E.C. FLEXING ITS MUSCLES ON CROSS BORDER ONLINE GAMBLING

(498) (22-September-2006)

More countries could be added to list of infringers investigated by European Commission

Several European states have taken action against online gaming companies in a bid to protect their own gambling operations, but the tactic looks likely to accelerate the demise of their own monopolies, says a report in Hemscott this week.

The report quotes a European Commission spokesman who said the body is prepared to target more EU member states deemed to be stifling competition in the sports gambling sector.

"'We will perhaps add to the number of countries involved in infringement procedures', said the EU executive arm's internal markets spokesman Oliver Drewes during a European Commission meeting on the issue. EU Internal Market Commissioner Charlie McCreevy wants to ensure that laws in member states banning gambling services are 'necessary and not discriminatory'.

The arrest of two Bwin executives from Austria on alleged gambling violations whilst they were visiting France is seen as something that could accelerate the possibility of EC legal action in a European market that takes more than Euro 70 billion ($89 billion) from European gamblers every year, Reuters reported this week.

Detentions of international online gambling businessmen by US federal and state authorities have resulted in a closer focus by online gambling companies on alternative markets, with Europe being the prime target.

"Things are coming to a head," the report quotes Simon Holliday at gaming consultants GBGC. "The industry is currently in a legal grey area, but we think this will accelerate the speed it opens up."

Betfair Managing Director Mark Davies said it was wrong to equate the situation in Europe with that in the U.S. "The two are completely different," he said. "In America it is clearly illegal to take sports bets over the Internet, but in Europe it's clearly legal."

Last week, European Union Internal Market Commissioner McCreevy said eight EU countries might be added to a list of seven already facing legal action for refusing to open their betting markets. France is said to be among them.

"France could have shot themselves in the foot by getting this aggressive, as it could bring the whole process forward," said Holliday. "We thought it would take five, six or seven years to sort itself out, but it now looks like two to three years."

Although European Union law allows cross-border trade by gambling companies under the Treaty of Rome , many individual states prevent it, claiming they are protecting the public from gambling addiction. The counter argument to that is the large monopolistic revenues these governments themselves make from gambling, sometimes offered to citizens of other countries too in vehicles like lotteries.

European Lotteries , which represents 74 organisations, said gambling was a unique activity, and states should be allowed to monopolise it to protect consumers and regulate crime. But critics say these same states promote equally addictive national lotteries, and accuse them of hypocrisy.

Three of the EC investigations are at the behest of British gaming group Ladbrokes , with complaints against Sweden, Finland and the Netherlands, said John O'Reilly , managing director of Ladbrokes's Internet division.

"I think what we've seen in recent weeks is a bit of a backlash by European member states who want to treat betting as a national issue," he said. After seven or eight years of trying to get national legal disputes heard at a European level, O'Reilly said he welcomed the prospect of clarity.

Earlier this year Bwin launched an EC complaint against France, claiming that its gambling monopoly breaches Article 49 of the European Community Treaty which enshrines the freedom to provide cross-border services. The complaint asks the Commission to force France to comply with EC law on the freedom to provide services.
 
Evelyn Heffermehl at law firm Ulys in Brussels said France's action against Bwin did not signal Europe was becoming a riskier place for online gaming groups. "They can be seen rather as a sign that the monopolies in general, and in France in this specific case, are concerned that they might not 'survive' for long," said Heffermehl.