Reading Placanica: The Consolidation of Restricted Markets

8 March 2007

Although the Placanica case is an Italian referral (language of procedure: Italian), while the court's working language is French, this does not provide an excuse to the lawyers of the remote gambling operators for commenting on the judgment without having read it. Judgments of the European Court of Justice are indeed translated in all EU languages, and most of the translation were online available on the ECJ Web site ( the same morning.

So great was my surprise to read comments about the end of monopolies and the fact that on-line operators could now provide services on cross border basis. The stock markets reacted ASAP, and the shares of several remote gambling operators went up. As one of my colleagues asked: Is there another Placanica judgement? What will happen when they all read the judgment?

Did the ECJ create any shockwaves as some of these lawyers said? Experts in EU law are indeed smiling by such comment. The ECJ is conservative and stable and does rarely change its jurisprudence. In general the ECJ makes little steps to enhance the interpretation of EU law and its own case law. The prudent question is therefore whether the ECJ took a little step and in what direction?

The best way to find out is simply by reading the judgment. From §40 onwards, the court addresses the issues referred by the Italian courts. The court starts by recalling the most important elements of its Gambelli decision. Restrictions imposed upon intermediaries as at stake constitute a restriction under the Treaty.

The court continues by explicitly recalling its standing jurisprudence established by the Schindler judgement and further detailed in Läärä, Zenatti and Gambelli, namely that "a certain number of reasons of overriding general interest have been recognised by the case law, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander on gaming, as well as the general need to preserve public order"( §46).

In § 47, the court reaffirms that national authorities have a margin of discretion to determine what is required in order to ensure consumer protection and the preservation of public order. Further, the court reminds us that such restrictions must satisfy the conditions laid down by the case law.

Interesting are §§50 to 58, where the court analyzes the Italian situation and the licensing requirement. The court considers in line with Gambelli that Italy cannot invoke the first reason (reducing gambling opportunities) (§§53-54); however, the court explicitly backs the Italian Supreme Court and admits that Italy can legally invoke the second type of objective (that of preventing the use of betting and gaming activities for criminal or fraudulent purposes by channelling them into controllable systems). The court recognizes that for such purpose, Italy is entitled to have a policy of controlled expansion.

The court (§55) also agrees for the first time with the argument developed by the Belgian and French governments (although the EU Commission did at the oral hearing vigorously argue against it) "that in order to achieve that objective, authorised operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may necessitate, according to the court, the offer of an extensive range of games, advertising at a certain scale and the use of new distribution techniques."

Here is indeed the innovative element, the step forward in the jurisprudence into the direction of maintaining restrictions. The argument based upon a selective reading of Gambelli and used by several remote gambling operators that monopolistic environments can not be maintained when the concerned operator does expand, advertise, etc. . . . is hereby totally dismissed.

The court considers, therefore, that a (national) licensing system may constitute "an efficient mechanism" enabling operators active in betting and gaming sector to be controlled. The court does, however, refer the question whether the total number of licenses back to the national court who needs to find out whether the limitation of licenses contributes to the objectives invoked.

The court continues by addressing in §§59 to 72 the questions of the tendering procedure used by Italy to allocate the sport betting licenses in the past. The issue remains important for Stanley Betting from the perspective of the penal sanctions, but is no longer relevant since Italy did in the meantime replace its licenses allocation system whereby many non Italian operators did get licenses. Again the court starts by recalling the Gambelli judgement insisting upon the fact that access to licenses must be available for all EU based companies on a non-discriminatory basis (§61). The court adds that "the blanket exclusion of companies quoted on the stock markets" goes beyond what is necessary to achieve the objective pursued by Italy. There are indeed alternatives to control such companies (§62). As regards the consequences flowing from the unlawful nature of the exclusion of a certain number of operators from the tender procedures, the national legal order must lay down detailed procedural rules to ensure the protection of the rights of those operators derived by direct effect of Community law.

The court admits that operators active in the betting and gaming sector are subject to an ex-ante control as well as to ongoing supervision as this does clearly contribute to the objective of preventing the involvement of those operators in criminal and fraudulent activities. This appears, according to the court, entirely commensurate with that objective (§65).

The court makes it further clear that a member state may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the state in infringement of Community law as pointed out before (§§69 -70)

This does not mean that in general member states can no longer apply penal sanctions to illegal operators. Only in the specific circumstances that a company is excluded without a valid reason under EU law from participation in a license tender process or any other available license allocation process, it is not acceptable to apply penal sanctions to such company for not having obtained such license.

This is indeed a fair outcome, but does not change the landscape of betting in gambling in the EU. On the contrary, it consolidates and enhances the practice of restricted markets.

Mr. Vlaemminck is a senior partner of the Belgian law firm Vlaemminck & Partners and was visiting professor of European law at Ghent University. He is currently a member of the International Masters of Gaming Law.