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Private Betting Operator Granted German State Injunction

August 27, 2008 2008

by James Kilsby, published on Gambling Compliance Ltd, August 26th, 2008

The High Administrative Court of Rhineland-Palatinate has granted a temporary injunction to a private betting shop operator due to issues relating to the ownership of the state’s sports betting monopoly, while also calling into question the monopoly’s compliance with advertising provisions of the Interstate Gambling Treaty.

The High Administrative Court said last week that sports betting operator Happybet should be allowed to offer over-the-counter betting in Rhineland-Palatinate as the German state’s monopoly betting operator continues to be owned by three private sports federations rather than by the state itself.

The Interstate Gambling Treaty that came into force in January preserved the 16 German states’ monopolies over sports betting activities, “assuming that the risks associated with addiction can be controlled more effectively with the help of a state monopoly which is geared to combating addiction to games of chance and problematic gambling behaviour than by checking private organisers.”

But doubts have already been expressed over whether a monopoly could be upheld in Rhineland-Palatinate due to the fact that the betting monopoly is technically privately-owned, and particularly after the Federal Competition Authority, Germany’s anti-cartel watchdog, blocked a planned takeover of Rhineland-Palatinate GmbH by the state government last year.

The High Administrative Court’s decision applies only to operator Happybet, said Wulf Hambach, gaming law specialist at Munich-based firm Hambach & Hambach, but it will effectively open up the state’s entire sports betting market to private competition should the Court apply the same reasoning in more than 50 similar pending cases.

“Private betting shop operators in the whole state will see the opportunity from this and now look to open up their businesses,” Hambach said.

Rhineland-Palatinate authorities are faced with somewhat of a Catch 22 situation, he added, as the Federal Competition Authority (Bundeskartellamt) has made it clear the government will not be able to take short cuts to bring the public lottery company under state control.

“If they look to take the lottery company into state hands they risk breaking competition law; if not, then they are in violation of the Interstate Gambling Treaty,” said Hambach of Rhineland-Palatinate’s predicament. “But there is no way Rhineland-Palatinate can exclude other private operators if its betting monopoly is itself privately-operated.”

Other factors were at play in the High Administrative Court’s decision, Hambach added, including Rhineland-Palatinate’s recent record of compliance with the Interstate Treaty’s restrictive advertising measures.

Under the treaty, gambling advertising should be limited to offering just specific information on games, and should not be designed to entice Germans to gamble. But the High Administrative Court suggested that the Rhineland-Palatinate lottery company had violated this provision through recent promotional campaigns for sports betting products, in particular during the Euro 2008 football championships held earlier this summer.

While the state’s lottery ownership conundrum is unique in Germany, Hambach believes the court’s comments on advertising could resonate throughout the country. Already this year, German courts have ruled that lottery companies must further restrict their advertising practices in order to comply with the Interstate Treaty – the same questions could now be asked of sports betting, Hambach believes.

“How can you advertise without enticing? What does ‘informing the customer’ mean and how can you apply this in practice?” he asks rhetorically. “Of course, one state after another will break this provision.”

The Court said that Happybet could continue to operate in Rhineland-Palatinate, but resolved that the company would not be able to promote its services and would equally have to ensure compliance with the Interstate Treaty’s player protection requirements. Accordingly, Happybet must take steps to prevent minors and problem gamblers from betting, as well as issuing warnings about the dangers of gambling addiction.

Wulf Hambach

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