The ECJ dealt a further blow to online operators last week when it confirmed EU Member States can prohibit cross-border advertising on consumer protection grounds without breaching European law.
The ruling by the Court of Justice of the European Union (formerly the ECJ) followed an action brought by Slovenian online casino operators HIT and HIT LARIX after their applications for permits to advertise in Austria were refused. Austrian authorities claimed they had failed to prove Slovenian gambling protection standards were comparable to those in place across the border in Austria, or that its legislation was sufficient to prevent minors from playing online casinos. The Austrian Administrative Court asked the CJEU if the Austrian legislation was compatible with the freedom to provide services guaranteed under European law by Article 56 of the EU Treaty.
But the CJEU ruled last Thursday that a Member State such as Austria may restrict the advertising of casinos located in another Member State when protection levels for gamblers are not equivalent there, as long as this restriction can be justified by overriding reasons clearly in the public interest, such as consumer protection and prevention of fraud.
However, more positively for pan-European online gaming operators, the CJEU also ruled that the burden will fall on countries imposing such a ban to prove the measures being used are proportionate. Further, these Member States will only be able to impose such a ban if they have proved that the rules under which the foreign-based advertiser operates do not ensure equivalent levels of protection against the risks of gaming. Finally, they “cannot impose rules not directly related to protection against the risks of gaming”, meaning that any Member State which introduced rules clearly aimed at protecting incumbents such as state-backed gaming monopolies would no longer be able to justify their continued restriction of private operators’ freedom to provide gambling services.
The issues will be considered when the case is referred back to the Austrian Administrative Court to establish if the Austrian rules – including minimum share capital requirements for corporate entities – are proportionate and achieve their legitimate aim of shielding individual customers from the risks involved in gambling, or if they exceed what is strictly required to ensure player protection by also serving a protectionist purpose.
Online gaming industry lobby group the European Gaming and Betting Association, backed by PartyPoker and bwin owner bwin.party, BetClic and Unibet among others, said the ruling proved yet again that harmonisation of regulatory standards across the European Economic Area was urgently needed. EGBA Secretary General Sigrid Ligné said: “We welcome the CJEU’s ruling as it confirms that Member States cannot regulate the gambling market in isolation but need to take into account protection guaranteed by other Member States.”
The CJEU however, stated that in the current “absence of harmonisation in the field”, Member States were at present “free to set the objectives of their policy on games of chance and to define in detail the level of protection sought.”
Lawyer Dervla Broderick of Olswang said in a note: “The ruling highlights once again the fragmentation of EU Member States’ approach to gambling regulation and is a reminder that while outright protectionism will not be tolerated, there is still room for some Member States to take a more zealous approach than others.”
The CJEU last week cited the 2010 Carmen Media Case – in which the Gibraltar-licensed operator’s refusal of a licence in the German federal state of Schleswig-Holstein was upheld – in justifying Austria’s restriction on gaming activities in the interests of consumer protection. A number of other CJEU decisions in recent years have also in practice eroded online operators’ rights, enshrined within EU law, to offer gambling services across borders within the EU. In 2009, the court found in favour of Portuguese gambling monopoly Santa Casa de Misericordia against bwin, Carmen Media and the Portuguese football league. In June 2010, the court also found in favour of Netherlands gaming monopoly De Lotto against Betfair and Ladbrokes.