Source: EURLEX
Language: en
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# 52012SC0345

**COMMISSION STAFF WORKING DOCUMENT Online gambling in the Internal Market Accompanying the document Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions Towards a comprehensive framework for online gambling /\* SWD/2012/0345 final \*/**

  

TABLE OF CONTENTS

1.    Introduction. 4

2.    Definition. 6

2.1.     Games of
chance. 6

2.1.1.      EU.. 6

2.1.2.      Member
States. 7

2.2.     Online
gambling. 7

3.    The
market for online gambling services in Europe, and beyond. 9

3.1.     Global
Market 9

3.2.     Gambling
market in Europe. 9

3.3.     Cross-border
dimension. 11

3.4.     Technology. 13

3.5.     Data and
understanding. 13

4.    The
regulatory situation in Europe and national frameworks. 15

4.1.     EU
secondary legislation relevant to online gambling. 15

4.2.     The
notification procedure. 18

4.3.     Regulatory
framework for online gambling in Member States. 19

5.    EEA
case-law on games of chance. 21

5.1.     Introduction. 21

5.2.     The
organisation of games of chance is an "economic activity" covered by
the fundamental freedoms rules of the TFEU   23

5.3.     Restrictions
on the free movement of services and the freedom of establishment 24

5.4.     General
interest reasons which may justify restrictions on gambling activities. 27

5.5.     The
provision of gambling services via the Internet 29

5.5.1.      Specific
characteristics of on-line gambling. 29

5.5.2.      Taking
account of the checks on operators of games of chance carried out in other
Member States  30

5.6.     General
criteria for assessing the proportionality (suitability and necessity) of
national restrictions under different types of regulatory frameworks. 31

5.6.1.      A ban
on games of chance. 32

5.6.2.      An exclusive
right/monopoly. 32

5.6.3.      A
system of licensing. 41

5.7.     Assessing
the proportionality of specific corporate requirements imposed on gambling
operators  45

5.7.1.      Seat
requirements. 45

5.7.2.      Legal
form for operators of games of chance. 47

5.7.3.      Minimum
share capital requirements. 47

5.8.     Application
of State aid rules. 47

6.    Administrative
cooperation and efficient enforcement 49

6.1.     The
regulatory authority. 49

6.1.1.      Role
and competences of regulators. 50

6.1.2.      Institutional
arrangements. 50

6.2.     Administrative
cooperation. 50

6.2.1.      Existing
administrative cooperation. 51

6.2.2.      Areas
for administrative cooperation. 52

6.2.3.      Tools
for administrative cooperation. 54

6.2.4.      Cooperation
with other enforcement bodies and stakeholders. 56

6.2.5.      Cooperation
with third countries. 57

6.3.     Enforcement
measures. 57

6.3.1.      Preventive
enforcement measures. 57

6.3.2.      Responsive
enforcement measures. 59

7.    Protection
of consumers and citizens, including minors and other vulnerable groups. 67

7.1.     The
current framework. 67

7.2.     A safe
and regulated offer to protect consumers. 68

7.2.1.      A Recommendation
on common protection of consumers. 70

7.2.2.      The
Commission Proposal on Electronic Identification. 71

7.2.3.      Consumer
Survey of Gambling Services. 73

7.3.     The
protection of minors. 75

7.3.1.      Initiatives
to protect minors. 76

7.4.     Responsible
Advertising. 77

7.4.1.      A
Recommendation on Responsible Gambling Advertising. 79

7.5.     Problem-gambling
and gambling addiction. 80

7.5.1.      Key
challenges. 82

7.5.2.      EU
Initiatives. 86

8.    Fight
against fraud and money laundering. 89

8.1.     Commission
initiative on identity theft 89

8.2.     The EU
Anti-Money Laundering Directive. 91

8.3.     Certification
of gambling equipment 92

9.    Integrity
of sport and match fixing. 94

9.1.     Existing
anti-match fixing measures. 96

9.2.     Criminalisation
of match fixing. 98

9.3.     International
cooperation on match fixing. 99

10.      Financing
Systems for benevolent and public interest activities. 100

10.1.       Societal
activities benefitting from revenue derived from gambling. 101

10.2.       Sport,
including horseracing: a main beneficiary. 102

1.
Introduction

The online gambling services sector
accounts for 10.9% of the gambling market share in the EU with a growth rate for
2015 estimated to be double that of 2008, which stood at €6.6 billion. In
parallel, online technology is developing at a face pace. A large number of Member
States has engaged in a review of gambling legislation particularly over the
last few years. Given the cross-border nature of online gambling improving and
sustaining the protection of consumers and the regulatory environment is in the
interest of all Member States. This is achievable by the Member States and the EU working together.

Against this backdrop the Commission
launched the Green Paper[1]
in March 2011 primarily aimed at obtaining a facts-based assessment of the EU online
gambling market and of the different national regulatory frameworks of the
Member States. The consultation focused on six key interrelated themes: 1)
Definition and organisation of online gambling services; 2) Rules and practices
relating to services performed and/or used by online gambling service
providers; 3) Consumer protection, including minors; 4) Public order (fraud and
money laundering); 5) Financing of benevolent and public interest activities
and events; 6) Enforcement of applicable laws.

The responses to this consultation
encompass close to 260 contributions from a diverse range of stakeholders: public
authorities, commercial and public operators, intermediary services providers
(e.g. media, internet, data storage, payment) beneficiaries of societal
organisations, researchers and academia. An overwhelming majority of Member
States contributed to the consultation. A Resolution[2] was adopted by
the European Parliament whilst the Economic and Social Committee adopted an
Opinion[3]
on the Green Paper.

The Commission services complimented the consultation
with five thematic workshops organised around key issues identified in order to
benefit from the knowledge and experience of experts in the field. The
workshops focused on sports integrity (fight against match-fixing), detection
and prevention of problem gambling and gambling addiction, financing mechanisms
regarding public interest activities benefitting from revenue derived from
gambling and the  prevention of crime and enforcement.

The Commission services have assessed the contributions
to the Green Paper in detail and have drawn from the resourceful information
and valuable insight provided together with the workshop conclusions, the
expert group meetings with the regulatory authorities of EU/EEA jurisdictions, meetings
with stakeholders as well as other sources of information.

Whilst the Green Paper focused on the online
segment of gambling services and topics linked to the free movement of services
(Article 56, Treaty on the Functioning of the EU), a number of these are
pertinent to all forms of gambling services.

Finally, the supply of online gambling
services is influenced by evolving information and communications technology.
It includes forms of gambling using means of electronic or distance
communication such as digital TV, mobile phone technology, telephone and fax.

It is within this context that the present
staff working document addresses the challenges in the EU. The staff working
document accompanies the Communication "Towards a comprehensive European
framework for online gambling". The Action Plan, seeking to enhance legal
clarity and establish policies based on evidence, identifies the prevailing issues
across the Member States, examines the shortcomings and explores solutions for:

-           compliance of national regulatory frameworks with EU law

-           enhancing administrative cooperation and efficient
enforcement

-           protecting consumers and citizens, minors and vulnerable
groups

-           preventing fraud and money laundering

-           safeguarding the integrity of
sports and preventing match-fixing

This document is structured along these
parameters, substantiating the issues and shortcomings as well as the mix of actions
being proposed to strengthen the impetus to tackle the shared challenges. In
addition, this document delves into the definitions, the market for online
gambling services, the regulatory situation in Europe, the fundamental
principles of the EU Treaty and the financing systems for public interest
activities. The evidence in the report stems from the Green Paper public consultation;
case-law of the Court of Justice of the EU and the EFTA Court, and other
sources referred to earlier.

The proposed list of actions and the
timeframes for taking forward the initiatives in this area can be found in the
Action Plan.

The summary of replies to the Green Paper
consultation is published alongside the Communication and this staff working
document. All the non-confidential contributions and the conclusions of the
workshops can be consulted on the Commission website[4].

This is an
indicative document of the Commission services, which cannot be considered in
any way binding on the Commission as an institution, and it is without prejudice
to the interpretation of EU law by the Court of Justice of the European Union.

2.
Definition

The term "online gambling" refers
to a range of different gambling services and distribution channels[5]. Definitions
at national level vary or do not exist.

The term
"games of chance" when the activity is offered online can cover a
number of different gambling services, such as

•
Betting services
(including horse and dog racing, event betting and pool competitions),

•
Poker and casino
services,

•
Bingo services,

•
Gambling services
operated by and for the benefit of recognised charities and non-profit making
organisations,

•
Lottery services,

•
Media gambling services
(i.e. games in the editorial content of the media),

•
Sales promotion
services consisting of promotional games with a prize or where participation is
exclusively linked to purchase.

It is not only the cooperation between
gambling authorities and the exchange of information that depends on a common
understanding of what online gambling means but also the development of policy
initiatives and actions online. In order to ensure a successful and sustainable
policy such common understanding therefore needs to be established in the EU.

2.1.
Games of chance
2.1.1.
EU

The long-standing definition that exists
for gambling activities in general in EU secondary legislation is that relied
upon to exclude such services from the Electronic Commerce Directive[6]:

"gambling
activities ... involve wagering a stake with monetary value in games of chance,
including lotteries and betting transactions."

In later texts such as the Services Directive[7] and most
recently in the Audiovisual Media Services Directive[8] a slightly
different definition is "games of chance involving a stake representing a
sum of money, including lotteries, betting and other forms of gambling
services". While the Anti-Money Laundering Directive[9] refers to the
term 'casino' it does not define it.

To date, the Court of Justice of the
European Union (CJEU) in its rulings on games of chance has not given specific
guidance on the interpretation of the definitions used in secondary legislation[10].

2.1.2.
Member States

While not all Member States have a legal definition
of the concepts of “games of chance” and of “gambling”, in most jurisdictions a
game of chance is defined as a game that offers an opportunity to compete for
prizes, where success depends completely or predominantly on coincidence or an
unknown future result and cannot be influenced by the player. At least one of
the players loses his or her stake. The first important element characterising
a game of chance is that of stake money or monetary value. The second essential
characteristic of a game of chance is the element of chance. Success or loss
must depend completely or predominantly on coincidence and not on abilities and
knowledge. Success is considered to depend in any case on coincidence, if the
relevant aspect is the occurrence of an uncertain event.

In order to avoid that certain games are
not covered by the definition because a skill element can prevail in playing a
particular game and therefore risking that a common policy would be incoherent,
the understanding of games of chance should also comprise games of chance and
skill. This concerns games where the result is not totally accidental but
depends, to a certain extent on the skill and/or knowledge of the participant
(such as poker or sports betting). However, the distinction between games of
chance and skill and games of skill is not always easy to make and has been
subject to numerous court proceedings at national level.

2.2.
Online gambling

Many Member States do not yet have a
definition of online gambling at national level. In the Green Paper
contributions Member States and stakeholders alike stressed that there is a
need for any definition to encompass all forms of gambling and all forms of
electronic or distance communication, such as internet, mobile phone, digital
TV. A number of jurisdictions therefore do not refer to online gambling but to
remote gambling in order to have a more technology neutral term given evolving information
and communications technologies.

Gambling services offered by the media are
typically covered by national gambling laws. Generally no distinction is made
between gambling and promotional games if these fulfil the
conditions of application of the respective gambling law (stake, prize, random
outcome). In some cases specific rules for commercial communication games are
laid down in the gambling law. In other cases Member States have specific rules
in their consumer protection regulations or have established specific acts or
codes of conduct for promotional games. Promotional games not involving a stake
but promoting other games of chance may also fall within the scope of the national
gambling law.

In the Green Paper on online gambling in
the Internal Market the Commission took the view that the definition as set
down in the e-Commerce Directive should be maintained for gambling and that it
should be combined with that for information society services as set down in
Directive 98/34/EC, as amended by Directive 98/48/EC[11]. In this
respect, the following common definition for online gambling services should be
applied as defining the scope of the consultation:

Online
gambling services are any service which involves wagering a stake with monetary
value in games of chance, including lotteries and betting transactions that are
provided at a distance, by electronic means and at the individual request of a
recipient of services.

Most responses to the Green Paper
consultation supported this definition as a basis for discussions at European
level. At the same time some respondents raised concern that such a definition is
too restrictive, in particular because of the criteria "individual request
of a recipient of services", and would incorrectly exclude certain activities
from the term "online gambling".

The Commission services will, together with
the Member States, further develop a common understanding of types of games and
the means of electronic or distance communication used to be covered by the
term "online gambling".

3. The market for online gambling services in Europe, and beyond

The gambling sector is a growing market, both
land based and online. In 2011, the annual revenues generated by the gambling
service sector, measured on the basis of Gross Gaming Revenues (GGR) (i.e.
stakes less prizes but including bonuses), were estimated to be €84.9 billion
(EU 27), with an average annual growth rate of 2.8%. Online gambling services
accounted for annual revenues in excess of €9.3 billion, 10.9% of the overall
gambling market. The average annual growth rate for online gambling services is
14.7%. In 2015 online gambling is estimated to generate annual revenues of
€13.0 billion, 14.2% of the overall gambling market[12].

Online gambling is not only developing at a
rapid pace economically but also technologically. Gambling services are increasingly
used and offered on mobile phones, tablet computers and IPTV. Furthermore, gambling
operators are also using and relying on business-to-business services (B2B) and
intermediaries, for managing gambling platforms, providing software, payment
services, internet services or marketing.

The consistent growth of the market fuels
the need for a comprehensive and technology neutral set of rules and measures
at EU and national level. New technologies create new challenges and regulation
needs to adapt to keep up the pace.

3.1.
Global Market

In 2010 the global gambling market
(land-bases and online) generated GGR of €275 billion. With a GGR of €80 billion
the EU had a market share of 29% of the world market. The total global internet
gambling market (all products) was worth €23.28 billion. The EU online gambling
market represented 45% of the world market share.

Worldwide online gambling profits (GGR)
amounted to €16.39 billion in 2008. Approximately, €4.7 billion of this total
comes from the 6.84 million European consumers who participate in online
gambling (compared to 4.32 million consumers in Asia & Middle East and 4.21
million consumers in North America).

Asia is the fastest
growing market. It is already bigger ten the European market and will most
probably soon overtake the US as the biggest gambling market in the world. The US is currently debating and preparing the opening of the online gambling market.

3.2.
Gambling market in Europe

The overall gambling market in Europe is growing, both land-based and online. Lotteries and gambling machines remain the
biggest sectors in the overall gambling market.

Source: H2 Gambling Capital

The online gambling market is growing
though at a faster pace. With annual growth rates of almost 15% the market will
most probably double in size between 2008 and 2013. However, with a market
share of 10.9% online gambling is still a relatively small part of the overall
market.

Source: Global Betting and Gaming
Consultants (GBGC), year?

Compared to the overall gambling market the
online gambling market shares are slightly different. Betting is the biggest
sector followed by poker and casino games.

Source: H2 Gambling Capital

The size of the online gambling market differs
significantly between Member States. In Austria, Denmark, Finland, Ireland, Sweden and the UK online gambling already constitutes 20% or more of the overall
gambling market.

Source: H2 Gambling Capital

3.3.
Cross-border dimension

In many Member States no data exists on the
scale of the cross-border gambling market. Member States stress that it is
difficult to quantify the cross-border dimension of online gambling services as
these services are very often not regulated in the respective Member State. A number of Member States however have conducted studies and surveys whilst for
others third party studies are available:

·
In the UK the regulator concludes that players
appear to gamble on UK regulated sites. There is little, if any evidence, of an
unauthorised market.

·
In Sweden the number of players gambling with
foreign operators is growing: from 3% of the population in 2008/2009 to 4.5% in
2009/2010. 29% respectively 38% of the players was gambling only with foreign
operators. The market share of foreign online operators is estimated to be 10%
of the overall gambling market.[13]
150 foreign commercial operators are estimated to be active in the market.
Their marketing expenses rose from SEK 437 million in 2000 to SEK 1.6 billion
in 2010. Licensed non-EU operators are only a small proportion of the total online
market.

·
The government estimates the turnover of the
unauthorised sports betting market in Germany (land-based and online) to be at
least €2.7 bn (€350 million GGR), about 60% is generated online. Germany is considered to be the biggest cross-border online poker market in the EU with a
market size of around €320 million and almost 600 000 players.[14]

·
In Finland the value of gambling on foreign
sites totalled €120 million in 2008 (betting €40 million, casino games €40
million, poker €30 million and bingo €10 million)[15]. In 2009 the
total amount of sports betting by players located in Finland using service
providers outside Finland was approximately €50 million[16].

·
In France regular data collection and reporting
has been introduced by the new gambling law in 2010 and studies are under
preparation. Previously unlicensed operators now have a market share of 65% for
betting, 12% for horse racing, 90% for casino in the regulated market. Out of
35 operators that have been issued a licence since the introduction of the new
law 14 operators already had a license from another Member State and 12 are
part of a group with a license in another Member State.

·
In Greece government estimates that around 250
unauthorised online gambling sites, 60 of which have Greek language versions,
are active in the country. 20 000 gaming machines and 150 000 computers in
public places are offering unauthorised online games. The annual turnover of
illegal online betting in Greece is estimated to reach €2 billion, equal with
brick and mortar betting of state monopoly. Also, the turnover in the betting
exchanges, illegal poker and casino games reaches a €1.5 - 2 billion.

·
In 2008 1 million Dutch citizens used unauthorised
gambling services. 5.1% of the population or 500 000 citizens gamble online;
with an average stake of €12-13[17].

·
In Slovenia the number of players placing sports
bets with foreign operators has increased in comparison with previous years
while the number of players gambling in casinos or playing the lottery
decreased. An increasing number of players from Slovenia are gambling with
foreign online gambling providers (almost 40% of those surveyed), for example
betting an average of over €30 during the 2010 World Cup in South Africa[18]

·
In Slovakia the government estimates that 90% of
online players gamble on foreign sites.

·
In 2010 380 000 Norwegians gambled online; 55%
only in Norway, 25% only with foreign operators, 20% both. The total turnover
amounted to NOK 7.2 billion while foreign sites only generated NOK 5 billion
(suggesting that players set higher stakes on foreign sites)[19].

3.4.
Technology

The change in information and
communications technology is also influencing the supply of online gambling
services. Online gambling does not only include gambling services offered and
used on the internet but any type of gambling using a means of electronic or distance
communication (including digital interactive TV, mobile phone technology,
telephone and fax).

The provision of remote gambling services
through mobile telephone technologies is gaining popularity and market share.
In France for example the number of players using mobile phones and tablets has
doubled for sports betting, and tripled for poker from 2011. Within a year the
number of players using mobile phones for sports betting and poker increased to
15 %. 12% of all horseracing bets are done via mobile phones[20].
Digital interactive TV seems to be an obvious distribution channel for gambling
services and with the development of Digital interactive TV services the offer
of gambling services through this channel will most probably increase.

The gambling platform hosting the online
game of chance is not necessarily provided and managed by the gambling operator
dealing with the player but will often be managed and provided by a different
operator. The platform operator is providing B2B services to the gambling
operator offering the game to the player. It is rather common that the platform
is established and authorised in a different jurisdiction than that of the
gambling operator. The possible take-up of cloud computing solutions in the
gambling sector may add further complexity to this situation. A new and
important development is also the offering of games of chance for money or
money's worth in social media networks.

3.5.
Data and understanding

While data and information exist for some
markets a comprehensive overview of the market is missing. There is a need for
further information on the size and the development of the online gambling
market (domestic and cross-border, intra EU and global, authorised and
unauthorised offer). Furthermore, there is a need for a better understanding of
the market (in Europe and globally), its dynamics and the technological
challenges.

The Commission services will, together with
Member States and all stakeholders concerned, discuss and develop means of
improving statistics on online gambling services and of fostering understanding
of the technological and market developments.

4. The regulatory situation in Europe and national frameworks

Gambling services are not regulated by
sector-specific regulation at EU level. Nevertheless gambling services are
subject to a number of EU acts. In other cases gambling services have been
explicitly excluded from the scope of EU law.

The regulatory situation at national level
shows a very diverse picture across the EU. Member States have regulated online
gambling services in very different ways,: by banning them, by establishing a
monopoly for the offering of online gambling services or by issuing licences
for the operation of these services. Few Member States do not have any rules at
all covering this service activity.

4.1. EU secondary legislation relevant to online gambling

In addition to benefiting from horizontal
rules such as those pertaining to Intellectual Property Rights (IPR)
protection, the following texts are relevant to online gambling: the
Audiovisual Media Services Directive, the Unfair Commercial Practices
Directive, the Distance Selling Directive, the Directive on Consumer Rights, the
Anti-Money Laundering Directive, the Data Protection Directive, the Directive
on privacy and electronic communication, the e-commerce Directive and the
Directive on the common system of value added tax.

The Audiovisual Media Services Directive
(AVMSD)[21]
aims at coordinating certain provisions laid down by law, regulation or
administrative action in the Member States concerning the provision of
audiovisual media services. Gambling offers, where any audiovisual content is
merely incidental to the service and not its principal purpose, are not
considered AVMS.

The Unfair Commercial Practices
Directive (UCPD)[22]
aims at protecting consumers from unfair practices which are likely to induce a
transactional decision which they would otherwise not have taken. Common rules
and principles provide consumers with protection against unfair practices
whether they are buying from their corner shop or purchasing from a website
based abroad. Businesses can advertise and market to all consumers in the EU,
in the same way as to their domestic customers. Although the UCPD is without
prejudice to authorisation regimes such as the rules related to gambling
activities, advertising and marketing practices fall within its scope. As a
consequence, gambling advertising falls foul of the Directive if it is contrary
to the requirements of professional diligence and if it is distorting the
economic behaviour of the average customer or a clearly identifiable group with
an underlying vulnerability, e.g. minors, where the gambling provider can
reasonably expect such a distortion. The UCPD bans in particular misleading and
aggressive commercial practices.

The Unfair Contract Terms Directive[23] aims to
protect European consumers against unfair terms in the contracts they conclude
with professionals. It introduces a notion of "good faith" in order
to prevent significant imbalances in the rights and obligations of consumers on
the one hand and sellers and suppliers on the other hand. This general
requirement is supplemented by a list of examples of terms that may be regarded
as unfair. Terms that are found unfair under the Directive are not binding for
consumers. The Directive also requires contract terms to be drafted in plain
and intelligible language and states that ambiguities will be interpreted in
favour of consumers.

The Distance Selling Directive[24] applies to
most contracts where a consumer and a supplier running an organised
distance-selling scheme do not meet face-to-face at any stage until after the
contract has been concluded. "Distance communication" includes
traditional means of distance communication but also covers more
technologically advanced means of distance communication such as teleshopping,
mobile phone commerce (m-commerce), and the use of the internet (e-commerce).
The Directive provides a number of rights for consumers in order to ensure
consumer protection throughout the EU, including provision of comprehensive
information before the purchase, right of withdrawal, protection from
unsolicited selling and protection from fraudulent use of payment cards.
Article 6(3) however excludes the right of withdrawal for contracts for gaming
and lottery services, unless the parties have agreed otherwise. The Directive
will be repealed once the rules of the Directive on Consumer Rights will have
to be applied in all Member States, i.e. by 13 June 2014. The Directive on
Consumer Rights incorporates the provisions of the Distance Selling Directive.

The Directive on Consumer Rights[25] aims at
achieving a real business-to-consumer (B2C) internal market, striking the right
balance between a high level of consumer protection and the competitiveness of
enterprises. The Directive contains requirements on the information to be
provided by traders prior to the conclusion of all consumer contracts, provides
for specific information requirements and regulates the right of withdrawal distance
and off-premises contracts and for rules on delivery and passing of risk
applicable to contracts for the sale of goods as well as certain rules
applicable to all types of consumer contracts. These include rules on the costs
for the use of means of payment (e.g. credit or debit cards), on telephone
hotlines operated by traders as well as on additional payments and pre-ticked
boxes. In comparison with the Distance Selling Directive, the Directive on
Consumer Rights however does not apply anymore to contracts for gambling
(Article 3(3), sub (c)).

The Anti-Money Laundering Directive
(AMLD)[26]
requires certain institutions and businesses to apply a series of preventive
measures with a view to prevent money laundering and terrorist financing. For
the gambling sector the AMLD explicitly covers casinos. Member States can
however extend the rules to other categories of undertakings with a particular
risk to be used for money laundering and terrorist financing purposes. Those
subject to the Directive are obliged to:

–
verify the identity of their customer and to
monitor their business relationship with the customer (casino customers must be
identified and their identity verified if they purchase or exchange gambling
chips with a value of EUR 2000 or more),

–
report suspicions of money laundering or
terrorist financing to the public authorities; and

–
take supporting measures, such as ensuring a
proper training of personnel and the establishment of appropriate internal
preventive policies and procedures.

Competent authorities should ensure that
the persons who effectively direct or will direct the business of such entities
and the owners of such entities are fit and proper persons. It furthermore
imposes enhanced due diligence procedures in certain situations which carry
higher risks of money laundering, e.g. where the customer has not presented
himself physically.

The Data Protection Directive[27]
and the Directive on privacy and electronic communication[28] provide for
the legal data protection legal framework in the EU. The Data Protection
Directive sets out the general framework for the protection of individuals with
regard to the processing of personal data and the free movement of such data
while the Directive on privacy and electronic communication contains specific
rules on processing of personal data and the protection of privacy in the
electronic communications sectors, and regulates areas such as confidentiality,
billing and traffic data, rules on spam/unsolicited commercial communications,
cookies, etc. For gambling services these rules not only cover static data such
as contact or financial information but also behavioural data, like gambling
frequency and pattern or the stake.

