Breaking of state-monopoly in Sweden recommended

A public commission in Sweden has suggested that the monopoly should be broken up, at least partially.

A local media report, highlighting that Sweden’s state-monopoly on providing betting has been criticised by the European Commission for violating the EU competition regulations, has shared that the commission proposes that companies other than Svenska Spel shall get the right to offer sport betting in Sweden.

They also say that foreign betting sites on the Internet which do not fulfill the criteria to operate in Sweden shall be blocked.

According to stockholmnews.com, the commission wants the monopoly to remain on Internet poker and casino since these are considered particularly dangerous for people with gambling problems.

“Svenska Spel brings in large amounts of money to the Swedish state every year. A big part of its profit also goes to the sports movement. But the most common defense for the monopoly is that Svenska Spel is suppose to take more responsibility for people with gambling problems than the private companies. Critics say however that this is just an excuse and that the real purpose is to get more money for the state,” reported the publication.

Meanwhile, another report has indicated that an official study of Swedish gambling legislation has recommended the introduction of a licencing system that would divide gambling offers on the basis of their risk to players, and proposes that Svenska Spel be allowed to maintain its monopoly over land-based casinos, lotteries and online poker. But with the changes not scheduled to take effect for a further two years, observers question whether the proposals will be enough to placate the European Commission in Brussels.

RGA urges authorities to address unfair restrictions

The Remote Gambling Association has welcomed the French Council Presidency initiative to review gambling laws and calls on the European Commission to continue infringement proceedings against Member States.

According to the RGA, these efforts should not, however, slow down infringement proceedings against Member States that are failing to apply EC Treaty rules in this area.

Referring to issues such as crime prevention, consumer protection and the maintenance of public and social order mentioned in the Presidency report , the RGA said it agrees that these are all worthwhile objectives, but believes it is important to remember that the online gambling industry already addresses these issues through codes of practice established by the industry itself and through compulsory licence conditions in the European jurisdictions where they are based and regulated.

Clive Hawkswood, chief executive of RGA, said: “All RGA members already operate to our own code of practice on social responsibility. Codes such as these, combined with existing regulations in EEA jurisdictions that issue online gambling licences already set high standards for consumer protection.”

Going forward, the RGA called on the Council to give greater attention to another issue addressed in the Presidency report: the rulings by the European Court of Justice on the opening of national markets to competition from operators who are licenced in other EU jurisdictions.

“The freedom of establishment and the freedom to provide gambling services across internal EU borders are set down in the EC Treaty. Several Member States, however, have yet to amend their gambling laws to take account of this and Commission infringement proceedings against those States are still outstanding. The RGA urges the Council and the Commission to address these unfair restrictions as a matter of priority because not only do they constitute a clear breach of EC law, but they are also unfairly restricting the growth of many well established and responsible online European companies and reducing consumer choice,” stated the RGA.

“You cannot address standards and Member State involvement without mentioning the basic principles of access to markets for online gambling operators licensed in Europe. We hope that any future iteration of this report will make this abundantly clear and serve as a starting point for further consideration of these issues,” said Hawkswood.

An outlook of the Italian gaming market at two years from its liberalisation

The paragraphs below try to summarise the most relevant regulatory and commercial developments that dramatically affected the Italian gaming business over the last biennium.

The paragraphs below try to summarise the most relevant regulatory and commercial developments that dramatically affected the Italian gaming business over the last biennium.

The 2006 year marked the beginning of a new era for the Italian gaming industry. In an effort to put an end to the thriving business of many foreign-based gambling sites that had long since been aggressively targeting and profitably servicing Italian players without holding an Italian licence, in early February the local authorities enacted the infamous and very controversial measures aimed at restricting Italian residents from accessing a large number of blacklisted ‘.com’ sites. Yet shortly thereafter (August) the Prodi-led cabinet suddenly opened up the domestic market by legalising remote skill games and launching a licence tender that resulted in some 14.000-plus fresh terrestrial licences and 33 pure remote gaming licences being awarded.

