Camelot asked to discontinue its email campaign

The Advertising Standards Authority (ASA) recently directed Camelot Group to drop its email advertising campaign for the National Lottery.

The Authority upheld a complaint that Camelot encouraged excessive gambling although it rejected the suggesting it implied gambling was indispensable.

According to Camelot, the ad was one of a series of e-mails which were sent to National Lottery players who had opted to receive marketing communications.

The advertiser explained that the ad did not imply that gambling was indispensable and reasoned that it merely suggested that, because of the advantages of playing the Lottery interactively, a good excuse was needed by recipients if they were to miss out. Also, it added that the ad was designed to stress some of the advantages of playing the Lottery interactively and mentioned features like automated ticket checking, advance play and win notifications. The ad did not encourage excessive play but provided information that helped recipients decide if they wanted to play Lottery games interactively.

But the ASA considered that the ad focused on the benefits of playing the Lottery interactively and invited recipients to use their interactive account repeatedly by stating “The more you play the more likely you are to win”.

It noted the ad suggested that recipients had a higher chance of winning if they bought multiple lines, across the numerous Lottery games on both the Wednesday and Saturday weekly draws, and concluded that, by referring to the greater chance of winning resulting from multiple entries, the ad encouraged repeated and potentially excessive gambling.

Violating laws by earning a living from gambling

The Danish Supreme Court has reportedly decided that an unemployed man, who allegedly had been earning a living as an online poker player, would have to be taxed as a professional gambler.

According to a report filed by the Copenhagen Post, the concerned player, whose identity wasn’t disclosed, earned nearly $28,000 playing online poker in one year. The court said in its ruling that the man violated the laws by using his poker winnings as his sole source of income and ordered him to surrender the money. The Court ruled that even though computer servers used to run the poker games are placed outside of Denmark, the individual computer used to play is located in the country and subject to Danish law.

The Supreme Court chose not to enforce a DKK5000 fine issued by a lower court.

Update Regarding EC Commission’s Position on Draft French Gaming Law

Following the notification procedure, the European Commission rendered its comments on the last Draft French Gaming Law as amended by the French National Assembly Commission works and after the French Government’s reply, on July 9th, 2009.
As a result, at this stage of the proceedings, the Draft Law has not yet been given green light by the EC Commission.

Following the notification (in accordance with Directive 98/34/CE) of the Draft French Gaming Law (hereinafter referred to as the “Draft Law”), the EC Commission rendered its detailed opinion on the above-mentioned Draft Law on June 8th, 2009. On September 1st, 2009, the EC Commission commented on the French Government’s reply, on July 9th, 2009, to the aforementioned detailed opinion and took into account the latest amendments of the Draft Law at the French National Assembly. As a result, at this stage of the proceedings, the Draft Law has not yet been given green light by the EC Commission.

Considering the European Commission’s comments, the latter and France are on the right way to reach a compromise regarding the Draft Law’s provisions which are alleged to be incompatible with EU law.

EC Commission’s comments on the French Government’s reply to its detailed opinion will be briefly summarized below.

• As regards Article 16 of the Draft Law providing for a licensing system with respect to online gaming operators, the EC Commission welcomed the proposal by the French Authorities to amend the wording of the Draft Law so as to take into account the requirements to which the requesting online gaming operator is already subjected in its country of establishment.

• As regards Article 52 of the Draft Law which provides for an obligation for all licensed online gaming operators to obtain consent from the operating right owner of the sport event, the EC Commission noted that the aforementioned provision applies equally to the use of French sporting events both by foreign and domestic online gaming operators. In these circumstances, the EC Commission would welcome a commitment by the French Authorities to carry out a business impact assessment two years after the entry into force of the provision in question, with a special emphasis on its impact on the free movement of services as well as the contribution of such a provision to sports development and the guarantee of integrity of the sport.

• As regards Article 8 of the Draft Law which provides for a maximum return per player ratio, the EC Commission noted that the aforementioned provision applies equally to both domestic operators and operators licensed in another Member State of the EU and the EEA. In addition, the EC Commission noted the concerns of the French Authorities relating to public and social order, but it would welcome further evidence of the appropriateness and proportionality of such a provision. In these circumstances, the EC Commission welcomed the proposal by the French Authorities to conduct a study to assess the benefits of this provision from the perspective of public and social order, within two years after the entry into force of the Draft Law.

