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Practice is ahead of the Concession Granting Process

January 31, 2014 News & Reports

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The Hesse Ministry of the Interior responsible for the nationwide concession proceedings set the entire process to zero in November 2013. Lawyers specialized in sports betting and providers analyze the legal development and the current practice situation. Despite all obstacles one thing is clear: bets and betting shops are part of everyday life now. Whether the industry is going to pull together, is uncertain. This shows an example of mutual association work.

The granting of the nationwide sports betting licenses by the responsible Hesse Ministry of the Interior turns more and more into a farce and probably to a never ending story.

In fall, it was stated that from the 41 candidates who were already in the second stage of application, the Ministry had invited 14 providers to a personal presentation. According to information by the Ministry, these providers had already fulfilled the minimal requirements.

“A final review of the applications of all applicants who had been admitted to the second stage has been carried out in course of the concession granting process”, the Ministry stated in an email dated 15 November 2013, quoted by “Juve”, a publishing house for legal information: “It was found that […] none of the applicants were able to show compliance with the minimal requirements […] in an auditable manner,” the Ministry announced.

Thus, the second stage of the proceedings was set to zero. According to the Hesse Ministry of the Interior, the companies are to receive information about what is to be rectified by January 2014. “The (legal) situation is unclear and unsatisfactory: the new Interstate Treaty on Gambling has already existed for one and a half years, yet still no nationwide concessions were granted,” Dr. Wulf Hambach, Munich lawyer and expert on gambling law stated.
The providers did not know when they were to receive a concession. “Due to the legal ambiguities there is a lack of predictability. The conditions are hostile to the market: five percent tax on turnover, restrictive advertising regulations, prohibition of parallel casino offers”, Dr. Hambach listed the atrocities. Originally, a maximum of twenty concessions were intended to be issued by spring 2013.

“The granting of the licenses, if at all, can only be expected in the course of the year 2014. Since the tender is little transparent and open to criticism, further subsequent proceedings before the administrative courts also seem likely”, says Mirko Benesch, lawyer and partner of the law firm Morawe, Benesch, Winkler in Freiburg.

Dr. Hambach also assumes: “Until all twenty concessions are granted, it will probably take at least another year; if not a sensible legal regulation is met before.”

The lawyer also points to another legal issue: “The relation to the licences from Schleswig-Holstein is unclear. Finally, there is considerable evidence that the provisions of the new Interstate Treaty on Gambling are incoherent and thus contrary to European law. ”

Aside from the European Court of Justice (ECJ), the Court of the European Free Trade Association (EFTA), the counterpart to the ECJ for the four EFTA states, will also have to deal with the granting of concessions in the near future. The Liechtenstein Constitutional Court, the Constitutional Court of the Principality of Liechtenstein, submitted a case regarding the issuance of the single casino concession to the EFTA court with the decision from 29 October 2013 (Ref. StGB 2013/044). “The court will be asked to clarify which general requirements of European law arise to the concession procedure, in particular with regard to Article 43 AG (freedom of establishment) and 49 EC (freedom to provide services) and the resulting `transparency rule`”, the lawyer and sports betting legal expert Martin Arendts explains.

The court in particular has to deal with the question, whether a new tender was necessary if the former tender was in breach with legal provisions of European law. According to Arendts, this case particularly is about the fact that the weighting of the concrete issuance criteria was not published in advance, but was determined after the application deadline. A decision of the EFTA court is likely to also be of importance for the intransparent licensing procedure in Germany, according to Arendts. “Here, too, the specific selection criteria and their weighting (5,000 points scheme) have not been published yet, but were conveyed strictly confidential to successful candidates of the second stage. Interested parties had therefore no opportunity to realistically assess their chances for a license”, Arendts points out.

