Germany's State-Owned Sport-Betting Monopolies May Be Unlawful, Court Says
Germany’s state monopoly on sports- betting and lotteries risks being struck down after the European Union’s highest court said the country’s current rules are incompatible with EU law.
Germany can’t block betting companies such as Bwin Interactive Entertainment AG from providing betting services while allowing public monopolies to “carry out intensive advertising campaigns” to maximize lottery profits, the European Court of Justice in Luxembourg said today. Shares in Bwin rose the most in more than a month after today’s rulings.
“The German state monopoly now has to climb down from its high horse,” said Oliver Kloeck, a partner at law firm Taylor Wessing LLP in Dusseldorf, who has represented private operators. “The German rules will have to be re-discussed and re-worked from scratch.”
The German cases are the latest in a series brought by betting companies including Bwin, which is merging with PartyGaming Plc, and Ladbrokes Plc, disputing whether it is legal for state monopolies to block them from operating freely across the 27-nation union. Previous EU court rulings on similar cases in Italy and Portugal said national gambling monopolies are legal if they meet policy goals like reducing fraud and gambling addiction.
“The German rules do not limit games of chance in a consistent and systematic manner,” a 13-judge panel of the court said in three separate rulings today. Germany doesn’t apply the same restrictions to casinos and slot-machine games, which “carry a greater risk of addiction than games which are subject to that monopoly,” the court said.
Bwin Shares Rise
Bwin, rose 6.4 percent to 41.10 euros in Vienna and PartyGaming climbed 5.8 percent to 288.3 pence in London. Both had the biggest gains since their merger was announced on July 29. Ladbrokes rose 0.5 percent to 138.2 pence in London. Tipp24 SE, a German internet gambling company, soared 14.5 percent to 27.35 euros in Frankfurt, its biggest increase since 2007.
“We are delighted with today’s rulings,” Katharina Riedl, a spokeswoman for Vienna-based Bwin, said in a telephone interview, calling the decisions “trend setting.” “This is a historic opportunity to change German gambling regulation,” following the examples of the U.K., France and Italy, she said.
Tipp24 Chief Executive Officer Hans Cornehl said the ruling was a “victory in all aspects,” adding that the company expects to “soon be able to resume our business of brokering state lotteries in Germany.”
Question Mark
The rulings mean Germany will have to review its law, putting a question mark over several pending actions in the country against private operators, said Geoff Nicholas, a partner in London at Freshfields Bruckhaus Deringer LLP.
“The likelihood is that the German courts will find that the law is not in line and throws it back to the German legislator to see how to move forward,” Nicholas said in a phone interview.
A political solution is needed “that does justice to the demand of consumers to play online and that at the same time ensures a high level of consumer protection,” said Sigrid Ligne, secretary general of the European Gaming and Betting Association, of which Bwin is a member.
The rulings stem from separate disputes in several of Germany’s states over the authorities’ refusal to grant sports- betting licenses to companies or prosecuting people who offered the games on behalf of operators registered in other EU countries.
The German courts that sought the EU tribunal’s guidance will now have to rule in line with today’s decisions, based on the facts of each individual case.
“The Court today did by no means advocate a liberalization of gambling,” said Friedrich Stickler, president of the European Lotteries Association. “The Court reminded Germany that it has to control more strictly the offer of dangerous forms of gambling such as casino games and gaming machines.”
Germany is among countries targeted by the European Commission, the EU’s executive agency over potentially unlawful gambling restrictions.
To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net
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