• As regards Article 39 of the Draft Law which provides for an obligation to have a fiscal representative established in France, the EC Commission noted the response of the French Authorities about the lack of any form of assistance or cooperation in administrative levies on gambling (recovery of taxation affecting the operators of online games), and the intention to include such provisions during renegotiation of bilateral tax agreements so as to eliminate the requirement for the establishment in France of a fiscal representative.

In any event, the EC Commission will carry out an overall assessment of the Draft Law’s final version adopted by the French Parliament. The plenary session of the National Assemblee should take place the 7,8,9 October for scrutiny. Once the text is adopted by the deputees it will be transmitted to the Higher Chamber. The Government plans to see the final version of the law adopted by the end of 2009.

Furthermore, France will still have to notify the Draft Law’s implementing acts so as to enable the EC Commission to assess their compatibility with EU law. This should intervene in the beginning of 2010.

According to the Government’s expectations, the entire licensing system is likely to be operational before the Football World Cup starting in June.

Harris Hagan August Newsletter 2009

Inside this issue:

1. Sports Betting
2. Data Protection
3. Alderney’s New Licensing Regime
4. A Fair Deal for UK Licensed Operators
5. Gambling Regulatory Update

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The french online gambling market: analysis of the draft french gaming law

The French online gaming market is opening up to competition: the French Government is in the process of enacting a legislation liberalising the online gaming market under the pressure of both the European Commission (hereinafter referred to as the “Commission”) and the fast-moving environment on the Internet where online gambling operators are already present and offer games of chance to french consumers.

The present memorandum will briefly summarize the main features of the Draft French Gaming Law (currently under discussion at the French Parliament) and will put a particular emphasis on the following issues:

1. Is the future licensing and tax regime viable?
2. Is France a real opportunity for new entrants?
3. Is the new regime compatible with EU law?

Main features of the Draft French Gaming Law

In order to safeguard social order and to prevent addiction, wagers, winnings and the average rate of return to the players will be limited. In a preventive way, operators will have to insert apparent objective messages on their websites about the prohibition to play for minors and the risks related to gambling activities.

– The opening will be limited to online horse race betting, sports betting and games consisting of shared games which depend on skill, whereby the player, after the intervention of chance, demonstrates his/her will and decides, in relation to the strategy adopted by the other players, to use a strategy which is likely to increase his / her chance of winning (for example online poker);

Thus, lotteries, virtual slot machines, “spread betting”, “betting exchange”, betting on virtual competition and casino games in which consumers play against the bank (roulette, blackjack, etc…) are excluded from the opening since they are considered to be too dangerous in light of maintaining public and social order, i.e. said to be too addictive;

– The online Games Regulations Authority, ARJEL, independent public authority, will be specially created to regulate the remote gambling market. This Authority will be in charge of:

1. Monitoring compliance with the objectives of the policy of games accessible via the internet;
2. Proposing a cahier des charges (list of requirements established by the ARJEL)to the government for each type of license (see below);
3. Preparing the licence request files for online gaming operators and attributing the licenses;
4. Auditing for compliance by operators with legislative and regulatory measures and clauses of the reference terms that they are subjected to;
5. Carrying out surveillance of online operations and participating in the fight against illegal game sites and against fraud; To that end, the ARJEL shall be entitled to block access to illegal websites by a direct injunction addressed to Internet Service Providers as well as to block financial transactions of illegal online gambling operators;
6. Enacting rules regarding the audit of technical and financial data for each online game or bet;
7. Determining, where appropriate, the technical parameters of online games within the framework of rules set by the decrees;
8. Proposing legislative and regulatory modifications to the Government;
9. The license will only be granted to online operators complying with the regulations contained in the cahier des charges setting general requirements for all operators and specific clauses according to each type of licenses, namely sports betting, horse race betting or circle games (such as poker or baccarat);

For instance, all operators will be required to provide information and guarantees concerning their identification, their experience in the gambling industry, the transparency of their shareholding, the measures they will implement to fight against fraud and money laundering, to authenticate online payment, and to protect children or process personal data, etc;

