Brussels, 28 June 2013 - One year after the commencement of the First Amendment to the Interstate Treaty on Gambling (1st GlüÄndStV), the restricted market opening for sports betting in Germany is still to get off the ground. This confirms the concerns of Europe's leading gaming companies and the European Commission concerning the German regulation and its implementation.
The amended Interstate Treaty on Gambling entered into force on 1st July 2012 and heralded the reformation of gambling in Germany after the European Court of Justice (ECJ) declared that the German regulation infringed upon European law in 2010. According to the Treaty, the market is only open to 20 sports betting providers for a period of seven years. In doing this, the Treaty aims to channel the black market and combat gambling addiction.
The European Commission was prompt to express concerns about the German regulation, particularly in relation to the problematic limitation of providers and the Treaty's lack of consideration of online poker and casino games. The Commission fails to see how a restriction of the overall number of licenses is a suitable means to achieve the goals set (see notification of Interstate Treaty on Gambling 2011/0188/D). In combination with the narrow boundaries imposed on the organisation of sports betting, the limitation makes it extremely difficult to provide an attractive (online) sports betting offer in Germany.
These concerns of the Commission now seem to be confirmed: One year after coming into effect, the new regulation on sports betting has proved unsuccessful, and one year of the seven-year open period has already elapsed without any sports betting providers being admitted to the market. The procedure selected by federal state leaders to issue the 20 sports betting licenses does not meet European requirements: it has failed to provide candidates with clear, transparent and reliable information concerning the tender criteria to be used. This has led to numerous lawsuits by providers and several postponements of licence awards by the administration. It remains unclear when exactly the licenses will be granted, and even the authorities expect up to 80 proceedings, involving both unsuccessful applicants and licence holders. In addition, online poker and casino providers are not part of the limited market opening, despite the fact that this segment constitutes a much larger market portion than sports betting.
Maarten Haijer, General Secretary of the EGBA, states, 'Numerous questions concerning sports betting remain unanswered in Germany, despite the fact that the tender procedure has been running for months. Even if the allocation is successful, it will result in a market regulation that will bring disadvantages for everyone involved - not only the providers and authorities but also amateur and professional sports and the advertising sector, which are closely dependent on betting providers.'
The sluggish licence allocation shows just how problematic the chosen regulatory model is. The EGBA believes that the Commission's concerns can only be resolved if the regulatory approach is completely revised or the tender procedure is started again. In any case, the German regulation stands as a lone model in Europe. In other European countries providers are admitted to the market based on a comprehensive catalogue of criteria. Moreover, the betting licence procedure practised in Schleswig-Holstein since 2011 presents an example of successful regulation within Germany itself: there, licences are only granted to providers who can prove their fulfilment of high reliability, quality, profitability and safety criteria. These procedures have proven their success in practice and have not led to any of the delays or legal battles witnessed in Germany.
Maarten Haijer concludes: 'Germany is a prime example of how a political compromise that no one wishes to disavow can create a very poor procedure. For our members who are active throughout Europe, the German approach is simply incomprehensible against the background of successful European regulations and the continued existence of concerns in terms of European law.'
In light of the procedural problems in the granting of licences, the achievement of the political aims of channelling the black market and combating gambling addiction has been pushed into the background. The European Commission is planning an intensive evaluation of the German regulation as part of an inspection of the Interstate Gambling Treaty by 2014. The procedure used to issue licences is expected to be the subject of the evaluation.
German customers have the right to receive an efficiently regulated offer that meets their demand for digital entertainment and avoid consumer need to online gamble in Asia. To support fact based policy making and make available its experience to national policy makers and other stakeholders, EGBA will very soon establish a Berlin Branch to represent the online industry.

About EGBA
The European Gaming and Betting Association (EGBA) is the industry association for the online gambling and betting providers Bet-at-home.com, bwin.party, Betclic, Digibet, Expekt and Unibet, which are registered, licensed and regulated in the European Union. The EGBA advocates a consistent online betting and gambling market regulated by fair competition in accordance with EU law. The EGBA firmly believes that such a regulated market should be based on upholding public order and safeguarding consumer interests whilst corresponding to the cross-border character of the online market. www.egba.eu

24 June 2013

State operators do not fulfill command of separation

by Martin Arendts

Section 21 par. 3 of the Interstate Treaty commands that the operation and intermediation of sports bets are strictly separated (“Trennungsgebot”). No “organisational, legal, economic or staff connection” is allowed.

Several of the 16 state operators (one for each German state) do not fulfill this requirement. At least four operators are partly owned by sports associations. The most blatant example is Lotto Rheinland-Pfalz, the operator for the State of Rhineland Palatinate. This operator is partly (49 %) owned by three sports associations. The biggest member of one of these associations, Sportbund Pfalz, is 1. FC Kaiserlautern. This football club is playing in the Bundesliga (at the moment, in the second league). Bets are offered on matches with 1. FC Kaiserlautern.

The proposed new sports betting operator of the state operators, ODS Oddset Deutschland Sportwetten GmbH, is partly owned by Lotto Rheinland-Pfalz. So, from my point of view, ODS GmbH does not fulfill the requirement of separation and should have been excluded from the licensing procedure for this reason.

