Europe’s War against Gambling Monopolies

The European Commission is making sure that EU members grant equal opportunities to all online gambling operators.

The online gambling industry is booming in Europe, but it looks like there is still a lot of work to be done on legislation as several countries don’t comply with the European Union’s requirement to grant free movement of services. At least, this is what gambling operators are complaining about to the European Commission (EC).

Luckily for them, the EC is there to serve and shows no mercy in its investigations. Over the past few years, Germany, France and more recently Greece have gotten rid of their gambling monopolies, as ordered by European authorities. It’s not always that simple, however, as sometimes states will be granted the permission to block or limit cross-border gambling services.

The EU makes an exception for states pursuing public interest objectives, such as consumer protection and prevention of fraud. If state authorities can prove the necessity of such measures and demonstrate that they are being consistently pursued, governments can get away with it. And this is precisely what some of them are successfully doing.

Cheating at their own game

In 2008, eight online providers challenged the monopoly approved by German gambling laws in court, after the state-run operator was “caught” not only advertising its services, but also expanding its offer with a growing number of gambling machines.

This is certainly not how a company behaves when seeking to limit gambling addiction, the European Court of Justice (ECJ) thought, and gave what the betting industry called a “landmark ruling” to end the German control over gambling services in the country.

At the end of 2013, the European Commission decided to investigate the cases of:

• Romania
• Cyprus
• Czech Republic
• Lithuania
• Poland
• Belgium

After being awarded monopoly over gambling in Sweden, in order to ensure that players are protected from the dangers of gambling addiction, Svenska Spel was caught cheating. A report published by the Swedish National Audit Office in 2012 found that the business “is in danger of moving towards a rise in pathological gambling, which is not in line with the objectives of the Swedish Parliament.”

The auditors considered that Svenska Spel isn’t taking sufficient measures to combat pathological gambling and recommended that it ensured “a moderate and restrictive marketing of the company”. Apparently, the company isn’t taking these directions too seriously and seems more concerned to stop gambling ads from other EU nations than deal with its own issues.

More to come?

After Germany’s defeat, state monopolies started to fall like dominoes. In 2010, it was France’s turn to end its control over online gambling and finally allow private operators to set up poker and sports betting websites. The country was forced to hand over its billion-euro market to private companies and settle for a 7.5% tax on sports bets and 2% take on online poker sites in France.

It wasn’t until long ago that Greece’s monopoly on gambling was also crushed by the ECJ. Betting giants Stanleybet, William Hill and Sportingbet took the Greek Organisation of Football Prognostics (OPAP) down, after complaining to the court that the company is listed at the Athens Stock Exchange and works for profit.

Now it looks like the EC now has its eyes on several other states that don’t have a clearly regulated and free gambling market. Sweden was recently told to comply with European laws, along with Belgium, Cyprus, the Czech Republic, Lithuania, Poland and Romania.

While most of these issues concern online gambling, Romania offers the perfect example of how bad monopolies can be. The country’s National Lottery was recently fined with EUR 2 million because it signed a preferential contract that promoted disloyal competition.

Preparing to break the law

However, not all countries have learned their lesson. Just a few months ago, Polish authorities have announced that they were going to enforce online monopoly for number games, lottery and bingo. Several online sports betting companies are already operating in the country and now some might have to take their business elsewhere. In a notification sent to the EC, Poland said the goal was to ensure the “controlled development of legitimate games via the available distribution network.”

Meanwhile, the Republic of Macedonia also intends to regulate its online gambling market and the plan is to establish a state-controlled monopoly. Local authorities have entered an agreement with Casino Austria and are planning to launch a company that will manage the video lottery, sports betting and online poker services, while simultaneously blocking all foreign operators.

The state would own 51% of the business, but it remains to be seen if the Macedonian government will get away with this one. In order to butter up European lawmakers, the country’s officials said they plan to spend gambling revenues on national healthcare and other public services, but the EC is already looking into the matter.

So are monopolies good or bad? It seems like a good idea to redirect all profits to the state, which could put them to a good use. But this is not always the case, especially if local authorities use the money to encourage gambling or to bring benefits for certain private companies. Gambling can be a powerful weapon and, as always, it depends on whose hands it’s in.