The E-Commerce Directive[29] sets up an Internal Market framework for electronic commerce. It
establishes harmonised rules on issues such as the transparency and information
requirements for online service providers, commercial communications,
electronic contracts and limitations of liability of intermediary service
providers. While Article 1(5)(d) excludes gambling activities which involve
wagering a stake with monetary value in games of chance, including lotteries
and betting transactions from the scope of the directive the liability regime
for information society service providers hosting or transmitting illegal
content, Articles 12 to 15 of the Directive, also applies to gambling-related
content.

Article 135(i) of the Directive on the
common system of value added tax[30]
exempts betting, lotteries and other forms of gambling, subject to the
conditions and limitations laid down by each Member State, from the common
system of value added tax. This however means that, in practice, a margin of
discretion is available to Member States and in practice, not all forms of
winnings from gambling are exempt in all Member States. In some cases, the tax
exemption extends only to a limited number of forms of gambling (typically
lotteries and some forms of betting) and in practice it may not specifically
cover all forms of online gambling.

4.2.
The notification procedure

The notification procedure under Directive
98/48/EC[31]
(the "Transparency Directive") allows the Commission and Member States to follow legislative developments in the Member States.

The Transparency Directive lays down a
procedure for the provision of information about rules on information society
services. The Directive is intended to help avoid the creation of new barriers
to trade within the EU. The Directive requires Member States to notify their
rules on information society services in draft form, and generally observe a
standstill period of at least three months before formal adoption, in order to
allow other Member States and the Commission to raise concerns about potential
barriers to trade. Where notified drafts are liable to create barriers to the
free provision of information society services under primary or secondary EU
law, the Commission and other Member States may submit a detailed opinion, or
comments in the case of more minor concerns, to the Member State that has notified the draft. Private stakeholders can submit contributions, thereby
assisting the Commission and national authorities in identifying possible trade
barriers at an early stage.

Over the years, the active participation of
Member States in assessing the notified draft has generated an effective
dialogue between them and the Commission. In the period 2009-2011, around 100
notifications were submitted by the Member States on online gambling. Recent
notifications have dealt with issues such as seat requirement, server location,
limitations on the number of licences and exclusive rights systems.

However, Member States do not always
respect the obligation to notify draft rules on information society services
under the Transparency Directive or do not provide the information as required by
the Directive to properly assess if restrictions contained in the notified
texts are justifiable. Moreover, Member States do not always take into
account the Commission's position or provide only brief responses to the
Commission's comments and detailed opinions. The Commission services will
remain vigilant so as to ensure that unlawful barriers to online services are
detected at the earliest possible stage. In this respect the Commission
promotes an open and constructive dialogue with Member States in the
notification process.

4.3.
Regulatory framework for online gambling in
Member States

A number of Member States prohibit gambling
on their territories, except in so far as exceptions are provided by law. This
restrictive policy normally aims to safeguard the interests of consumers and to
prevent fraud, illegal gaming and problem gambling or addiction. It also aims
at ensuring that the profits derived from the gambling market are attributed to
the public’s general interests. In certain Member States, it is unlawful to
facilitate participation in foreign games of chance. In a similar manner, it
may be unlawful to deliberately participate in a game of chance offered by an
operator not licensed by the competent national authority of the Member State where the participant resides.

For online gambling services different
regulatory frameworks exist:

•           Ban

A few Member States (e.g. Germany, The Netherlands) prohibit the offering of games of chance on the internet, either
for all games of chance or for certain types of games, such as poker and casino
games.

•           Monopoly

Some European jurisdictions (e.g. Finland, Portugal, Sweden) have set up monopolistic regimes for the offering of online gambling
services. These services are offered either by a state-controlled public
operator or by a private operator on the basis of an exclusive right.

•           Authorisation/licensing

The notifications received over the past
years show that a growing number of Member States establish licensing systems
for the offering of online gambling services, allowing more than one operator to
offer its services on the Member State's market (e.g. Denmark, Estonia, France,
Italy, Spain). The vast majority require every operator of online gambling
offering services on their territories to obtain a licence within the
jurisdiction. These gaming licenses can only be issued by national or regional
authorities; whether or not the operator disposes of a gambling licence from one
or more EU Member State is not always taken into consideration. Some Member
States accept proof and documents demonstrating compliance with domestic
licensing requirements. A few Member States recognise licences issued in other
EU Member States. In general, the policy of granting licenses is elaborated and
potential licensees have to comply with a series of strict requirements. In
some Member States, there are also specific requirements as to the type of
legal entity entitled to run a specific gambling activity. In a few cases,
licences are only issued to non-profit national companies.

Online licences at large do not only cover online
gambling services but all types of remote offers of gambling services,
including mobile phones, tablet computer and IPTV.

While most Member States issue only one
type of online licence, for business-to-consumer (B2C) services, some
jurisdictions issue B2C and B2B licences. B2C licenses are the individual
licences for the offering of different types of games (lotteries, betting,
poker and casino type games) and for the promotion of gambling services. B2B
gambling licences are issued for the hosting and managing of remote gambling
operators, i.e. the provision of management and hosting facilities on a platform.

•           No specific regulation

A few Member States (e.g. Ireland, Lithuania) still do not have any rules on the offering of online gambling services.

5.
EEA case-law on games of chance
5.1.
Introduction

Since its land-mark decisions in Schindler
(1994) and Gambelli (2003), the Court of Justice of the European Union (CJEU or
"Court") has delivered over 20 judgments
on games of chance in the area of the free movement of services and the freedom
of establishment. In recent years the Court's jurisprudence has increasingly
dealt with national rules on online gambling.

The Court's case-law in this field has been
developed mainly on the basis of references for preliminary rulings from
national courts under Article 267 TFEU. In those cases, the Court provided
general principles and criteria for the interpretation of Articles 49 and 56
TFEU in the area of games of chance, so as to enable the referring national
court to take the final decision on the compatibility of the relevant national
law with EU law.

The EFTA Court has also established
case-law with respect to the fundamental freedoms of the internal market in the
area of gambling. It issued two judgments in 2007.

This section provides a summary of the main
jurisprudence developed by the CJEU and the EFTA Court ("the courts")
on gambling rules. It is structured in the following manner:

·
the qualification of the organisation of games
of chance as an "economic activity" covered by the fundamental
freedoms of the Treaty (chapter 5.2);

·
restrictions on the free movement of services
and the freedom of establishment (chapter 5.3);

·
recognised reasons of general interest which can
justify restrictions (chapter 5.4);

·
specific characteristics of gambling services
provided via the Internet (chapter 5.5);

·
criteria for assessing the proportionality
(suitability and necessity) of the national restrictions under the different
types of regulatory frameworks: a ban on games of chance (chapter 5.6.1), an
exclusive right/monopoly (chapter 5.6.2) and a system of licences (chapter
5.6.3), as well as in the case of specific corporate requirements (chapter
5.7).

The main focus of this section is on the
circumstances under which restrictive national gambling laws can or cannot be
justified on grounds related to the general interest, which are also the basis
for the Commission to assess the compatibility of national gambling laws under
the Treaty.

It is important to underline that some of
the principles enshrined in the case-law of the CJEU and the EFTA Court on gambling apply both to the online and the land-based games of chance. Other
features of the case-law are specifically relevant for games of chance offered
via the internet.[32]
This section deals with both channels.

In addition, the document is limited to
case-law developed by the courts in the context of national rules on gambling
and the Treaty provisions on the free movement of services and the freedom of
establishment. The following table provides an overview of the relevant cases:

CJEU judgments and pending cases

Preliminary Rulings

Judgment of 24/03 1994 || Schindler, C-275/92 || ECR [1994] I-01039

Judgment of 21/09 1999 || Läärä & Others, C-124/97 || ECR [1999] I-06067

Judgment of 21/10 1999 || Zenatti, C-67/98 || ECR [1999] I-07289

Judgment of 11/09 2003 || Anomar & Others, C-6/01 || ECR [2003] I-8621

Judgment of 06/11 2003 || Gambelli & Others, C-243/01 || ECR [2003] I-13031

Judgment of 13/11 2003 || Lindman, C-42/02 || ECR [2003] I-13519,

Judgment of 06/03 2007 || Placanica & Others, C-338/04, C-359/04 & C-360/04 || ECR [2007] I-1891

Judgment of 08/09 2009 || Liga Portuguesa de Futebol Profissional & Bwin International (Santa Casa), C-42/07 || ECR [2009] I-7633

Judgment of 03/06 2010 || Sporting Exchange & Others (Betfair), C-203/08 || ECR [2010] I-4695

Judgment of 03/06 2010 || Ladbrokes Betting & Gaming and Ladbrokes International, Case C-258/08 || ECR [2010] I-4757

Judgment of 08/07 2010 || Sjöberg & Gerdin, C-447 & C-448/08 || ECR [2010] I-6921

Judgment of 08/09 2010 || Winner Wetten, C-409/06 || ECR [2010] I-8015

Judgment of 08/09 2010 || Stoß & Others, C-316/07 etc. || ECR [2010] I-8069

Judgment of 08/09 2010 || Carmen Media Group, C-46/08 || ECR [2010] I-8149

Judgment of 09/09 2010 || Engelmann, C-64/08 || ECR [2010] I-8219

Judgment of 30/06 2011 || Zeturf, C-212/08 || ECR [2011] I-0000

Judgment of 15/09 2011 || Dickinger and Ömer, C-347/09 || ECR [2011] I-0000

Judgment of 16/02 2012 || Costa and Cifone, C-72/10 & C-77/10 || ECR [2012] I-0000

Judgment of 12/07 2012 || HIT and HIT LARIX, C-176/11 || ECR [2012] I-0000

Judgment of 19/07 2012 || SIA Garkalns, C-470/11 || ECR [2012] I-0000

Pending Cases

Joined cases C-186/11 & C-209/11, || Stanleybet International & Sportingbet || [Opinion of the Advocate General of 20 September 2012]

Joined cases C-660/11 & C-8/12 || Biasci & Rainone ||

Case C-390/12 || Pfleger and others ||

EFTA Court Rulings || ||

Judgment of 14/03/07, || EFTA Surveillance Authority v The Kingdom of Norway (gaming machines), Case E-1/06, || EFTA Court Report 2007, p.11

Judgment of 30/05/07, || Ladbrokes Ltd. v The Government of Norway, Ministry of Culture and Church Affairs and Ministry of Agriculture and Food (Ladbrokes), Case E-3/06, || EFTA Court Report 2007, p.89

This section is
not intended to provide an exhaustive overview of all EU and EFTA courts'
case-law that might be potentially relevant in future cases of national
legislation on gambling, nor does it cover certain requirements of general
application which are not limited to the gambling sector. For example,
restrictions on the participation of foreign capital and certain banking
requirements may also be incompatible with (secondary) EU law but are not dealt
with here.[33]

A separate part of this section is
dedicated to the application of the state aid rules in the gambling sector
(chapter 5.8).

5.2.
The organisation of games of chance is an
"economic activity" covered by the fundamental freedoms rules of the
TFEU

The CJEU ruled for the first time in its judgment
in Schindler that the organisation of all games of chance or gambling[34]
such as lotteries can be considered an economic activity since there is
a particular service provided for remuneration and an intention to make a cash
profit.[35]
Hence, they are subject to the fundamental freedoms of the Treaty: the free
movement of services (Articles 56-62 TFEU) and the freedom of establishment
(Articles 49-55 TFEU). The Court held in Gambelli that services offered
by electronic means are also covered by these Treaty principles.

The notion of “services” within the meaning
of Articles 56 and 57 TFEU applies not only to activities allowing users to
participate in gambling, but also to the activity of promoting gambling,
given that such an activity merely constitutes a specific step in the
organisation or operation of the gambling to which it relates.[36]

Magazine competitions involving crosswords or other puzzles in which a number of readers
who have given correct answers receive a prize following a draw, do not
constitute an economic activity in their own right. They are merely one aspect
of the editorial content of a magazine, and are organised on a small scale,
with small stakes. The CJEU has assessed restrictions on the organisation of
such competitions under the Treaty rules on the free movement of goods.[37]

5.3.
Restrictions on the free movement of services
and the freedom of establishment

Articles 49 and 56 TFEU require the
abolition of all restrictions on freedom of establishment and freedom to provide
services – even if those restrictions apply without distinction to national
providers of services and to those from other Member States – if they are
liable to prohibit, impede or render less attractive the activities of a
service provider established in another Member State in which it lawfully
provides similar services.[38]

National rules in the area of gambling
constitute an obstacle to the freedoms guaranteed by the internal market
freedoms if they:

·
ban the exercise of an economic activity in the
area of gambling;[39]

·
confer exclusive rights to organise and promote
games of chance on a single operator;[40]

·
make the exercise of an economic activity
subject to a licensing requirement.[41]

The freedom to provide services involves
the freedom of the provider to offer and supply services to recipients in a Member State other than that in which the provider is established, and also the freedom to
receive or to benefit as recipient from the services offered by a provider in
another Member State. The freedom to provide services therefore is for the
benefit of both providers and recipients of services.[42]

Restrictions on freedom of establishment
for nationals of a Member State in the territory of another Member State are prohibited by Article 49 TFEU, including restrictions on the setting-up of
agencies, branches or subsidiaries.

As regards the delimitation of the scope,
respectively, of the principles of freedom to provide services and freedom of
establishment, it is necessary to establish whether or not the economic operator
is established in the Member State in which it offers the service in question.

According to the Court´s case-law, for
there to be “establishment” within the meaning of the Treaty, a commercial
relationship entered into by an operator established in a Member State with
operators or intermediaries established in the host Member State must make it
possible for the operator to participate, on a stable and continuous basis, in
the economic life of the host Member State and must thus be such as to enable
customers to take advantage of the services offered through a permanent
presence in the host Member State, which may be done simply by means of an
office managed by a person who is independent but authorised to act on a
permanent basis for the operator, as would be the case with an agency.[43]

On the other hand, every provision of
services which are not offered on a stable and continuous basis from an
establishment in the Member States of destination constitutes a "provision
of services" for the purposes of Article 56 TFEU. In this context, the
Court has ruled that no provision of the Treaty affords a means of determining,
in an abstract manner, the duration or frequency beyond which the supplier of a
service or of a certain type of service can no longer be regarded as the
provision of services. Accordingly, "services" for the purposes of
the Treaty may cover services varying widely in nature, including services
which are provided over an extended period, even over several years.[44]

The CJEU has recognised that that "any
restriction concerning the supply of games of chance over the internet
is more of an obstacle to operators established outside the Member State
concerned, in which the recipients benefit from the services, those operators,
as compared with operators established in that Member State, would thus be
denied a means of marketing that is particularly effective for directly
accessing that market".[45]

In Dickinger and Ömer, the Court
clarified which fundamental freedoms may apply in a situation where gaming
services are marketed over the internet in the territory of a host Member State by an operator established in another Member State but with a certain
infrastructure in the host Member State. It ruled that the mere fact that a
provider of games of chance marketing over the internet makes use of material
means of communication (such as a server, a helpdesk) supplied by another
undertaking established in the host State is not in itself capable of showing
that the provider has, in that Member State, a fixed establishment similar to
an agency, which would have the consequence that the Treaty provisions on
freedom of establishment would apply.[46]
The Court answered the questions of the referring court under the provision of
Article 56 TFEU on the free movement of services.

In practice, in the area of gambling, the
importance of the difference between the application of the Treaty provisions
governing the free movement of services or the provisions on the freedom of
establishment is rather limited. Under both Articles 49 and 56 TFEU, the
case-law provides for a similar interpretation of whether there is a
restriction to the free movement and whether such a restriction can be
justified on the basis of a general interest.[47]

Concrete examples of national rules in the
gambling sector which constitute a restriction on the freedom to provide
services and/or the freedom of establishment, as interpreted by the courts,
are:

·
the ban on the importation of lottery
advertisements and tickets into a Member State with a view to the participation
by residents of that State in a lottery operated in other Member States;[48]

·
the prohibition of promoting gambling
organised legally in other Member States and of unlicensed gambling nationally
thus ensuring that national consumers only take part in gambling in the context
of the national licensing system;[49]

·
where a company established in a Member State
pursues the activity of collecting bets through the intermediary of an
organisation of agencies established in another Member State, any
restrictions of the activities of those agencies would constitute such an a
obstacle[50]

·
the conferral of exclusive rights on a
single operator (set up either under public or private law) to organise and
promote games of chance, and whereby all other operators, including operators
established in another Member State, are prohibited from offering, over the
internet, services falling within the scope of that regime in the territory of
the first Member State;[51]

·
the prohibition on individuals to connect by
internet from their home to a bookmaker established in another Member State;[52]

·
the limitation of the number of licences or
operators;[53]

·
the prohibition of activities in the betting and
gaming sector without prior authorisation from the administrative
authorities;[54]

·
restricting the right to operate games of
chance or gambling solely to casinos in permanent
or temporary gaming areas created by decree-law;[55]

·
treating foreign lotteries differently for
tax purposes from national lotteries;[56]

·
the obligation that persons wishing to operate
gaming establishments must adopt the legal form of a public limited company,
which prevents, inter alia, operators who are natural persons and undertakings
which, in the country in which they are established, have chosen another
corporate form, from setting up a secondary establishment;[57]

·
the obligation on persons holding
concessions to operate gaming establishments to have their seat in the
national territory.[58]

Finally, the CJEU has made clear that
restrictions which are incompatible with the freedom of establishment and the
freedom to provide services, because they do not contribute to limiting betting
activities in a consistent and systematic manner, cannot continue to apply, not
even during a transitional period.[59]

5.4. General interest reasons which may justify restrictions on gambling
activities

Member States may justify restrictions to
the fundamental freedoms for reasons related to the general interest.[60]
A restriction to the freedom to provide services or to the freedom of
establishment may be:

·
allowed as a derogation, on grounds of public
policy, public security or public health, as expressly provided for by Articles
51 and 52 TFEU, which are applicable in the area of services by virtue of
Article 62 TFEU,[61]
or

justified, in accordance with the case-law
of the CJEU, by overriding reasons in the public interest.[62]

With regard to the justifications which are
capable of being accepted, the CJEU has observed that the objectives pursued by
national legislation adopted in the area of betting and gaming, considered as a
whole, usually concern:

·
the protection of the recipients of the services
in question and of consumers more generally, and

the protection of society.

Within these two general categories of
objectives, the courts have identified more specific interests such as the
fight against gaming addiction, the reduction of gambling opportunities, the
fight against crime and malpractice, and the general need to preserve public
order.

On the other hand, the general interest
objectives must be of a non-economic nature. Other reasons put forward by
Member States have been rejected by both courts, owing to their economic or
financial nature. These reasons include:

a)
the diminution of the reduction of tax revenue[63]
/ maximising public revenue;[64]

b)
the need to ensure continuity, financial
stability and a proper return on past investments of licence holders[65]
/ protecting the  market positions of existing operators;[66]

c)
the contribution to the rural development by
financing horse breeding.[67]

It is also settled case-law that a “ground
of economic nature” such as the financing of benevolent or social or other
public-interest activities through a levy on the proceeds of authorised games
of chance may constitute only “an incidental beneficial consequence” and
not the real justification for restricting the freedoms of establishment and
the provision of services related to games of chance.[68]
Therefore, a Member State is not entitled to rely on reasons of public policy
relating to the need to reduce opportunities for gambling in so far as the
public authorities of that State incite and encourage consumers to participate
in games of chance so that the public purse can benefit.[69]

The Member State concerned should in each
case determine which legitimate objectives may justify the restriction, and the
justification grounds put forward by a Member State must be taken together and
considered as a whole.[70]

The Court has acknowledged that, when
analysing the betting and gaming sector, it is not possible to disregard the
associated “moral, religious or cultural factors” or the “morally and
financially harmful consequences for the individual and for society” associated
with betting and gaming.[71]

According to settled case-law, in the
absence of harmonisation on the games of chance, all those particular factors
justify national authorities having “a sufficient margin of discretion [...] to
determine, in accordance with their own scale of values, what is required in
order to ensure consumer protection and the protection of society”.[72]
The Member States are therefore “in principle free to set the objectives of
their policy on gaming of chance and, where appropriate, to define in detail
the level of protection sought".[73]

The Court has also held that, in the
context of legislation which is compatible with the Treaty, the choice of
methods for organising and controlling the operation and playing of games of
chance or gambling falls within the margin of discretion enjoyed by
national authorities.[74]

However, the restrictive measures imposed
by the Member States must be applied without discrimination and must satisfy
the conditions laid down in the case-law as regards their proportionality.
Thus, they must be suitable for ensuring the attainment of the objective
pursued and not go beyond what is necessary in order to achieve that
objective. In this connection, it is settled case-law that national legislation
is appropriate for ensuring attainment of the objective pursued only if it
genuinely reflects a concern to attain it in a consistent and systematic
manner.[75]

5.5.
The provision of gambling services via the
Internet
5.5.1. Specific characteristics of on-line gambling

Internet constitutes a "channel"
through which games of change may be offered.[76] In light of the
assessment of whether the establishment of a public monopoly on the offer of
games of chance via the internet is necessary, the Court has however made clear
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:[77]

(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[78] (see further chapter
5.5.2).

(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 market.[79]

(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 characterised 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 has also stated that the internet may prove to be a source of risks of a
different kind and of 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.[80]

According to the
Court, when assessing a national restriction on the provision of gambling
services, all the substitutable marketing channels should be taken into
account, unless the consequence of using the internet is to increase the risks
linked to games of chance beyond those that exist in relation to games marketed
through traditional channels. In the context of a national single licence
system for betting on horseracing which did not draw any distinction between
the online and land-based marketing channels, the CJEU has clarified that an
assessment of the scope of the restriction on the freedom to provide services
should be made from the point of view of restrictions placed on the entire
sector concerned.[81]

5.5.2.
Taking account of the checks on operators of
games of chance carried out in other Member States

The courts have ruled that, in the current
state of EU / EEA law, there is no duty of mutual recognition of
authorisations issued by the various EU / EEA States.[82]

Thus, the EFTA Court acknowledged in Ladbrokes
that the EEA State where the services are provided has a right to require
possession of a new licence even if the service provider already holds a
licence in its home state. It added, however, that national measures must not
be excessive in relation to the aims pursued. This would be the case if the
requirements to which the issue of a licence is subject coincided with the
requirements of the home state.[83]

The CJEU has similarly ruled in Stoß and
Others that a duty mutually to recognise authorisations issued by the
various Member States cannot exist having regard to the margin of discretion
recognized to Member States and the absence of any EU harmonisation in this
matter.[84]

This line of case-law has been recently
developed by the Court in the context of the specific features of online
gambling, referred to in the previous section.

In the absence of sectoral harmonisation of
legislation at European Union level, the mere fact that an operator lawfully
offers services in one Member State, in which it is established and is in
principle already subject to statutory conditions and controls on the part of
the competent authorities of that State, cannot be regarded as a sufficient
assurance that national consumers will be protected against the risks of fraud
and crime. The Court has justified such exemption to the rule in view of:

·
the substantial differences between the
objectives pursued and the levels of protection sought by the legislation of
the various Member States; and

·
the difficulties liable to be encountered in
such a context by the authorities of the Member State of establishment in
assessing the professional qualities and integrity of operator.[85]

Moreover, the mere fact that a Member State
has opted for a system of protection which differs from that adopted by
another Member State cannot affect the assessment of the need for and
proportionality of the relevant provisions, which must be assessed solely by
reference to the objectives pursued by the competent authorities of the Member
State concerned and the level of protection which they seek to ensure.[86]

The Court has also accepted that various
Member States do not necessarily have the same technical means available for controlling
online games of chance, and do not necessarily make the same choices in
this respect. The fact that a particular level of protection of consumers
against fraud by an operator may be achieved in a particular Member State by
applying sophisticated control and monitoring techniques does not permit the
conclusion that the same level of protection can be achieved in other Member
States which do not have those technical means available or have made different
choices. A Member State may legitimately wish, moreover, to monitor an economic
activity which is carried on in its territory. That would be impossible if it
had to rely on checks done by the authorities of another Member State using regulatory systems outside its control.[87]

Consequently, the case-law which states
that it is not compatible with Article 56 TFEU to make a provider subject to
restrictions for safeguarding the public interest in so far as that interest is
already safeguarded in the Member State where he is established does not apply,
in the present state of development of European Union law, in a field such as
that of games of chance. This area is not harmonised at European Union level,
and the Member States have a wide discretion in relation to the objectives they
wish to pursue and the level of protection they seek.[88]

5.6.
General criteria for assessing the
proportionality (suitability and necessity) of national restrictions under
different types of regulatory frameworks
5.6.1. A ban on games of chance

The Schindler judgment remains the only
decision where the CJEU ruled on a national (UK) general ban on a certain
category of games of chance - the organisation of lotteries (subject to very
limited exceptions). The Court decided that under the circumstances in
question, the national legislation amounted to an obstacle to the freedom to
provide services, but was not incompatible with the Treaty in view of the
concerns of social policy and the prevention of fraud which justify it.