Licensing procedure in Germany: Transparency criteria of the CJEU not met

by Martin Arendts

In its decision of 30 April 2013, file no. 5 L 90/13.WI, the Administrative Court of Wiesbaden granted one applicant (BetVictor) to the up to 20 sports betting licenses to be issued under the regime of the new Interstate Treaty on Gambling 2012 interim protection. The court mentioned that the whole procedure was not transparent. If the Hessian Administrative Court of Appeal (Hessischer Verwaltungsgerichtshof) follows this line of argument, it even might be possible that the whole licensing procedure would have to start again. The CJEU expressly stated that interested operators must have a fair chance to evaluate their chances at the beginning of the procedure. The Administrative Court held that there was no such possibility in the current procedure: “... the requirements with regard to a transparent procedure are not fulfilled (…)” (page 6 of the decision)

05 June 2013

Germany: Cancellation of the trademark 'TOTO'

Originally published by World Online Gambling Law Report

In the decision of 23 March 2013, the Federal Patent Court in Munich ordered the cancellation of the trademark 'TOTO'1. This trademark along with the gambling related trademark 'LOTTO'2, was held by the member companies of Deutscher Lotto- und Totoblock (a cartel of the German state gambling operators). As a result of this decision, the state operators forfeit the protection of this trademark. Martin Arendts, Attorney-at-Law at Arendts Anwalte, discusses the decision.

In the 1990s, Deutscher Lotto- und Totoblock filed trademark applications for descriptive terms related to sports betting and gambling (e.g. 'TOTO', 'LOTTO' and 'ODDSET'3) and - as a monopoly operator (with no competitors) - was granted trademark protection. The state operators were not required to prove that these descriptive terms had acquired a secondary meaning as a trademark within the affected trade circles ('Verkehrsduchsetzung'). Several state operators used these trademarks to foreclose the German market to operators from other EU Member States, for example WestLotto4 argued that the term 'supertoto' infringed the trademark 'TOTO' and claimed damages from several bookmakers, offering their services online over a website in German.

In January 2005, the law firm ARENDTS ANWÄLTE, on behalf of a Maltese gambling operator, applied for a cancellation of the trademark 'TOTO' (filed with the trademark office by Deutscher Lotto- und Totoblock in 1996 and registered in 1997). In the infringement lawsuit, WestLotto had argued that 'TOTO' (a commonly used abbreviation of totaliser) was not descriptive, but an imaginary term, alluding to the German word 'Tor' (goal). In the trademark cancellation procedure, Deutscher Lotto- und Totoblock alleged that 'TOTO' had acquired a secondary meaning and had been extensively marketed since the 1950s. In 2009, on request of the German Patent and Trademark Office, the trademark owners presented a survey of an opinion research institute. According to this survey, 'TOTO' had acquired a secondary meaning with regard to the whole population 25.8% and with regard to persons not fundamentally disapproving of sports betting 29.7% (well below the 50%, usually required for descriptive terms as a minimum).

Nevertheless, the German Patent and Trademark Office declined to cancel the trademark5. It argued that although 'TOTO' was merely descriptive, it had to been proven that at the date of registration (August 1997) 'TOTO' had not acquired a secondary meaning. As the survey was conducted eleven years after the registration, this was not to be regarded as clear evidence. In the meantime, ODDSET had displaced TOTO as the common form of betting, according to the trademark office.

The Federal Patent Court overturned this decision. It pointed to the fact that 'TOTO' was an abbreviation of football toto and was merely describing a specific form of bet. Neither at the date of registration nor at the date of the court decision, had 'TOTO' acquired a secondary meaning. Such a secondary meaning could not be inferred from the fact that the trademark owners were monopoly operators for decades. As 'TOTO' was purely descriptive, a secondary meaning would have to be existent not only for a minimum of 50% of the affected trade circles, but more than 50%. Here, the affected circles were persons not fundamentally disapproving of sports betting. The negative result of the survey could not be offset by the millions spent on marketing by Deutscher Lotto- und Totoblock and the duration of its use.

In trademark cancellation procedures, the applicant has to bear the objective burden of proof. This means, if the question of whether a term has acquired a secondary meaning cannot be resolved, the trademark will not be cancelled. However, the cancellation of a trademark does not require doubtlessness, as the Federal Patent Court points out. Here, an overall appraisal of the survey and of all facts presented by the parties convinced the court that 'TOTO' had not acquired a secondary meaning at the date of filing and at the date of registration. The fact that 'TOTO' had acquired a secondary meaning with regard to less than 30% of the affected circles in 2009 infers that it had not acquired a distinctive character before. In addition to this between 1996 and 2009 there was not such a dramatic change of market conditions, that this could be seriously considered.

Martin Arendts M.B.L.-HSG Attorney-at-Law

1. Bundespatentgericht, decision of 23 March 2013, file no. 33 W (pat) 35/10. 'TOTO' was registered by the German Patent and Trademark Office as trademark 396 38 297.
2. Cancelled in 2006 by the Federal Court of Justice: Bundesgerichtshof, decision of 19 January 2006, file no. I ZB 11/04.
3. The Federal Patent Court declined to cancel this trademark, arguing that an absolute ground for refusal was not proven for the date of the registration. Bundespatentgericht, decision of 10 February 2009, file no. 27 W (pat) 131/08.
4. Westdeutsche Lotterie GmbH & Co. OHG, the state-owned operator of North-Rhine Westphalia.
5. Deutsches Patent- und Markenamt, decision of 2 February 2010, file no. 396 38 297.5/28 - S 11/05 Lösch.