Stakes high as gambling industry battles for EU access

Meanwhile, the debate continues elsewhere:
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Financial Times FT.com



Stakes high as gambling industry battles for EU access

By Tobias Buck in Brussels
Published: August 10 2006 03:00 | Last updated: August 10 2006 03:00


Werder Bremen, one of Germany's leading football clubs, is used to facing down opponents on the pitch rather than in the court room. But this summer the team has been fighting a legal battle to save its €6m ($7.7m, £4m) sponsorship deal with Bwin, an internet betting company.
The city of Bremen insisted Bwin's logo should appear neither on the team jersey nor in the club's stadium, arguing the company had no licence to operate in Bremen. Last month the club won an injunction against the ruling but now it may well have go to courts across Germany and pick off the country's 16 federal states one-by-one.
For Bwin, however, things have taken a turn for the worse. Yesterday its shares dropped 30 per cent on reports that the group's German betting licence would be revoked by Saxony's interior ministry, which called a press conference on the issue for later today.
Bremen's and Bwin's travails are part of a wider conflict being fought across the European Union, pitting sports betting and gambling companies against governments desperate to keep these fast-growing businesses out of their markets.
At stake are not just the prospects of an industry that has enjoyed rapid growth thanks to the rise of the internet but also the sanctity of the EU's prized internal market, the web of rules that allows goods and services to circulate freely between the union's 25 member states.
The industry's troubles in Europe have an echo in the US, where prosecutors are cracking down hard on internet betting and gambling providers. The campaign has already ensured that David Carruthers, former chief executive of BetonSports, the British internet gaming company, is in jail in Texas waiting a bail hearing more than three weeks after his arrest for alleged violations of US gambling laws.
In Europe the threat faced by senior industry executives is more to their profit growth than to their liberty. But they are taking it seriously all the same.
"It is a complete mess," says Malcolm Harbour, a British Conservative member of the European parliament and expert on the EU internal market. "Some markets, such as the UK, are open and regulated. Others are nominally open but governments have been trying to restrict operators. And some countries have strongly entrenched state lotteries which the governments are trying to protect at all costs."
According to several rulings by the European Court of Justice, lotteries and sports betting operators enjoy the same rights as other service providers under EU law. Just like hair-dressers, builders and cooks, they should in principle be free to offer their services across the EU. Governments may impose restrictions but they have to be consistent, proportional and non-discriminatory.
In practice, however, many member states have erected barriers that close off their markets to foreign sports betting and gambling businesses. Supporters of gambling restrictions say such measures are necessary to fight the social ills associated with the industry - from gambling addiction to organised crime. But critics point out such views sit uncomfortably with the behaviour of state-owned gambling and betting monopolies that promote their services widely.
Adrian Morris, finance director of Stanleybet, the UK operator, says: "Is there a demand for our product? Yes. But the harder question is: How determined will the authorities be and what are the chances of stopping them? There are some countries where . . . the legal process is very drawn-out. "
Mr Morris adds: "In this sector the internal market hardly exists. It is not about not working properly, it just does not exist because there are so many barriers."
Earlier this year the European Commission, the body responsible for ensuring the smooth functioning of the internal market, took aim at some of those barriers. It launched legal challenges against seven member states - Germany, Italy, the Netherlands, Sweden, Denmark, Hungary and Finland - for illegally restricting sports betting services.
The countries had, for example, required operators to hold a state concession or licence even if the company was already lawfully licensed in another member state. Others had banned sports betting companies from advertising and promoting their services.
The Commission's intervention, which could ultimately land the seven countries in the European Court of Justice for violating EU law, was welcomed by the industry. But Torbjörn Ihre of the European Betting Association, an industry lobby group, says operators had really been hoping to be included in the EU's services directive, a sprawling and controversial piece of legislation designed to break down national barriers faced by all services providers.
To the industry's dismay, gambling services were specifically excluded in the directive's final draft this year, leaving the operators in limbo once more.
Mr Ihre says: "There is a real need for a harmonised approach to betting legislation in Europe. Whether this should come as a special EU directive or through other legislative measures is difficult to say.
"But someone who decides to bet with his money should have a choice - like any other consumer."

Copyright The Financial Times Limited 2006




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