The conclusion was based on a number of
considerations, in particular the moral, religious and cultural aspects of
lotteries, the high risk of crime or fraud that lotteries involve and the
incitement to spend which may have damaging individual and social consequences.
In addition, the general ban on lotteries could not be considered to be
discriminatory based on the nationality of the operators.[89]

National legislation on gambling may also
contain bans on the organisation and promotion of games of change through
certain channels, in particular via the Internet. In Sporting Exchange
and Ladbrokes Betting & Gaming and Ladbrokes International, the
Court decided that in the light of the specific features associated with the
provision of games of chance via the Internet, a total ban may be regarded as
justified by the objectives of combating fraud and crime.[90]

5.6.2.
An exclusive right/monopoly

Most of the case-law on gambling of both
the CJEU and of the EFTA Court deals with national legislation which:

·
creates a public entity which enjoys an
exclusive right to offer certain games of chance and which does not itself
operate such services but instead manages a network of “concessions”, i.e.
natural or legal persons which are allowed by an act of the competent
administration to operate on the market on behalf of the public entity
holding the exclusive right;[91]

·
establishes an exclusive right/legal monopoly
for a public or State-controlled operator directly by law, [92]
or

·
limits the organisation and promotion of games
of chance to one public or private operator through the grant of a single
licence.[93]

The courts have developed a number of
specific requirements which should be met by national regimes of exclusive
rights/monopolies in order to be considered proportionate under the free
movement principles. These include the need for a strict state control (chapter
5.6.2.1); the need for a particular high level of protection of consumer
protection (chapter 5.6.2.2) and the need for a detailed analysis of the
consistency of the national gambling policy, in particular as to the commercial
strategy of the holder of the exclusive licence/monopoly and as to the overall
national policy pursued in the field of games of chance (chapters
5.6.2.3-5.6.2.5).

5.6.2.1.
Strict state control

The CJEU has ruled that a Member State
seeking to ensure a particularly high level of protection of consumers or of
society may be entitled to take the view that it is only by granting
exclusive rights to a single entity which is subject to strict control by the
public authorities that it can tackle the risks connected with the gambling
sector and pursue the objective of preventing incitement to squander money on
gambling and combating addiction to gambling with sufficient effectiveness.[94]

The public authorities of a Member State
may legitimately consider that the fact that, in their capacity as overseers of
the entity holding the monopoly, they will have additional means of
influencing its conduct, outside the statutory regulating and monitoring
mechanisms, is likely to secure for them a better command over the supply of
games of chance and better guarantees that their policy will be implemented
more effectively than in the case where those activities are carried out by
private operators in a competitive environment. This is the case even if
private operators are subject to a system of authorisation and a regime of
supervision and penalties.[95]
The choice between granting exclusive rights to a public body whose
management is subject to direct State supervision or to a private operator
over whose activities the public authorities are able to exercise tight control
falls within the margin of discretion which Member States enjoy in the context
of games of chance.[96]

With respect to the objective of fighting
gambling addiction caused by gaming machines, the EFTA Court admitted in
the Gaming machines case that "it is reasonable to assume that a monopoly
operator in the field of gaming machines subject to effective control by
the competent public authorities will tend to accommodate legitimate concerns
of fighting gambling addictions better than a commercial operator or
organisations whose humanitarian or socially beneficial activities partly rely
on revenues of gaming machines. Furthermore, it is plausible to assume that in
principle the State can more easily control and direct a wholly State-owned
operator than private operators. Through its ownership role, the State has
additional ways of influencing the behaviour of the operator besides public law
regulations and surveillance."[97]

The condition of strict state control
has been elaborated on in Liga Portuguesa. This case concerned the
granting of exclusive rights to organise online lotteries, lotto games and
sports betting to Santa Casa, a "legal person, in the public
administrative interest". It was submitted that the main objective pursued
by the national legislation was the fight against crime, more specifically the
protection of consumers of games of chance against fraud on the part of the
operators.

The Portuguese Government argued that the
grant of exclusive rights to Santa Casa would ensure that the system would
function in a secure and controlled way. The CJEU analysed the national legal
framework and acknowledged that Santa Casa operates under the strict control by
the public authorities.[98]
The Court concluded that, in circumstances such as those in the main
proceedings, the granting of exclusive rights to operate games of chance via
the internet to a single operator may confine the operation of gambling within
controlled channels and be regarded as appropriate for the purpose of
protecting consumers against fraud on the part of operators. In view of the
specific features associated with the provisions of games of chance via the
internet (see chapter 5.5.1), the CJEU also considered the restrictive measure
to be necessary.[99]

In Zeturf, the CJEU assessed a
national system conferring an exclusive right to a single operator to organise
off-course betting on horseracing. It concluded that national legislation is appropriate
to ensure the objective of combating the criminal and fraudulent activities
linked to gambling, as well as that of protecting society, having regard to the
effects of gambling on individuals and on society, in the situation where there
appears to be particularly strict State control over the organisation of
betting on horseracing. Thus, "the State exercises direct control over the
functioning of the exclusive operator, the organisation of the events on which
bets are placed, the types of bet authorised and their channels of
distribution, including the proportion of the winnings to the stakes and the
conduct and supervision of the regulated activities".[100]

5.6.2.2.
High level of consumer protection

However, as a monopoly is an unusually
restrictive measure, it must be ascertained that the national authorities
really intend to ensure a particularly high level of consumer protection
with regard to the objectives relied on, and whether, having regard to the
level of protection sought, the establishment of a monopoly could actually be
considered necessary.[101]
In this context, it is the Member State wishing to rely on an objective capable
of justifying the restriction of the freedom to provide services which must
supply the court called on to rule on that question with all the evidence of
such a kind as to enable the court to be satisfied that the measure does indeed
comply with the requirements deriving from the principle of proportionality.[102]

In the Gaming machines case, the EFTA Court, examined the introduction of an exclusive right for the operation of gaming
machines of a fully state-owned public company supervised by the relevant
Norwegian Ministry. It considered that the national legislation did not opt for
a total ban, but for a monopoly system with a view to reducing the risk of
gambling addiction to a level which it deems acceptable and to reduce crime and
malpractice. In such a situation, the necessity test consists of an assessment
of whether the monopoly option is functionally needed in order to reduce
the problems to the level opted for, or whether this reduction could equally
well be obtained through other, less restrictive means such as admitting
private operators under a stricter licencing regime. The EFTA Court
noted, as regards the objective of reducing crime and malpractice, that Norway
"failed to demonstrate that a licensing scheme allowing private operators,
if necessary with more restrictive rules on who may qualify, will not be
equally effective as an exclusive right [for the monopoly operator] in
preventing money laundering and embezzlement”. Nonetheless, it concluded that
taking into account the public interest objectives considered as a whole, including
the one of fighting gambling addiction, the exclusive right system is likely to
be more effective, in the end, than the other available regulatory means. [103]

On the level of protection, the EFTA Court ruled in the Ladbroke case that "if it turns out that the national
authorities have opted for a rather low level of protection, it is less
probable that a monopoly is the only way of achieving the level of protection
opted for. In that case, it is more likely that less restrictive means, for
instance in the form of a licensing system […] could suffice".[104]

National authorities will therefore be more
easily able to justify an exclusive right scheme if they can demonstrate that
the relevant legislation entails a high level of protection which could not be
ensured with the same efficiency under a normal licensing system.

5.6.2.3.
The consistency of the national gambling policy

Member States must not take, facilitate
or tolerate measures that would run counter to the achievement of the
stated objectives of a given national measure.[105]
Thus, restrictions on gaming activities are suitable to achieve their public
interest objectives only insofar as those objectives are being pursued "in
a consistent and systematic manner", which involves a complete assessment
of the gaming policy of the concerned Member State in respect of the level of
players' protection it has freely chosen to ensure. The "consistency"
requirement will apply, first, in regard to the games of chance which are
subject to the exclusive right scheme and the way they are being marketed by
the monopoly holder and, secondly, in regard to the gaming policy which the
national authorities pursue in other sectors of the gambling industry.[106]

Concerning the commercial strategy of the
exclusive right holders, the Court noted that there is a certain degree of
conflict of interest for all operators, including those that are public or
charitable bodies, between the need to increase their income and the objective
of reducing gambling opportunities. A public or non-profit-making operator may,
like any private operator, be tempted to maximise its income and develop the
gambling market, thus undermining the objective of seeking to reduce gambling
opportunities. The single operator may be encouraged to increase the income
generated by the gambling in order to fulfil public interest objectives more
effectively. The allocation of income to those objectives may, moreover, lead
to a situation in which it is difficult to forgo the amounts generated by the
gambling, the natural tendency being to increase opportunities for gambling and
to attract new bettors. [107]

This is particularly relevant in situations
where a single operator holds exclusive rights over the organisation of games
of chance. That operator is then in a very favourable position to increase,
should it so wish, gaming activities.[108]

In this context, the CJEU has underlined
that:

"the
establishment of a measure as restrictive as a monopoly must be accompanied by
a legislative framework suitable for ensuring that the holder of the said
monopoly will in fact be able to pursue, in a consistent and systematic
manner, the objective thus determined by means of a supply that is
quantitatively measured and qualitatively planned by reference to the said
objective and subject to strict control by the public authorities."[109]

On the other hand, the overall national
gambling policy of a Member State should also be consistent with the public
interest objectives invoked to justify restrictions to free movement. This
assessment needs to be made taking into account the game of chance for which
the exclusive right/monopoly is provided, and the way in which other types of
games of chance are marketed.

If the national legislation is based on
more than one legitimate objective, the consistency of the gambling policy must
be assessed in relation to each of these legitimate objectives. Moreover, as
the objectives pursued may not apply equally to all games of chance covered by
the national law in question, it may also be necessary to distinguish between
the different games.[110]

The next sections will provide more details
of the application of the "consistency" condition in the context of
the main general interest objectives of reducing gambling opportunities and
combating fraud and crime.

5.6.2.4.
The commercial strategy of the exclusive right
holder

The CJEU has accepted in steady case-law[111]
that Member States may justify limitations on the number of operators allowed
to offer games of chance by invoking the objective of "preventing the use
of betting and gaming activities for criminal or fraudulent purposes by
channelling them into controlled systems". The Court has also admitted
that "a policy of controlled expansion in the betting and gaming
sector may be entirely consistent with the objective of drawing players
away from clandestine bettering and gaming – and, as such, activities which are
prohibited - to activities which are authorised and regulated". It is for
the Member States to demonstrate that such channelling measures including,
if relevant, the development of new games may reasonably be assumed to serve
their purpose.[112]

To be consistent with the objective
of fighting crime and reducing opportunities for gambling, national legislation
establishing a monopoly of games of chance which allows the holder of the monopoly
to follow an expansionist policy must be based on a finding that the crime
and fraud linked to gaming and addiction to gambling are a problem in the
Member State concerned which could be remedied by expanding authorised
regulated activities.[113]

According to the Court, "[s]ince the
objective of protecting consumers from gambling addiction is, in principle,
difficult to reconcile with a policy of expanding games of chance
characterised, inter alia, by the creation of new games and by the advertising
of such games, such a policy cannot be regarded as being consistent unless
the scale of unlawful activity is significant and the measures adopted are
aimed at channelling consumers’ propensity to gamble into activities that are
lawful."[114]
That fact that demand for games of chance has already increased noticeably
particularly at a clandestine level, must be taken into consideration.[115]

The Court underlines the need for national
authorities to bring all the necessary evidence in this regard.[116]
In Placanica, the Court accepted factual evidence of the Italian
Government (investigations carried out by the Italian Senate) which led to the
conclusion that the activities of clandestine betting and gaming, prohibited as
such, were a considerable problem in Italy as it appeared that half the total
turnover figure of the betting and gaming sector in Italy was generated by
illegal activities.[117]

In order to achieve the objective of
drawing players away from clandestine betting and gaming, authorised operators
must represent a reliable, but at the same time attractive, alternative to a
prohibited activity. As such, this may require "the offer of an
extensive range of games, advertising on a certain scale and the use of new
distribution techniques".[118]

An increase in the commercial activity
of an operator who has been granted exclusive rights in the field of games of chance and a substantial increase in
the income received from those games require particular attention
when examining of whether the legislation at issue is consistent and
systematic, and hence whether it is appropriate for pursuing the objectives
recognised by the case-law.[119]

The courts recognised[120]
the following concrete features of such expansionist policy:

·
the public monopoly extends to lottery games and
the holder is engaged in intensive advertising campaigns for lottery games,
emphasising the need to finance social, cultural or sporting activities to
which the profits are allocated, thereby making it appear that maximisation of
the profits destined for such activities is becoming an end in itself of the
restrictive measures concerned;

·
the development and marketing of addictive games
by the monopoly holder;

·
the public authorities are developing or
tolerating policies of expanding supply of casino games and automated games,
despite the fact that they present a higher risk of addiction than bets on
sporting competitions;

·
the public authorities tolerate the offering of
new possibilities of casino games on the Internet;

·
the relaxation, by the public authorities, of
the conditions in which automated games may be exploited in establishments
other than casinos, such as gaming arcades, restaurants, cafes and places of
accommodation;

·
restrictions on how often per week or per day
games are on offer, restrictions on the number of outlets which offer games of
chance and on sales and marketing activities of the outlets, as well as
restrictions on advertising and development of new games (from the owner of an
exclusive licence);

·
the extent and effect of marketing and
development of the games of chance, inter alia, how much the owner of an
exclusive licence spends in that regard as well as the form or content of the
marketing and the susceptibility of the targeted groups;

·
the fact whether the advertising of the gambling
and betting services is rather more informative than evocative in nature;

·
the fact that the number of casinos has risen
from 66 to 81 in 6 years;

·
the fact that the exclusive right holder makes
use of sustained and growing advertising for its products, including on the
internet, is increasing the number of outlets for betting and for the products
offered to bettors, and uses a commercial strategy seeking to draw in new
audiences for the betting offered.

More specifically in the context of the
objective to draw players from illegal gambling to controlled channels, the CJEU has considered a number of features related to advertising,
relevant for the assessment of the commercial policy of the holder of the
monopoly:

·
any advertising by the holder of a public
monopoly must remain measured and strictly limited to what is necessary in
order thus to channel consumers towards controlled gaming networks. Such advertising cannot aim to encourage consumers’ natural
propensity to gamble by stimulating their active participation in it. Examples
are trivialising gambling or giving it a positive image because revenues
derived from it are used for activities in the public interest, or increasing
the attractiveness of gambling by means of enticing advertising messages
holding out the prospect of major winnings.[121]

·
in particular, a distinction should be drawn
between strategies of the holder of a monopoly which are intended solely to
inform potential customers of the existence of products and serve to ensure
regular access to games of chance by channelling gamblers into controlled
circuits, and those which invite and encourage active participation in
such games. A distinction must therefore be drawn between a restrained
commercial policy seeking only to capture or retain the existing market for
the organisation with the monopoly, and an expansionist commercial policy
whose aim is to expand the overall market for gaming activities.[122]

5.6.2.5.
The overall national policy in the field of
gambling

Consistency of the national policy should
also be assessed by reference to the gambling sector taken as a whole, in
particular in regard to other types of games of chance, which are not subject
to the respective monopoly. In this context, the specific differences between
games, including their addictive level, should be properly considered.

The Court has recognised that the various
types of games of chance can exhibit significant differences, particularly
as regards the actual way in which they are organised, the size of the stakes
and winnings by which they are characterised, the number of potential players,
their presentation, their frequency, their brevity or repetitive character and
the reactions which they arouse in players, or by reference to whether, as in
the case of games offered in casinos and slot machines in casinos or other
establishments, they require the physical presence of the player.[123]

In those circumstances, the fact that some
types of games are subject to a public monopoly while others are subject to a
system of authorisations issued to private operators is not, in itself, capable
of affecting the suitability of the monopoly to achieve the relevant objectives
pursued.[124]

However, in the particular circumstances of
the case, the Court acknowledged that the referring courts "may
legitimately be led to consider that the fact that, in relation to games of
chance other than those covered by the public monopoly […], the competent
authorities thus conduct or tolerate policies aimed at encouraging
participation in those other games rather than reducing opportunities for
gambling and limiting activities in that area in a consistent and
systematic manner, has the effect that the objective of preventing incitement
to squander money on gambling and combating addiction to the latter, which was
at the root of the establishment of the said monopoly, can no longer be
effectively pursued by means of the latter, so that the latter can no longer be
justified having regard to [Articles 49 and 56 TFEU]".[125]

Measuring the level of gambling addiction
requires an assessment of the danger of certain games of chance. In the Gaming
machines case, for example, Norway had chosen to fight gambling addiction
through the reduction of gambling opportunities by subjecting the operation of
gaming machines to a State-owned monopoly. The EFTA Court considered that an
increase in gambling addiction had occurred simultaneously with the increase in
gaming machine gambling, and that 81% of the callers of a helpline reported
gaming as a problem. Studies presented pointed at gaming machines as the single
most potentially addictive form of gambling, due to the structural
characteristics of the machines, such as rapid event frequency, the near miss,
and light and sound effects. From this, the EFTA Court concluded that gaming
machines are more dangerous in terms of leading to gambling addiction than
other games lawfully offered on the Norwegian market. Even though other games
may also lead to gambling addiction, the EFTA Court could not see this on a
comparable scale, and considered in this particular case the marketing and
development of other games not relevant when assessing the consistency of the
contested legislation.[126]

In this context, the EFTA Court clarified
that "when assessing the consistency of the contested legislation, it is,
in the light of the overriding legislative motivation of fighting gambling
addiction, essential to put the focus on games with comparable effects with
respect to creating such addiction. Whether and to which extent a given
game can lead to gambling addiction must be evaluated by taking into account
the specific circumstances, including its features, its presentation, the
reactions of its potential consumers and the broader social-cultural
environment".[127]

5.6.3.
A system of licensing
5.6.3.1.
General

Licensing systems for certain categories of
offline gambling are common in many countries. A growing number of Member
States is introducing licensing systems for the provision of online gambling
services (see chapter 4). These licenses may be issued on the basis of a call
for tender which sets out the eligibility requirements. Once awarded the
licence, its holder will be subject to the national gambling laws and
supervisory structure.

According to consistent case-law of the
CJEU, a prior administrative authorisation scheme, even though it
derogates from a fundamental freedom, may be justified on the basis of
objective, non-discriminatory criteria known in advance, in such a way as to
circumscribe the exercise of the authorities´ discretion so that it is not used
arbitrarily. Also, any person affected by a restrictive measure based on such
derogation must have a judicial remedy available to them.[128] In
order to enable the impartiality of the authorisation procedures to be
monitored, it is also necessary for the competent authorities to base each of 
their decisions on reasoning which is accessible to the public, stating
precisely the reasons for which, as the case may be, authorisation has been
refused.[129]

Case-law has developed as regards the
procedure to grant such licences. The principles of transparency, equal
treatment and legal certainty appear to apply both in the situation where a
Member State opts for an "open" system of licences in which
access to a certain gambling activity is granted to every operator which
fulfils the requirements provided by the relevant national law (such as a bank
guarantee, absence of previous offences, etc.), and in the situation where a
Member State establishes a “closed” system of licenses under which only
one or several licences are granted by the national authorities in respect of
each of the games of chance authorised (see also chapter 5.6.2).

5.6.3.2.
The principles of transparency, equal treatment
and legal certainty

The case-law of the CJEU states that public
authorities which grant betting and gaming licences have a duty to comply with
the fundamental rules of the Treaties and, in particular, with Articles 49 and
56 TFEU, the principles of equal treatment and of non-discrimination on grounds
of nationality and the consequent obligation of transparency.[130]

The obligation of transparency
applies if the licence in question may be of interest to an undertaking located
in a Member State other than that in which the licence is granted. It requires
the licensing authority to ensure, for the benefit of any potential tenderer, a
degree of publicity sufficient to enable the licence to be opened up to
competition and the impartiality of the award procedures to be reviewed,
without necessarily implying an obligation to launch an invitation to tender.
The award of such licences must therefore be based on objective,
non-discriminatory criteria which are known in advance, in such a way as to
circumscribe the exercise of the national authorities’ discretion.[131]

The purpose underlying the principle of
transparency, which is a corollary of the principle of equality, is essentially
to ensure that any interested operator may take the decision to tender for
contracts on the basis of all the relevant information and to preclude any risk
of favouritism or arbitrariness on the part of the licensing authority. It
implies that all the conditions and detailed rules of the award procedure must
be drawn up in a clear, precise and unequivocal manner, to make it possible for
all reasonably informed tenderers exercising ordinary care to understand their
exact significance and interpret them in the same way, and to circumscribe the
contracting authority’s discretion and enable it to ascertain effectively
whether the tenders submitted satisfy the criteria applying to the relevant
procedure.[132]

The principle of equal treatment
requires moreover that all potential tenderers be afforded equality of
opportunity and accordingly implies that all tenderers must be subject to the
same conditions.[133]

The principle of legal certainty
also requires that rules of law be clear, precise and predictable as regards
their effects, in particular where they may have unfavourable consequences for
individuals and undertakings.[134]

The CJEU ruled in Costa that the
effect of an obligation for new licence holders to observe a minimum
distance between their establishments and those already in existence is to
protect the market positions acquired by the operators who are already
established. This is to the detriment of new licence holders, who are compelled
to open premises in less commercially attractive locations than those occupied
by the former. Consequently, any  such  measure entails an unequal treatment
which could not be justified on the basis of the general interest objectives.
As regards the objective of combating of criminality by making the operators
active in the sector subject to control and channelling betting and gaming into
the systems thus controlled, the Court observed that the rules on minimum
distances were imposed exclusively on new licence holders and not on those
already established. It ruled that even if a system of minimum distances
between outlets were in itself justifiable, it could not be acceptable for such
restrictions to be applied in circumstances such as those of the cases pending
before the national court, in which the only operators to be placed at a
disadvantage would be the new licence holders entering the market.[135]

In Sporting Exchange, the CJEU
elaborated the case-law on the principle of transparency. It had to rule on the
validity of the renewal of a licence to operate games of chance granted to a
single operator without a competitive tendering procedure.

The Court recalled that the obligations of
equal treatment and transparency is also applicable in the situation of such
“closed” systems of licences.[136]
It accepted however an exception to the compliance with that obligation in so
far as the operator in question is a public operator whose management is
subject to direct State supervision or a private operator whose activities are
subject to strict control by the public authorities”.[137] In
such situations, granting an operator with exclusive rights to operate games of
chance, or renewing such rights, without any competitive tendering procedure
would not appear to be disproportionate in the light of the objectives pursued
by the national legislation in question (protection of consumers and combating
both crime and gambling addiction).[138]

5.6.3.3.
Reserving the grant of licenses to non-profit
entities

The CJEU assessed in Sjöberg and Gerdin
the compatibility with EU law of national legislation which makes the award of
a licence to organise gambling activities subject to the condition of the
applicant being a public or a non-profit organisation. The Swedish law in
question prohibited the promotion of gambling legally organised in other Member
States and the promotion of unlicensed gambling in Sweden.

The Court underlined that the purpose of
the national law was “to ensure that those consumers take part in gambling only
in the context of the system licensed at national level, thereby in particular
ensuring that private profit-making interests are excluded from that sector”,
which is a restriction to the free movement of services.[139] It
then ruled that “it might be considered unacceptable to allow private profit to
be drawn from the exploitation of a social evil or the weakness of players and
their misfortune” and consequently that “according to the scale of values held
by each of the Member States, and having regard to the discretion available to
them, a Member State may restrict the operation of gambling by entrusting it
to public or charitable bodies”.[140] Moreover, the Court
considered that the prohibition on the promotion of services of private gaming
operators run for profit, who would never be entitled to obtain national
licences for the operation of gambling, may be regarded as necessary to meet
such an objective. [141]

In Ladbrokes, the EFTA Court recalled that the aim of preventing gambling of being a source of private profit
may in principle justify restrictions on the right of establishment and the
free movement of services. As an aim in itself, it must be based on a general
resentment of games of chance for reasons of morality, in particular if it
relates to non-addictive games. Thus, the aim of preventing gambling from being
a source of private profit can serve as a justification only if the
restrictive measure (such as the introduction of a State-owned monopoly
offering a range of gambling opportunities) reflects that moral concern.[142]
However, national authorities cannot be required to oppress all games of chance
offered by socially beneficial organisations. The acceptance of certain games
of chance of a limited volume offered by such organisations, typically in local
communities, constitutes a reasonable use of statutory prohibitions which does
not fatally undermine the moral position on which the aim is based.[143]

5.6.3.4.
Limited number of licences

Some Member States limit the number of
licences, for example to a maximum for a certain category of gambling. In Placanica,
the national (Italian) law at issue limited the number of licenses for the
management of sport bets on competitive events not involving horses (to 1000),
and also the number of licences for the acceptance of bets on competitive horse
events.[144]
Similarly to the case-law on exclusive rights/monopolies (see chapter 5.6.2),
the CJEU made clear that limits on the number of operators are restrictions to
the fundamental freedoms which are in principle capable of being justified.[145]

Under the specific circumstances of Placanica,
the Court first analysed the general interest objective of “reducing gambling
opportunities”. It ruled that the restrictions on the number of operators “must
in any event reflect a concern to bring about a genuine diminution of gambling
opportunities and to limit the activities in that sector in a consistent and
systematic manner”. In that case it was however common ground, according to the
national court, that “the Italian legislature is pursuing a policy of expanding
activity in the betting and gaming sector, with the aim of increasing tax
revenue, and that no justification for the Italian legislation is to be found
in the objectives of limiting the propensity of consumers to gamble or of
curtailing the availability of gambling”.[146]

The CJEU turned then to the objective of
"combating criminality", which was identified as the true goal of
Italian legislation at stake. In this context, it underlined that it is
possible that a policy of controlled expansion may be entirely consistent with
the objective of drawing players away from clandestine betting and gaming to
activities which are authorised and regulated. A licensing system may, in those
circumstances, constitute an efficient mechanism enabling operators active in
the betting sector to be controlled with a view to preventing the exploitation
of those activities for criminal or fraudulent purposes. It must nevertheless
be ascertained whether the imposed limitations satisfy the conditions laid down
by the CJEU case-law as regards their proportionality.[147]

5.6.3.5.
Restriction on advertising of licence holders
established in another Member State

In its recent case HIT and HIT LARIX,
the CJEU assessed the rejection of a permit to carry out advertising in Austria for gaming establishments located in Slovenia, in particular for casinos. In order for such
permit to be granted, the Austrian legislation required that the level of
protection of gamblers in the Member State of origin should be comparable to
the level in Austria. It was not in dispute that such national legislation
pursues the objective of protecting consumers against the risks connected with
games of chance.

