European Parliament approves Creutzmann report on online gambling

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

On 15 November 2011, the European Parliament voted in favour of a Report on online gambling in the Internal Market (the "Report") prepared by the Committee on the Internal Market and Consumer Protection which was chaired by German MEP, Jürgen Creutzmann (to see the report click here). The Committee's investigation ran in parallel to the European Commission's Green Paper consultation and collected views from across the gambling sector.

The Report's overarching argument is for greater co-ordination in the regulation of online gambling across the EU and its recommendations range from a call for a European Directive on consumer protection and betting fraud to a request for common standards on licensing. The Report acknowledges the unique nature of gambling as a service, and the validity of continued regulation by individual member states rather than at a pan-European level. On the other hand, it argues that as the sector grows dramatically, a lack of co-ordination between Member States distorts the competitive environment, permits grey and black market gambling to thrive on the internet, and fails to protect potentially vulnerable consumers.

Impact

The Report has been welcomed by gambling operators for its recommendations in favour of an EU-wide approach to online gambling regulation, in stark contrast to the 2009 Schaldemose Report (also approved by the European Parliament) which warned against regulation at an EU level. The Report is seen as a significant shift in the right direction. That being said, scepticism remains over the recommendation that the intellectual property rights of sports events organisers be protected (part of the so-called "betting right"), and also over the time the EU may take to put any positive recommendations into practice.

Michel Barnier, the European Commissioner responsible for the internal market and services, has been particularly forthright in communicating his intentions regarding increased cooperation on online gambling in the EU. In a speech given in Strasbourg prior to the Parliament's vote, Barnier praised the Report and outlined his intention to publish an action plan on online gambling by mid-2012. Barnier also undertook to foster a collaborative dialogue between the national gambling regulators of Member States in order to overcome the apparent lack of trust that exists between these bodies and to encourage increased cooperation.

Objectives

The Report's vision for the future of online gambling regulation in Europe is defined by both moral and practical considerations. Strong emphasis is placed on the protection of vulnerable consumers, in particular minors and those for whom online gambling is an addiction. Adopting a joined-up approach to regulating online gambling across Europe is suggested as the best means for market entry barriers to be lowered and for a safer regulated sector to thrive.

Creutzmann also explores the potential for gambling revenues to be put to use in furthering publicly beneficial causes. Citing the existing success in securing such revenues from legal and regulated gambling providers, the Report suggests that further revenues will accrue from greater regulation at the Member State level and that the public will benefit as a result.

Finally, the Report emphasises the importance of integrity in sports, and the threat posed to it by betting fraud. In particular, conflicts of interest arising between betting providers and sports clubs are singled out as areas of concern.

Recommendations

Several recommendations are put forward for achieving the objectives of the Report. The Commission's role is central, its suggested mandate being to explore all possible methods of protecting consumers across the EU. As a first step this could involve a pan-European code of conduct for online gambling which addresses the interests of both service providers and consumers and supports national and European agencies in combating cyber-crime. The longer term proposal would include a new European Directive.

The Report also suggests that the Commission co-ordinates a formal network of national regulators, acknowledging existing models such as the Gaming Regulators European Forum and the European Regulatory Platform as precedents. Such a network would prevent unregulated gambling providers playing Member States off against one another and exploiting regulatory gaps between national laws. It would also deter non-European criminal online gambling interests from operating in the EU.

Key specific policy recommendations in the Report can be found at clauses 20, 22 and 45.

Clause 20 proposes the introduction of a regulatory principle whereby a gambling company can only operate in one Member State if it does not operate in contravention of the law of any other Member State. This is significant in practice as it suggests a raising of the regulatory bar towards the highest common denominator.

Clause 22 urges the European Commission to adopt a more active approach in investigating inconsistencies between the Treaty on the Functioning of the European Union and Member States' national gambling legislation, and pursuing infringement cases to eliminate such inconsistencies where necessary. Currently, the Commission is failing to prosecute Member States whose national regulatory regimes are not compatible with EU law. Some outstanding cases stretch back as far as 2008, and to date no Member State has been referred to the European Court of Justice. If the Report were to result in the Commission gaining motivation to pursue Member States' infringements more vigorously, the commercial impact would obviously be positive. Whether this will be the outcome in reality remains to be seen.

Clause 45, the only part of the Report to receive overt criticism from the gambling lobby, emphasises the importance of protecting sports competitions from any unauthorised commercial use by recognising the property rights of sports event organisers. The purpose of this recommendation is stated as securing equitable financial returns for the benefit of all levels of amateur and professional sport, and to increase the resilience of sporting events to sports fraud, particularly match fixing. The Remote Gambling Association in particular has been vocal in denouncing this measure as a fig- leaf to allow lobbying sporting bodies to gain new income from betting products.

The Report makes further recommendations for the Commission at a practical as well as a policy level. It is suggested that the Commission's mandate could include providing legal support to consumers affected by illegal gambling practices. In order to combat the growing threat of gambling addiction, new studies should be conducted in the field of gambling-associated behavioural disorders and a formation of national organisations should be co-ordinated by the Commission, sharing expertise and providing care for addicts.

Future Developments

Predictions as to future developments vary. Many remain cautious as to how much attention online gambling is likely to receive given the current economic crisis in the Eurozone. At this point in time Member States may be even less willing to contemplate any risk to the lucrative tax revenues generated from online gambling. However, given Michel Barnier's commitment to change, the industry should be prepared for a potentially busy 2012.