Company for Europe's Scrutinized Seven?

18 September 2006

The European Commission on April 4, 2006 sent official requests for information on national legislation restricting the supply of sports betting services to seven member states: Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden. Now, some five months later, a spokesman for Services Commissioner Charlie McCreevy has informed the press that eight to 10 additional countries could be illegally preventing the free movement of services.

The added countries have not been announced, although according to information from Brussels, French monopolist La Française des Jeux and the Organization of Football Prognostics (OPAP) in Greece are included in the list as well.

The Commission wishes to verify whether the measures in question are compatible with Article 49 of the EC Treaty, which guarantees the free movement of services. The decision relates only to the compatibility of the national measures in question with existing EU law and only for the field of sports betting.

The Commission has not given any implications for the liberalization of the market for gambling services. Its primary concern is that the entitlement of member states to protect their general interests is consistent with EU law; all measures of this nature must be necessary, proportionate and non-discriminatory.

The letters of formal notice are the first step in an infringement procedure under Article 226 of the EC Treaty. The member states in question have two months to respond. The Commission hopes that the answers it receives will lead to an early and satisfactory resolution of the matter.

The central principles governing the internal market for services are set out in the EC Treaty. This guarantees EU companies the freedom to establish themselves in other member states and the freedom to provide services on the territory of EU member state other than the ones in which they are established. The principles of freedom of establishment and free movement of services are two of the so-called "fundamental freedoms" that are central to the EU internal market.

"The Commission has an obligation under the Treaties to ensure that member states' legislation is fully compatible with EU law," McCreevy explains. "This is an important responsibility which it takes seriously. It has received a number of complaints from operators in the area of sports betting, and it feels obliged to respond. It has, therefore, decided to seek information on the matter from the member states concerned. I don't underestimate the sensitivities that exist in many member states on the question of gambling. In sending these letters, we are not seeking to liberalize the market in any way. Rather, we are seeking reassurance that whatever measures member states have in place are fully compatible with existing EU law, or have been brought fully into line. I hope that the replies we receive will offer us sufficient reassurance. In that case, it will be the end of the matter. I will certainly do what I can to facilitate an early resolution, and I encourage all concerned to play their part too."

The Commission's decision to inquire into the compatibility of the measures in question is based on complaints made by a number of service providers and on information gathered by the Commission services. The complaints concern restrictions on the provision of sports betting services, including the requirement for a state concession or license (even where a provider is lawfully licensed in another member state). In some cases, restrictions also extend to the promotion or advertising of the services and to the participation of nationals in the member state in question in the games.

The European Court of Justice stated that all restrictions seeking to protect general interest objectives, such as the protection of consumers, must be "consistent and systematic" in how they seek to limit betting activities. A member state cannot invoke the need to restrict its citizens' access to betting services if at the same time it incites and encourages them to participate in state lotteries, games of chance or betting that benefits the state's finances.

Tjeerd Veenstra, director of the executive board for the Dutch De Lotto and a board member of the European Lotteries (EL), predicts the process will be delayed.

"I have read articles suggesting that in mid October the European Commission will give a decision to forward the cases to the European Court of Justice," Veenstra said. "But that is to begin with technically almost impossible of course. First of all the European Commission has to come to a conclusion on all those different cases if they are indeed or not infringements. That analysis will take time. . . . Furthermore, they talk about eight to 10 new countries, but we should first wait and see if there will be any new countries at all.

"We know as European Lotteries that several betting companies have complained; they are looking for more liberalization. It is of course the responsibility of the European Commission that all those complaints have to be dealt with in a correct procedural way. And I can only warn that by simply starting up an infringement procedure by the European Commission that does not mean that the defendants are already judged. It will take years before the European Court of Justice finally confirms if there is an infringement or not."

The European Betting Association (EBA) has reviewed four of the seven countries' responses--Sweden, Finland, Holland and Germany--and the association's external affairs officer, Torbjörn Ihre, does not believe the states make a good case.

"We can only find that these governments keep on repeating the same hollow arguments as previously," Ihre said. "We rest assured that the Commission will see this and we hope it finds enough reasons to take the next step in the infringement procedure; issuing of reasoned opinions."

He added, "Concerning additional member states that would receive letters of formal notice (LFN), we lack information when that would happen. This is quite interesting indeed, and it pretty much confirms what we have discussed here in Brussels. Besides, we all know that there are additional cases pending, like France, and even in the current cases the Commission sent the LFNs, these covered only the Article 49 angle and left out Article 43.

"We also know that McCreevy is under political pressure not pursuing gambling complaints. We can expect that the council will exercise considerable force in trying to stop what they consider to be an attack on one of their more important sources of income."

Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.