The CJEU ruled that such authorisation is
in principle capable of fulfilling the condition of proportionality if it is
limited to making authorisations to carry out advertising for gaming operators
established in other Member States conditional upon the legislation of the
latter providing guarantees that are in essence equivalent to those of the
national legislation. Such a condition does not appear to constitute an
excessive burden for operators given the objective of protecting the population
against the risks inherent in games of chance. The legislation would however
have to be regarded as disproportionate, if it required the rules in the other
Member States to be identical or if it imposed rules not directly related to
protection against the risks of gaming.[148]

5.7. Assessing the proportionality of specific corporate requirements imposed on
gambling operators
5.7.1.
Seat requirements

The CJEU has held that "the
requirement that an undertaking create a permanent establishment or branch
in the Member State in which the services are provided runs directly counter to
the freedom to provide services since it renders impossible the provision of
services, in that Member State, by undertakings established in other Member
States".[149]
The CJEU has furthermore underlined that "if the requirement of
authorization constitutes a restriction on the freedom to provide services, the
requirement of a permanent establishment is the very negation of that freedom.
For such a requirement to be accepted, it must be shown that it constitutes a
condition which is indispensable for attaining the objective pursued."[150]

The Court has stated that a requirement for
a licence holder to have its seat in the national territory is a discriminatory
restriction which can therefore be justified only on the grounds of public
policy, public security or public health.[151] The Court has, in
this context, underlined that "it is settled case-law that the concept of
public policy, first, presumes that there is a genuine and sufficiently serious
threat to a fundamental interest of society and, second, must, as a
justification for derogation from a fundamental principle of the Treaty, be
narrowly construed." [152]

In Engelmann, the national
(Austrian) legislation provided that one of the conditions for granting
concessions for the operation of land-based games of chance was that
operators should have their seat in Austria. The Austrian Government
claimed that the purpose of this was to permit effective control of operators
in the gambling sector, with a view to preventing those activities from being
carried out for criminal or fraudulent purposes. The obligation would permit,
in particular, a degree of control to be exercised over the decisions taken by the
company's organs by reason of the presence of representatives of the State in
organs such as the supervisory board.

The CJEU ruled however that, without it
being necessary to determine whether that objective can fall within the
definition of public policy, "the categorical exclusion of operators whose
seat is in another Member State appears disproportionate, as it goes
beyond what is necessary to combat crime. There are indeed various measures
available to monitor the activities and accounts of such operators".[153]

The Court referred, inter alia, to the
possibility of requiring separate accounts audited by an external accountant to
be kept for each gaming establishment of the same operator, the possibility of
being systematically informed of the decisions adopted by the organs of the
concession holders and the possibility of gathering information concerning
their managers and principal shareholders. Any gaming establishment in the Member State can be supervised and have sanctions imposed on it, regardless of the
residence of its managers. Member States can also carry out supervision on
premises of the gaming establishments located in national territory in order,
in particular, to prevent any fraud being committed by operators against
consumers.[154]

In Dickinger and Ömer, the Court
assessed a similar condition for the exploitation of online casinos. The
national (again Austrian) law provided that the holder of the monopoly of
operating lotteries must have its registered office in national
territory. According to the Austrian Government, this obligation should allow
effective monitoring the holder of the monopoly for online casinos, and it is
necessary to ensure effective supervision of the operator, inter alia by the
presence of State commissioners in its supervisory bodies. The CJEU ruled that
it is for the national court to determine, first, whether the objectives in
question are capable of falling within the concept of public policy, and, if
so, whether the obligation concerning the registered office satisfies the
criteria of necessity and proportionality. In particular, it must be considered
whether there are other less restrictive means of ensuring a level of
supervision of the activities of operators established in another Member State equivalent to that which can be carried out in respect of operators whose
registered office is in the country of the provision of the service.[155]

5.7.2.
Legal form for operators of games of chance

The CJEU has clarified that the requirement
of a particular legal form for operators of games of chance such as a
public limited company may, by virtue of the obligations binding certain kinds
of company with respect in particular to their internal organisation, the
keeping of their accounts, the scrutiny of which they may be subject and their
relations with third parties, be justified by the objective of preventing money
laundering and fraud.[156]

5.7.3.
Minimum share capital requirements

Similarly, the requirement for a share
capital of a certain amount may prove to be of use in order to ensure a
certain financial capacity on the part of the operator and to guarantee that it
is in a position to meet the obligations contracted towards winning gamblers.
The observance of the principle of proportionality requires however that the
restriction imposed does not go beyond what is necessary for achieving the aim
pursued, having regard to other possible ways of ensuring that the claims of
the winning gamblers will be honoured by the operator.[157]

5.8.
Application of State aid rules

The European
Commission opened, under the EU state aid rules (Articles 107 and 108 TFEU), two
formal investigations in the field of gambling. One formal final decision has
been adopted whilst the other one is pending:

·
Denmark: here the
Commission examined whether lower taxes for online casinos in comparison to
traditional casinos in Denmark could procure an anticompetitive advantage for
such online casinos. Denmark had decided to reform the national legislation on
gambling and betting services and to replace the monopoly regime with a
regulated and partially liberalised one. Under the notification provided to the
Commission in July 2010, online providers of casino games and gaming machines
would be subject to a flat tax of 20 % on the GGR compared with up to 75 % for
land-based casinos and gaming halls. The Commission submits that the measure
constituted State aid as the differential treatment entails a competitive
advantage for online casinos as compared to their land-based
"competitors". However, the Commission concluded that the measure is
compatible with the internal market under Article 107(3)(c) TFEU because the
overall balance of implementing the measure was considered to be positive. If
the tax rate for online gambling had been set at the same rate or at a similar
level as the rate for land-based gambling operators this would have led to a
situation where the industry and the players would not have responded to the
possibility of legally providing online gambling services on the Danish market.
This would have defeated the objectives of general interest pursued by the
Gaming Act (keep gambling at a moderate level, protect gamblers, ensure public
order and prevent gambling being used for criminal purposes).[158]

·
France: here the
Commission has opened the formal investigation procedure to examine whether a
parafiscal tax (levy) to finance horse racing companies is in line with
competition rules because of its doubts regarding the qualification of the
mission conferred on horseracing companies as a service of general economic
interest.[159] The procedure is still to be finalised with a formal decision.

6.
Administrative cooperation and efficient enforcement

The increased supply of online gambling
services, authorised and unauthorised, their cross-border impact and the
progressing regulation of gambling services in Member States raises the
immediate question about the need for enhanced administrative cooperation and
efficient national enforcement. One of the objectives of the Green Paper
consultation was to determine if greater cooperation at EU level would help
Member States to achieve more effectively the objectives of their gambling
policy. The response has been an almost unanimous call from Member States, the
European Parliament and stakeholders for an enhanced administrative cooperation
between gambling authorities at EU level. The Council already stressed in
December 2010 in its conclusions on the framework for gambling and betting in
the EU member states[160]
that "the cross-border nature of the different issues requires Member
States to work more closely together, and with third countries where
appropriate, in order to address them".

Set the conditions for a successful
administrative cooperation

The supervisory structure in Member States
differs significantly. The role and competences of the gambling regulatory
authorities differ, yet sufficient competences are crucial if administrative
cooperation is to be effective. Albeit administrative cooperation is taking
place, this is often on an ad-hoc basis and informally. Existing bilateral and
multilateral cooperation is considered useful by Member States. However they recognise
the deficits in terms of the quality of information that can be exchanged and
the implementation of the decisions taken in the ambit of these multilateral
structures because frequently these do not meet the needs of a regulator.
Outside the area of sports administrative cooperation with other stakeholders is
limited.

Ensure effective enforcement for the
achievement of policy objectives

The Green Paper also highlighted the
importance of effective enforcement for Member States to ensure the achievement
of the public interest objectives behind their national gambling policy.
Effective enforcement encompasses the organisational structure and competences
of the national gambling authority, adequate administrative cooperation with
other regulators and suitable enforcement tools. The responses to the Green Paper
show a relative absence of preventive enforcement methods. While responsive
enforcement methods are used by some Member States there is still a lack of
information and of experience on these methods in the EU. Therefore, the
efficiency, technical limits and costs of responsive enforcement methods need
to be discussed.

6.1.
The regulatory authority

The effective implementation and
enforcement of gambling rules and an efficient cross-border administrative
cooperation requires strong institutional arrangement in Member States.

6.1.1.
Role and competences of regulators

In the EU the role and competences of
gambling regulators differ amongst Member States in terms of powers and scope. Whilst
more and more Member States establish independent regulatory bodies, normally
in parallel with the introduction of an open licensing system for the offering
of online gambling services, the majority of Member States still entrust a
specific department within a Ministry (mainly within the Ministry responsible
for finance or the interior) with the task of regulating and supervising the
gambling market. Having said this, the regulation and supervision of gambling
services can be the competence of several authorities, depending for example on
the type of game regulated or the channel of distribution.

6.1.2.
Institutional arrangements

In a rapidly developing market, it is
essential for regulators to understand the business and the technology and to
have up-to-date information. This assists regulators not only when setting
licensing/authorisation requirements but also in the supervision of the licence
holders and the enforcement of the national gambling rules. Today a number of
regulators in the EU lack experience with online gambling regulation. In other
cases regulatory authorities have not been set up or suffer from limited staff
and resources. In the workshop organised by the Commission on efficient
national enforcement measures and administrative cooperation a number of
regulators expressed a lack of experience with online gambling regulation, due
to their unregulated or newly regulated markets, as well as their desire to
draw knowledge from the more experienced regulators[161].

Regulators need to have a coherent legal
basis, be adequately resourced and have rules and procedures that are fit for
purpose. A number of regulators deem that a regulator's powers should cover all
forms of gambling (online and land-based). Sufficient competences are crucial
for effective administrative cooperation with regulatory authorities in other
Member States. Effective cooperation could be hampered by the fact that not
every Member State has a single, central and independent gaming regulatory
authority. Also the European Parliament considers the establishment of a
regulator with suitable powers in each Member State to be a necessary step
towards more effective regulatory cooperation.

All Member States are therefore encouraged
to set up a regulatory authority with an appropriate structure and powers or
embedded in an appropriate network of competent authorities at national level
to ensure appropriate administrative cooperation. Regulators need to have
proper competences and engage in cooperation with relevant authorities at
national level in order to meet demands for cooperation from other Member
States' regulators and not fall short of their expectations.

6.2.
Administrative cooperation

Enhanced administrative cooperation is
imperative to meet today's regulatory challenges. The European Parliament calls
for cooperation among national regulatory bodies to be considerably expanded,
giving them a sufficient remit, with the Commission as coordinator, to develop
common standards and take joint action against online gambling operators which
operate without the required national licence.

6.2.1.
Existing administrative cooperation

Today administrative cooperation is
organised in multilateral or bilateral agreements, mainly with a view to
discuss and exchange information and best practices on gambling-related issues.

Multilateral cooperation

Multilateral cooperation between gambling
regulators has been ongoing since the 1980′s. It takes place in two regulatory
organisations, in which Member States participate: the Gaming Regulators European
Forum (GREF)[162]
and the International Association of Gambling Regulators (IAGR)[163].

IAGR is a world-wide organisation including
members from the EU (Austria, Belgium, Bulgaria, Denmark, Finland, Hungary, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Slovenia, Spain, Sweden, the UK). The mission of IAGR is to advance the effectiveness and efficiency
of gaming regulation. GREF is the only multilateral organization that
concentrates on European countries. Regulators from most but not all Member
States are active members of GREF. GREF’s main importance is described as
providing a forum for the competent authorities to meet both at formal and
informal level, exchange information and views and learn from the different
approaches of the participating countries (best practices) regarding land-based
and remote gambling. GREF serves as a body to represent the different views of
European gambling regulators and also provide a central point of contact for
enquiries directed at them from authorities or related organisations in Europe and elsewhere. Both, GREF and IAGR, have established eGambling working groups. The
work focuses primarily on getting a common understanding of the risks and the
options for dealing with the risks in terms of consumer protection, ensuring
gambling is fair and keeping crime out of gambling.

Existing multilateral cooperation has been
successful in sharing experiences and good practice. The group has produced
good practice guidelines for internet gambling. Members learn from one another
and discuss particular challenges of gambling regulation and enforcement, on a
non-political and technical basis. However the work and the results achieved
seem to be limited due to the scope and mandate of the organisations and a
number of constraints on the exchange of information and data. The informal
structure and the non-binding character of statements and recommendations
discussed impede the development of common policies and measures.

Bilateral cooperation agreements

More recently Member States' regulators
have started to enter into bilateral cooperation agreements. On 28 June 2011
the French and Italian gambling authorities signed a first cross-border
cooperation agreement.[164]
The purpose of the agreement is to improve the enforcement of the respective
national regulatory systems and the effectiveness of the regulatory work by
sharing information and experience in four key areas: compliance checks on
operators licensed in both countries and adoption of player protection
measures, institutional communication strategies, preventing fraud in the
sports sector and the fight against websites of unauthorised operators.

In May 2012 Denmark and Malta entered into a cooperation agreement.[165]
The two jurisdictions intend to exchange information in particular to enhance
and facilitate respective licensing processes and the monitoring of licence
holders, to protect young and vulnerable groups and to protect players. The
agreement also raises the issues of equipment location parameters and common
use of B2B service providers. The Member States aim to cooperate on enforcement
of their gambling laws regarding joint licensees and to collaborate on areas
such as non-duplication of requirements and controls, shared responsible gaming
initiatives and employee exchange programmes.

Denmark has signed
agreements with a number of jurisdictions, such as Alderney, Gibraltar and the Isle of Man, in order to establish a formal basis for cooperation and information sharing
between the competent authorities.

Bilateral cooperation allows for a better
adaptation of the scope and content of the cooperation to the individual needs
of the parties and can be more effective than multilateral cooperation.
However, by its very nature it covers only two Member States and does not allow
for common initiatives tackling the existing challenges in the cross-border online
gambling market. Bilateral cooperation agreements furthermore require
sufficient resources if entered into with a number of Member States.

Existing bilateral and multilateral cooperation
agreements help Member States in their regulatory work and have proved useful
in achieving a certain degree of cross-border cooperation. These agreements
however have deficits in terms of the quality of information that can be
exchanged and the implementation of decisions taken in multilateral structures
and thus often does not meet needs of a regulator. Member States miss
appropriate structures for the exchange of information as well as focussed
discussions and an appropriate follow-up on agreed implemented programmes.

6.2.2.
Areas for administrative cooperation

Successful administrative cooperation
requires a clear definition of the areas Member States can request and exchange
information on and develop common actions and initiatives.

In the conclusions on the framework for
gambling and betting in the EU Member States the Council concluded that the
cooperation between the Member States seems required to assess the scope,
possibilities and mechanisms, in order:

•
to share information on gambling operators,

•
to protect consumers, minors and ensure the
integrity of games,

•
to minimize, where possible, any unnecessary
administrative burdens,

•
to identify and share best practices in relation
to for example player protection, technological tools for effective regulation
and responsible gambling measures.

The development and implementation of technical
solutions such as cross-border B2B licences or cloud computing in the gambling
sector might pose further challenges in terms of multijurisdictional regulation
and increases the need for enhanced cooperation.

The level of administrative cooperation
depends on the information and data that can be exchanged between gambling
regulators. In terms of the quality of the information and data and the
conditions for sharing it a distinction can already be made between sharing information
of a more general nature and sharing information and data on specific issues.

General information sharing would concern

•
National legislation governing online gambling
and the competences of the national authorities regulating gambling,

•
Experience and best practice regarding the
enforcement and supervision of national online gambling regulations, consumer
protection, gambling addiction, prevention of fraud and money laundering,
ensuring the integrity of sports,

•
Authorisation/licensing conditions for operators
seeking to operate in a Member State, including information on testing and
certification of gambling equipment.

Information and data exchange on specific
issues would cover

•
Applicants at the pre-licensing stage,

•
Testing results and certification of gaming
equipment, software, games to be offered,

•
Post-licensing information exchange such as

o
monitoring of authorised operators,

o
enforcement of applicable rules for consumer
protection,

o
enforcement of applicable rules prevention of
fraud  and of money laundering,

o
operators' compliance with applicable
legislation and/or licence conditions,

o
any breach by operators of their license
conditions,

o
audit reports/findings,

o
licensees suspended,

o
customer interaction, and

o
 complaints against authorised operators,

•
Consumers/players such as

o
exclusion lists or barred citizens,

o
identity checks for the purpose of age
verification,

o
identity checks for the purpose of crime
prevention (identity theft, money laundering),

•
Illegal unregulated operators such as

o
their identity,

o
the means used to detect them,

o
the means used to prevent them from operating in
the jurisdiction, and

o
interaction with the authority/jurisdiction
authorising them (where this exists).

6.2.3.
Tools for administrative cooperation

Administrative cooperation will only work
if arrangements are put in place defining why, on what and how regulators
should cooperate. Many responses to the Green Paper consultation see a crucial
role for the Commission in organising administrative cooperation among Member
States. The Commission is called on to create a structure for administrative
cooperation and to assist this cooperation, in order to ensure focused
discussions as well as an appropriate follow-up on agreed implemented
programmes. In exploring how to improve administrative cooperation in the EU
two different goals have to be distinguished: (1) involve the Member States in
the development and implementation of an EU policy on online gambling services
and (2) provide a structure for the coordination of administrative cooperation
between Member States. Both are needed.

Involve Member States in the development
and implementation of an EU policy on online gambling services

The Communication "Towards a comprehensive
European framework for online gambling" and this Commission Staff Working
Paper define an action plan identifying initiatives to be taken at national and
EU level in response to key challenges for the regulation of gambling services.
In order to better involve Member States in the development and implementation
of an EU policy on online gambling services the Commission will establish an
expert group on gambling. The expert group, composed of representatives of
Member States, will provide advice and expertise on the preparation of EU
initiatives. It will also be tasked with facilitating the development of mutual
understanding and the exchange of information and best practices. Several
Member States have called for the establishment of an expert group by the
Commission. Stakeholder experts may be invited to the expert group, in line
with respective Commission procedures.

Provide a structure for the
strengthening of administrative cooperation between Member States

In order to strengthen cooperation assisting
Member States and gambling regulators in their regulatory and supervisory work and
responding to daily and operational needs an appropriate structure for
administrative cooperation between Member States needs to be in place. This
corresponds to a request from the European Parliament calling on the Commission
to explore – in keeping with the principle of ‘active subsidiarity’ – all
possible tools or measures at the EU level designed to protect vulnerable
consumers, prevent addiction and combat illegal operators in the field of
gambling, including formalised cooperation between national regulators. The
structure such formalised cooperation between national regulators could take
however depends to a large extent on the kind of information and data to be exchanged
between the authorities.

As a first step cooperation needs to focus
on exchange of more general information and best practices, in order to share
intelligence, reduce administrative burdens and build confidence and trust
between regulators. Member States have suggested that regulators should start
collaborating on common objectives.

In order to facilitate this cooperation the
Commission will set out, together with all EU/EEA regulators and in cooperation
with Member States, the objectives of cooperation, common principles and
cooperation arrangements. Ultimately, the aim is to facilitate cooperation
between the all EU/EEA regulators, setting out the arrangements for sharing of
information, views and assessments, and preparing for the management and resolution
of cross-border issues.

The advantage of a step-by-step approach as
regards administrative cooperation is the general acceptance of all Member
States and the prospect of immediate implementation. It may be general in scope
and requests for information or intelligence exchange may be more on a
case-by-case basis, entailing therefore a degree of administrative work. In the
long term this may not suffice to deal with the challenges of the online
gambling market adequately as inter alia it may not facilitate the exchange of
information on applicant licensees and on authorised operators (eg minimal
application process requirements met, such as financial stability of company,
shareholders, certified technical equipment and software, monitoring, complaints
by customers, interaction with regulator), and it will not allow for the use of
existing instruments for mutual assistance and administrative cooperation in
the EU, such as the Internal Market Information system (IMI)[166].

Therefore, in a second step cooperation
could be extended to exchange of information on operators and players. This
will enable administrative cooperation to be fully functional. However, the
challenge will be to define the kind of information to be shared and to put the
right infrastructure in place to guarantee protection and reliability of data.

The EU has a solid data protection legal
framework. The exchange of information between Member States should comply with
the rules on the protection of personal data in the Data Protection Directive.
The processing of personal data under EU Law may only take place under certain
conditions and in accordance with a set of principles. EU law furthermore
requires an adequate and specific legal basis for the processing of personal
data.

In its conclusions on the framework for
gambling and betting in the EU member states the Council concluded that IMI
could become a useful tool in order to facilitate administrative cooperation[167]. This has
been reiterated by a number of Member States and stakeholders in the
consultation. The European Parliament states that IMI could serve as the basis
for more effective cooperation among national regulatory bodies. IMI is a
software application accessible via the Internet, developed by the Commission
in cooperation with the Member States, in order to assist Member States with
the practical implementation of information exchange agreements by providing a
centralised communication mechanism to facilitate cross-border exchange of
information and mutual assistance. In particular, IMI helps competent
authorities to identify their counterpart in another Member State, manage the exchange of information, including personal data, on the basis of simple and
unified procedures and overcome language barriers on the basis of pre-defined
and pre-translated workflows.

The Commission proposal for a Regulation on
administrative cooperation through IMI[168]
is to create the possibility to launch IMI pilot projects to test the use of
IMI for administrative cooperation, including the exchange of personal data, in
any single market area. In practice, IMI guarantees a high level of technical
and procedural data protection. The processing of personal data in IMI offers a
considerably higher level of protection and security than other methods of
information exchange such as mail, telephone, fax or e-mail. In addition, data
protection considerations are addressed in the day-to-day use of the system. The
Commission will therefore, through a dialogue with Member States, explore
further the possibilities for an exchange of personal data, in particular
through the application of IMI and in compliance with applicable data
protection rules.

The Regulation on Consumer Protection
Cooperation[169]
sets up an EU-wide network of national enforcement authorities with similar
investigation and enforcement powers investigating possible breaches of
consumer laws and to take action against traders. The network seeks to tackle
breaches of consumer law in areas such as misleading advertising and distance
selling. The Regulation further sets out supporting measures to foster
expertise and cooperation between authorities as well as the possibility of
international cooperation agreements with third countries. The Commission will
further assess the use of this tool and may draw from this network in seeking
to facilitate administrative cooperation amongst regulators.

6.2.4. Cooperation with other enforcement bodies and stakeholders

In the Commission's workshop on efficient
national enforcement measures and administrative cooperation participants
considered cooperation with other enforcement bodies and dialogue with industry
(not only operators but also related services such as hardware and software IT
providers and consumer associations) crucial to properly regulate the market as
well as share knowledge and experience. Cooperation on criminal investigations
should be improved. Dialogue with industry can be formal or informal or on an
ad-hoc basis. Regulators and industry alike stressed that continuous
cooperation and dialogue can only benefit the quality and efficacy of
regulation.

The Commission therefore encourages Member
States to ensure cooperation between relevant competent authorities at regional
and national level, such as enforcement and consumer organisations. In order to
respond to the regulatory challenges of a technologically complex and fast
developing market regulators should also engage in a constructive dialogue with
the industry sectors concerned.

6.2.5.
Cooperation with third countries

The challenges in the online gambling
market are of a transnational character, often originating from outside the EU
borders. With regard to illegal offers from third countries regulators have
little or no contact with relevant authorities in other parts of the world,
often because no such regulators or contact points exist, making it difficult
for the regulators of the Member States to follow-up on operators from such
countries (e.g. Asian ones). In some instances regulators use established
networks in other industry sectors, such as financial services, for information
sharing.

Currently no agreements exist between the
EU and third countries covering gambling related issues. However, Member States
almost unanimously call on the Commission to coordinate actions and initiatives
toward third countries.

The Commission will together with Member
States identify the issues that need to be raised with third countries and will
seek to strengthen the dialogue with these countries. Existing international
information and intelligence exchange mechanisms need to be understood and
better exploited.

6.3.
Enforcement measures

The success of a national gambling policy
also depends on a Member States' ability to effectively enforce its national
rules. For this purpose Member States can use preventive and responsive
enforcement measures.

6.3.1.
Preventive enforcement measures

Preventive enforcement means aim at
reducing the contact of citizens with the unregulated gambling offer and
ensuring compliance with national gambling rules and common principles.

Inform players about the available legal
offer

Today many players are not aware of or ignore
if and where a gambling service is authorised. In order to enforce national
gambling rules players need to be enabled to make a distinction between authorised
and unauthorised gambling services offered online. Member States should
therefore explore means encouraging users to play on websites of authorised
operators as opposed to websites of unauthorised operators providing services
without a licence.

While many Member States have information
campaigns to inform consumers about the risks of gambling the Commission has
little information about campaigns held to inform consumers about the
availability of an authorised offer and the specific risks of using
unauthorised gambling services provided without a licence.

One way of informing players about the
reliability of a gambling service offered online is the use of trustmarks,
issued by gambling regulators to authorised operators. They exist in several
jurisdictions and players are thus better able to identify if a gambling site
is licensed and by which jurisdiction. Nonetheless, the question remains as to effective
such trustmarks are in channelling players to regulated websites, in particular
without complementary promotional campaigns enabling player recognition. In the
Commission's workshop on enforcement views differed on the impact that
trustmarks have on consumers in choosing an operator over another.

The Commission will explore, together with
Member States, best practices for consumer information and education.