Notably the liberalisation pushed by the Italian authorities was much more driven by budgetary needs than by a genuine desire to free up the domestic gaming market after decades of unchallenged oligopoly by the three Italian sisters (SNAI, Lottomatica and SISAL). Whatever the reasons that may have actually spurred the government’s action, such regulatory breakthrough resulted in a wave of new operators being at long last able to legally and legitimately offer their gaming services to Italians.

The 2007 year was mainly a transition one during which the new licensees worked hard to set up their Italian online gaming platforms and organise the launch of their terrestrial networks of betting outlets (shops and corners) with very few of them, if indeed any, managing to launch operations in the first semester. In the meantime the gaming regulatory authority (AAMS) implemented the online bingo and the skill gaming rules and in particular legalised online poker tournaments by making them eligible for skill game classification. In December then Italy notified the European Commission with the proposed new remote gaming rules and relevant lighter licensing requirements which look more EU-friendly than those currently in place. Such move by the Italian authorities had been triggered by a combined effect of a landmark ruling issued by the European Court of Justice earlier that year in re Placanica where the Luxembourg magistrates had heavily criticised the regulatory regime currently in place in Italy, as well as by the need to defuse the enormous political pressure that Brussels had been placing on Rome over the past several months by opening up to seven different dossiers on charges that Italy was enforcing gaming laws and regulations not fully in compliance with EU law.

At the end of April 2008 the European Commission sent a letter of remarks and observations to the Italian government suggesting also a few amendments aimed at rendering the proposed new rules fully consistent with the recommendations of the EC as well as with the jurisprudence of the European Court of Justice. Further contacts and meetings took place since between the Rome and the Brussels authorities to fine-tune the draft new regulations which are now understood to be ready for issuance any time soon.

Even though the new rules are not yet in place it is interesting to outline below their most relevant aspects:

· Any gaming company licensed and operationally based in another EU jurisdiction may apply for an AAMS licence subject to proving a global gaming turnover of no less than €1,5mln over the last biennium
· Even a non-gaming operator will be able to apply for an AAMS remote gaming licence subject to: (i) proving that he holds all required logistic, technical and organisational infrastructure, (ii) releasing an €1,5mln bank guarantee in favour of AAMS, (iii) setting up a company in an EU jurisdiction and locating there the hardware and software infrastructure that will be running the games covered by the AAMS licence

Among the fresh licensing requirements set out above is worth noting in particular the server location rule which will make it possible for a foreign-based AAMS licensee to keep his gaming servers abroad provided (i) they are within the European Union space, and (ii) a 24/7 remote linkup with the AAMS centralised system is guaranteed for bets validation, compliance monitoring and tax purposes.

The 2008 year also coincided with the time when most (if all) of the 2006 tender licensees went actually live with the first online poker tournaments being launched by a couple of Italian operators (Gioco Digitale and Microgaming) as from September. Notably a few other AAMS-licensed major operators like Bwin and Lottomatica launched their online poker product since and two of the largest poker rooms worldwide (PokerStars and PartyGaming) also got licensed in Italy in the second semester and are now preparing to launch their own tournaments.

The first figures available on the impact of poker (tournaments) on the Italian gaming market are quite impressive as while we are still in the very early stages with just a few platforms already offering it, the monthly turnover is already at around €65mln despite the fact that for the time being AAMS allows tournaments open to local residents only (national pool liquidity as opposed to international pool liquidity). Given such a good response notwithstanding the game is only available at domestic level, it can be quite safely predicted that in 2009 the poker tournaments turnover will by far exceed the rosiest expectations of the Italian authorities that were initially forecasting for next year a total turnover in the region of €400mln.

