Compatibility of the French draft law with EC law cannot be taken for granted

The European Gaming and Betting Association (EGBA) has stated that compatibility of the French draft law with EC law cannot be taken for granted.

The Association is concerned that a series of key provisions of the draft law envisaged by the French government would conflict with the EC Treaty and the European Court of Justice (ECJ) case law:

The EGBA referred to five points:

1. How can the reform and the opening of online sports betting only be consistent when sports betting in the offline environment will remain under the monopoly of FDJ and PMU?

2. Is “French tradition” an acceptable justification to limit the opening of horse betting only to pool betting – especially when fixed odds betting is offered for all other types of sports and is very much appreciated by French and European consumers?

3. Is a ceiling on the pay-back ratio (percentage of stakes paid back to players) to the same level of those currently applied by historical operators compatible with EU law? Given that such ceiling has no proved or known impact on consumer protection, what other objectives than protection of the French market and the position of historical operators can it possibly serve?

4. Will the French online gaming authority, in compliance with the jurisprudence of the ECJ, take into account the warranties and controls already offered by other EU licensing jurisdictions such as for instance UK, Malta or Gibraltar, in order to avoid the application of dual licensing and purely administrative restrictions in the single market?

5. Is the creation of a sports betting right granted to the French sport federations in the context of commercial agreements with sports betting operators in France a credible means to prevent match fixing? The majority of stakeholders have already developed partnerships and successful early warning systems to anticipate and prevent those risks.

For its part, the EGBA is particularly concerned about “the threat of the creation of a local Internet market for online betting and gaming services given the French authorities’ clear intention to adopt payment and ISP blockings and the continued criminal enforcement against EU established online gaming and betting operators”.

The Associated stated that this would be completely incompatible with the European dimension and the cross-border nature of this leading internet sector.

According to Sigrid Ligné, secretary general of the EGBA: “The notification procedure is a great tool to anticipate potential conflicts. We are convinced that the recommendations that will be addressed to France by June will facilitate the French Parliament’s discussions and prevent unnecessary litigation once the law comes into force.”

The French government notified its draft law recently to Commissioner Verheugen’s services in the context of a preliminary conformity test with EU Law. Member States and the European Commission have until the June 8 to examine whether the law is in conformity with the rules of the EC Treaty and to require, if necessary, amendments to be made so as to avoid future litigation.

South Carolina may legalise home games

There is a possibility of a new legislation coming in the state of Carolina which, if passed, could make poker gambling legal at home.

It is being said that in the wake of a recent court case declaring poker a game of skill, the state’s stance appears to be softening.

Glen McConnell (R-Charleston), South Carolina Senate President Pro Tempore, has introduced a bill proposing the legalisation of poker home games.

The bill would legalise poker play in the home or for a charitable cause, reported local media.

It has also emerged that members of the public have told a state Senate panel that South Carolina needs to ditch its anti-card laws. McConnell has offered two measures on the subject. One would overturn a 1802 law that could be interpreted to make any dice or card game of chance illegal. The other is a constitutional amendment to allow churches and charities to hold raffles, reported AP.

Jean-Francois Vilotte to lead new French online gambling regulatory authority

An official associated with the French Tennis Federation (FFT) has been chosen to set up France’s new regulatory authority for online gambling – despite the FFT chief’s previous role as a plaintiff in litigation against a number of would-be French licencees.

The government has appointed the FFT’s secretary general Jean-Francois Vilotte to be in charge of establishing the authority that will licence and regulate private companies in the newly-liberalised sector.

The creation of a new regulatory authority for online gambling – l’autorité administrative indépendante de régulation des jeux en ligne, ARJEL – was confirmed by France’s budget minister Eric Woerth recently.

Last year the Fédération Française de Tennis (FFT) had failed in its attempt to prevent online betting companies from taking bets on the French Open tennis tournament. The case, brought in the Belgian court, had aimed to prevent Ladbrokes, along with Bwin and Betfair, from accepting bets on the event from Belgian residents.

How close is France to opening up of its gambling market? – Legal Gaming Special

French Budget Minister Eric Woerth has said that the gambling market in France would be expanded to adapt “to Internet reality” and help France “get out of an unsustainable situation in which the state is losing a growing part of the betting market”.

All this may sound positive, but is the real “opening” of the market is still a long way to go?

ULYS’s partner Thibault Verbiest certaily thinks so.

“The presentation of the draft bill on 5th of March is a first step towards the opening of the French market but the harder part will have to be achieved within the next few weeks,” Verbiest told Bulletbusiness.com.

“The draft bill first has to be submitted to the Conseil d’Etat for an opinion, then presented to the French Cabinet, afterwards be notified to the European Commission in application of Directive 98/34 in (standstill procedure) and finally be discussed and voted by the French Parliament. Once the bill is enacted, the new administrative authority, in charge of enforcing the regulation of online gambling market, will need another few months to be efficient and begin to grant licences. In saying that France will start to grant online betting licences in the beginning of 2010, Eric Woerth was very optimistic,” shared Verbiest.

