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The EC Green Paper – an ‘ambitious consultation’?

On March 24th, the European Commission published an online gambling Green Paper designed, apparently, to find out if the member states of the European Union are willing to embrace an online gambling framework to regulate the industry across Europe. Its primary aim, according to the EU, is “to obtain a facts-based picture of the existing situation in the European Union online gambling market” while investigating the “different national regulatory models”.  This prompts a number of questions of which the most immediate and pressing is ‘what planet are they living on?’  Michael Barnier, the European commissioner for Internal Market and Services calls it “an ambitious consultation with no pre-determined views on its possible follow-up”, but it is hard to consider a consultation as being particularly ambitious when the answer to the question it is designed to answer is already known and has been for some time; the answer, of course, being ‘no’.

Professor Peter Collins, in a presentation he made some years ago on the future of gambling in Europe, highlighted a number of inherent conflicts of principle at work when faced with harmonising gaming regulation across Europe. The view was that gambling policy needs to be shaped by sensible policies about consumer choice, harm prevention and taxation.  All European countries understand this in general but nevertheless have radically different specific policies in respect of these objectives. “The European Court and the Commission don’t understand this, and, especially, they don’t understand why you can never have a free market in gambling.”

Since Professor Collins made that remark some five years ago, nothing has changed in this respect and, seemingly, no lessons have been learnt. What has happened is that, following the UK, both France and Italy have regulated their markets, all using a different basis and all pursuing different motives. Nevertheless, it should be noted that these countries’ desire for regulation was not about providing players with a better structure in which to gamble, but rather about the opportunity to earn more revenue or to defend existing revenues by enshrining their gambling monopolies in some form of protection; in other words, a position that inexorably sets them on a collision course with the EU with its founding principle of creating ‘an internal market where competition is free and undistorted’. Now, more and more European countries are moving towards regulation and the EU has obviously decided it can no longer ignore the elephant in the room.

The nature of the problem, however, has not changed. So far, the member states within the 27-country EU bloc have consistently and, according to Nikki Tait of the Financial Times, are “notoriously unwilling to cede any control over gambling policy in Brussels.”  Ostensibly, this is on public interest and citizen welfare grounds, although, in reality, it is because no European jurisdiction is prepared, particularly in times of economic hardship, to renounce their taxing prerogatives. Moreover, on-line gambling, as Tait points out, has already “been effectively excluded from several internal market related directives, including the services directive.” Admittedly, the EC has begun infringement actions against about 10 countries, but there has been practically no movement on these in the past few years, and some have been closed as countries have made changes to their laws.

The EU has decided, it would seem, that it can no longer ignore the issue and that, not unreasonably, they must do something about it. I say ‘not unreasonably’ because anybody that has time to pass regulations on the green-ness of the person on the pedestrian crossing lights and issue three separate directives on the loudness of lawnmowers, cannot afford to be seen ducking a challenge to its raison d’être. They have to do something and, in the time-honoured custom of government, this ‘ambitious consultation’ is the something that they are doing. As Groucho Marx once said ‘politics is the art of looking for trouble, finding it everywhere, diagnosing it wrongly and applying unsuitable remedies’.

Perhaps this is a bit harsh. It is after all hard to disagree with what the European Commission indicates is the primary aim of the Green Paper, namely to ‘obtain a facts based picture of the existing solution in the European Union online gambling market’ while investigating ‘different national regulatory models’. However, given that the situation has existed not just in theory but also has been vigorously challenged in various courts of Law over a number of years, it does slightly beg the question why the EU has waited so long to get a facts-based picture of the industry. The Green Paper also promises that ‘there will be no predetermined views on its possible follow up’, which, given that what seems to have prompted this fact seeking initiative in the first place is the realisation of a number of facts, this seems disingenuous at best.

The facts in question, of course, are that annual revenues from on-line gaming within Europe have already topped €6 billion and look to double by 2013 and that online activity is now the fastest growing segment of the gambling markets, accounting for 7.5% of total annual revenues in 2008. In other words, it would appear that they have at last recognised that on-line gambling is big, growing and important and that, therefore, following on from their successful intervention in 2008 into the important issue of the kiwi fruit market, where, crucially, they banned the sale of kiwi fruits that were too small, they must be seen to act.