Such key factors as (i) a relatively favourable regulatory framework and (ii) a very responsive domestic market, coupled with a much less online operator-friendly environment across most of the other first-tier continental Europe jurisdictions like France and particularly Germany, lead to believe that in 2009 Italy will be yet again at the forefront of the online gaming business in the EU. Actually the “stick-and-carrot” regulatory model adopted by AAMS (blacklist restrictions enforced flat out on the unlicensed foreign-based sites and full right to offer online gaming services to local residents only granted to those operators holding an Italian licence) is now being carefully analysed by other EU regulators with a view to assessing whether it could be usefully exported across the Alps too. Indeed in the past few months there was an intense traffic of delegations of regulators from France and from Northern European countries too that repeatedly met with AAMS to better understand the Italian model.

Italy’s chances to become a champion in Europe of a pragmatic and profitable regulatory model placed somewhere in between the Franco/German-style monopoly-driven approach and the pro-market, de-regulated UK regime, may prove even higher if once the new remote gaming rules are enacted AAMS should also adopt in due course a “whitelist policy” along the lines of what the UK Gambling Commission has already been doing for a while. In this respect it is understood that bilateral talks and meetings already took place earlier this year between Rome, Alderney and the Isle of Man competent authorities and the “whitelist policy” is on the AAMS’ 2009 agenda.

All in all 2009 is promisingly set to be another buoyant year for the Italian gaming business altogether given also the traditional attitude of Italians to spend even more money in betting and gambling under gloom economy times like the present ones. Other important market growth drivers will be the following:

· The implementation of the new remote gaming and relevant licensing rules
· The possibility as from 1 December 2008 for each AAMS licensee to propose to his own regulator new sporting and non-sporting events on which he would like to take fixed odds bets (AAMS publishes on a weekly basis the full list of all “bookable” events and up until now bookmakers were not allowed to accept bets on any unlisted events)
· The likely advent of other top online poker rooms not yet licensed in Italy
· The likely introduction by AAMS of the international pool liquidity rule
· The possible legalisation and subsequent regulation by AAMS of online poker and other cash games over a time period realistically ranging from 1 to 3 years

With specific regard to the latter aspect, it should also be said that legalising and regulating online poker and other cash games seems an almost inevitable outcome for the Italian authorities if they do aim at making the ‘.it’ gaming platforms fully competitive in commercial terms vis-à-vis the ‘.com’ ones. Hence the real question is not if poker and other cash games will be introduced in Italy, but when this will in fact happen. The only sensible answer one could presently give to such question is: time will tell.

Quirino Mancini, partner
Sinisi Ceschini Mancini
qmancini@scm-partners.it

Rien ne va plus in the French Casinos

The French Casinos have decided to have their voice heard. They have reached a situation of extreme difficulties whereby they require the French public authorities, at both the federal level as well as local level, to know of their concerns regarding the current state of the French gaming market. The French Casinos have requested the government to enact remedies which will allow French Casinos to become more competitive.

The French Casinos have decided to have their voice heard. They have reached a situation of extreme difficulties whereby they require the French public authorities, at both the federal level as well as local level, to know of their concerns regarding the current state of the French gaming market. The French Casinos have requested the government to enact remedies which will allow French Casinos to become more competitive.

Despite many warnings over the last number of years, the French Government now finally appears ready to undertake a series of initial action to assist French Casinos. But to what extent will these actions allow the Casinos to regain a competitive edge?

The Casino industry in France consists of 197 casinos, which employ 18,200 employees, and operate 22,000 slot machines in addition to roulette and poker. At the end of 2006-2007, the gross revenue reached
€ 2.8 million, which represented an increase of 3.07% over prior years. In comparison, the gross revenue fell by 13.5%, with a decrease of 20% recorded in September alone, during 2008.

French Casinos have expressed their dissatisfaction with the current legal system and tax regime. French Casinos have warned the public authorities for years. In the words of a director of one of the leading French Casinos: “[w]hen the casino coughs, the municipality gets a cold.”

As an example, Barbazan (a municipality in southern France) received € 529 000 in 2007 from casino tax payments, which represents 74% of its budget. Barbazan was a town of 350 inhabitants before the opening of its casino. One hundred new inhabitants relocated to Barbazan as a result of the construction of the casino, which has generated hundreds of jobs and commercial opportunities.