In an interview, Verbiest also spoke about the sort of legal access the private operators are expected to have, the possibility of a new legal battle regarding lotteries and slot machines monopoly in future and much more.

Woerth has said that illegal gambling generates €7 billion a year, and said that there were 25,000 illegal gambling websites in France, representing 75 percent of the market. Rather than banning 25000 websites, he said we’d rather give licences to those who will respect public and social order. What sort of legal access do you think private operators are expected to have in the French market considering the sign of opening up of the sector?

Since the announcement of the liberalisation last summer, Eric Woerth has repeated several times that the opening of the online gambling market will be controlled. In other words, it means that the opening will be limited and that gambling operators will have to satisfy a large number of specifications to obtain a licence. In the name of public order, operators will be required to give guarantees concerning their experience in the gambling industry, the transparency of their shareholding, the measures they will take against fraud and money laundering, and the security measures to certify online payment, protect children or process personal data, etc.

It seems that companies without experience in the gambling industry will have more difficulties to receive an agreement in France. The specifications required to obtain a licence will exclude a lot of operators.

It is being said that online operators, including non-France-based companies, will be granted five-year licences to take bets from French residents on sport and poker. Lotteries and slot machines will remain under state control. How do you assess this selective opening?

According to the draft bill, lotteries will remain under the Française des jeux monopoly and slot machines only available in terrestrial casinos. Moreover, spread betting, betting exchange or bets on virtual competitions will be forbidden. These games are known to be more risky (addiction and lack of control to avoid fraud and money laundering) than others and consequently are excluded from the opening.

Officially the European Commission has never criticised lotteries and slot machines state’s monopoly. The reasoned opinion sent to the French Government on October 2006 only concerned sports betting services. Therefore, the Government has decided to limit the opening of the market.

This restriction is not satisfying for gambling operators. Indeed, a lot of them operate sports betting services, online poker and lottery or virtual slot machines. Excluding lotteries and virtual slot machines to protect consumers, the Governmenent is being incoherent. If the Government wishes to ensure consumers’ protection, it should prohibit these games in general for both, public and private operators.

In application of EU law, the measures taken by Member States to restrict the free movement of gambling services have to be necessary, proportionate and non-discriminatory which is not the case when the market is closed in favour of public companies that do not particularly have consumers’ interests at heart. A new legal battle on the field of lotteries and slot machines monopoly could be declared by private operators in the next few months.

Industry leaders however have predicted the caveats in the bill would put off many operators. Woerth said he was proposing to impose a 7.5 percent tax on operators taking sport bets to maintain the €5bn a year it gets in receipts from the industry. He also intends to set limits on the ratio of bets that can be paid out to players in winnings. But according to the European Gaming and Betting Association, this raises questions about how economically viable the whole project will be for operators. What’s your opinion regarding the same?

The project will certainly not be economically viable for all operators as France gives priority to public and social order above all.

In theory, only operators located in uncooperative tax havens will be put off. Nonetheless, for practical purposes, in the draft law, especially the tax system and the limitations of wagers, winnings and the ratio of bets that can be paid out to players in winnings, we can infer that the liberalisation will only be profitable to gambling industry leaders.

The French Government has never hidden its objectives. The goal of the opening is not to authorise every operators to provide their services in France but to legalise the activity of honest companies offering financial and legal gurantees to ensure the respect of public and social order. The consequence is that many average operators will be excluded.

Recently, you had mentioned that according to the ongoing discussion within the French government, the draft bill requires that all operators should obtain a licence in France, without respect to the fact they may already have one in another Member State. Still how do you think online gaming companies especially ones from other countries can take realistic and swift action in terms of identifying opportunities and then acting in accordance with to the local licencing regimes?

European institutions promotes a principle of mutual recognition between Member states. It means that a licencee in a Member state could obtain automatically an agreement in France. Eric Woerth has explicitly rejected this principle. Nevertheless, once the regulation of the French market will be effective and consolidate, we can expect bilateral agreement between Member states to simplify proceedings to obtain a licence.

What do you recommend as far as the gambling tax issue is concerned? France has moved to open its gambling market, but insists all licenced Internet gambling sites will pay French tax, regardless of base location. How do you think this whole issue needs to be tackled?

It is impossible to give recommendations for the moment because decrees which will specify the content of the law have not been published yet and we still do not know how exactly the rules will be enforced.

Interview with Quirino Mancini, Partner, SCM Partners – The Italian market is really a must-be-there one – Legal Gaming Special

A group like Grupo Lottomatica in its annual results for 2008 referred to the Italian Government’s “unprecedented” need for revenues as a driver for growth in its business this year.

Agreeing with the same, Quirino Mancini, Partner, SCM Partners, says the likeliest scenario in the short- /mid-run is that the Government needs to somehow fix or at least reduce the Treasury’s budget gap and this will pave the way to the legalisation and regulation of more gaming products such as online poker and other cash games.

In an interview with Bulletbusiness.com, Mancini spoke about the recent approval of the regulations by the Upper House and the future course of action on this front, chances of Italy to become a fairly flexible, and certainly improvable, regulatory model and other issues. Excerpts:

Earlier this year, you had mentioned that new online gaming regulations were being delayed despite being in the Italian regulator’s pipeline for several months now. Is there any development on that front?