Understand citizens' choice/behaviour

Many EU citizens purchase online gambling
services for entertainment purposes. Many of these users, either because of a
lack of national supply of such services or because they seek to maximise their
return on stakes, search across competing online gambling services across
borders. It was highlighted in many responses to the Green Paper, from Member States and stakeholders alike, that in order to channel these requests into the
authorised national market a Member State will have to provide an attractive
authorised offer.

Responsible Business Conduct

Naturally, industry inherently has an
important role to play in the enforcement of national gambling rules. The
nature of the internet allows consumers to access gambling services
cross-border. Very often Member States require a national licence for the
offering of gambling services to a citizen. In order to ensure the
effectiveness of national gambling regimes operators need to respect these
regimes and refrain from offering their services to consumers if not authorised
to do so.

At the same time industry can and has
launched its own initiatives to ensure the attainment of policy objectives. The
European Committee for Standardisation (CEN) workshop agreement on responsible remote gambling measures[170] for example was
initiated by the gambling operators. The CEN workshop agreement developed a set
of control measures designed to ensure the adequate protection of customers and
the responsible behaviour of gambling operators, software suppliers and
associated service providers.

Appropriate reporting obligations and
supervision of licensees

A thorough post-licensing process is imperative
to ensure full compliance of authorised operators with the respective national
regulatory regime. In order to have a full understanding of the market and of
the regulated entities that are operating it is crucial to collect information from
all relevant sources not only from the regulated operators. Establishing the
information requirements, collecting and processing the information are key
challenges for regulators.

In an online and technology-based sector the
monitoring of gambling transactions between the player and the operator and
access to the operators' server are considered essential for proper supervision
of authorised gambling operations. In some Member States monitoring of gambling
transactions is conducted in real time. Access to the server is important to
perform the monitoring of gambling transactions and of the operator's compliance
with the licensing requirements. In order to have access to an operator's
server it does not seem necessary to have the server located in the Member State where a game is offered. From the authorities present in the Commission's
workshop on efficient national enforcement measures and administrative
cooperation only few regulators consider the location of the server in the
recipient Member State as essential while the majority of regulators do not see
a need for such requirement from a technological standpoint. Instead, access to
servers at a distance, central control units and real time control through
technical supervisory tools (allowing, for example, for "know your
customer" (KYC) checks by operators, central list of excluded players and
storage of players' balances) were considered far more efficient and
appropriate, provided that the information is processed and analysed
adequately. Ensuring the accuracy of data is considered more important than
physical access to it. Software and hardware certification can play an
important role in this respect. Duplication of IT infrastructure furthermore
increases the complexity of a system without necessarily facilitating access to
information.

However, while technology is an important
enforcement tool many regulators have highlighted that it should not be
overestimated. They consider direct contact with operators to be at least
equally important.

Together with Member States the Commission
will discuss the necessary means for the supervision of authorised gambling
operators and explore methods and technologies for remote supervision. The
Commission could promote best practices for this important regulatory task.

Administrative cooperation

Enhancing administrative cooperation
amongst public authorities, including enforcement bodies, and with the gambling
operators and other relevant stakeholders will further improve the quality of
enforcement.

6.3.2.
Responsive enforcement measures

Responsive enforcement measures should
provide the appropriate tools to cater for those cases where gambling operators
or other relevant service providers do not comply with national rules. Member
States are in need of means for the execution of administrative decisions
prohibiting the provision of unauthorised gambling services in cases where an
operator fails to implement a decision prohibiting the offer. Technical
enforcement means available have certain benefits but also a number of
significant shortcomings. As responsive enforcement measures directly impact
not only on the rights of the player but also of the service providers they
require a proper legal basis in national law.

Blocking access to websites

Blocking access to websites is used in a
number of Member States in order to enforce national gambling rules. This is
the case at least in Belgium, Estonia, France and Italy. Other Member States
have provisions for blocking access to websites in their national gambling laws
but are currently not applying them, such as Denmark. While in principle two
main methods are available for blocking access to websites, Domain Name System
(DNS) filtering and Internet Protocol (IP) blocking, most Member States
applying blocking methods seem to use DNS filtering:

In order to access a website, rather than
having to write the full IP address (which is actually the ‘location’ where the
content really is on the worldwide network), it is possible to use a domain
name. A domain name is an alias to an IP address, and an IP address can have an
unlimited amount of aliases. A domain name looks like http://europa.eu. To
ensure that these aliases work, a matching table associates a precise domain
name to a specific IP address; they are provided by the DNS Servers.

An example:

1.
The Internet user opens a web browser and types
"europa.eu";

2.
The browser asks the DNS servers which IP
address is associated with "europa.eu";

3.
The DNS server checks its matching table and, if
a match is found, it answers by giving the associated IP address
‘123.345.567.789’;

4.
The browser contacts the given IP address and
tries to access its content.

DNS blocking occurs at Step 3. Instead of
answering the real IP address which is associated to the given alias, the DNS
Server answers with another IP address which is, in most of the cases, owned by
a governmental service such as the police or, in the case of gambling, the
gambling authority.

National procedures

Procedures for the rules for blocking
access to websites offering unauthorised gambling services differ between
Member States. Gambling authorities are either authorised to order internet
service providers (ISPs) directly to block access to websites identified by the
regulator or they first have to seek a court order:

In the first case, the gambling authority
is authorised to issue a list of websites providing unauthorised gaming
services. The list, which is regularly updated, is communicated to ISPs, which
have to deny access to listed websites, normally by redirecting players to a
regulator's website informing them that they were trying to access a website
offering an unauthorised gambling service. The gambling authority can also be
empowered to impose fines on ISPs for any breach of their blocking obligations.

In the latter case, a court, upon an
application by the gambling authority, may order a provider of information
society services to restrict access to websites through which online gambling
services are provided without authorisation. Before applying for a Court
decision the gambling authority will have to request the gambling operator to
cease its activities in the Member State and the operator has to fail to abide
by this decision. Member States associate a number of benefits with blocking
access to websites. It is considered as a communication tool, providing
information to consumers in terms of what are authorised and unauthorised
offers under national law. Citizens are thus made aware of the existence of
authorised and unauthorised gambling services offered online. For those who do
not wish to use unauthorised operators or first time gamblers blocking can
serve as an effective deterrent. Authorised operators and consumers consider
state control as beneficial.

However, blocking access to websites does
not work as an isolated enforcement tool and can be easily circumvented. Moreover,
depending on the technology used, website blocking can impact on legitimate
businesses. The efficiency of the blocking method furthermore depends on the
validity of the list of blocked websites. Keeping the list up-to-date requires
significant resources while internet addresses can be changed instantly. Lastly,
ISPs are faced with the implementation of the provisions for blocking access to
websites, not only implying costs and tying-up of resources but also creating
potential liability issues.

EU framework

The E-Commerce Directive provides for
exemptions from liability for information society service providers when they
host or transmit illegal content that has been provided by a third party.
Information society service providers can under certain conditions benefit from
these exemptions when they provide one of the so-called intermediary services
set out in Articles 12 to 14 of the Directive. Moreover, Article 15 of the
Directive prohibits Member States from imposing on providers of these services
a general obligation to monitor content that they transmit or host. The
Directive provides for a technologically neutral framework and the liability
regime strikes a balance between the several interests at stake, in particular
between the development of intermediary services, the societal interest that
illegal information is taken down quickly, and the protection of fundamental
rights.

Article 14 of the E-Commerce Directive
contains the basis for procedures for notifying and acting on online illegal
content. It provides that hosting providers, in order to benefit from a liability
exemption, should act expeditiously to remove (take down) or to disable access
to (block) illegal activity or information of which they have obtained actual
knowledge.

EU initiative

The E-Commerce Directive provides the basis
for Member States' rules on blocking access to websites of unauthorised
gambling operators. As announced in the Communication on the "Completing the
Digital Single Market – A coherent framework for building trust in the Digital
Single market for E-commerce and online services",[171] the
Commission services are preparing an initiative on procedures for notifying and
acting on illegal online content. The cross-border nature of the Internet, the
lack of development of regulatory codes at European level and conflicting
jurisprudence within and across Member States justify an analysis of the need
for EU action. The initiative will have a horizontal scope in the sense that it
will cover all types of online services (not only gambling but also
entertainment, adult, health, etc.)[172].

Blocking payments between players and
operators

A number of Member States, such as Belgium, Denmark, France, and Germany, are introducing or have introduced provisions in their
national gambling laws on the blocking of payments between players and gambling
operators not authorised to offer their services in the Member State. Different payment means are offered and used in gambling transactions. The methods for
blocking payments between the player and the gambling operator and their
efficiency depend on the payment means used:

·
Payment blocking for card payments is based on
the Merchant Category Code (MCC) used by the merchant, i.e. gambling operator.
All card transactions are tagged with a specific four-digit identifier, the
MCC. This number is based on ISO standards and is applied globally by issuing
and acquiring member banks. The purpose of the MCC is to identify the goods or
services the merchant provides or to classify the nature of the merchant’s
business. MCC 7995 is the universal identifier for gaming and gambling
merchants and is linked to all transactions from these merchants. It covers all
transactions (face to face and online) from merchants that provide betting,
lottery tickets, casino gambling chips, off-track betting and wagers at
racetracks.

·
The prohibition of processing payments is
undertaken via the blocking of payment orders where cards are using MCC 7995.
Payment for authorised gambling services in a Member State is approved using of
the respective country code in combination with MCC 7995. Payment service
providers covered by the regulations therefore must implement routines to
differentiate between requests for the authorization of payments for authorised
and for unauthorised gambling services, on the basis of the combination of the
MCC and the respective country code, before the approval or denial of a
transaction.

·
Payment blocking for bank transfers is based on
the account number used by the gambling operator. It covers transactions both
originating from (payments crediting players’ accounts) and going to
(repatriation of profits by players) unauthorised gambling operators. The
implementation requires the gambling authority to identify bank accounts used
by unauthorised operators and submit respective bank account numbers to the
banks. Banks then have to block these accounts; they cannot be used for payment
transfers related to gambling activities to and from the Member State.

·
For e-wallets, the implementation of the
prohibition of processing payments to unauthorised gambling operators seems to
depend on the active involvement and internal controls of the e-money issuer.
The issuer uses a single worldwide system for senders and receivers of
payments. Both, sender and receiver are customers of the issuer and information
is available about each party involved. All gambling operators are identified
as such in the system, and a payment is considered to be for gambling if it
goes to a gambling operator. Based on the verified and recorded information to
indicate a customer's nationality the issuer can block payments for gambling
services according to the customer's nationality. The issuer can also check the
payer's IP address at the time of payment as an additional precaution.

For other payment means, such as pre-paid
cards, little information has been provided in response to the public
consultation on how the prohibition of processing payments is undertaken.

Some gambling regulators consider financial
blocking a more efficient instrument than ISP blocking. The European Parliament
calls on the Commission to examine the possibility of proposing a legally
binding instruments obliging banks, credit card issuers and other payment
system participants in the EU to block, on the basis of national black lists,
transactions between their clients and gambling providers that are not licensed
in their jurisdiction, without hindering legitimate transactions. However,
being a relatively new enforcement tool the debate about the use and efficiency
of payment blocking system suffers from a lack of experience and data.

Within Europe Norway is the only country
having significant experience with the implementation and enforcement of
payment blocking rules. In a recent evaluation of the law the Norwegian
authorities concluded that access to gambling without a Norwegian license has become
somewhat complicated, but the effect of the ban on payment transfers has been
less effective than intended when the provisions were introduced[173].

The advantages most frequently attributed
to payment blocking rules are the observation that the transfer of payments to
unauthorised gambling operators becomes more difficult for players and the
prohibition is considered to have an effect on spontaneous, first time
gamblers. The prohibition provides the information to the player that an
available online gambling site is not necessarily licensed or supervised by the
national authority.

However, a number of shortcomings of
payment blocking systems are raised in the debate. A payment blocking mechanism
may result in blocking licit commercial transactions, in particular if based on
the operators MCC. At the same time the effectiveness seems to be limited as in
those countries applying payment blocking the majority of players continues to
use the services of unauthorised gambling operators, using their credit or debit
cards. Payment blocking systems can also be circumvented, for example by using
third-party solutions or by changing payment details frequently. If a payment
blocking system covers only certain means of payments it might urge players to
resort to less controlled and regulated means of payment, not covered by
existing enforcement measures. The implementation of payment blocking systems
entails substantial costs for the payment service provider and other financial
institutions.

EU framework

The main objective of the EU policy on
payment services is the establishment of a Single European Payment Area, in
which citizens and businesses can make cross-border payments as easily, safely
and efficiently as they can within their own countries and subject to identical
charges. The Directive on Payment Services (PSD)[174]
provides the legal foundation for the creation of an EU-wide single market for
payments. In Article 55 II to IV the PSD provides rules on the blocking of
payment instruments referring inter alia to the suspicion of
unauthorised or fraudulent use of the payment instrument. However, it is
unclear how existing rules on the blocking of payments for unauthorised
gambling services would fit within the PSD provisions.

EU initiative

Considering the general lack of data and
experience with payment blocking methods it is not the time to consider an EU
policy initiative. The Commission will assess the possibilities and limits of
payment blocking in more detail before taking a final decision. It will discuss
the issue with Member States and stakeholders concerned. The upcoming review of
the PSD might also offer an opportunity to look into the issue.

Other enforcement means

White- and Blacklisting

In most Member States gambling regulators
provide a list of licenced operators (white list). These lists can provide
useful information on the one hand to players, informing them that a gambling
operator is authorised to offer services in the Member State and supervised by
the competent authorities, and on the other hand to regulatory authorities in
other Member States, verifying that an operator is regulated in another EU
jurisdiction.

In a few instances Member States provide
lists of operators not authorised to offer gambling services in the Member State. The European Parliament stresses in this respect that more action should be
taken by Member States to prevent illegal gambling providers from offering
their services online, for example by blacklisting illegal gambling providers.
While black lists in principle can also inform consumers and regulators about
the absence of an authorisation and thus the absence of supervision in a Member State it is almost impossible to keep these lists up-to-date, considering the huge
number of gambling operators active on the internet.

In both cases players need to be aware of
the existence and accessibility of the list.

Domestic Domain Name

A number of Member States require that
licence holders offer their gambling services on a website with the country
code top-level domain of the respective Member State, for example website.fr
for France or website.es for Spain. Players should thus be enabled to identify
quickly if the gambling service offered on a website is authorised in a Member State.

Advertising bans

National gambling laws commonly prohibit
the advertising of online gambling services not authorised in the respective Member State. Member States consider such a prohibition as an indispensable part of their
enforcement policy. Advertising bans for unauthorised gambling services are
generally compatible with EU law. In Sjöberg & Gerdin the Court
found that Article 56 TFEU does not preclude legislation of a Member State which prohibits the advertising to residents of that State of gambling not
authorised in the Member State, under the condition that the general regulatory
framework for gambling services in the Member State is in compliance with EU
law. In HIT and HIT Larix it held that Article 56 TFEU does not preclude
legislation of a Member State which permits the advertising in that State of
casino's located in another Member State only where the legal provisions for
the protection of gamblers adopted in that other Member state provide
guarantees that are in essence equivalent to those of the corresponding legal
provisions in force in the first Member State. Member States however find it
difficult to enforce the restrictions on advertising, in particular against
advertising on the internet. Regulators experience the same technical and legal
challenges as with blocking access to the unauthorised gambling service itself.
Links and banners directing players to unauthorised gambling websites are
easily changed and difficult to control and hosting websites often receive a
percentage of the profit for each player directed to the website.

Administrative and criminal sanctions

In the workshop on efficient national
enforcement measures and administrative cooperation some regulators suggested
that regulatory authorities need to have full enforcement rights against
unauthorised offers, including appropriate administrative and criminal
sanctions. Without such powers close and robust working arrangements with law
enforcement authorities are required. A number of participants advocated that a
sanction regime should also cover related services, such as ISP, financial
services and media services.

EU initiative

The efficiency of enforcement tools is
crucial for the successful implementation of a national gambling policy.
Commission services, together with Member States and stakeholders concerned,
will discuss the issue of efficient enforcement measures and seek to develop
best practices.

7. Protection of consumers and citizens, including minors and other
vulnerable groups

The Green Paper consultation embraced the
relevant public interest objectives like consumer protection that gambling
touches upon. The objective of protecting consumers and preventing gambling
disorders are societal issues recognised by the Court, providing a margin of
appreciation for Member States in devising national policy in this area, in
compliance with the Treaty and respective case-law[175]. Further, in
2008 the Council highlighted the 'significant similarities in the Member
States objectives as regards gambling and betting', and the variety of
arrangements devised to attain the converging aims[176]. Taking
account of the contributions[177]
to the Green Paper from Member States, stakeholders and the European
Parliament, the calls for measures to protect all citizens and consumers are
intended to

·
Protect minors and young adults from gaining
access to gambling facilities

·
Protect other vulnerable groups

·
Channel players (recreational and professional)
into an authorised competitive offer

·
Prevent the development of gambling-related
disorders

as well as ensuring a transparent, fair and
safe gaming environment.

7.1. The current framework

In the EU a number of similar if not
outright common measures for safeguarding consumers exist in the regulatory
frameworks of Member States. This is clearly manifested through the
contributions provided in the Summary of Responses.  However, whilst these are generally
provided for in legislation, the range and detail of the prescribed provisions
required by licensed operators differ. The requirements to be met by licensed
operators may also be laid out in the licence requirements, against which an
operator is to be monitored for compliance. Some competent authorities
substantiate these provisions with other initiatives, such as Codes of
Practice. Industry has also developed its own initiative towards adequate
detective and preventive consumer standards through the CEN workshop agreement[178], and against
which the signatory gambling operators are externally audited.

Although clearly a number of binding and
non-binding measures exist, given the lack of such measures at an EU level, not
all citizens may be adequately protected, minors may be exposed to gambling
content and consumers in general may be exposed to unregulated gambling sites.
Not all regulatory systems may require strict age verification and player
identification checks and controls to open an account with an authorised
operator, on-line self-reality checks in real time or protection of player
funds/accounts. Different solutions are used in the Member States for personal
identification, digital or manual, and not all may be robust enough to prevent
minors accessing online gambling activities. Support to customers by operators
and by regulators may not currently be obligatory in all regulatory systems to
which a customer can turn to for information and complaints. Further, education
and awareness of online gambling and potential ensuing risks, including for
minors, as well as information on the national or regional regulating authority
are not necessarily readily available in the Member States. In addition,
gambling service providers use a broad range of commercial communications for
marketing purposes and citizens may not be well-informed on the choices they
may pursue. However, gambling–specific advertising initiatives are not
available in all Member States, even though there are existing examples such as
codes of conduct by regulatory authorities or other designated competent bodies
as well as industry.

Lastly, the intrinsic nature of gambling
can give rise to problem gambling or lead to gambling addiction. However,
research and studies or surveys on the nature and scale of this aspect is
significantly limited. Yet, this is imperative for instance to ensure that the
preventive and detective measures in place serve the purpose of protecting
consumers adequately. The factors potentially leading to gambling-related
problems equally need to be better grasped. These issues are important in order
to be able to prescribe the dedicated treatment that would be required by those
exposed to such problems.

The Commission is seeking to ensure that
all citizens across the EU/EEA are afforded a high level of common protection
throughout the internal market, both as regards an authorised and safe offer
and against the unregulated offers which are accessible to consumers because
online gambling inherently crosses national borders. As highlighted earlier,
consumers do not necessarily pay attention to operators' authorisation details
when seeking to play online. In any event, market figures show that there is
consumer demand for this type of service in the EU[179]. As the
Commission described in launching the Green Paper consultation 'Citizens
search across borders for competing online gambling services and currently they
may not be sufficiently protected against the risks associated with these
illegal offers'. It is therefore also imperative that regulatory approaches
to protect consumers are not overly cumbersome such that players seek access to
unregulated sites. Further, according to available data online gambling is a
recreational activity for the majority of consumers in Europe. However,
although the percentage of people with a type of gambling-related disorder has
broadly remained within 0.5-3% to date it is nonetheless a significant number
of individuals in the EU. It is an area which duly requires dedicated research
to understand the risks entailed and to identify adequate early detection and
preventive measures. Finally, there is an important segment of the population
that must be protected appropriately, that is minors and other vulnerable groups.

Following from this perspective the
Commission is proposing a number of actions with a view to providing adequate
protection of consumers and citizens, including minors and vulnerable groups,
as well as drawing from relevant Commission initiatives.

7.2. A safe and regulated offer to protect consumers

From the outset, the Green Paper stressed
the importance of adequate protection of consumers. More than enhancing
consumer confidence, consumers need to be able to make informed choices online
and be cognisant therefore of the existing offers online of unregulated
gambling. Transparency is important, including clear terms and conditions on
the operator's site. It is frequently said that consumers are faced with
information overload on online services in general but consumers do not
necessarily have the information they need and do rely on labels.[180]. First and
foremost given the number of unregulated gambling sites on the European market[181] and the
ensuing risk of fraud, the Commission services believe that consumers need to
be able to distinguish a regulated online gambling offer from an unregulated
one. This is primarily possible through an immediately visible and recognisable
logo of the authorising competent authority in the EU/EEA Member States together
with the details of the authorised operator on its website. In this respect
trustmarks,[182]
raised earlier, are generally referred to for online services inter alia to
protect consumers against illegal sellers and can provide a means by which
consumers can be informed on the protection offered by the authorised operator.

In the EU consumers should feel assured that an
authorised online site they choose to play on has adequate safeguard measures
in place, such as

·
prevention and detection measures e.g.,

o
time and financial limit-setting possibilities
for the player,

o
signposting to helplines (in respective
languages),

o
exclusion possibilities,

o
reality checks (e.g. account and session
activity on player screen at regular intervals),

·
no playing on credit or wagering a bet if the
registered player account does not have the necessary funds,

·
the protection of their funds,

·
customer support inter alia for treating
information requests and for handling complaints.

It follows that players must be able to
review deposit limits, that their requests are promptly dealt with and that any
requests for upward increases are enabled only after a fixed period.
Information on the types of games offered on respective authorised sites and
warning signs of addiction possibilities should also be available. Identity
checks and age verification for registering and opening an online gambling
account are to be carried out in the first instance to abide with age limit
requirements and to protect minors from accessing online gambling sites.
Currently, it may not always be the case that an account is activated, enabling
player activity, only once all checks are carried out. Furthermore, player
activity should be monitored by the operator including for tracking gambling
behaviour. The training of employees responsible for such monitoring is
necessary in order to be able to identify alterations in player activity. This
is also so as to ascertain adequate awareness, enable appropriate intervention
(e.g. cooling off period) or if required provide guidance to support centres,
treatment centres or to debt counselling for instance. The Commission services encourage
both Member States' regulating authorities and industry to provide for these.

To adequately protect consumers all
regulatory frameworks need to embrace these types of safeguards, with
authorised operators incorporating these in the responsible business conduct
that they pursue and as part of their authorisation requirements. A regulating
authority should responsibly carry out checks and controls on operators as an
intrinsic part of post-licensing monitoring to ensure the protection of
consumers. In a similar vein, the Commission services believe that support to
customers should extend to regulators, so as to enable consumers to take
complaints to the responsible regulator. In this respect complaints relating to
contractual disputes for instance could be handled through the use of
alternative dispute resolution (ADR) and online dispute resolution (ODR)
entities[183].
Today, data on complaints taken to regulating authorities does not seem to be
readily available, however consumers should be afforded support.

The benefit of these types of measures is
that they can be viewed as benchmarks against which regulators assess
authorised operators for compliance. Currently, some authorising systems can
monitor operators in real times whilst others entail reporting obligations[184].

The Commission
services consider that at the minimum a common set of principles is to be established
with a view to providing a high level of consumer protection across the EU/EEA.
This is also essential for enhancing trust and for facilitating the exchange of
information between regulators. Developing common measures at EU level
contributes to mutual trust and to confidence-building. As regards exchange of
information, as described earlier the Data Protection Directive sets out the
general framework for the protection of individuals with regard to the
processing of personal data and the free movement of such data[185].

The adverse effect of the absence or lack
of common measures is less protection being afforded to consumers. This is
because authorised operators in the EU may choose to concentrate their
activities in the larger markets, due to costs of compliance to meet the
requirements of the regulatory regimes across the Member States. Secondly,
overly rigid measures sought by a regulatory system can lead consumers to seek
more accessible offers across borders. The net effect is that consumers may end
up on unregulated sites, and out of the protection of a regulated framework.

7.2.1. A Recommendation on common protection of consumers

To this effect the Commission intends to
ensure comparable and improved information and safeguards to consumers,
including a high level of protection as regards minors and other vulnerable
groups, and will as a matter of course adopt a Recommendation on Common
Protection of Consumers. The Commission will draw on the existing practices
introduced in the EU in identifying solutions aimed at safeguarding consumers
and protecting minors. These will be drawn up with Member States' authorities
in the expert group on gambling that is being established by the Commission.

In a first phase the Recommendation will
provide Member States with an instrument at the national level for the adequate
protection of consumers and it should also help optimise synergies between
competent authorities. The Recommendation can be only be effective if it is
applied by Member States. It is therefore significantly reliant on the take-up
by Member States at the national and regional level within their system of
authorisation and supervision. Having said this, action requires efforts of all
stakeholders. In light of the Communication the Commission services will assess
the application of the Recommendation after its adoption. The information
provided by Member States on the actions undertaken to implement the
Recommendation will help the Commission services to assess the effectiveness of
the implementation of the Recommendation. The findings will help determine the course
of action that will be subsequently called for. A Recommendation can take the
form of standardisation of protective approaches.  The Commission could mandate
CEN to develop standards for the protection of consumers in the area of online
gambling, which can also take the form of a European standard. CEN provides a
platform for developing European standards, recognised under the Transparency
Directive[186]. 
Service standards can be used to promote best practices or to set benchmarks to
measure the quality and performance of the service. Their value is that these
are drawn up by bringing together expertise of interested parties
(manufacturers, consumers, regulators) of a particular service. European
standards offer a common standard in the Member States, in the area of online
gambling helping to enhance the understanding of consumer protection
requirements and transparency.

