Online gaming and betting: proposed new law in Germany criticised by the European Commission

19.07.2011, The European Commission today issued a ‘detailed opinion’ against the draft German State Gambling Treaty. This detailed opinion confirms that the Commission believes the proposed German State Treaty is in breach of EU law. If the draft is not substantially changed after this warning, Germany risks formal infringement proceedings, referral to the European Court of Justice (CJEU) and ultimately financial penalties.

The Commission has identified a number of provisions in the German draft State Gambling Treaty which are in conflict with the EU Treaty. While the draft law appears to open the market for online sports betting operators from all EU member states, it in practice reserves the market for the incumbent German monopolies. EGBA considers that several requirements in the draft State Treaty are in breach of EU law, including:

The total number of sports betting licences available is limited without justification to seven (7), whereas the state monopoly for sports betting is exempt from the requirement to apply for a licence; An exorbitant tax of 16.67 percent of the amount wagered is imposed on all operators. This will make online wagering uneconomic, excluding online operators and is clearly intended to protect the current state monopoly on offline bets from online competition; The licensing system ‘bundles’ offline and online sports betting together and applies a commercial viability test to would-be operators, thus putting online-only operators at an automatic disadvantage in applying for a licence; While privately owned land-based premises are limited to 350 per license, no such restriction applies to outlets employed by the state-owned operators Certain casino games may be offered online but only by specified casino game operators that are already operating land-based casino games in Germany; An illegal expansion of marketing is encouraged for the state monopoly, but marketing restrictions are placed on other operators; The license fee will favour those applicants with land-based operations that attract higher margins and appears to be unrelated to the costs incurred to deliver and then maintain the license.

Sigrid Ligné, Secretary General of EGBA said today: ‘The draft German treaty has many provisions which are in conflict with EU law. But worse: it is clear that, taken together and especially including a prohibitive tax on wagers from which the incumbent state monopoly is exempt, these provisions effectively slam the door in the face of EU operators from other member states and will in fact extend the monopoly for offline to online games. The Commission must act quickly to stop this test case for its stated aim of a common EU framework for this sector ’.

The proposed German State Gambling Treaty comes after a number of preliminary rulings by the EU Court that the current State Treaty is incompatible with EU law (see inter alia Carmen Media, C- 46/08). The current law expires at the end of 2011 and the intention was to have the new treaty to come into force in January 2012.

In Germany the regions, or Länder, are competent for lotteries and sports betting while casinos and slot machines are the competence of the federal state. There is however no agreement between the Länder on this draft treaty on sports betting. Schleswig Holstein has already notified an alternative gambling law that will foster a commercially viable sports betting market for EU-licensed operators, thereby removing the attractions of the black market for consumers. The Commission raised no objections to such law and EGBA remains fully supportive of the efforts to enact it.

According to a study by Gold Media, the gross online gaming and betting revenue in Germany was €1 billion in 2009, with a 30 percent annual growth rate (1). Online gaming is a large and vibrant segment of the digital economy in Germany. Whilst material, failing to comply with EU law is only one of the major issues with the proposed State Gambling Treaty. The draft Treaty, if enacted as proposed will simply drive consumers into the hands of black market operators that will not deliver the same levels of consumer protection, that will reduce visibility of the online gaming and betting market in Germany and will forego the opportunity to raise tax revenue.

(1) http://www.goldmedia.com/en/press/newsroom/ study-betting-and-gambling-in-germany.html

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For further information or comment please contact: Sigrid Ligné: +32 2 554 08 90 Sigrid.Ligne@egba.eu

About EGBA

The EGBA is an association of leading European gaming and betting operators Bet-at- home.com, BetClic, bwinparty, Digibet, Expekt, Interwetten, and Unibet. EGBA is a Brussels-based non-profit association. It promotes the right of private gaming and betting operators that are regulated and licensed in one Member State to a fair market access throughout the European Union. Online gaming and betting is a fast growing market, but will remain for the next decades a limited part of the overall European gaming market in which the traditional land based offer is expected to grow from € 79.6 Billion GGR in 2009 to € 83 Billion GGR in 2012, thus keeping the lion’s share with 87% of the market. Source: H2 Gambling Capital, April 2010

The Notification Procedure

Under Directive 98/34/EC, Member States must notify to the European Commission and other Member States draft regulations regarding products and Information Society services such as online gaming and betting, before adopting them. This procedure is aimed at preventing Member States from creating new barriers to the internal market freedoms by giving the opportunity to the Commission and Member States to evaluate the content of a draft law before it is adopted.

The notification of a text to the Commission opens a three month standstill period during which the draft text must not be adopted. This period allows the Commission and Member States to ascertain whether the draft text presents any unjustified barriers to the internal market. The Commission and/or Member States may then issue: a detailed opinion, if they consider that the draft text would, if implemented, create barriers to trade, services or establishment within the EU; comments, if they consider that the text raises issues of interpretation or requires further details; or no response, if they consider that the text is compatible with EU law. A detailed opinion attempts to prevent Members States from adopting a text, which contains barriers to the internal market, or to urge them to remove the restrictive provisions, thereby avoiding unnecessary legislative work and future EU infringement proceedings.

Once a detailed opinion had been issued, the standstill period, during which the draft text must not be adopted, is extended by one month. If, after this time, the draft text is adopted without modification, the Commission can immediately commence an infringement procedure against the Member State’s newly adopted legislation.

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