Dr. Andreas Leupold LL. M. (UT)
Leupold Legal
Dr. Andreas Leupold LL. M. (UT)
German Lawyer / Business Mediator
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Harmonizing online gambling services in the EU - a delicate start

November 04, 2014

On 14 July 2014, the EU Commission took a bold first step towards the harmonization of the rules governing online gambling services by issuing recommendations on how to protect consumers and notably minors from the perceived perils of this pastime (Commission Recommendation of 14 July 2014 on principles for the protection of consumers and players of online gambling services and for the prevention of minors from gambling online, Official Journal No. L 214/38 of 19 July 2014, downloadable at http://ec.europa.eu/internal_market/gambling/initiatives/index_en.htm - hereafter referred to as “the Recommendations”). While recommendations are often referred to as “soft law” that has no binding effect on Member States and merely suggests a possible line of action (see e.g. http://europa.eu/eu-law/decision-making/legal-acts/index_en.htm) the importance of this step must not be underestimated. Rather than delivering a comprehensive interpretation of these recommendations, this contribution provides readers with a focus on the most interesting provisions and shines a light on the questions the recommendations raise with regard to the permissibility of national bans on cross border gambling services in the EU and the road ahead to the full realization of a common European market for such services.

I. The essence of the Recommendations

The recommendations essentially consist of certain information requirements that every gambling operator must fulfill (Section III.), measures to prevent minors from gambling (Section IV.) requirements for player registration (Section V.), measures designed to protect players from overspending (Section VI.), the creation of time out and self-exclusion options (Section VII.), standards for commercial communications on gambling offers (Section VIII.), sponsorship (Section IX.) as well as suggestions on the education of consumers about online gambling (Section X.) and a very short “invitation” to the Member States “to designate competent gambling authorities to ensure and monitor in an independent manner effective compliance.

The need to prevent minors from gambling is certainly undeniable and the requirement that advertisements for gambling services should not specifically target minors or appeal to them in Section III. will contribute to achieving this aim. The introduction of electronic identification systems during the registration process suggested in Section V. serves the same purpose but poses similar challenges as in-game monitoring of a player ́s behavior under privacy considerations that have not yet been thought through to the end but should be solvable with the player ́s informed consent and technical solutions that incorporate data protection by design and by default as set forth in Art. 23 of the draft General Data Protection Regulation (Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data downloadable at http://www.janalbrecht.eu/themen/datenschutz-und-netzpolitik/alles-wichtige-zur-daten- schutzreform.html). While problem gamblers are indeed a rare breed among players (estimates vary between 0.1 and 0. 8 % of the general adult population (see p. 28 of the the Impact Assessment published by the EU Commission at http://ec.europa.eu/internal_market/gambling/initiatives/index_en.htm) the EU Commission ́s plea for enabling players to opt for time out and self-exclusion from a specific gambling service also make sense as they help to prevent players from developing a gambling disorder. Last but not least, the call for Member State action to prohibit misleading advertisements in Section VIII. and transparent sponsorships only reflect what can by and large already be deducted from national unfair competition laws.

II. The true challenge

All of these suggestions do not come as a surprise serve the legitimate aim to make online gambling a safe experience for consumers in the EU and protect minors from being exploited. So where ́s the catch, one might ask? The true challenge can only be found in the recitals and the accompanying impact assessment published by the EU commission (hereafter referred to as the “Impact Assessment”). The new set of recommendations will most certainly be only the first step on an irreversible journey to a gradual harmonization of the European gambling market that will benefit both consumers and gambling operators that are still prevented from exercising their freedom to provide cross border services, that is so crucial to the effective functioning of the EU internal market. To create a safe gambling market for consumers and enforce the freedom of services in such a market, the EU Commission will have to consider the following propositions:

(1) As recital 14 of the Recommendations aptly points out, online gambling operators established in the Union increasingly hold multiple licences across several Member States which have chosen license-based systems in relation to gambling regulation and could benefit from a more common approach. The multiplication of compliance requirements indeed create unnecessary duplication of infrastructure and costs, not only resulting in an unnecessary administrative burden on regulators, but first and foremost in a disproportionate burden on gambling operators. The insight that unnecessary duplication of regulatory requirements across the EU negatively impacts the competitiveness of regulated gambling sites (Impact Assessment p. 27, 33) must hence inevitably lead to the mutual recognition of the recommendations as a common benchmark that does not allow the application of different standards by any Member State.