In practice, the betting shop operators and agencies are struggling with the local licensing authorities and are often given a hard time. According to Mirko Benesch, the providers struggle to find suitable locations for the opening of betting shops in the communities, although, for example, according to the legislator 600 betting shops are to be provided in Baden-Wuerttemberg alone. In some large cities, in contrast, the situation is a different one. In Cologne, for example, about 300 betting shops were operated, according to Roland Kilp from the local public order office. Kilp was looking forward to the implementation of the Interstate Treaty on Gambling, yet it would result in clear-cutting if the provisions of the treaty would actually be implemented. Shops run by unlicensed providers would have to close. “Then, only a few companies would be allowed to operate a limited number of betting offices,” Kilp states in the Kölner Stadt-Anzeiger.

It is obvious that sports betting providers do not assess the market situation the same way as each company is positioned differently. Providers who have a strong stationary market sector do naturally assess the situation differently than online providers.

“Due to the five percent betting tax introduced in July 2012, the mood is quite depressed at the moment,” says Dr. Norman Albers, who provides products by yoobet with the betting shops Albers Wettannahmen. According to Dr. Albers, many providers were only expecting a drop in revenues of five percent of the stakes. But actually, 20 to 25 percent of customers’ liquidity is withdrawn from the sports betting market due to the tax. “Accordingly, revenues have drastically declined, which causes immense problems, in particular for the stationary distribution. Customers respond much more elastic to price changes, especially if they are given alternatives on the internet, without having to pay the tax online”, Dr. Albers explains.

Ronny Kießling, Head of Business Development at HappyBet, emphasizes another problem: “Since the licenses are long in coming, there is a competitive market, which benefits ´self-retaining`. “Those are individuals who buy quotas and retain the bets at their own risk. This also increases the odds. “Unfortunately, on part of the authorities, still too little attention is paid to whether bets are legally offered by concession holders or not. Although the current legal situation is a gray area in many ways, it is however absolutely clear that sports betting may only be offered by companies participating in the concession process”, says Ronny Kießling.

Dr. Norman Albers hopes that the municipalities will consistently apply construction law and commercial law in 2014. “It is unreasonable that in some municipalities betting shops registered as restaurants are sprouting from the ground, even in purely residential areas or near schools. On the other hand, there are municipalities that do not want to issue permits for betting offices at all, which is not right either”, Dr. Albers says.
The managing partner of Albers Wettannahmen advocates that “the sports betting operators should become much more sensitive regarding the choice of location.” Otherwise the image of the entire industry would experience damage due to an uncontrollable proliferation.

HappyBet expects “to grow in 2014 by using new strategies and to positively change the nature of sports betting”, Kießling says. Werner Becher, CEO of the online provider Interwetten, is pleased with his company`s growth of twenty percent in 2013. Everyone is looking ahead but, as for months, has been shaped by great uncertainty regarding the intended granting of twenty sports betting licenses on the basis of the Interstate Treaty on Gambling. “The chances that this populist motivated and legally extremely questionable concession procedure will be optimized before its implementation, are increasing day by day now”, Becher says.

In order to enforce their interests in society and politics, every serious sector tries to bundle their forces in associations. There are the Association of European Betting Companies (VEWU) and the European Gaming & Betting Association (EGBA), yet their impact is assessed differently within the industry.

“An association does certainly make sense, as long as all interests are represented. It is however questionable whether this is the case at the moment”, Kießling doubts. Interwetten, as a founding member of the EGBA, had always been concerned about the exchange of experience within the industry. “Therefore, we would very much welcome the establishment of an association in Germany”, says Werner Becher, Interwetten.

Dr. Norman Albers also refers to the German Bookmakers Association (DBV). The association was open to bookmakers and sports betting providers of the German market in particular. “For years, the DBV has been well networked in the federal states and the federal government and has been actively involved in the legislative process”, Dr. Albers said. However, he also points out that the major players on the market have also been acting independently in recent years and “would probably hardly feel adequately represented by an association.”

Instead, the managing partner of Albers Wettannahmen calls for a new common goal: the reduction of the tax rate down to two percent. “This is advisable in order not to pass the tax to the players directly, so that the tax remains price neutral in the competition. I do not expect the total tax revenue to decline, since the sales rotation will start up again”, Dr. Albers predicts.

Original German Source: http://sportwettenmarkt.net/ (author: Uwe Specht)

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