– Licenses will only be granted to operators established in a Member State of the European Union or the European Economic Community. Operators whose headquarters are based in one of the states featuring on the list of non co-operative tax havens made by the Organisation for Co-operation and Economic Development or whose main shareholders are based in one of the States featuring on this, cannot be granted a license to provide their services in France;

– Operators will have to operate from an internet website accessible through a first level domain name with a “.fr” ending;

– All data related to gambling activities, all data exchanged between players and operators and data linked to the identification of gaming or betting events, should be available on a mirror server based in France and eventually provided through an operator representative in France;

– The license will be granted for a period of five years. It is renewable. It is not transferable. A specific agreement will be requested for each type of games operated by the licensee;

– The tax rate will be calculated on the amount of the wagers: the total sums outlaid by players and punters. The winnings, invested by the latter in the form of new bets, will be equally taxed. The taxation is set according to the following scheme:

* 8,5% for sports betting;
* 15,5% for horse racing betting;
* 2% for online poker.

Once the Draft French Gaming Law is enacted, the ARJEL will need another few months to be efficient and begin to grant licenses. According to Eric Woerth, France will not start granting online betting licenses in the beginning of 2010 as initially contemplated. Due to a delay in the legislative process caused, among other things, by the Commission’s detailed opinion, rendered on June 8th, 2009, the Draft French Gaming Law is unlikely to enter into force as from January 1st, 2010. In any event, it should enter into force by the beginning of the World Football Cup in South Africa at the latest.

Is the future licensing and tax regime viable?

The Draft French Gaming Law provides that taxation shall be based on wagers rather than on gaming gross revenue; the latter being much more adapted especially for poker operators. In application of the above, imposing a 2% tax on global wagers would amount to tax around 60% of their gross revenue.

It is likely that this will be considered as very little incentive for most operators to offer their services on the French online gaming market. In addition, this system could be considered as a barrier to the freedom to provide services within the EU.

Is France a real opportunity for new entrants?

Following completion of the contemplated reform, France should remain an attractive market for new entrants.

However, several issues will have to be addressed in order to improve the attractiveness of the French online gaming market.

First, as noted above, the proposed tax regime is likely to constitute a deterrent for foreign online gaming operators willing to penetrate the French online gaming market.

Second, the requirement to designate a fiscal representative in France seems to be disproportionate in the light of the aim pursued: in this regard, an appropriate system of ex post surveillance/notification requirements would be more suitable to attain the legitimate aim pursued, namely an efficient tax collection.

Third, operators established in “proper jurisdictions” outside the EU, such as Alderney or the Isle of Man, should be allowed to apply for a license since their home jurisdictions offer an equivalent level of protection for players.

Is the new regime compatible with EU law?

Following the notification (in accordance with Directive 98/34/CE) of the Draft French Gaming Law, the Commission rendered its detailed opinion on June 8th, 2009.

The French authorities are urged to clarify and amend some of the provisions of the Draft French Gaming Law in order to ensure its compatibility with EU law.

* The first objection relates to Article 16 of the Draft French Gaming Law and the system put in place for granting licenses. According to the Commission, this rule restricts the freedom to provide services (Article 49 of the EC Treaty). To be compatible with European law the French authorities are requested to clarify to which extend they will take into account the requirements of the legal system under which the operator is already licensed (home country).

* The second objection pertains to Article 52 of the Draft French Gaming Law which provides for an obligation for all licensed operators to obtain consent from the operating right owner of the sport event. According to the Commission, such a requirement could constitute a restriction to the freedom to provide services, as the betting offer would become less attractive.

* The third remark questions the justification of Article 8 of the Draft French Gaming Law: French Government has to prove the necessity of this restriction. According to this provision, a maximum payback ratio is foreseen, whereby the Commission considers this might constitute an infringement to the freedom to provide services. In this respect, the French authorities are urged to adduce evidence concerning the link between the rate of return and fight against addiction.

* The last objection is related to Article 39 of the Draft French Gaming Law which provides for an obligation to have a fiscal representative established in France. Such a requirement might constitute a restriction to the freedom to provide services, notwithstanding the contention of the French Government that this provision is aimed at ensuring an effective fiscal supervision. Such a contention is not acceptable (see Commission v. France judgement C-334/02) considering that such an obligation is disproportionate and can be replaced by less restrictive measures.