A Behavioural Study on Online Gambling
could test the consumer policy options[187].
The Commission services could undertake this exercise through a framework
contract for behavioural studies. It analyses policy options from a consumers'
perspective and is intended to support an initiative such as the
above-mentioned Recommendation. Carried out for areas like retail investment
services, tobacco and bank accounts, these studies have provided a useful
foundation, as well as supplementary information for the initiatives
subsequently undertaken. As an example, the study could provide whether warning
signs and helplines provided on websites are effective or to what extent types
of images used are effective. The benefit of this study is that it can be
carried out within a 6-month period from the date it is contracted, within the
terms of reference provided.

7.2.2. The Commission Proposal on Electronic Identification

The Commission services believe that
registration by customers to open a player account with an online gambling
operator should be a pre-requisite of the protective measures in place online.
According to the contributions to the Green Paper consultation identification
checks are carried out by authorised operators, in line with the requirements
of respective jurisdictions. Currently, there are different solutions in the
Member States for personal identification, which can be digital or manual (e.g.
credit card details, tax registration number, recognised third party databases,
hard-copy documentation) which lend to interoperability problems, and which
gives rise to challenges in view of the number of EU citizens, including
consumers, crossing borders for short or longer term periods. A legal frameworkfor
the legal acceptance and recognition of electronic identification means improves
confidence in electronic transactions for consumers, enhances the technical
interoperability of identity authentication schemes and facilitates the
administrative work of the gambling regulating authorities. The importance of
consumers' perception of less cumbersome but secure registration processes is
also in light of the prevalence of unregulated online gambling offers on the
European markets. The need for an EU-wide legislation on electronic
identification and authentication was identified in the Digital Agenda[188] and the
Single Market Act[189]
and confirmed by the results of the public consultation launched by the
Commission[190].

The Commission has adopted a proposal
for a Regulation on electronic identification and trust services for electronic
transactions in the internal market[191]
providing common rules on mutual recognition and acceptance of electronic
identification means, which are already used in many Member States to access
mostly public online services but not yet generally utilised to access online
gambling services. The proposal should support further Commission initiatives
to foster administrative cooperation between gambling regulators as well as
consumer protection in the context of the above-mentioned Recommendation.
Furthermore, the mutual recognition and acceptance of eIDs enables age
verification without the need to disclose personal data. However, the proposed
Regulation does not in itself oblige Member States to introduce electronic
identification schemes.

In Denmark, for example electronic
identification with a code card is obligatory, together with a secure digital
signature which the players provide. when they register with a gambling
provider.[192]

'Scoping the Single Digital Identity
Community (SSEDIC) is a thematic network for European eID[193]. Its
objective is to provide a platform for all stakeholders of electronic identity
to collaborate together to develop an agenda for a SSEDIC. A number of sectoral
stakeholder groups were set up, including a business-focused group, to assess
the political, economic, social, technical, legal and environmental aspects of
a single European digital community. In this respect, the ongoing work by
SSEDIC may be of interest to online gambling operators.

7.2.3. Consumer Survey of Gambling Services

Information on national consumer conditions,
consumer markets and consumer behaviour assists the devise of policies that fit
the purpose. The Commission attaches utmost importance to providing adequate
policy responses at EU level. Since 2008 the Commission has been gathering
evidence by monitoring markets and national consumer conditions and studying
consumer behaviour. The Commission's annual Consumer
Scoreboard[194]
includes the market for gambling and lottery services (online and offline
combined) amongst the 50 consumer markets that it monitors garnering feedback
from consumers in the Internal Market. However, the Commission services feels
that better information regarding the market performance of the online segment
and the behaviour of consumers regarding online gambling is needed. This should
assist the Commission in its approach towards ensuring the protection of all
consumers in the EU. Therefore, the Commission services seek to better identify
any malfunctioning of online gambling from the consumers' perspective.

The aim of the Scoreboard is to show those
markets which are at risk of malfunctioning and which are not meeting consumer
expectations. The market performance is monitored from the perspective of
economic and social results for European consumers and ranks and monitors
markets from their perspective. The indicators used to rank the markets include
comparability of offers, trust in retailers or providers, problems, complaints
and overall consumer satisfaction. As a second step in-depth market studies for
the sectors that appear to underperforming are carried out to analyse the
problems and propose possible solutions.

The Scoreboard edition of October 2011 rates
the market for gambling and lottery services as tenth out of the 30 services markets
surveyed, performing above the average of all services markets on almost all
indicators. Consumers' ranking of 'comparability', a key component capturing
consumers' ability to compare offers and therefore to make informed choices was
at 7.3 out of a 0-10 scale mirroring 2010, whilst 'trust' is ranked 6.8. This
is 0.4 and 0.2 respectively above the average for all service markets,
mirroring the ranking achieved in 2010. Further, only 3% of consumers mentioned
that they have experienced problems in the market in comparison to the average
of 12.5% of all services markets. Moreover, the proportion of experienced
problems in this market dropped in comparison to 2010 (4.2% in 2010). In terms
of complaints, 78% consumers complained about problems with 55% being
complaints to the retailer or provider. As for the overall consumer
satisfaction the market is ranked 7 on a scale of 0-10 which is below the
average score of 7.3 points of all service markets. Finally, with an average on
the competition component of 8.0, the market for gambling and lottery services
is among the top markets of all services markets.

Market performance

Breakdown by indicator || || || || ||

|| 0-4 || 5-7 || 8-10 || Average 2011 || average  2010

COMPARABILITY || || || || ||

Gambling And Lottery Services || 10.4% || 33.6% || 56.0% || 7.32 || 7.35

All services markets average || 14.0% || 37.0% || 49.0% || 6.91 || 7.00

TRUST || || || || ||

Gambling And Lottery Services || 16.2% || 36.9% || 47.0% || 6.76 || 6.69

All services markets average || 15.9% || 41.6% || 42.5% || 6.62 || 6.75

SATISFACTION || || || || ||

Gambling And Lottery Services || 12.5% || 36.8% || 50.7% || 6.98 || 6.85

All services markets average || 9% || 37% || 54% || 7.28 || 7.43

CHOICE || || || || ||

Gambling And Lottery Services || 7.4% || 24.5% || 68.2% || 7.98 ||

All services markets average || 12% || 29.4% || 58.7% || 7.39 ||

Source: 2011 Market Monitoring Survey

The Commission will seek to obtain more
thorough feedback on market performance of gambling. Therefore from 2013 the
Commission will obtain targeted feedback for the online gambling market
separate to the offline market, in light of adequate consumer protection and
player support that should be sought.

7.3. The protection of minors

An underlying objective of the Commission
in launching the Green Paper consultation was to gather information on the
measures in place at national level to protect minors from online gambling. The
internet is used as a source of information, education and entertainment by
children and therefore they may be exposed online gambling content. One way in
which regulatory frameworks seek to protect minors is by setting age limits
against which an authorised operator is to comply. In this respect, operators
are also generally required to carry out age verification checks alongside
identification controls. However, diverse methods are used to carry out these
checks and the extent of their effectiveness in detecting an under-aged seeking
to open an account may differ. Furthermore initiatives regarding education and
awareness of minors and parents on internet content and the safe use of the
internet are important. Different regulatory or self-regulatory policies are
implemented in the Member States. Some Member States require ISPs to provide
parental control software as a means to raise awareness and provide support to
parents in protecting minors.

As indicated earlier Member States share
common objectives in their respective regulatory frameworks. As recognised by
the Council in 2008 'the protection of minors and vulnerable persons is a
concern shared by all Member States'[195].
In fact the Council held, amongst other, that the possibility of a common
approach on access of such persons to gambling and betting could be explored.
Further, the EP has called on the Commission to explore 'all possible tools
or measures at the EU level designed to protect vulnerable consumers'[196]. Vulnerable
groups were highlighted in the Green Paper to gather specific feedback.

The Green Paper
contributions show that most Member States set age limits for gambling services
and 18 is by and large the minimum age limit set for online gambling services.
In fact one reason regulatory systems require age verification to register with
an authorised operator is to protect minors (children and young persons) from
gambling content. At the same time different identification requirements and
methods exist to be able to open a player's account as the contributions to the
Green Paper indicate, and they may not all be robust to a similar degree. In
addition age verification tools to protect minors from accessing online content
such as gambling in the Member States are mainly implemented as a voluntary
measure and are widely used for online services such as gambling[197]. Age
verification for the purpose of protecting minors must also be viewed from a
risk management perspective. A prevailing issue is that there will be instances
where a minor manages to circumvent systems and open an online account.
Detection by the operator may then be more difficult. Although there is no
available data, one way in which minors can manage to do this is through the use
of parent's credit cards, so called 'identity theft'. This is by no means the
only possibility, as there are other payment systems used (see Section 8.2).

It seems that traditional authentication
controls serve to prove the user's identity without necessarily providing
accurate information about the age of the registering player. In this respect,
the non-activation of accounts until all checks are carried out and carrying
out checks also at the time of withdrawal of winnings to verify the age can
mitigate this risk. A number of preventive possibilities exist, such as
requiring systems to feature messages regarding under age play and clearly
displaying information on the measures taken to verify age.

Nonetheless, the Commission services feel
that age verification solutions should complement other methods to protect
minors in the online environment. The Internet is increasingly used as a source
of information, education and entertainment by children not just adults. Conversely,
it exposes children as they may be less able to immediately identify potential
risks during the time they spend online. Minors may be prone to misuse of the
internet and must be protected. For instance parental awareness of associated
risks can be increased as well as encouraging software filtering in the home.
As the findings in the recent Commission Communication 'European Strategy
for a Better Internet for Children'[198]
show, different regulatory or self-regulatory policies are implemented in the Member
States, such as for parental controls or for content rating. A Member State can require ISPs to provide parental control software free of charge or they
can require that customers are asked if they want such software at the time of
purchase. Industry has also drawn up Codes of Conduct.

7.3.1. Initiatives to protect minors

The envisaged Recommendation on Common
Protection of Consumers is also intended to protect minors from accessing
gambling websites and one of its core principles will be a requirement of age
verification controls, which are necessary in order to substantiate the
identity details which should be provided to register and open an account.

Through the Safer Internet Programme
(2009-2013)[199]
which runs till 2014 as well as the Connecting Europe Facility[200] the
Commission will vigorously seek to increase the awareness of parents and of
children on the safe use of the internet to protect children. The Commission
will support benchmarking and testing of parental controls and relevant support
services to empower parents and children, as well as research and development
(R&D) to look into how age-rating and content classification systems could
be made interpretable by parental controls that can deal with a wide range of
languages. .

Safety education and awareness raising are
key. The Digital Agenda promotes awareness-raising campaigns for the wider
public. The Commission encourages Member States to pursue these objectives
through e-safety curricula in schools and by analysing the impact on children
of using digital technologies through independent research[201]. The
Commission also encourages public authorities to take a more prominent role, by
equipping children and young people with knowledge and skills to navigate the
internet safely. In this respect, operators should provide a link to a
recognised filtering programme to assist parents in preventing minors from
going on gambling sites. Further, the Commission services believe that a clear
message that minors are not permitted to participate in online gambling activities
should also feature prominently on the website of the operator.

Whilst the role of parents in the home is
imperative, the Commission has also called on industry to take positive action
and in response a Coalition[202]
has been set up committing to make the internet a better place for children and
to achieve this goal in the EU. One of the concerted efforts of the Coalition
is the establishment of age-appropriate privacy settings across services, as
well as build on content classification systems. This requires outreach to
interested stakeholders. The uptake of parental control tools by industry is
also stressed in the Communication 'European Strategy for a Better Internet for
Children'. Industry need to ensure that user-friendly parental controls are available
and accessible as regards all internet-enabled devices in Europe. Parental
control tools must enable the blocking, filtering and monitoring of websites to
prevent minors from accessing online gambling websites. The Commission
encourages Member States to carry out awareness-raising campaigns and education
on risks associated with gambling and with playing excessively seeking abroad
outreach and targeting all vulnerable groups. A main role of a regulating
authority should be to assure the protection of minors and vulnerable groups,
including through responsible advertising requirements.

Mystery shopping exercises are carried out to check the possibilities of minors accessing
online sites. The contributions to the Green Paper did not give in-depth detail.
However these exercises serve to test compliance with age limit requirements
and with verification systems. Regulating authorities can commission mystery
shopping designed to protect minors and vulnerable groups. This initiative can
be carried out as part of a rolling programme of mystery shopping exercises
looking at compliance of authorised operators with social responsibility and
license requirements. They can also serve to re-test operators found
non-compliant through the exercise.

7.4. Responsible Advertising

A wide array of commercial communications
is used by online gambling service providers for marketing purposes. Whilst
gambling services are not subject to sector-specific regulation at EU level the
advertising and marketing of the offer and promotion of gambling services are
covered by the Unfair Commercial Practices Directive. The Commission believes
that in a competitive online cross-border environment consumers need to be
sufficiently informed on the choices they make and they should feel that enforcement
of existing provisions for online services is adequate. Another important
consideration however given the broad outreach of advertising in printed or
online form is that limitations of advertising are to be regulated to protect
minors and other vulnerable groups.

The Green Paper specifically raised the
issue of regulation of commercial communications at national level to protect
all vulnerable groups. Vulnerability may arise due to a financial situation,
previous behavioural including gambling disorders or daily interaction by
persons working in or with the gambling industry, as well as the frequent
exposure of persons such as athletes and other sport persons. Responses show
that there are a few codes of conduct or codes of practice for socially responsible
advertising and promotions drawn up by competent authorities or by industry,
and there are variations in these. However, not all Member States have
advertising regulations specific to gambling services or dedicated to online
gambling services. National legislation can provide for the limits of
advertising which can then be detailed further by the competent authorities and
to which operators are to comply as part of their license requirements.

International organisations such as the
European Advertising Standards Alliance (EASA) or the International Chamber of
Commerce (ICC) have drawn up best practice models and standards respectively
for self-regulatory advertising with a view to protecting consumers. These
concern advertising in general but principles that advertising should be honest
are applicable to gambling-related advertising. Another pan-European
self-regulatory initiative is the CEN workshop agreement which incorporates
guidelines for responsible marketing, including for the protection of minors.
IAGR eGambling Guidelines on the other hand are an international initiative.
Similar initiatives also exist in some jurisdictions with a view to
contributing to integrating of online gambling.

Challenges

All citizens need to be well-aware that gambling
can be harmful if not played responsibly, from a financial, social and health
perspective. Transparency is key. The inherent risks associated with gambling,
such as problem-gambling or addiction, call for clearer guidelines across
Member States as regards responsible gambling advertising. Furthermore, this is
also called for in light of unregulated offers of online gambling so as to
ensure that consumers are channelled to authorised and regulated sites. There
is the risk that overly restrictive advertising requirements will inadvertently
be to the detriment of consumer protection leading them to the black market.
Nonetheless, the provision of certain key information on any form of
advertising should be compulsory, such as the details of the regulating
authority and that underage gambling is not allowed. Factually correct
information should equally be given as to the winning and losing possibilities
for example, the risks of chasing losses and warning messages against excessive
gambling.

As regards minors advertising concerns
frequently focus on the potential effects on children and young people.
Advertising Codes generally outright prohibit the specific or intentional
targeting of minors, including in the media, or require a clear 'No underage
gambling' message. However, online commercial communications such as pop-up
promotional images on non-gambling sites also need to be addressed. There is
the risk that minors are not protected or shielded from exposure to the same
degree in all Member States.

A main aim of regulating authorities should
be to provide the parameters for advertising and promotion messages or images
that authorised operators are to comply with. The core principle should be that
gambling advertisements are to be socially responsible. These can comprise
provisions to the effect that advertising shall not imply that gambling allows
for social acceptance, that it shall not play on the
susceptibilities of the vulnerable, in particular
minors or young adults and that it shall not be portrayed as means to solve
financial or other problems. Under-age and vulnerable groups must be
specifically protected and in no manner enticed to gamble, whilst images used
should not portray persons which look below the age limit or within the minimum
age limit threshold. Further, operators should not engage directly or
indirectly in unsolicited mail, including to persons who have self-excluded
themselves from a site.

7.4.1. A Recommendation on Responsible Gambling Advertising

The Commission aims to improve socially responsible
advertising, seeking to guarantee an equal level of protection of European
consumers, minors and other vulnerable groups. The Commission will adopt, a
Recommendation on Responsible Gambling Advertising. The aim is to draw
up common rules of conduct at European level according to the specifics of the
sector.. The aim is to capitalise on synergies of existing regulatory and
self-regulatory approaches encompassing both regulators and industry to devise
a set of core principles for responsible advertising. The objective is to
provide Member States with the parameters to undertake adequate protection
measures, including therefore sanctions for non-compliance or for knowing or
repeated breaches which in themselves are an incentive for operators to abide by
them. The Commission intends to seek the balanced involvement of all
stakeholders. The Recommendation will be drawn up with the expertise of
industry and discussed with the authorities in the expert group on gambling
that is being established.

The Recommendation should extend to
intermediaries providing the ancillary marketing service and operators should
be ensure that intermediaries contracted to carry out their advertisements do
so in respect of the code.

The Recommendation will take the form of a
voluntary commitment by Member States and industry. However, self-regulation
cannot operate in a vacuum. The effectiveness of the Recommendation will depend
on its functioning within a regulatory framework and should therefore be
concretely implemented. Regulating authorities should be able to actively
assess the Recommendation against the requirements set out for the authorised
gambling operators. The Commission will encourage Member States to endeavour to
take up its provisions of within their regulatory frameworks. Member States may
set out more detailed provisions at national level, in law or in regulatory
practices, to cater for respective regulatory systems, given that contexts
differ from one Member State to another.

Additionally, self-regulatory approaches require
regular review as to whether the provisions are sufficient in meeting the
objectives. The Commission will carry out such an assessment in cooperation
with Member States to review its operation throughout the EU and to determine
the course of action that may be subsequently called for. The findings will be
published in the form of a report. Where implementation falls short of the core
principles set out, the possibility of introducing more binding norms can be
considered.

The Commission encourages the Member States
to complement the Recommendation on Responsible Advertising with awareness and
education campaigns at national and regional level. This should include
informing on the regulating authority so that the logo indicating an operator
is authorised is well-recognised from a potential false one.

The Recommendation does not replace
national legislation nor applicable EU legislation. It is intended to
compliment legislation, beyond what is already provided for. In addition, it
will compliment and support the Recommendation on Common Protection of
Consumers as well as the Unfair Commercial Practices Directive[203].

Finally, the Unfair Commercial Practices
Directive has contributed to better protection of consumers against
misleading or aggressive marketing. Misleading commercial practices can be
misleading actions or omissions and to this effect the Directive refers to
information requirements that must be provided to consumers. Aggressive
practices include those practices that use undue influence impairing consumer's
ability to make a decision. To this end the Commission will undertake a more
prominent role in monitoring the Directive in the Member States. The Report on
the application of the Unfair Commercial Practices Directive will be published
in autumn 2012 and will assess the existing relevant provisions aimed at
safeguarding minors and vulnerable groups. The Directive covers the
vulnerability of consumers and protects their economic interests; it does not
extend to other areas such as safety or health.

7.5. Problem-gambling and gambling addiction

The development of online gambling services
gives rise to gambling disorder considerations. The need to protect consumers,
including minors and vulnerable groups, from potentially developing a gambling
problem is invoked by Member States in restricting or limiting the offer of
online gambling or the types of games and bets that may be offered.

One of the aims of the Green Paper has been
to look at the potential social consequences of online gambling. The Green
Paper sought to gather evidence on the factors linked to the different types of
games or bets, the instruments used to keep gambling habits in check and types
of games suggested to be more problematic, as well as the scale of the problem
in the Member States and available treatment. The responses primarily point to
a limited understanding of problem-related gambling behaviour, which is needed
so as to comprehend the nature and scale of a problem. Conversely this is also
needed in order to determine the action required, both as regards detection and
prevention measures as well as the type of treatment. These findings were
confirmed by the expert participants in a workshop on detection and prevention
of problem gambling and gambling addiction organised by the Commission
services.

Member States, the European Parliament and
stakeholders call for more action at EU level in this sphere. A main objective
of the Recommendation on common minimum protection of consumers is to prevent
problem gambling or gambling addiction.

The Green Paper showed that there are
marked differences (e.g. scope, criteria, population range) in the studies and
surveys on gambling carried out in the EU. The available studies do not allow
for comparisons to be drawn between Member States or for instance, the
environmental factors that may be linked to the problem. The lack of empirical
evidence or comparable national studies do not allow for a much-needed
comprehension of the prototype and percentage of the adult population gambling
online excessively and the elements categorising the behaviour of a person.
Current research or academic writings extend to two ends of the pendulum
ranging from gambling overall viewed as inherently dangerous to views that the
majority of the population and players in that respect are not subject to
gambling-related actual harm. This is also because behavioural research in this
area is in its infancy.

Extracts from the Green Paper responses[204]:

MS || Year || +/- Scale of problem given

Belgium || 2007 Report || 20,000 deemed pathological players from an estimated 100,000 players

Denmark || 2006 Survey || 0.2% of 18-74 deemed addicted to gambling at some stage, 0.13% 'currently' addicted or had been in the last 12 months. A 2007 survey found 1 in 3 of problem gamblers referred to the internet

Finland || 2007 Study || 3% of the population deemed problem gamblers, 1% deemed gambling addicts

France || 2009/10 Phone Survey || 0.4% of 18-85 deemed pathological gamblers, 0.8% deemed problem gamblers (at moderate risk)

Germany || 2011 Study || 0.35% of 14-64 deemed pathological gamblers, the prevalence of problem gambling is 0.31%, 1.41% are 'high risk gambling'

Italy[205] || 2010 || 1.01% of 18-74 deemed problem gamblers, 1.71% of adult gamblers deemed problem gamblers

Norway || 2008 Survey || 0.7-0.8% of population deemed problem gamblers but not all can be categorised as pathological problem gamblers. Surveys for 2002 and 2007 provide the same %

|| 2010 Study || Adolescent (13-17) gaming: 1% deemed problem gamblers

Poland || || 3% of the population deemed problem gamblers

Sweden            || 2009/10 Study || 1.9% deemed at moderate risk, 0.3% deemed problem gamblers

UK || 2009/10 Survey || Problem gambling is 0.7% or 0.9% of adult population (2 screening instruments used). Overall prevalence is that 5.5% are deemed at low risk gambling, 1.8% at moderate risk gambling and 92% experience no problems from gambling. Online gambling represented 2% of the gamblers.

Other || ||

INSERM global study[206] || 2008 || 1-2% of the population deemed problem gamblers (at risk players)

Harvard Medical School affiliate || 2007 Study || 1% of players considered highly involved bettors

The prevalence
level depends extensively on the tool used. A range of identification tests are
used in prevalence surveys, with South Oaks Gambling Screen (SOGS) being the
most used tool. Other surveys and studies may be carried out differently.
Nonetheless, the scale of the problem also depends on the population used as
the denominator, which could the whole population or all of-age gamblers for
example.

A common set of criteria is called for,
particularly to determine the link with the size of the problem and with
regulatory approaches including monitoring systems for early problem detection.

7.5.1. Key challenges

·
Understanding the definitions and terminology

The terms generally used are 'problem
gambling', 'gambling addiction', 'compulsive gambling', 'excessive gambling'
and 'pathological gambling'.  There is a tendency to use the terms
interchangeably but there are variances between these terms. 'Pathological
gambling' for example means a mental disorder, according to the international
disease classification systems DSM, IV, ICD 10. A 'problem gambler' for
instance may gamble frequently or infrequently and does not need to gamble
every day to manifest symptoms of a problem. A 'compulsive gambler' finds it
difficult to control the impulse to gamble, whilst problems caused by
'excessive gambling' are not only financial ones. Impulsive behaviour in itself
lends to vulnerability of the player. 'Gambling disorder' is a more neutral
term to refer to the issue.

A complex pattern of genetic,
neuropsychological, individual vulnerability and social factors are relevant to
the development of an expression of terms used. A core set of agreed
definitions is needed for a better understanding of the problem, the scale of the
problem at EU level, the determinants and the type of treatment required.

·
Understanding the determinants

The Green Paper suggested non-exhaustive
factors that may be relevant to the development of a gambling disorder:
event/game frequency, payout interval, accessibility/social environment,
chasing losses/being close to winning, perceived skills, commercial
communications. Frequency, duration of gambling episodes or intensity of
gambling engagement are factors often highlighted. However, the responses to
the Green Paper confirm the lack of researched evidence on the factors. Whilst
a combination of factors can be relevant to defining the problem, none of these
types of factors individually cause the development of a gambling disorder or
rank higher in terms of potential harm than another. Furthermore, consideration
to the development of new markets or the expansion of existing ones is
required, for instance the wider accessibility of the internet to young people,
women and ethnic groups, as well as to pensioners.

The lack of interdisciplinary collaboration
restricts evidence on the situational and structural features contributing to
the risk of problem development. There are also genetic features to consider.
Past manifestations of behavioural characteristics or disorders can also
contribute to the risk, including previous gambling problems in the off-line
environment. Accessibility of the online environment and the development of new
enabling technologies can be a characteristic. Available research suggests that
online gamblers tend to be frequent players who take part in different forms of
gambling not only online. Further research is required as to whether internet
gambling is the cause of problem gambling or reflective of problem gambling.