Its response, the Green Paper, asks a total of 51 questions. These questions, essentially, revolve around four areas; firstly, the definition and organisation of online gambling services; secondly, related services performed and/or used by online gambling services providers; thirdly, public interest objectives such as consumer protection, public order and financing of ‘good causes’; and, finally, enforcement. Interestingly, it omits the central question of how different countries can reconcile the EU’s ‘ambition’ with its own fiscal imperatives. As a consequence, if they are seriously about finding a resolution, they are, in fact, asking the wrong questions.

Indeed, this may be why reactions to the adoption of the Green Paper have been generally positive. The European Casino Association, for example, welcomed the Commission’s initiative to address the ‘crucial’ question of “whether the current rules at EU levels are sufficient to ensure an adequate environment for gambling across the EU”, while the European Lotteries expressed their full support of the Commission’s approach to “recognize subsidiarity and accept the Member States’ wide margin of political discretion in gambling policy”. Both organisations find comfort in the Green Paper, albeit that they have diametrically opposite views on how best the issue can be resolved. The European Gaming and Betting Association, on the other hand, although welcoming the Green Paper, expressed its concern with the Commission’s “apparent lack of commitment to curb further fragmentation of the common market”, while the Remote Gambling Association highlights the “lack of interest to address ‘Member States’ restrictions on the freedoms of the internal market.”

In effect, then, what everyone agrees on is that there is an issue and, metaphorically, the Green Paper resembles the German and British soldiers in the First World War playing football against each other on Christmas Day. It is a welcome gesture but it does not form part of the solution,

Moreover, it is difficult to envisage how, other than both sides agreeing on what the facts are, it could lead to a solution when the EU appear so unwilling to grasp the nettle of taxation. The Green Paper seeks to cajole recalcitrant jurisdictions by highlighting that fewer than 15% of the near 15,000 gambling sites are fully licensed. This purports to be a concern about player protection but is, in fact, a stark reminder to Member States of the vast leakage of revenues that derive from non-regulated markets. The Commission also goes to maintain that a “significant unauthorised cross-border market has developed, often from outside the EU” and that, wait for it, there is “a grey market of operators approved in one member state but also operating elsewhere without proper authorisation.”  Talk about a statement from the Ministry of the Bleeding Obvious. Where have they been? Have they not heard of Unlawful Internet Gambling Enforcement Act, passed in the US in 2006, or considered its consequences? Have they not read Party Gaming’s annual report, which reveals that they earn a substantial proportion of their revenues from Germany, which, categorically, they do without ‘proper authorisation’? Have they never come across Poker Stars or Full Tilt? If not, I revert to the earlier question and wonder what planet they are living on.

In September last year, gambling companies won a rare legal victory in their quest to loosen government monopolies in continental Europe when the European Union’s top court found that German betting restrictions contravened EU laws, particularly the extensive advertising undertaken by the Government and State monopolies. However, some advisors to the German states have argued that, complying with the ruling would mean that the states would not only have to rein in their advertising but also to grapple with the thorny problem of how to harmonise rules for racecourse betting and slot machines. Given these requirements, they say, liberalisation could prove the only path.

However, Michael Barnier, the internal market and service commissioner, despite his claims for a consultation with “no pre-determined views” has already ruled out any liberalisation. As he says himself “this consultation is not about liberalisation of the market. It is about ensuring that the market for online gambling within the EU is well regulated for all.”  However, as Sigrid Ligne, Secretary General of the European Gaming and Betting Association puts it: “we are deeply concerned that the focus of the paper seems to be on a national rather that an EU approach despite the clear cross-border nature of the sector. What we expect is the Commission to propose an EU regulatory framework for on-line gambling as it has done for other inherently highly regulated sectors such as telecoms or pharmaceuticals. In parallel, the Commission, in its role as guardian of the Treaty, should vigorously and systematically pursue infringement proceedings against those member states that continue to violate EU Law.”

That’s never going to happen and certainly not as a result of this Green Paper. In this sense only is the Green Paper ‘ambitious’.  As the old saying has it ‘If you don’t know where you are sailing to, then no wind is favourable.”

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