The regulatory situation for on-line gambling is characterized by the fact that in 2006 the Commission, following a unanimous demand of the Council and the European Parliament in first reading, excluded gambling services from the scope of its modified proposal for a Services directive21. As a consequence of the lack of political will to consider the adoption of secondary law in this sector, the focus turned to the application of primary law. A number of infringement proceedings22 against cross-border restrictions to such services were processed as a result of the many complaints lodged with the Commission for alleged violations of the Treaty. As the Court of Justice of the EU (CJEU) has now developed and set out a number of guiding principles, a significant proportion of the Member States against which the Commission opened infringement cases have since launched national regulatory gambling reforms and more than 150 draft Acts and regulations have been notified to the Commission23.
A study by the Commission in 200624 examining the various laws regulating on-line and offline gambling services’25 and their impact upon the smooth functioning of the Internal Market for these and associated services presented a picture of a very fragmented Internal Market where Member States frequently imposed restrictions to cross-border gambling services. The interpretation of national rules was not always clear and the study listed almost 600 cases before national Courts demonstrating the significant legal uncertainty affecting the EU market for such services26.
The Treaty on the functioning of the European Union (TFEU)
Article 56 of the TFEU prohibits restrictions on the freedom to provide services to recipients in other Member States. In Schindler27 the CJEU confirmed for the first time that the provision and use of cross-border gambling offers is an economic activity that falls within the scope of the Treaty. The Court furthermore held in Gambelli28 that services offered by electronic means were covered and that national legislation which prohibits operators established in a Member State from offering on-line gambling services to consumers in another Member State, or hampers the freedom to receive or to benefit as a recipient from the services offered by a supplier established in another Member State, constitutes a restriction on the freedom to provide services.
Restrictions are only acceptable as exceptional measures expressly provided for in Articles 51 and 52 TFEU, or justified, in accordance with the case-law of the Court, for reasons of overriding general interest. A certain number of reasons of overriding general interest have been recognized by the Court, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander on gaming, as well as the general need to preserve public order. The reduction of tax revenue however is not one of the grounds listed in Article 52 TFEU and does not constitute a matter of overriding general interest. The recognised societal issues can all serve to justify the need for national authorities to have a sufficient margin of discretion to determine what consumer protection and the preservation of public order require in terms of type of service provision offered in this field29.
The case-law also requires that such service provision and the cross-border restrictions that may result from the regulatory approach must bring about a genuine reduction of gambling opportunities and be applied in a consistent and systematic manner to all service offers in the area30. In so far as the authorities of a Member State incite and encourage consumers to participate in lotteries, games of chance and betting to the financial benefit of the public purse, the authorities of that State cannot invoke public order concerns relating to the need to reduce opportunities for betting in order to justify restrictions31. Restrictions must be applied without discrimination and be proportionate, i.e. they must be suitable for achieving the objective which they pursue and not go beyond what is necessary in order to attain it. The procedure for the grant of a licence is bound to comply with the principles of equal treatment and non-discrimination and with the consequent obligation of transparency32.
Of particular interest for this consultation is the Court’s view that gambling services offered via the internet have several specific characteristics which enable the Member States to adopt measures restricting or otherwise regulating the provision of such services, in order to combat gambling addiction and protect consumers against the risks of fraud and crime. Those specificities are the following:
(1) In the sector of on-line gambling, authorities of the Member State of establishment encounter specific difficulties to assess the professional qualities and integrity of operators. These difficulties justify that a Member State takes the view that the mere fact that an operator lawfully offers on-line gambling services in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the authorities of that Member State, cannot be regarded as amounting to a sufficient assurance that its own consumers will be protected against the risks of fraud and crime33;
(2) The lack of direct contact between the consumer and the on-line gambling operator gives rise to different and more substantial risks of fraud by operators against consumers compared to the traditional gambling market34; and
(3) The particular ease and the permanent access to on-line gambling services and the potentially high volume and frequency of such an international offer, in an environment which is characterized by isolation of the player, anonymity and an absence of social control are factors likely to develop gambling addiction and lead to other negative consequences (The Court also states that the internet may prove to be a source of risks of a different kind and a greater order in the area of consumer protection, particularly in relation to young people and those with a propensity for gambling or likely to develop such a propensity, in comparison with traditional markets for such games)35.