In addition, individual characteristics
such as genetics, personality factors (impulsivity), early vulnerability
factors (stress) and impaired cognitive control must play a role in the
development of gambling disorders, compared to gambling characteristics and
environmental factors. It is a minority of regular gamblers that develop some
type of gambling disorder.

The Commission services feel that a better
understanding is needed amongst researchers experienced in online gambling as
to the direct or indirect link of these types of factors to the development of
a gambling disorder or the transition to pathological gambling. A stronger
evidence base for the possible links and relative risks will help identify and
sustain adequate protective measures in the EU to deter the development of
gambling disorder.

As regards commercial communications,
regulatory frameworks should require socially responsible advertising in
particular for the protection of consumers and vulnerable groups. Additionally,
imagery and test should not give rise to false perceptions about gambling.
Whilst advertising should be subject to regulatory oversight, this may be more
challenging for online advertising.

·
Understanding the types of games and bets

In the EU/EEA more than one type of online
game or bet can be promoted and offered on authorised gambling sites and a
player may participate in more than one type at any time. There is no causal
evidence available to allocate levels of risk to different types of games or
bets as being more problematic or riskier than another.  Some games or bets may
appear to be more problematic than others. Slot machines, bingo, casino-type
games or skill games are types of games that are sometimes cited as being
potentially riskier both in the online and in the offline environment. However,
whilst there is no supporting evidence the potential risks need to be seen
alongside other situational features and corresponding factors.

Players do use multiple gambling products
and they also tend to have preferences for a type of game. The problem or
addiction will be to gambling and not to an individual type of game or
product.

Regulators not just business need to
appreciate the technology and be up-to-date on related information. The Commission services encourage Member States to increasingly
promote the use of risk-assessment mechanisms, such as the objectives of
AsTERiG[207]
or GAM-GaRD[208]
to test new products against a number of factors and determine the level of
risk. The factors used by such mechanisms to assess the potential risk of products
are not unlike those highlighted in the Green Paper.

·
Understanding the preventive instruments

The regulatory systems in the EU/EEA often
require the authorised operator to have in place a number of preventive
measures. However, a comparison of the impact of regulatory systems in the EU
is needed to understand if these are effective in helping the prevention of
problem development and facilitate early detection or if there is a risk that
over-regulation or restricted competition leads players away from an authorised
offer to an unauthorised one.

The Green Paper listed the instruments most
often used to protect consumers, including minors and vulnerable groups: age
limits, self-limitation (financial and time), self-exclusion, information,
warnings, self-tests, banning use of credit, reality checks, diligence
obligations, restricting certain types of games or bets.  The responses clearly
indicate that none of these measures can meet the objective individually, they
are effective where all or most are required to protect players. As the summary
to the responses shows, to varying degrees, these types of measures are in
place in a number of Member States, mainly through legislation or license
requirements and supplemented by industry self-regulatory measures. Additional
detective and preventive measures such as customer support or remitting player
funds into the same deposit account are referred to earlier. Employees
responsible for player monitoring are warranted so as to be able to detect
behavioural changes in player activity and have the powers to act accordingly,
such as triggering 'self-exclusion' if necessary. This should be part of the
'Know Your Employee' criteria.

Players should be able to follow their own
activities online. There are arguments that the online environment entails the
risk of 'loss of social control'. On the other hand, the online environment
offers technical possibilities for player self-control, alerts during game play
and for close monitoring of individual player activity by the operator, which
should enable early detection of behaviour symbiotic to the development of a
problem. The supervisory role of the regulator is key. The regulator should
have sufficient competence to be able to carry out adequate monitoring of the
authorised operators and follow-up on customer complaints. Further research as
to the effectiveness of these measures for the early detection of potential
problem development is called for. This is also so as to better understand the
potential shift from a 'social' gambler to a problem gambler. In this respect,
data on the use of responsible gambling tools by the players would help such
research.

Self-exclusion and cooling-off
possibilities

Warning signs of addiction possibilities
should be provided at all times on the operator's site, alongside helplines and
signposting to dedicated support sites. The possibility of immediate and
confidential support to callers is of great importance. The responses to the
Green Paper suggest player self-exclusion possibilities amongst the preventive
measures. Generally, regulatory systems require that a player must be able to
self-exclude or authorised operators provide for this as part of their
responsible gambling tools. The self-exclusion period can be up to twelve
months or more. However, there should be a minimum period for self-exclusion.

Some regulatory systems also provide for
cooling off periods as part of reality check possibilities. Cooling-off enables
player to voluntarily lock their account for a shorter period, in order to
prevent themselves from online gambling participation. Cooling-off can be for
24-hour period or longer.

In both instances however, the player
request to reactivate an account should be done by email or phone to the
authorised operator, in no manner giving the player the possibility to reactive
the account simply by accessing the registered player account. During the
self-inactivation period, efforts should be undertaken to prevent marketing to
such consumers, including emails. Furthermore, a player should also be able to
choose further increments. The procedures concerning self-exclusion and
cooling-off similarly to warning signs, should be readily accessible through
the website. Finally, guidance to dedicated assistance should be immediately
provided by the operator in processing exclusion requests. Where exclusion
requests are by third parties, such as family members, the identification
provided should be verified.

In some Member States a registry of
self-excluded persons is maintained. However, having such a registry in place
at European level raises issues of enforcement and of data protection of
individuals.

·
Treatment

In the EU access and availability of
general or dedicated treatment, including counselling differs. In some Member
States services are provided free of charge. Given the different types of
centers and treatment possible, as well as respective national policy (e.g. in
Scandinavian countries the system would view this from a social rather than a
health perspective) it does not seem opportune to promote a network linking
national research centers. Furthermore, gambling disorder treatment is not
necessarily of long duration as for other behavioural disorders and often the
treatment required is brief intervention or non-medical, for instance debt-related
or money-management counselling. However, the nature of the treatment, and
whether this should be inpatient or out patient, should be dependent on the
type of gambling disorder problem of the individual.

There are also social repercussions concerning
the immediate family and employment for example resulting from the development
of the problem or addiction.

Funding

The responses to the Green Paper on funding
of problem gambling from gambling revenues provide that some Member States
re-distribute parts of this revenue to treatment and research centers or to
education campaigns. Voluntary contributions by operators are also made
directly or indirectly. The optimal scenario is that treatment is independent
from industry and that funding is channelled through governments or a
central/regional fund but not directly. Furthermore, there seems to be scope
for funding being directed into gambling-related research and education.

7.5.2.
EU Initiatives

The Commission believes that evidence is
the first required step to determine the prevalence and the scale of the
problem. Identification of the risk and vulnerability
factors for gambling disorders and improved knowledge about the trajectories of
the players are key objectives for setting out preventive actions as well as
for defining the relevant treatment. The objective of
having adequate measures should be to prevent adverse social, economic and
health consequences that may result from gambling.

A trans-disciplinary EU co-funded
project 'ALICE RAP' is underway with the objective of re-framing the
understanding of addiction and re-designing addiction policy based on objective
scientific evidence[209].
Online gambling is one of addictions that is being researched, to help policy
making and political decisions to be taken through informed debates. Whilst the
overall project runs for 5 years given its broad scope, it is divided into
areas and work packages which will carry out interim reports. Gambling will be
researched, with other addictions, under the following working group areas:

·
Counting addictions: definition and classification of addictions, compiling data and
impacts on health and society

·
Determinants of addiction: arriving at a better understanding of the initiation of the
problem, the transition to problem use, the transition to dependence and
emerging from the problem

·
Business of addiction: studies of revenues, profits and participants in legal and illegal
trade the impact of suppliers and the webs of influence on policy responses

·
Governance of addictions: research the ways in which societies steer themselves to deal with
different lifestyles, present governance practices on established and emerging
addictions and future scenarios.

The findings of the research work, together
with the review of the Recommendation and the Code of Conduct, will assist the
Commission to determine further action in this field. The project is also
envisaged to provide a consolidated figure for the percentage of problem
gambling in the EU.

Initiatives under Horizon 2020 will
seek to deepen the scientific understanding of consumer behaviour and health,
safety and sustainability dimension of choices they face. Through a
challenge-based approach it aims to bring together resources and knowledge
across different fields, technologies and disciplines. It covers activities
from research to market. Funding will include focus on health, demographic
change and wellbeing. The Commission publishes calls for proposals.

Education and awareness should be part and
parcel of preventive measures by Member States. This public information can be
made available through self-tests, advertisements and brochures and also by
dedicated government authorities or agencies

The Commission services also see the
relevance of bringing the public health dimension into the debate as it
broadens the focus on individual behaviour and it would also better-encompass
societal issues and costs. Therefore, the Commission will capitalise on the
meetings with experts from Member States working with the relevant Commission
services, such as the expert group on mental health. These can serve to draw up
common actions or good practice guidelines of national authorities, including
health promotion agencies, and research networking across the Member States.
This is also in consideration of the role of health authorities in developing
relevant policies in the Member States.

Minors and adolescents are a specific
vulnerable group in looking at risk of addictive behaviour of persons. A Study
on Internet Addictive Behaviour of Minors is being carried out through EU
NET ADB project which is evaluating the prevalence and determinants of addictive
behaviour. The project is looking at specific issues on the magnitude of
internet addictive behaviour, the factors that lead to development of addictive
behaviours, the consequences and the psycho social correlates. Increasing
awareness amongst relevant stakeholders and the public at large, and improving
the knowledge base towards bettering public health strategies related to
internet addictive behaviour amongst the young in Europe is an intrinsic
objective of the project. The project outcome should feed into policy making
and awareness raising as well as provide impetus for further actions and
studies, in particular through the harmonized databank that will be developed.
Finally, the policy recommendations stemming from this project, which are for
October 2012, will be both for the Commission and Member States.

Further, Commission services will draw from
the surveys that are carried out by Eurostat on behaviour of children more
generally, every 3-5 years with a view to conducting more-tailored surveys.

8.
Fight against fraud and money laundering

The prevention of fraud and
money-laundering are amongst the main objectives of Member States regarding
public order. In principle, all existing national gambling regulations seek to
prevent and tackle gambling fraud in order to protect consumers as well as
gambling operators. Different types of fraudulent behaviour may occur in the
online gambling environment but among them identity theft seems to be the most
frequently committed crime. Identity theft may be defined as the misuse of
personal data in order to impersonate another individual with the intent to
commit an illegal activity (e.g. abusing the victim’s banking or other
facilities, unduly gaining employment or receive medical treatment). In the
context of online gambling, identity theft aims at opening a player's account
falsely and is very often linked with unauthorised use of credit cards in order
to obtain a credit and other benefits in another person's name.

Another common fraudulent behaviour
identified by stakeholders is the so called chargeback fraud. This
occurs when an individual claims that a transaction is fraudulent and the
credit card issuer then debits the money from the merchant's account. This
facility is designed to protect consumers from fraudulent use of their credit
card, but can also be used to try to get back any losses they may have occurred
while gambling. It is suggested that a significant number of these claims are
fraudulent. When it comes to cyber-attacks against gambling operators'
infrastructure, their frequency and risk is not considered higher than in any
other industry sector.

As for money laundering, there is currently
very limited information or evidence suggesting that licensed online gambling
operators in Europe are subject to money laundering activities.  The prevailing
problem is linked to unregulated operators who are offering their services at a
distance from outside of the EU with either no or a very low degree of
regulation and supervision.

The fact that regulated gambling operators
are subject to strict antifraud and anti-money laundering provisions, which
stem either from licensing conditions including certification of gambling
equipment or internal risk assessment procedures, does not, however, mean that
no problematic issues arise, in light of the cross border context. It seems
that structured cooperation between national gambling authorities, national
police and international enforcement authorities needs to be enhanced given the
complexity of fraudulent transactions operators and regulators have to face. In
a number of jurisdictions either no online gambling regulations exist or there
are weak regulations and the lack of cooperation at the international level,
including with authorities such as Interpol, gives rise to problems in the
cross-border application and enforcement of existing tools, such as customer
verification checks, transactions and audit trail integrity.

8.1.
Commission initiative on identity theft

The Commission has been addressing identity
theft for several years, both with legislative measures and with other
initiatives. In 1995 a Directive on the protection of individuals with regard
to the processing of personal data was adopted[210].  The
Directive laid down rules for the legitimacy and the confidentiality and
security of data processing. The EU Action Plans 2001-2003 and 2004-2007 on
fraud on non-cash means of payment developed public/private cooperation between
the financial sector, law enforcement agencies, other Ministries, retailers and
consumer groups[211].

The need to more effectively combat
identity theft on a transnational level has been recognized in the EU policy
framework on several occasions, such as for example in the 2009 Stockholm
Programme[212]
and in the 2010 Council Conclusions on Preventing and Combating
Identity-Related Crimes and on Identity Management.[213] The
Commission also carried out a study on the status quo of the legal framework governing
identity theft in the Member States, which resulted in a 2011 report on the "Comparative
Study on Legislative and Non-Legislative Measures to Combat Identity Theft and
Identity-Related Crime". As a follow up to this report, the Commission has
launched an external study for an impact assessment to explore what is needed to
tackle the issue of identity theft effectively. Subject to the results of the
study and the Commission impact assessment, such provisions may include a
common definition of identity theft, the establishment of identity theft as a
criminal offence, measures to protect the victims of identity theft, and an
obligation to establish national reporting mechanisms that would also allow a
follow-up of complaints.

In this context, the possibility of mandating
the European Cybercrime Centre[214]
to cover other forms of cybercrime than those related to identity theft such as
hacking into on-line gambling systems, will be explored. The European
Cybercrime Centre, which will be established within Europol in the beginning of
2013, will strengthen the EU's capacity to tackle cybercrime and could
contribute to addressing other forms of cybercrime. It should, amongst other,
help the fight against online identity theft by tackling organized crime groups
involved in online fraud through stolen credit cards and banking credentials.
The Centre should act as the focal point in the fight against cybercrime in the
EU, having four core functions

·
it should serve as the European cybercrime
information focal point,

·
it should pool European cybercrime expertise to
support Member States,

·
it should provide support to Member States'
cybercrime investigations,

·
it should become the collective voice of
European cybercrime investigators across law enforcement and the judiciary.

8.2.
The EU Anti-Money Laundering Directive

The Green Paper consultation has confirmed
that the following practices are being used for money laundering purposes:

·
Online gambling firms credit winnings or unused
funds back to an account other than the one from which the original bet was
made,

·
Players are allowed to register multiple
accounts with the same operator,

·
Peer-to-peer games such as e-poker, where value
transfers can occur between both electronic and human players as a result of
deliberate losses, at a relatively low cost to the players. Players will make
large bets on very bad hands (expecting to lose to the accomplice),

·
Use of e-cash as a payment option or similar
means of payments such as Stored Value Cards (those of concern are
characterised by high limits, no post-purchase monitoring and poor KYC
controls).

As regard the EU legislative framework, the
AMLD[215])
applies to casinos with regard to gambling activities. The term 'casinos' is
not defined in the Directive. In addition to the general aspects caught by the
Directive as described above in section 4.1, the Green Paper consultation shows
that regulated online gambling operators and national regulators have
established a range of operational practices to fight against money laundering.
These include:

·
Customer due diligence tools aimed at verifying
the player’s identity, the player’s place of residence and, the player’s valid
e-mail address. The due diligence process may include velocity analysis
(deposit/trades), geographic risk analysis, player behaviour anomaly, exposing
player associations and cybercrime arrest policy. In all cases the player has
to opt-in to provide the relevant personal data to allow for his account to be
established,.

·
Payment controls whereby the player should
always receive any pay out from winnings by the same means in which the money
was originally received (and to the account from which it was deposited).
Operators also carry out controls over the credit card numbers and personal
data, relating to players, which they have stored in their systems. Moreover,
direct payments between customers are often prohibited. With regard to the use
of means of payment (e.g. credit cards, pay safe cards) for online gambling, it
is suggested that these could pose different risks in terms of fraud and money
laundering. Some may be subject to identity thefts whilst others, due to their
anonymity, could be abused for money laundering operations. Operators deal with
the different fraud/money laundering risks within the due diligence checks
carried out on customers, taking account of the degree of regulation of the
different payment systems and anti-money laundering controls already applicable
to the financial sector.

·
Operational controls whereby operators use age
verification lists and lists used by banks to identify terrorists and
politically exposed persons (PEPs), i.e. World Check  and the European Sports
Security Association's (ESSA ) watch list. Operators also keep statistical
records of transactional behaviour, which must comply with EU data protection rules,
in order to be able to identify suspicious activities. They are required to
apply stricter due diligence requirements where there are high limits on
stakes. Operators must also submit Suspicious Activity Reports (SAR) to the
national Financial Intelligence Units (FIU).

There is a broad demand to extend the scope
of application of the AMLD to all types of games of chance. This general support for a broader definition of gambling under the AMLD
is based on a number of reasons. Namely, to create a level playing field for
all gambling operators since the cost of compliance would give entities that
are not covered an "unfair" economic advantage, and to remove market
access obstacles arising from the application of different national anti-money
laundering regulations in the field of gambling.

The Directive is currently under review and
the Commission services have been seeking views from stakeholders about how the
Directive is applied, and what possible changes could be introduced when the
Directive is revised. The process of revision of the AMLD will not be confined
to a straight implementation of the new FATF international standards. The
Commission is conducting its own review process to assess the need for change
to EU rules beyond simply taking on board the new FATF standards. The
Commission will reflect on how broad the definition of gambling should be, and
how could proportionality be assured (for example, ensuring that bars and
social establishments that include one or two slot machines would not fall
under the AMLD rules).

8.3.
Certification of gambling equipment

Certification of gambling equipment is
another instrument used in the gambling sector in order to prevent fraud.
Certification of online gambling software is commonly required by Member State's competent authorities within the process of gambling licence application. To
that end accredited testing agencies, specialising in the certification of
online gambling software and systems are being entrusted.

In this context, there is a strong call by
gambling operators for more approximation of technical standards so that
re-testing and certification of equipment, with the associated costs, is not
required.  The Commission services indeed believe that in order to ensure a
comparable level of security of online gambling in the EU as well as to reduce
the administrative burden relating to different national certification
procedures,  it would be useful to explore the possibility of introducing an 
EU standard on gaming equipment certification. The main added value of European
standardisation is facilitation of free movement of goods and services.
Standards normally increase competition and lower output and sales costs,
benefiting economies as a whole. In addition standards may maintain and enhance
quality, provide information and ensure interoperability and compatibility,
thereby increasing value for consumers. European standards are adopted by CEN,
the European Committee for Electrotechnical Standardisation (CENELEC) or the
European Telecommunications Standards Institute (ETSI).

9.
Integrity of sport and match fixing

The Commission fully acknowledges the
seriousness of the problems related to match fixing that are affecting the
ethics and integrity of sport. In the Communication on Developing the European
Dimension in Sport[216],
the Commission addressed the issue of sports integrity and proposed a number of
initiatives to be taken over the next few years. Furthermore, the Commission
adopted in June 2011 a package of measures which cover the fight against
corruption at EU level and which includes corruption in sport, match fixing in
particular[217]. 
Within the Green paper consultation on online gambling in the Internal Market[218],  the
Commission sought i) to understand the scale of the problem, ii) to map the
measures currently in place in order to combat match fixing as well as the
efficiency of these measures.

The European Parliament has also given
consideration to the issue of match-fixing, in its 2009 Resolution on the
integrity of online gambling (the 'Schaldemose Report')[219], the 2011 Resolution
on online gambling in the Internal Market (the 'Creutzmann Report')[220], and the
2012 Resolution on the European Dimension in Sport (the 'Fisas Report')[221]. The Council
first dealt with the fight against match-fixing in the EU Work Plan for Sport
and in November 2011 adopted conclusions on combating match-fixing. In these conclusions,
Member States, the Commission and relevant stakeholders are invited to forge
close cooperation in order to better protect the integrity of sport. The two EU
agencies in charge of cross-border judicial and police cooperation, EUROPOL and
EUROJUST, are also actively involved in the fight against match-fixing through
the establishment of Joint Investigation Teams (JIT) involving several
countries.

Besides the EU, on 28 September 2011, the
Committee of Ministers of the Council of Europe adopted the Recommendation on
the promotion of integrity of sport against manipulation of results, notably
match-fixing.[222]
On 15 March 2012, the Council of Europe's Conference of Ministers Responsible
for Sport meeting in Belgrade invited the Enlarged Partial Agreement on Sport
(EPAS) to launch the negotiations, in coordination with the EU, on a possible
international legal instrument (Convention) against the manipulation of sports
results, notably match fixing. Negotiations on the Convention are expected to
be launched in autumn 2012, following the meeting of the Committee of Ministers
of the Council of Europe on 13 June 2012.

The International Olympic Committee
launched a working group in March 2011, composed of high-level representatives
of the sport movement, public authorities, international organisations
including the European Commission, and betting operators. The objective of the
working group is to propose ways to fight against irregular and illegal sports
betting. A roadmap for follow-up action was adopted by the working group on 2
February 2012[223].

There are currently various interpretations
of the concept of match-fixing, also described as sporting fraud or sport-fixing.
The Commission services believe that an agreed definition would facilitate a
common understanding of the problem and would ensure that an appropriate legal
arsenal is in place to fight against this phenomenon. The definition provided
in the Council of Europe Recommendation on the promotion of integrity of sport against
manipulation of results, notably match fixing, provides a good working basis
for this purpose:

"The manipulation of sports results
covers the arrangement on an irregular alteration of the course or the result
of a sporting competition or any of its particular events (e.g. matches,
races…) in order to obtain financial advantage, for oneself or for other, and
remove all or part of the uncertainty normally associated with the results of a
competition".

Despite the lack of a common definition,
there is a broad agreement amongst all stakeholders that match fixing poses a
direct threat to the integrity of sport competitions. Past experience shows
that match fixing can occur both with and without the involvement of betting
operators. This means that not all match fixing scandals are necessarily
betting-related[224].
When it comes to betting-related match fixing, Member States, sport
organisations and regulated gambling operators seek to fight this specific type
of gambling fraud in order to, in particular:

1. protect financial
interests of both players (consumers) and regulated operators,

2. prevent money
laundering through betting on events with fixed outcome,

3. protect fairness in sport which is crucial for sport
organisations as well as for individual sportspeople.

Match fixing occurs in both the offline and
the online gambling markets, and both regulations and self-regulations seek to address
this threat in similar ways, at the same time taking account of technical
specificities of the particular platform used. In this context, it is suggested
that in regulated markets, due to customer identity verification procedures and
profiling of customer's behaviour, online bets are less anonymous than offline
bets and, therefore, match fixing threats are more detectable in the online
segment. When it comes to sport disciplines exposed to match fixing, whilst it
is easier to influence the outcome of events of individual sports, football seems
the most threatened discipline because of its popularity and the liquidity
volume involved.

As regards the scale of the problem, the Commission
services note a lack of reliable data since in the majority of cases online betting
related match fixing seem to occur, through gambling operators established in
unregulated markets outside the EU.  Statistics confirm that regulated
operators detected very few match scandals over the past few years[225]. It
certainly has to do with the fact that in regulated gambling markets monitoring
mechanisms designed to detect suspicious betting patterns have been developed
by regulators, gambling operators or sport federations and, therefore, fraud
attempts are likely to be efficiently tackled. On the contrary, cases originating
outside regulated markets cannot be systematically monitored and, therefore,
there is a real lack of information concerning the scale of match fixing at
global level. By way of example, Interpol has conducted four soccer gambling
operations (SOGA) over the past years targeting illegal football gambling
across South-East Asia. These operations led to more than 7,000 arrests,
closure of illegal gambling dens[226]
and seizure of close to $27 million in cash.

9.1.
Existing anti-match fixing measures

As far as the current measures to combat
match fixing are concerned, a number of various regulatory (gambling licensing
conditions, statutes of sport federations) and self-regulatory mechanisms
(codes of conduct), exist, introduced either individually or jointly by Member
States, sport federations, associations of athletes and gambling operators.
Educational campaigns for athletes, coaches and referees are in place but it is
often questioned whether these adequately reach out to the targeted audience[227]. Other
preventive measures used are conflict of interest rules such as betting bans
for sports people and their family relatives, betting bans for employees of
operators, exclusion of certain events from betting such as youth competitions,
limitation or prohibition of certain types of bets, authorisation of bets by
sport bodies, bet monitoring systems, alert tools (whistle blowing, hotlines),
mutual reporting obligations applied between operators, sport bodies and
gambling regulators (e.g. through memoranda of understanding).

In the context of anti-match fixing
measures, it is argued by some that certain types of bets increase the risk of
an event being fixed and should be, therefore, prohibited. There are also calls
for a system whereby sport federations remain in control of the way bets are offered
on competitions organised by them. The Commission services believe that as
regards limitation and regulation on types of bets and/or types of events on
which bets can be placed, further debate is necessary. Whilst at this stage it
may be difficult to determine by law for all sports which types of bets are or
are not allowed, the risk to the integrity of sport should be a factor in
determining which bets may be offered. Gambling regulators could play a role in
this context, certainly facing the challenge to strike the right balance
between commercial interests of gambling operators and interests of sport
bodies so that customers are not directed to unregulated markets with more
attractive gambling offers. Therefore, increased structured dialogue between
gambling regulators, sport bodies and gambling operators is certainly
necessary. Cross border dialogue and exchange of best practice between national
gambling regulators is equally important in this respect given the differing
regulatory approaches in Member States. In this context, the Commission will,
by using part of the funds available under the 2012 Preparatory Action for
European Partnerships in Sport, launch test projects aimed at promoting
international cooperation in the fight against match fixing notably in the area
of prevention through education and awareness-raising mechanisms[228].

