EC, Netherlands Clash on Gambling Policy

12 December 2005

European Commission Vice President Gunter Verheugen recently sent a letter to the Dutch government concerning its plan to award Holland Casino a three-year license to exclusively operate games of chance over the Internet. Verheugen's letter warns the Netherlands against proceeding with its proposed monopoly scheme for online games of chance, advising that such a policy would not be compatible European Laws that establish the freedom to provide services in other member states.

The commission notes that Article 49 of the EC Treaty, which requires the elimination of restrictions on freedom to provide services, has been found by the European Court of Justice to apply at least to sports betting. Verheuhen says the commission, therefore, believes that the same rules apply to games of chance.

The commission recognizes that certain restrictions to the freedom to provide services can be "justified by imperative reasons relating to the public interest," but it notes that "such restrictions must be suitable for achieving those objectives, inasmuch as they must serve to limit betting activities in a consistent and systematic manner."

The commission does not believe that the Netherlands' proposed monopoly for games of chance would accomplish these goals, however. It instead states, "It appears . . . that the Dutch government is mainly concerned by the lost revenues (estimated by the government to be 144 million euro in 2004 which goes to (illegal and) foreign service providers)." That the state-run gambling operators contribute to financing benevolent activities is not sufficient justification for limiting foreign gambling providers.

The Dutch government had also indicated that its proposed policy seeks to prevent gambling addiction, protect consumers and counter illegal acts by providing a legal and reliable alternative to non-regulated gaming sites, but the commission points out that all 25 member states regulate gambling services with the very same aim of protecting the public interest.

The proposed policy would allow only licensed gambling service providers to promote their services in the Netherlands, but again the commission notes that the result would be contrary to European law. Verheugen's letter reads, "It is important to note that the Court of Justice has held that a measure such as the prohibition on advertising even if it is non-discriminatory, has a particular effect on the cross-border supply of advertising space in economic sectors which have a cross-border dimension, and thereby constitutes a restriction on the freedom to provide services within the meaning of Article 49 of the EC Treaty."

Verheugen closes by stating "The commission would like to invite the Dutch government to consider measures which are less restrictive to intra-community trade."

The commission is not the only body to take issue with the Dutch government's proposed monopoly for interactive games of chance. At home, both the private slot machine industry and the Council of State have vocally opposed the policy. The slot machine operators are angry that the games of chance legislation would create a monopoly under Casino Holland because they believe the Dutch Ministry of Justice promised that they would be able to operate games of chance over the Internet. The slot machine companies argue that Holland Casino would receive an unfair competitive advantage.

Meanwhile, the Dutch Council of State is concerned that limiting a license to a single operator should be reconsidered. The council does not agree with the government's argument that a single reputable state operator is best suited to hold the license because of its ability to prevent fraud and protect players. The council believes that other operators, both foreign and domestic, are equally capable of meeting the goals of fraud prevention and player protection.

Click here to view EC Vice President Gunter Verheugen's letter to the Dutch government.

Bradley Vallerius

Articles by Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials. Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

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