Germany: What a Week

20 June 2007

In Germany there is a continuous flow of gambling-related information. No day passes without new developments--legal or otherwise.

Last week kicked off with a decision by the Higher Regional Court of Düsseldorf, which rejected the lottery companies' appeal against the Federal Competition Authority's (FCA) August 2006 ruling.

In its ruling, published June 11, the court declared some of the practices resulting from the formation of the German lottery and pools organization to be anti-competitive and incompatible with German and European competition law.

In the meantime, in two separate letters, the European Commission (EC) had already informed the German states directly that the planned State Lottery Treaty violated fundamental market freedoms upheld by the European Union.

The Düsseldorf ruling confirmed the current legal position held by the EC, where the regionalism principle--the formal restriction of lotteries to their relevant state--violates European anti-trust laws.

"[The regionalism principle] was meant to be a central element of the new gaming State Treaty," said Jens Schumann, CEO, Tipp24 AG. "Now that the Higher Regional Court has confirmed the Federal Cartel Office's decision, this is no longer an option. We see this as a clear signal for the future of the German lottery market."

The competition-law dispute had been triggered by the lottery companies' refusal to accept lottery tickets sold over the counter by Fluxx subsidiary Jaxx at outlets like supermarkets and filling stations, argued Rainer Jacken, management board member and spokesman, Fluxx AG.

And according to the FCA, he said, the boycott is unlawful and must therefore cease.

“The Higher Regional Court of Düsseldorf has now confirmed as much," Jacken added. "The [FCA] had also ruled that the regionalism principle and parts of the so-called Regionalization State Treaty may no longer be applied."

Jacken said that the 16 state lottery companies have since been in competition with each other and are no longer permitted to reach pacts--for instance, on commission payments to commercial gaming agents.

Taxes and lottery funds, too, must remain in the federal state in which the tickets were submitted by gaming agents; now, no redistribution may take place.

Strangely enough, there was no reaction from both the Lotto and Toto Block and European Lotteries on the Düsseldorf decision.

On Wednesday news broke that, in the German Parliament, the sports committee had joined with a broad majority in support of the sports-betting monopoly.

The same day, the German football federation (DFB) and the German football league (DFL) criticized the German government over its intention to extend the national monopoly to 2011. Representatives from both organizations have argued--so far, without success--to reorganize sports betting in Germany.

Die Welt also reported Wednesday that WestLotto, one of the 16 state monopolies, saw its market share reduced by 2 percent to 1.77 billion euro in 2006. While the company's lotto business remained strong, turnover from its Oddset sports-betting business fell 20 percent to 84.2 million euro.

On Thursday the state of Rhine-Palatinate became the majority partner in Lotto Rhineland-Pflasz GmbH (LRP), which, until then, had been privately held. The existing shareholders--the sports associations Sportbund Pfalz, Sportbund Rheinland and Sportbund Rheinhessen--will, altogether, retain 49 percent.

After announcing plans last week to bid for LRP, Fluxx management was taken off-guard by the news.

"The information seems to be correct," Stefan Zenker, Head of Investor Relations, Fluxx, told IGN. "We were also very surprised to find this information in the newspaper. We immediately forwarded it to the Cartel Office--this cannot be the way things work."

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.