The Upper House (Senate of the Republic) approved the regulations last week. They are in fact embedded in a piece of primary legislation which covers also other and unrelated matters and is aimed at implementing altogether various directives issued by the European Commission over 2008.

Such legislaion is now supposed to be reviewed, discussed and then approved also by the Lower House (House of Deputies). The relevant scrutiny process will probably start after the Easter break and will certainly take several weeks to complete.

Forecasting for gambling sector, you had recently mentioned that the deeper the recession, all the better for those anyhow engaged in the provision of offline/online gaming services in the Penisnula. But recently, shares in Italian lottery and gaming group Lottomatica fell by 5.3 percent to 12 euros after Goldman Sachs, which has a ‘buy’ rating on them, cuts the target by 10 percent to 20.3 euros. In fact, Goldman Sachs mentioned: “Despite the habitual nature of gambling, demand is not entirely impervious to economic performance”. How do you assess the overall sentiments related to gambling business specifically online at this juncture in Italy and what makes you bullish or bearish going forward?

Although the gaming sector too is suffering from the global recession times, I still take the view that solid and very diversified (in terms of both assets, operations and products) companies like Lottomatica profitably active on a worldwide scale are even today a good and reasonably safe shelter for those willing to invest their savings in the stock market, and of course Lottomatica is not the only one.

In terms of your expectations, Italy stands good chances of becoming a fairly flexible, and certainly improvable, regulatory model that other regulators could replicate elsewhere in Europe in the years to come. Can you elaboarte on what positive and negative factors are associated with liberalisation at this stage?

Quite frankly as long and as much as the Commission will not be able to harmonise the rules across Europe – something which is not exactly around the corner – I do not see any negative factors associated with a state-controlled liberalisation of the European gaming markets along the lines of the Italian regulatory model which indeed is ripe for being further refined and then exported, with some inevitable adaptations, across the Alps.

You had also mentioned that as per the legal & regulatory policy in Italy, the authorities have sort of tried to entice foreign operators to seek a local licence by opening up the domestic market through (i) the award of a large batch of new licences and (ii) a controlled yet progressive gaming liberalisation. When you say gaming liberalisation, how competitive do you think domestic and foreign gambling companies are as of today and how do you think this is expected to change in lets say the next couple of years?

There is in my view a very close and direct relationship between clear, uniform and fair rules, on one hand, and competition on the other.

Take the Italian example which I’m very familiar with. At the moment the local market is quite packed with nearly 40 operators already holding an AAMS-granted remote gaming licence yet they are not so competitive on the domestic market nor on the international one.

Indeed at the domestic level the various restrictions still partially in place in terms of games that are already legal and regulated versus those still illegal (like gambling), and the quite burdensome administrative requirements to be complied with by all AAMS licensees make the gaming offer pretty much standard and similar from one ‘.it’ platform to another so the operators do not enjoy enough freedom and flexibility to diversify enough their offers. By contrast at international level where such Italian regulatory hurdles like (i) the domestic-only pool liquidity rule for poker tournaments and (ii) the gambling ban is not in place and therefore online casino and Vegas-style gamess are allowed, the ‘.com’ gaming sites enjoy a big advantage business/operations-wise.

In a nutshell, the key to the best competiveness for foreign and domestic gambling companies is to provide and enforce the same (pro-liberal) rules for all and I very much hope that, in addition to the money factor, this will be the other driver for AAMS to complete its market liberalisation mission.

You had recommended realistic and swift action on part of gaming operators in terms of identifying opportunities and then acting in accordance with to the local licencing regimes. How do you think companies need to approach a market like Italy as this juncture? What sort of advice would you give to them for encashing on opportunities in an earnest manner?

The local market is already crowded but there still are fairly good business opportunities in terms of consolidation and integration between local and foreign operators.

I reckon that for every foreign operator seeking Italian market entry there are out there at least three or four potentially great business opportunities in terms of acquisition, joint venture or other commercial partnership deal. It is first of all a matter of generally knowing the hard facts and key rules of the Italian gaming market, having a clear understanding of what kind of business plans one wishes to launch in Italy, what kind of profile a suitable local partner should have and then conducting all necessary and appropriate due diligence checks to ensure that no time and money is wasted in pursuing the wrong strategy and/or an unfit prospective partner.

Italy, along with parts of Spain, has been targeted by several British bookmakers as the government has begun to liberalise its betting shop industry. But in July last year, William Hill withdrew from Italy after 18 months, writing off £1m and agreeing to sell its embryonic joint venture. In this context, how do you think some of the relatively bigger and established gaming and betting companies are going to approach Italy in the time to come?

To put it very simply, the record of the last three years, the number and identity of AAMS licences granted thus far shows that from the viewpoint of most international gaming operators the Italian market is really a must-be-there one.

Almost all of them with very limited and motivated exceptions are already active here and those who are not might soon call in or come back as the case may be. Money talks and last year the Italian gaming industry altogether generated a turnover in excess of €52bn.