In total, € 245 million in taxes have been paid by French Casinos to municipalities. This tax figure excludes additional revenue received from employee wage payments and revenue derived from connected activities (such as resorts and entertainment, etc…).

Considering that some of the French Casinos are now in the process of laying-off employees, or even face the prospect of ceasing operations, the economic crisis will not only affect the French Casinos, but also the municipalities where the casinos are located.

Reasons for such a crisis

There are multiple factors which have directly and indirectly caused the French Casinos to face losses in revenue during 2008.

First, the smoking ban which became effective on January 1, 2008, has radically changed the habits of players. Players were used to being able to smoke and drink while playing. Instead of quitting smoking, players have preferred to neglect the casino properties and now play at home via the internet in order to keep smoking while gambling.

Second, as a consequence of the financial crisis and a general declining economic atmosphere, casinos have experienced an even greater decrease in players frequenting their properties.

Third, the strict identification and registration process for anyone to enter casinos premises in France has had a negative effect on the number of players entering casinos and, thus, likely contributed to a decline in gaming revenue. Such traceability of players and money may have contributed to regular casino patrons electing to play at foreign casinos in countries bordering France.

Finally, the French Casinos suffer from unfair competition from online gaming operators. According to French law, internet gaming is generally prohibited except in limited circumstances. Specifically, online gaming is only authorized by virtue of an exemption for the historic gaming actors in France: the two State monopolies, the Française des Jeux (FDJ) and the Pari Mutuel Urbain (PMU). Hence, these two majors gaming businesses are free to offer gaming opportunities which French Casinos are otherwise strictly prohibited from offering. Newly authorized casinos have even been sued in French courts when they attempt to enter the online market, whereas operators licensed by other Member States of the European Union are “free” to proceed to offer online gaming in France.

Opening of the market… any prospect for French Casinos?

On June 11, 2008, the French Government announced it would open its gaming markets as a result of pressure from the European Commission.

The imminence of a new legal framework has been confirmed; the main features of the new liberalized gaming law has been announced. However, because the legal process to open the French gaming market is still at a political stage, the new law is still an evolving work in progress. The French Parliament must still enact legislation and final amendments to the law may be made by the President. Therefore, the details which have been announced may be subject to subsequent changes. Moreover, implementing the new legal framework may not begin until the second half of 2009.

Opening up the French gaming market will primarily be directed at on-line gaming (which excludes off-line gaming such as lotteries, which will remain within the scope of the State monopoly “la Française des Jeux”, as Casinos being subject to special authorizations of the Ministry of Home Affairs and as Gaming Clubs (Cercles de Jeux) or Phone Gaming).

On-line gaming which may be authorized under the new gaming law regime include:

– betting on sport events;
– mutual betting on horse races and fixed odds betting for all other sports betting;
– poker and maybe a limited number of other games currently offered in Casinos and Gaming Clubs (“Cercles de jeux”), such as backgammon.

As a result, betting on virtual events, the financial market, spread betting or on results not linked to a true sports event are excluded from the liberalization of the French gaming laws. These games will remain prohibited under the new gaming law, as is the case under current French law. In addition, lotteries and slot machines will be excluded from the new law, even for online versions.

As far as French Casinos are concerned, the restrictions represent for online lotteries and slot machines their main point of contention because it prevents the French Casinos from developing a very lucrative business activity within the “information society.” It is well known that la Française des Jeux competes in these sectors of the gaming market. La Française des Jeux holds a State monopoly, which is officially justified by reasons of social health and public order. In reality the activities of la Française des Jeux represent a huge source of income for France.

On the positive side, as a result of the opening of the French gaming market, French Casinos will finally be officially allowed to operate online poker. Hence, the new regulation aims at creating a real opportunity for larger operators, which are able to fulfill all licensing criteria, to target the French online gaming market. This system tends to promote already operating and licensed large operators willing to adopt some responsible gaming measures and be subject to France’s control, as opposed to illegal or smaller entities. That is, the terrestrial casinos may have some preference in obtaining an online gaming license.