The Court developed its case-law primarily on the basis of references for preliminary rulings from national courts. At the same time however the Commission launched a series of infringement proceedings against Member States in order to verify on the basis of the jurisprudence of the Court the proportionality of restrictions implemented in Member States. Following reforms in Member States the Commission has already closed some of these cases36.
Furthermore, the European Commission has opened, under EU state aid rules (Articles 107 and 108 TFEU), a formal investigation to examine whether lower taxes for online casinos in comparison to traditional casinos in Denmark are in compliance with the Treaty rules37.
EU secondary legislation relevant to on-line gambling
As regards secondary European law, gambling services are not regulated by sector-specific rules at EU level but nevertheless are subject to a number of EU acts38. The following texts are noteworthy in this respect39: the Audiovisual Media Services Directive40, the Unfair Commercial Practices Directive41, the Distance Selling Directive42, the Anti-Money Laundering Directive43, the Data Protection Directive44, the Directive on privacy and electronic communication45, and the Directive on the common system of value added tax46. In other cases gambling services have been explicitly excluded from the scope of EU law. This is the case of the E-commerce Directive47 and of the Services Directive48.
21 COM(2006) 160, 4.4.2006. Currently Article 2(2)(h) of the Services Directive expressly excludes gambling activities.
22 Commission launched inquires into restrictions on sports betting services in a number of Member States on 4 April 2006 (IP/06/436). The Commission was criticized for not processing these complaints fast enough by the European ombudsman following a complaint lodged with his office by the European Parliament (Case number: 289/2005).
23 151 notifications relating to gambling were notified to the Commission under Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations (OJ L 204, 21.7.1998, p.37) (amended by Directive 98/48/EC (OJ L 217, 5.8.1998, p. 18)) 2005 – 2010.
24 Study on gambling services in the EU Internal Market, by the Swiss Institute of Comparative Law.
25 (1) lotteries, (2) betting; (3) gambling offered in casinos; (4) gambling on gambling machines that are placed in locations other than licensed casinos; (5) bingo; (6) media gambling; (7) sales promotion services consisting of promotional games with a prize exceeding € 100,000 or where participation is exclusively linked to purchase; (8) gambling services operated by and for the benefit of recognized charities and non-profit making organizations.
26 587 cases, most of these cases were dealt with by German Courts.
27 Case C-275/92, ECR 1994 Page I-01039.
28 Case C-243/01, ECR 2003 Page I-13031.
29 C-275/92, ECR 1994 Page I-01039; Case C-124/97, ECR 1999 Page I-06067; Case C-67/98, ECR 1999 Page I-07289.
30 Case C-67/98, ECR 1999 Page I-07289; Case C-243/01, ECR 2003 Page I-13031.
31 Case C-243/01, ECR 2003 Page I-13031.
32 Case C-203/08, ECR  Page I-0000.
33 Case C-42/07, ECR  Page I-7633, § 69, see also section 2.4 (enforcement) and question 48.
34 Case C-42/07, cited above, § 70. As regards face-to-face customer identification and age verification, see questions 16 and 24.
35 Case C-46/08, ECR , Page I-0000, §103. As regards factors linked to problem gambling, see questions 17 and 19.
36 See IP/10/504 (Italy) and IP/10/1597 (France). The Commission has also closed a case against Austria (no IP)
37 Case C35/2010 – DA – Duties for online gaming in the Danish Gaming Duties Act (OJ C 22, 22.1.2011) and IP/19/1711. See also Staff working document Section 2.3.
38 See Section 2.1 of the Staff working paper.
39 For a more complete listing of EU secondary legislation, see “Staff working document”.
40 OJ L 95, 15.4.2010, p. 1.
41 OJ L 149, 11.6.2005, p. 22.
42 OJ L 144, 4.6.1997, p. 19.
43 OJ L 309, 25.11.2005, p. 15.
44 OJ L 281, 23.11.1995, p. 31.
45 OJ L 201, 31.7.2002, p. 37.
46 OJ L 347, 11.12.2006, p. 1.
47 OJ L 178, 17.0.2000, p. 1.
48 OJ L 376, 27.12.2006, p. 36
Credit © European Union