(2) If a gambling operator meets or exceeds the criteria set forth in the Recommendations, it is safe to assume that consumers are adequately protected and are not exposed to any dangers beyond the ordinary risks of life. The logical consequence ensuing from this undeniable conclusion is the obligation of all Member States to grant any such operator a license and/or permit to offer its services in any Member State without being subject to further scrutiny and untransparent supplementary requirements. Once the recommendations are fulfilled, there is no need to limit the total number of licenses in order to “channel” players to sport bets and games of chance that are offered by state owned lotteries to protect citizens from unsafe gambling environments.

(3) Once the competent authority of a Member State has found that a gambling operator fully complies with the recommendations, regulatory authorities in other Member States may not challenge this assessment in the first place. Since things can change, however, national authorities may examine whether a specific operator still meets all criteria of the recommendations periodically and ask the operator to demonstrate his compliance.
(4) As the Commission pointed out correctly, regulators may fail to take action if there is no adequate regulatory oversight (Impact Assessment, p. 25). If the aim of a high level of safety and security for consumers and citizens is to be taken seriously, the task of monitoring online gambling services cannot –at least in the long run– be left to national regulatory authorities in Member States and their provinces that finance their budgets partly by revenues from state owned lotteries and are also offering sports bets. Even if the national authority that monitors online gambling services is not bound by instructions of the ministry or other government body that is promoting its own games of chance by its state owned lotto and sports betting companies, it is questionable whether any such authority will live up to its task to ensure an independent monitoring of all online gambling operators without drawing a distinction between state owned and private operators.

III. The road ahead

The carefully drafted and comprehensive Recommendations have received widespread approval from key stake holders that participated in their creation and show that Member States must not worry that harmonizing cross border online gambling in the EU may result in a “race to the bottom”. Exactly the opposite is true as the Commission has realized that “online gambling provides good opportunities for close monitoring of individual gambling behaviour and early detection of problem development” (Impact Assessment p. 22) and acted appropriately upon this finding. Now that consumers and minors are adequately protected, the next step must remove the obstacles that are impeding the free flow of gambling services within the European Union. The fragmented European gambling market that was caused by national monopolies, the lack of manageable safeguards to identify players and minors and the inherent conflict of interests that Member States are still facing due to their double role as monitoring bodies on the one hand and gambling operators on the other, effectively resulted in a vast and seemingly incurable black market for all kinds of gambling offers. The Recommendations are a first stepping stone to make gambling a safe consumer experience again but they alone cannot prevent gambling operators residing outside the EU from unduly exploiting consumers in the EU. Effective consumer protection will in fact remain a moving target until gambling operators who meet the criteria of the Recommendations are allowed to offer their services in any Member State without facing administrative sanctions or even criminal prosecution. Only then will consumers have no reason to direct their attention to dubious offerings from unlicensed third country gambling operators that do not comply with the Recommendations, if the internal single market becomes a reality for online gambling too. In such a market, where gambling services that are both attractive and safe for consumers and operators are neither hampered by different licensing requirements nor unrealistic tax regimes, consumers will have no need to let themselves be diverted from tried and tested offerings by operators that abide by the Recommendations. To make this single gambling market a reality against the stiff resistance from Member States is certainly no easy task that must nevertheless be tackled by the EU Commission as soon as possible if consumers are indeed to be safeguarded against the dangers that are not mitigated but exacerbated by monopolies and unregulated markets.


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