However, the new system is far from being adopted and implemented and does not even meet the main expectations of the French Casinos.

Latest measures announced in order to help the Casinos

Following up to a meeting held by the French Minister of Home Affairs, Michèle Alliot-Marie, with French Casinos representatives on November 14, 2008, the Minister officially proposed some measures to support terrestrial casinos facing the dramatic impact of the economic crisis.

Taking into consideration the popular success of poker tournaments, Michèle Alliot-Marie announced a relaxation of restrictions with regard to the organization of such tournaments. By the end of 2009, the number of tournaments will no longer be limited. In addition, French Casinos will be authorized to organise competitions off their premises, which is not authorized under the current gaming law.

Moreover, the Ministry assured casinos that the procedure authorizing new games will be considerably reduced.

Finally, conditions to request additional slot machines or further casinos games will be also relaxed with the aim of bringing players back to casinos.

Even if casinos representatives have expressed some satisfaction from the already announced changes, they are still waiting for answers regarding their main requests.

Main requests still unsatisfied

The Casinos have repeatedly pointed to the loss of revenue due to competition from online gaming. The new gaming law, which would potentially allow casinos to partially develop online activities, is still at a drafting stage. Considering the unfair competition domestic French casinos face and overall economic difficulties, French Casinos have requested a global review of the tax system. They have officially called for:

– an immediate decrease of or exemption from taxes until the new gaming law is in place;
– an update of the rates for the progressive tax, which has been obsolete for 22 years because of inflation;
– a distinction in the tax applicable to, on the one hand slot machines and, on the other hand table games, whereby the tax rate on table games should take into account the value generated from the greater employment table games generate in casinos;
– a strict limitation of 15% of the global tax payments should be shared with the municipalities.

These requests have been unfulfilled thus far and the draft legislation authorizing online gaming has been too restrictive for French Casinos. As a result, some French Casinos are seeking alternative solutions to contain their losses.

When the Casinos start to bet on the law…

Losing patience and excited by the success of online poker free rolls offer (up to 4000 players online simultaneously), The Partouche Group, one of the European leaders in terrestrial casinos, decided to promote a new online poker game with real money – which is absolutely illegal under current French law. This new offer is now available for French players on https://poker.partouche-game.com.

Partouche is the first French casino to cross the red line and challenge the French government. Nonetheless, as long as the current French gaming law system is the subject of criticism by the European Commission and the liberalization reforms for online gambling are still in progress, it is very unlikely that any prosecution will be made. On the other hand, who knows what will be decided under the future licensing system: could one bet that the new French gaming law will have some future consequences for Partouche to obtain a License?

Penalty for gaming operators in case they lure problem gamblers

The state government in Queensland, Australia has decided to increase the penalty for gaming operators who lure known problem gamblers back to their venues with advertising and promotion.

Recently, the state had put an end to new poker machines in Queensland. Premier Anna Bligh and Treasurer Andrew Fraser announced a permanent cap on the number of additional machines for clubs. The move will cost the Government $20 million a year in lost revenue.

As per the information available, in the latest move, laws would be introduced early next year to increase the fine to up to $4,000.

“This step introduces real penalties aimed at reducing a problem gambler’s exposure to material which could potentially worsen their situation,” said Bligh, who also emphasised on keeping children out of gambling venues to reduce the risk of breeding future problem gamblers.

According to Queensland Treasurer Andrew Fraser, the government had moved to place a cap on the number of pokies in pubs and clubs. Office of Liquor, Gaming and Racing statistics show in the month of October, Pine Rivers’ 859 gaming machines took in $4,044,084.31 at $4707.90 per machine. The rate was higher than Caboolture ($4145.53), Redcliffe ($4601.26) and Brisbane ($4213.46) for the same month.

The number of poker machines in Queensland pubs and clubs increased by 2560 between November 2005 and October 2008.