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Dr. Andreas Leupold LL. M. (UT)
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High Administrative Court Baden-Württemberg: Equal treatment for Offerers of Games of Chance

July 01, 2013

High Administrative Court (VGH) of Baden-Württemberg: When prohibiting games of chance the authorities may not act with divergent approaches, inconsistent with the system or haphazardly

by Dr. Andreas Leupold, LL.M. (UT)

With its ruling of May 23, 2013 in the proceedings 6 S 88/13 (see http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/document.py?Gericht=bw&Art=en&az=6%20S%2088/13&nr=16973) the 2nd Senate of the High Administrative Court (VGH) of Baden-Württemberg has overruled the prohibition of the Regional Council Karlsruhe regarding the holding or organization of so-called “1-cent auctions” (see here http://en.wikipedia.org/wiki/Bidding_fee_auction) as the authority had exercised its discretion in misinterpretation of law. The plaintiff’s business model was characterized by the participation in such “auctions” held by the plaintiff only being possible with the purchasing and redemption of so called “offer points”, the costs of which were not reimbursable by the plaintiff. Between the parties of the proceedings it was in dispute as to whether such “auctions” can be seen as games of chance at all according to § 3 Section 1 subsection 1 of the Federal German State Treaty on Gaming (GlüStV). The High Administrative Court (VGH) and the previous instance affirmed this, although the organizer had brought forward some arguments to the contrary that are worth taking into consideration and saw the three essential features of a game of chance as being fulfilled, namely the presence of a game, its payment and its dependence on chance. Whether the participation in 1-cent auctions really, as the High Administrative Court (VGH) finds, is lacking “a serious commercial purpose” and the latter is therefore always to be seen to be a “game” however appears to be questionable; even if 1-cent auctions do not have a price-setting mechanism, the participant placing a bid, pursues with this tangible commercial purposes, for example the purchase of a refrigerator at a price below the regular market price. The High Administrative Court (VGH), however, also did not accept the argument of the plaintiff that the fees charged by the plaintiff for placing a bid that are non-reimbursable are actually participation fees, but saw therein remuneration, from which the players chances of winning arise. The outcome of the auction depended according to the opinion of the High Administrative Court also on chance, as it was not to be influenced by the participant how often he/she is outbid and how many bidding points the participant must deploy until he/she is finally awarded the tender, whether he/she has an economic benefit with the “tender” or whether the participant must use so many bidding points that his/her stake is higher than the market value of the product to be auctioned.

Whether or not the plaintiff’s 1 –cent auctions fulfilled all the criteria of a game of chance in the sense of § 3 Section 1 subsection 1 of the Federal German State Treaty on Gaming (GlüStV), the High Administrative Court (VGH) has nevertheless overruled the prohibition decreed by the authority as the authority had given no factual reasons as to why they had not taken action against a number of other offerers of such auctions. In this lacking of a uniform administrative practice, the High Administrative Court (VGH) correctly saw an arbitrary intervention in the freedom of profession/occupation and competition of the offerers affected by such prohibitions and thus a violation of Art. 3 section 1 and 12 subsection 1 of the Federal German Basic Constitution. That is to be agreed with and over and above that, it is to be determined that a coherent enforcement of the Federal German State Treaty on Gaming is also lacking, if the supervisory authority of a Federal German State only takes action against certain private organizers who do not have a permit for the games of chance offered by them in the respective Federal German State. The question of whether the nationwide coherent enforcement of the Federal German State Treaty on Gaming throughout the whole of the Federal Republic of Germany, which also is necessary, is lacking, if one and the same offering of a game of chance is prohibited in one Federal German State, but not in another, has also been presented by the Federal German Supreme Court with the ruling of January 24, 2003 to the European Court of Justice for preliminary ruling (BeckRS 2013, 03519 – „Digibet“; see here my annotation on this legal decision in GRUR-Prax 2013, 116). This will have to also be answered with a clear “Yes” as a divergent protection level with respect to certain offerings of games of chance in a Member State cannot be justified with its federal structure.

 

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