FREEDOM TO PROVIDE SERVICES ONLINE GAMING AND BETTING

IDESTMaster - Law of Space Activities and Telecommunications

FREEDOM TO PROVIDE SERVICESONLINE GAMING AND BETTING

December 14th, 2007

Fabien GaucherAttorney at the Paris Bar

Ulys Law Firm (Brussels and Paris)fabien.gaucher@ulys.net

www.ulys.netwww.gaminglaw.eu

EC TreatyArticle 49 EC

Principle: Restrictions on freedom to provide services within the Community are prohibited

Exception: Restrictions may be imposed only for reasons of public policy, public security or public health

EC case lawArticle 49 EC

A Member State may impose restrictions on freedom to provide services only if such restrictions comply with the general interest and are both necessary and proportional to the realization of the expected objective, while complying with the criterion of non-dicrimination.

EC case lawGaming and betting

Reasons of overriding general interest set out by the ECJ:

➡ Consumer protection

➡ Prevention of fraud

➡ Reduction of gaming and betting opportunities

EC case lawGaming and betting

A few decisions were issued by the ECJ which relate to gaming and betting:

- Schindler (1994)- Läärä (1999)- Zenatti (1999)- Anomar (2003)- Gambelli (2003)- Placanica (2007)

EC case lawGaming and betting

Gambelli (2003)

Threat of reduction of tax revenues and/or the financing of social activities cannot justified restrictions.

Restrictions must be consistent and systematic: a Member State which encourages gaming and betting to the financial benefit of the public purse cannot invoke public order concerns.

Existence of harsh criminal sanctions and rigorous controls in the EC Member State where the operator is based make regulations generally not proportional.

EC case lawGaming and betting

Placanica (2007)

Same principles:

Restrictions must be justified by overriding general interest and be proportionate and necessary.

Member States must have a systematic and coherent gaming policy.

French regulationsGaming and betting

What about France: do French gaming and betting regulations and policy comply with EC law?

French regulationsGaming and betting

Let’s take a look...

French regulationsGaming and betting

Principle: General prohibition of lotteries and betting (law of 21 May 1836)

Exception: Lotteries and betting organized by Française des Jeux (“FDJ”) (law of 31 May 1933 and decrees of 9 November 1978 and 1 April 1985)

Betting on horses races organized by Pari Mutuel Urbain (“PMU”) (law of 2 June 1891)

FDJ and PMU are granted exclusivity over the Internet

French regulationsGaming and betting

Harsh criminal penalties➡ Lotteries and sports betting operators: €60,000 + 2 years

➡ Horse races betting operators: €90,000 + 3 years

➡ Advertisers: €30,000 / x4 the amount invested

➡ ISPs: €75,000 + 1 year if they do not warn customers of blacklisted sites

➡ Banks required to stop transferring funds relating to online gambling (?)

Situation of FranceGaming and betting

Legal proceedings and threats➡ Criminal complaints filed by the monopolies

➡ Judicial proceedings against Zeturf and Partouche

➡ Arrestation of Bwin’s CEOs and of Unibet’s CEO

➡ Hearing of personalities (e.g. Patrick Bruel)

➡ Pressures against public authorities (e.g. CSA and LFP)

➡ Pressures against partners of online gaming and betting operators

Situation of FranceGaming and betting

Objections put forward by France:

- Public and social order- Fight against money laundering

These concerns may be reasons of overriding general interest... but ONLY if:

➡ they are suitable for achieving theses objectives

➡ they limit gaming and betting in a consistent and systematic manner

Situation of FranceGaming and betting

Is this the case in France?

Key figuresMonopolies

- Semi-public corporation- Controlled by the ministry of budget- Offers lotteries and sports betting- Distribution: offline and online

- Economic Interest Group- Controlled by the ministry of agriculture- Offers betting on horse races- Distribution: offline and online

Key figuresMonopolies

Key figuresFrançaise des Jeux

Key figuresFrançaise des Jeux

Key figuresFrançaise des Jeux

Key figuresPari Mutuel Urbain

Key figuresPari Mutuel Urbain

Key figuresPari Mutuel Urbain

NetworkFrançaise des Jeux

NetworkPari Mutuel Urbain

MarketingMonopolies

Is FDJ and PMU’s advertising communication aggressive...?

MarketingMonopolies

FDJ was the 16th largest French media advertiser in 2006

➡ €132 million allocated to advertising➡ Advertising expenses has increased by 100% in 4 years

MarketingFrançaise des Jeux

MarketingPari Mutuel Urbain

Protection of playersMonopolies

Do FDJ and PMU protect players?

Protection of playersFrançaise des jeux

FDJ released 2 leaflets in 2006:

Protection of playersFrançaise des Jeux

Does FDJ protect minors...?

Protection of playersFrançaise des Jeux

Does FDJ protect minors...?

PMU released 1 leaflets in 2006:

Protection of playersPari Mutuel Urbain

PMU’s CEO statement in the 2006 annual report...

“PMU offers to punter a moderate number of occasions to bet: an average of 17 races per day”

DistributionFrançaise des Jeux

FDJ and “Bouquets d’Objets”:

DistributionPari Mutuel Urbain

PMU launched “PMU Mobile” in 2006:

DistributionPari Mutuel Urbain

Equidia Info

Paris Ovales

Pariez Spot

InternationalFrançaise des Jeux

EuroMillions

InternationalPari Mutuel Urbain

Situation in FranceOnline gaming and betting

What conclusion?

Situation in FranceOnline gaming and betting

France obviously fails:

➡ to meet the suitability standard- Money-driven policy

➡ to meet the proportionality standard- Monopoly system- Severe criminal sanctions

Situation in FranceOnline gaming and betting

Consequently, a few European operators filed complaints against France before the European Commission...

➡ Mr Bookmaker➡ Bwin➡ The French casinos union

Situation in FranceOnline gaming and betting

...and these initiatives were successful!

European CommissionOnline gaming and betting

What reaction from the European Commission?

➡ Infringement procedure on 12/10/2006 Sports and horse races betting only France was given 2 months to justify its regulations

➡ Reasoned opinion on 27/06/2007 France was given 3 months to comply with EC law

Situation in FranceOnline gaming and betting

What next?

Situation in FranceOnline gaming and betting

France has no choice than to open the French gaming and betting market...

➡ Ongoing talks with the European Commission

➡ A dra= gambling act to be ready in March 2008

➡ Licence system (exclusion of the mutual recognition principle)

➡ Tax issues

Thank you for your attention

Fabien Gaucherfabien.gaucher@ulys.net