EC Threatens Action against Member States Restricting I-Gaming

14 March 2006

According to the New York Times, the European Commission's internal market commissioner, Charlie McCreevy, is threatening to go after six EU member states for restricting certain forms of remote gambling--and sometimes banning foreign operators altogether--while permitting citizens to wager through national lotteries, effectively doing away with the free market and violating the EC Treaty.

The countries in question--Germany, Finland, Sweden, Italy, Holland and Hungary--have cited social responsibility and protecting the vulnerable from gambling addictions as reasons for the restrictions. But organizations like the Remote Gambling Association (RGA), an advocacy group for the remote gambling industry, and the European Betting Association (EBA), which promotes cross-border gambling businesses in Europe, say that what these countries really want to protect are their own interests.

"The official reason for opposing other forms of gambling is out of social concern," Torbjorn Ihre, head of public affairs at the EBA told the Times, "but the real reason they want to restrict other gambling outlets is because they don't want to lose the contributions to state coffers they get from their national lotteries."

The Swedish lottery, for example, generates revenue of about €2.7 billion a year, Ihre explained, and one fifth of that goes back into the state budget.

But Switzerland-based European State Lottery and Toto Association, which represents lottery operators in 40 European countries, argues that lottery operators and governments are working together to control gambling.

The lotteries group says that limiting betting to national lotteries can control money laundering and the abuse of gambling by minors.

"If it were left to private companies in a free market, the margins would be small and the only way to increase profits would be to incite people to gamble more frequently," a spokesman for the group explained.

Italy recently passed a law requiring Internet service providers to block gambling Web sites and imposing harsh penalties for ISPs that fail to comply. The move is being fought by the RGA and the EBA, which are helping several U.K. gambling companies--including Betfair, Ladbrokes, William Hill, Coral Eurobet and SkyBet--prepare a suit against the Italian government.

"The Italian ban, and the action taken, appears to breach so many laws, especially at the European level, that we’re almost spoilt for choice," said Clive Hawkswood, CEO of the RGA. "Of course, only those operators who are licensed in other EU states can really call on the protection of the European Commission and EU law, but plenty of them in that category have had their sites blacklisted by the AAMS. It will, therefore, call for a dual approach through the Italian national courts and the European Commission."

Should the EC follow through with its threats against the six offenders, it could serve to strengthen the RGA's case against Italy.

"The commission's concerns would go right to the heart of our case in Italy, and the timing couldn't be better," Hawkswood said. "It would put pressure on the Italian government, and judges in Italy could hardly fail to take note of the commission's enquiries."

He added that while McCreevy hasn't officially decided to bring a case against the member nations, he's probably running out of excuses not to. This isn't the first time this has come up in the EC.

One of the reasons for the cases being tabled in the past, Hawkswood said, is the lack of consensus among commissioners. Some have been adamantly opposed to taking action against the infringements, but the RGA has been trying to persuade those members over the last few months.

"We have a strong case and have tried to present it to them in a balanced and reasonable way," Hawkswood said. "Unfortunately, it is also possible that something with a higher priority could knock the infringements from the agenda and that could put a decision back as well. However, some of the complaints that have led to where we are now are three years-old and the lack of action on them is becoming embarrassing."

The commission is scheduled to meet March 22 with this case on the agenda for discussion. Legal proceedings could mean, at the very least, hefty fines for the six countries. But it could also mean answering to the industry.

"The immediate effect would be to force the member states to justify their rules and regulations," Hawkswood said. "We believe it would be almost impossible for some of them to do that and still satisfy the commission that they were not in breach of their Treaty obligations. Almost inevitably this could be a long drawn out process but it would expose the inequitable situation that exists. The outcome could only be of benefit to the industry whether that means each state revising its laws or the EU introducing some form of harmonizing measure, such as a directive specifically on gambling."