Various regulatory and self-regulatory
mechanisms also exist in relation to sponsorship and to ownership of sport
events/clubs by gambling operators, bearing a different degree of restriction
across Member States and sport disciplines. In general, the responses to the
Green Paper consultation indicate that sponsorship by betting companies of
sport clubs or sporting competitions does not create a higher risk of fixed outcome
of an event, especially in well regulated gambling markets. Operators seek
sponsorship of sport events and clubs within regulated markets because this
gives credibility and fair play labels and in this way distinguish them from
the unregulated operators.

As for bet monitoring systems, a number of
them are currently used by stakeholders such as sports governing bodies,
betting operators and gambling regulators. A number of memoranda of
understanding on sharing of intelligence and data have been signed between some
regulated operators and large sport federations as well as between regulated
operators and gambling regulators. It is, nonetheless, evident that
effectiveness of these systems is limited to bets placed through operators
providing services in regulated markets. Data
protection issues are often mentioned as a barrier for sharing information, in
particular with regard to match fixing alerts involving player's sensitive
data. Furthermore, it seems that the various bet
monitoring systems currently in place should be better coordinated and complement
each other, in order to increase the overall efficiency of detection of match
fixing threats. To that end, a
higher level of cooperation seems necessary both at national and international
level.

With regard to financing of sports
integrity mechanisms/measures including bet monitoring systems, there are
clearly different approaches across Member States. For example, the Italian
gambling regulator runs its own real time monitoring system, financed from gambling
licensing fees, France by law requires the operators to directly contribute to
sport federations in charge of the event on which bets are placed, whilst in
the UK sports integrity measures are financed by the sport sector itself. Also
gambling operators (both lotteries and commercial) have established their own detection
systems in order to protect themselves from the negative effects of match
fixing. None of the financing models currently applied has been found to be
more or less efficient than the others. Nonetheless and as stated by the
Commission in its Communication entitled "Developing the European
Dimension in Sport"[229],
sport stakeholders perceive challenges with regard to continued income streams
from gambling activities into sport. Regulatory approaches vary among
Member States in areas relating to intellectual property rights and gambling
activities, in particular regarding the extent of property rights for the
organisers of sport competitions in relation to the events they organise, as
well as the issue of image rights in sport.

The Court of Justice has in a recent
judgment[230]
held that "sporting events cannot be regarded as intellectual creations
classifiable as works within the meaning of the Copyright Directive. That
applies in particular to football matches, which are subject to rules of the
game, leaving no room for creative freedom for the purposes of copyright.
Accordingly, those events cannot be protected under copyright. It is, moreover,
undisputed that European Union law does not protect them on any other basis in
the field of intellectual property. Nonetheless, the Court also stated that
"sporting events, as such, have a unique and, to that extent, original
character which can transform them into subject-matter that is worthy of protection
comparable to the protection of works, and that protection can be granted,
where appropriate, by the various domestic legal orders.". In order to
further explore the nature and scope of property rights owned by organisers of
sporting competitions, the Commission has launched an external study[231]. The aim of
the study is to provide a comprehensive analysis of the issues related to
sports organisers' rights from an EU perspective and to formulate suggestions
as to whether EU action is needed to address any identified problem in this
respect.

9.2.
Criminalisation of match fixing

As a follow up to the Communication on
Developing the European Dimension in Sport, the Commission carried out a study
on how sporting fraud offences, and notably match fixing, are being covered by
the national laws of the Member States. The aim of the study was to enable the
Commission to assess whether EU action in this field is necessary. The study
results suggest that difficulties in prosecuting match fixing are frequently more
of an operational than legal nature (difficulties in gathering evidence,
prioritisation of cases and cooperation amongst law enforcement authorities). The
study also showed that the specific incrimination of sport offences did not
necessarily lead to a better track record in courts or to fewer suspicious
cases. In particular due to the lack of broader EU acquis in the area of sport
offences, combating match fixing at EU level by establishing a common
definition of sport fraud is not a feasible policy option at this stage. The
Study also served as a basis for a debate in the Commission and Member States' Expert
Group 'Good Governance', which concluded that despite the existence of differences
in the Member States' legal frameworks applicable to match-fixing, harmonisation
through an EU-defined crime of sporting fraud does not seem necessary. Having
said this, Member States have been invited to consider the adoption of a
possible international legal instrument against match-fixing aimed at ensuring
that national legal and administrative systems are provided with the necessary
legal tools, expertise and resources to combat this phenomenon.

When it comes to harmonisation of sanctions
imposed as a result of match fixing, it should be stressed that without a
harmonisation instrument in place, criminal and administrative sanctions cannot
be laid down at EU level. The only EU instrument in place in this field is
Framework Decision 2003/568/JHA[232]
on private corruption which, however, leaves Member States free to set levels
of sanctions and penalties.

9.3. International cooperation on match fixing

Law enforcement cooperation of police and
judicial authorities across borders is essential in view of the transnational
nature of match fixing, in particular when it is betting-related. EU-wide
coordination is currently implemented through Europol and Eurojust. Cooperation
at international level between Europol and Interpol is also in place whilst no
international equivalent of Eurojust exists. The Commission services suggest
that the next orientation document to be adopted by the Council with a view to
providing guidance on the action of Europol includes a reference to the fight
against match-fixing as a type of serious cross-border crime.

Furthermore, the Commission services
cooperate with and participate in meetings/working groups of the IOC and the Council
of Europe. A series of measures aiming at addressing this phenomenon in a
global manner have been recently recommended by these two organisations. Concerning
cross-border cooperation at EU level, the Commission services will, through the
expert group on gambling, seek Member States views on whether and how to
enhance cooperation amongst public authorities, including enforcement bodies,
in the fight against betting related match fixing. It seems that the creation
of national points of intelligence, where all relevant actors involved in
fighting match fixing at national level would meet, exchange information and
coordinate actions, would be the first necessary step for efficient cooperation
at EU and global level. In this context, the possibility of including the
protection of integrity of sport and the fight against match-fixing as topics
for political discussion with third countries and the competent international
organisations in the field of sport will equally be explored by the Commission
services. To that end, identification of countries that raise specific issues
in terms of betting related match-fixing of sport events taking place within
the EU would be necessary.

10.
Financing Systems for benevolent and public
interest activities

As regards financing of public interest
activities from revenue derived from gambling this is of paramount importance
for all Member States. This was clearly highlighted in the contributions to the
Green Paper. One of the objectives of the Green Paper consultation has been to
determine the revenue streams from online gambling services and the mechanisms
in place in the EU. The consultation encompassed the relevant public interest
objectives that gambling touches upon, including the policy reasons invoked to
justify the objectives such as the financing of benevolent or public interest
activities, including sport. The Council stressed in
its conclusions of December 2010 on the framework for gambling and betting in
the EU Member States[233]
that 'contributions, in particular from state lotteries or lotteries
licensed by the competent state authorities pay an important role for society
via for example the funding of good causes, directly or indirectly, where
applicable'.

The Green Paper suggested gambling-derived revenue
channelling systems in place in the EU. The contributions confirmed that diverse
systems have been set up in the Member States to collect the revenue from all
forms of gambling (online and offline) and, in turn, to allocate these to
activities of interest to society at large. Within this context, examples of
existing systems broadly include the granting of a licence for gambling
services often to a pre-determined benefitting entity, revenue from the State
gambling operator and commercial operators channelled by the State or through an
established mechanism (e.g. Funds), revenue from the State gambling operator
channelled directly to a benefitting entity or entities and voluntary channelling
by some commercial operators. In a number of the existing systems legislation
or the licence may determine the benefiting benevolent or public interest
activity and/or the rates (aside from fiscal revenue). A mix of these financing
systems also co-exists.

In the EU contributions stemming from
gambling are a source of income for a broad range of public interest activities
largely identified by the Member State, such as

· culture · sport · youth · tourism · education || · the arts · national heritage   · health and welfare · research, education and treatment of problems related to gambling

Therefore, national systems of financing
are also linked to Member States' ambition to safeguard the revenues for the
activities these are distributed to. Whilst the manner in which contributions
are collected and re-distributed differ, in part this is also a reflection of
cultural, historical and national traditions. Reforms of gambling legislation
have taken place in a number of Member States, namely to regulate online gambling
which also at times seek avenues to channel revenue from this type of gambling.
These considerations were confirmed by the stakeholder participants in the workshop
on systems of revenue distribution.

National lotteries are by and large
state-owned or state-controlled in the Member States and the contribution
systems have been set up with a view to re-distributing to society the revenue
from this traditional offline activity, for instance lottery tickets. The
expansion of the online environment for gambling services has given rise to
questions on the collection and allocation of revenue from these activities,
including whether the existing more traditional systems are directly transposable
to the online environment and in relation to the commercial operators. The regulated
markets in Europe allow for contributions generated from State-owned or
State-controlled lotteries, commercial operators as well as charity and private
lotteries, to the benefit of society at large.

However, the CJEU has expanded on the
question of public interest activities benefitting from gambling, that this
should not be the real justification for national restrictions to the free
movement of services[234].
The Court has stated that the financing of social activities through proceeds
from authorised gambling services is only to be an ancillary or incidental
result to restrictions in light of reasons of public interest. This is without
prejudice to the legitimacy, as ruled by the Court, of certain monopolies and
of State aid rules.

10.1.
Societal activities benefitting from revenue
derived from gambling

At the same time, a number of benefitting
societal activities do rely on these contributions, some organisations more
extensively than others and there may be scope for national systems to explore
alternate systems with a view to reducing over reliance on a single or main
stream.  In light of this, the Commission considers that funds lying in
unclaimed prizes from gambling and in dormant player accounts merit further
consideration in the Member States. Furthermore, there is merit for national
systems to seek fair distribution systems so that these do not inadvertently
benefit some benevolent or public interest activities over or more than others.

There is also scope for consideration
towards ensuring that revenue from gambling to certain organisations, for
example people with disabilities, does not portray this social group as being
dependent on charity. This was an intended aim of the UN Convention on the
Rights of Persons with disabilities which inter alia defines equal rights of
persons with disabilities.

The challenge is to reconcile the revenue
generated by Member States from gambling services and the systems to allocate
funding to support public interest activities with relevant EU rules and with
recipient activities.

Examples of revenue derived from gambling
from the contributions to the Green Paper

MS || Distribution || € +/- || Year

Finland || State budget earmarks % of revenue from gambling: sports, youth work, sciences, arts, health, social causes || ||

Greece || 20% of total gambling revenues are redistributed:  treating gambling addiction, fight against unemployment, disabled persons || ||

Italy || Online and offline tax revenues are directed to the State budget and re-distribution is usually determined through budget laws || 10 billion || 2010

The Netherlands || By law 50% of stakes of private charity lotteries is for charitable organisations: development aid, human rights, nature and environment, health and well-being, culture and heritage. Other lotteries are also operated || 375 million || 2010

Norway || Earmarked % of revenue from gambling distributed by government or by the Gaming Authority: sports, culture, humanitarian or social NGOs || 61% of the GGR re-distributed || 2009

Spain: ONCE || Spanish National Organisation of the Blind operating gambling in order to fund specialised social services it provides to blind and severely partially sighted people and towards social inclusion of all persons with disabilities in Spain || 800 million || p.a.

The diverse
financing systems generate revenue which is of significance to the Member
States which adopt mechanisms they feel are most suited to channel the revenue from
gambling to benevolent and public interest activities. A number of good
practices exist, in particular where the proportions and the beneficiaries are
pre-determined. Existing data does not indicate the growth in Europe of only
one type or types of gambling service or to reduced revenue and, by analogy, of
reduced contributions to benevolent and public interest activities related to
such considerations. Gambling revenue data is provided in Section 3.

Nonetheless, there is scope for financing
systems to be as transparent as possible in terms of both operators and
the beneficial public interest activities, inter alia the distribution as well
as use of the contributions by recipients. However, any transparency measures
should be aligned with responsible gambling advertising so as to avoid any
potential misleading portrayal of gambling to the general public[235].

10.2.
Sport, including horseracing: a main beneficiary

In a number of Member States sports is a
main beneficiary of revenue derived from gambling. A specific distributing Fund
mechanism for this type of revenue is set up only in a few Member States. From
the many and varied sport disciplines, including at grassroots level, football
is a main beneficiary through direct or indirect allocation.

A Study contracted by the Commission looked
into the financing systems across the EU. The analysis concluded that in 2008
€2.1 billion was directed to sport through the State from gambling and €0.2
billion reached sport directly from compulsory levies[236]. Of this, €1.1
billion is directed to the grassroots level, representing 2.2% of the total
budget of grassroots sport, 90% of which is channelled through government
accounts. Some sports tend to have a more mixed revenue stream than other
sports, with the effect, in particular at the grassroot level, some sport may
be more reliant on these proceeds to promote their sport, attract young
athletes, offer suitable facilities and organise competitive events. The Study,
whilst not finding significant regulatory barriers of the structures in place
did not identify a single best practice funding model for sport, including
grassroots sport.

MS || System || € +/- || Year

Denmark || 70.18% of profit through a fixed model || || 2010

Finland || 25% of gambling revenue from the Lottery monopoly || 143 million || 2010

France || 1.8% levy on lottery monopoly revenue 1.8% tax on turnover of bets on sports Both directly to the 'Centre National pour le Developpement du Sport' to distribute across sport federations. || 228 million 18 million || 2011 2012 est

Italy || State allocates funds to National Olympic Committee to distribute across sport federations || 470 million || 2009 /2010

The Netherlands || 14.1% from lottery revenues || 61.5 million || 2009

Slovenia || 80% of the concession fee (fee is 25% of GGR) || ||

Horse and
greyhound racing

Across jurisdictions where this takes
place, horse race betting systems are generally set up around specific
structures of financing on which the industry largely relies. Similar in this
respect to the situation for national lotteries this financing structure stems
from national traditions, in this case of the equestrian sport, horse breeding
and husbandry. The established mechanism in the Member States tends to be
unique to this sport. In the EU, more than €30 billion is bet on horseracing
every year. Pari-mutuel betting alone totalled €13 billion in the EU in 2010,
with €1.2 billon of this reinvested in the horse industry and racing. In the
Nordic countries (Sweden, Finland, Norway), an average of 12-13% of the total
turnover is redirected into trotting and thoroughbred racing, whilst in France the rate is 8%.

In Ireland and the UK, grey hound racing also takes place. Ireland has established a fund to redistribute the betting
duty, set at 1%, both for horse and for greyhound racing. The UK operates a similar compulsory levy scheme for horse racing.

MS || System || € +/- || Year

France || PMU (the pari mutual operator) funds 80% of the French horseracing sector, 8% levy return to the horseracing by PMU || 727 million || 2009

Italy || +/- 14% of revenue online and offline from horse racing bets is allocated to the National Union for the Betterment of Horse Breeds and for 2009 and 2010 an additional contribution of €150 million/year || || 2009 / 2010

The Netherlands || Revenue from the totalisator is received by the horse racing authority || 1.9 million || 2009

Poland || By law 2% of total stakes of horse racing bets is allocated to the Horse Racing Club || ||

Sweden || Swedish Horse Racing Totalisator (ATG) directs around 13% of total turnover to trotting and thoroughbred racing sport (70% returned winnings, 11% is State tax, 6% is ATG recovery of costs) || 180 million || 2010

UK || Statutory Horserace Betting Levy scheme; the rate is set annually through an established system, and varies per type of horseracing bet. E.g. 1 operator paid `£6 million in 2011 (+/- 10%of gross profits of horseracing bets by UK residents). Veterinary science is also funded through the levy scheme. || 20.35 million[237] || 2011

Following the Communication
'Developing the European Dimension in Sport'[238]
the Council in its Resolution on a European Union Work Plan for Sport for
2011-2014[239]
set up an Expert Group 'Sustainable Financing of Sport'. The Expert Group, to
which 21 Member States have appointed experts, reports to the Council. The Expert
Group intends to present recommendations on strengthened solidarity mechanisms
by the end of 2012. Commission will assess these recommendations with a view to
determining possible future action that may be necessary at EU level.
Furthermore the Commission will continue the discussions in this area in light
of the economic dimension of sport, in particular sustainable financing of
grassroots sport, which is prioritised as a theme for EU level cooperation in
sport.

[1] Green Paper on online gambling in the Internal Market of 24 March
2011 (COM(2011)0128 final)

[2] European Parliament resolution of 15 November 2011 on online
gambling in the Internal Market (2011/2084(INI)).

[3] Opinion of the European Economic and Social Committee on the Green
Paper on online gambling in the Internal Market COM(2011) 128 final

[4] http://ec.europa.eu/internal\_market/services/gambling\_en.htm

[5] See below Chapter 3 paragraph 4.

[6] Directive 2000/31/EC of
the European Parliament and of the Council of 8 June 2000 on certain legal
aspects of information society services, in particular electronic commerce, in
the Internal Market ('Directive on electronic commerce').

[7] Directive 2006/123/EC of the European Parliament and of the Council
of 12 December 2006 on services in the internal market

[8] Directive 2010/13/EU of the European Parliament and of the Council
of 10 March 2010 on the coordination of certain provisions laid down by law,
regulation or administrative action in Member States concerning the provision
of audiovisual media services (Audiovisual Media Services Directive)

[9] Directive 2005/60/EC of the European Parliament and of the Council
of 26 October 2005 on the prevention of the use of the financial system for the
purpose of money laundering and terrorist financing

[10] See for the notion "games of chance" and the application
of primary EU law below, Chapter 5.

[11] Directive
98/34/EC of the European Parliament and of the Council of 22 June 1998 laying
down a procedure for the provision of information in the field of technical
standards and regulations

[12] H2 Gambling Capital

[13] SWELOGS population study

[14] Online Poker in the European Union; Ingo Fiedler, Ann‐Christin
Wilcke; University of Hamburg.

[15] TNS Gallup survey, 2008

[16] The Atlas Survey, 1-6/2009

[17] "The nature and scale of illegal gaming in the Netherlands", Ministry of Justice, November 2009

[18] Research study on Gambling in Slovenian households, with emphasis
on internet gambling, FIHO, August 2011

[19] Regular survey of the Norwegian Gaming Authority

[20] Quarterly analysis of the online games market in France 1st quarter 2012, ARJEL

[21] Directive 2010/13/EU.

[22] Directive 2005/29/EC of the European Parliament and of the Council
of 11 May 2005 concerning unfair business-to-consumer commercial practices in
the internal market

[23] Council Directive 93/13/EEC of 5 April 1993 on unfair terms in
consumer contracts

[24] Directive 97/7/EC of the European Parliament and of the Council of
20 May 1997 on the protection of consumers in respect of distance contracts

[25] Directive 2011/83/EU of the European Parliament and of the Council
of 25 October 2011 on consumer rights

[26] Directive 2005/60/EC

[27] Directive 95/46/EC of the European Parliament and of the Council of
24 October 1995 on the protection of individuals with regard to the processing
of personal data and on the free movement of such data. On 25 January 2012 the
Commission has proposed a data protection reform package, including a Proposal
for a Regulation of the European Parliament and of the Council on the
protection of individuals with regard to the processing of personal data and on
the free movement of such data (General Data Protection Regulation) which will
replace Directive 95/46/EC, see http://ec.europa.eu/home-affairs/doc\_centre/police/docs/com\_2012\_10\_en.pdf.

[28] Directive 2002/58/EC of the European Parliament and of the Council
of 12 July 2002 concerning the processing of personal data and the protection
of privacy in the electronic communications sector (Directive on privacy and
electronic communications)

[29] Directive 2000/31/EC of the
European Parliament and of the Council of 8 June 2000 on certain legal aspects
of information society services, in particular electronic commerce, in the
Internal Market ('Directive on electronic commerce')

[30] Council Directive 2006/112/EC of 28 November 2006 on the common
system of value added tax

[31] Directive 98/34/EC of the European Parliament and of the Council of
22 June 1998 laying down a procedure for the provision of information in the
field of technical standards and regulations, as amended by Directive 98/48/EC
of the European Parliament and of the Council of 20 July 1998 amending
Directive 98/34/EC laying down a procedure for the provision of information in
the field of technical standards and regulations

[32] See most explicitly chapter 5.5.1.

[33] Such conditions should be assessed, for example, under Article 63
TFEU on the free movement of capital (e.g. for restrictions on participation of
foreign capital in order to obtain national gambling licences) and/or Directive
2006/48/EC of the European Parliament and the Council of 14 June 2006 relating
to the taking up and pursuit of the businesses of credit institutions (e.g. for
requirement to use a national credit institution). See however also chapter 5.8
for case-law on corporate requirements in the gambling sector.

[34] The CJEU appears to use “games of chance” and “betting and gaming”
interchangeably, see e.g. Dickinger and Ömer, par. 44, 45 and 47. In this
section these notions are, together with the term "gambling", used in
a general manner.

[35] See in particular Schindler, par.19 et seq., and Anomar, par. 47
and 48.

[36] See Case Schindler, par. 22; Case Winner Wetten, par. 43 and Stoß
and Others, par. 56.

[37] Case C-368/95, Familiapress [1997] ECR I-3689, par. 23. See also
Zenatti, par. 17.

[38] Costa and Cifone, par. 69; Liga Portuguesa de Futebol Profissional
and Bwin International, par. 51 and the case-law cited therein.

[39] E.g. Schindler, par. 43-44.

[40] E.g. Dickinger and Ömer, par. 41.

[41] E.g. Costa and Cifone, par. 70.

[42] See Case HIT, par. 16, and case-law cited.

[43] See Dickinger and Ömer, par. 35; Stoß and Others, par. 59-60.

[44] See recently Garkalns, par. 28.

[45] See Case Zeturf, par. 74.

[46] See par. 33-38 of the judgment.

[47] See, along these lines, Advocate-General Bot in Dickinger and Ömer,
par 55-56.

[48] Case Schindler, par. 37.

[49] Case Sjöberg and Gerdin, par. 33 and 34; Case HIT, par. 17.

[50] Case Gambelli, par. 45-46 and 58; Case Carmen Media Group, par. 41.

[51] Dickinger and Ömer, par. 41; Sporting Exchange, par. 24; Case Liga
Portuguesa, par. 52-53; Ladbrokes Betting & Gaming and Ladbrokes
International, par. 16; Ladbrokes, par. 40

[52] Case Gambelli, par. 56-57.

[53] Case Placanica, par. 42, 51.

[54] Case Garkalns, par. 34.

[55] Case Anomar, par. 66.

[56] Case Lindman, par. 21.

[57] Case Engelmann, par. 28.

[58] Case Engelmann, par. 32.

[59] Case Winner Wetten, par. 69.

[60] Consistent case-law, see most recently Case Garkalns, par. 35, and
the case-law cited.

[61] The reasons referred to in Articles 51 and 52 TFEU may justify
national measures which are either discriminatory vis-à-vis foreign operators
or which apply without discrimination to national and foreign operators. See,
to that effect, Case Dickinger and Ömer, par. 79; Case Placanica, par. 49.

[62] Restrictions justified by overriding reasons in the public interest
must be applied without discrimination.

[63] Case Gambelli, par. 61.

[64] Case Dickinger and Ömer, par. 55.

[65] Case C-260/04, Horse-race betting licences (Commission v. Italy), par. 35; Costa and Cifone, par. 59.

[66] Case Costa and Cifone, par. 65.

[67] Case Zeturf, par. 51; Ladbrokes, par. 68.

[68] Case Zenatti, par. 36; Case Gambelli, par 62; Case Gaming machines,
par. 36; Dickinger and Ömer, par. 61, with references to previous case-law;
Ladbrokes, par. 75. The financing of public-interest activities with the
revenues of gambling and betting activities must be distinguished from the “aim
of preventing gambling from being a source of private profit”. The latter
issue relates to the condition of limiting the grant of a licence to one or
more non-profit entities (see further chapter 5.6.3.3)..

[69] Dickinger and Ömer, par. 62.

[70] Schindler, par. 58; Zenatti, par. 31; Gaming Machines, par. 34;
Ladbrokes, par. 44.

[71] See already the judgment in Case Schindler, par.60; see also Case
Dickinger and Ömer, par. 45.

[72] Dickinger and Ömer, par. 45; Stoß and Others, par. 76, and case-law
cited.

[73] Liga Portuguesa, par. 59; Case Dickinger and Ömer, par. 47.

[74] Stoß and Others, par. 92, and case-law cited.

[75] Case Garkalns, par. 37, and the case-law cited.

[76] See Case Carmen Media Group, par. 100.

[77] See most recently Zeturf, par. 78-80; Ladbrokes Betting &
Gaming and Ladbrokes International, par. 54-55.

[78] Liga Portuguesa, par..69.

[79] Liga Portuguesa, par. 70. In Sporting
Exchange, the CJEU underlined that the fact that an online operator does not
pursue an active sales policy in the Member State of the consumer, particularly
because he is not making use of advertising in that State, cannot be regarded
as running counter to this consideration (par. 35)

[80] Case Carmen Media Group, par.103.

[81] Case Zeturf, par. 81, 82.

[82] Ladbrokes, par. 84-86, Stoß and Others, par. 112; Dickinger and
Ömer par. 96; Sporting Exchange, par. 33-35.

[83] See par. 86 of the judgment.

[84] See par. 112 of the judgment

[85] Liga Portuguesa, par. 69; Dickinger and Ömer, par. 96.

[86] Dickinger and Ömer, par. 97.

[87] Dickinger and Ömer, par. 98.

[88] Dickinger and Ömer, par. 99.

[89] See in particular par. 60 of the judgment.

[90] Sporting Exchange, par. 36 and Ladbrokes Betting & Gaming and
Ladbrokes International, par. 57.

[91] The (previous) Italian system, in particular subject to the judgments
in the cases Zenatti, Gambelli and Placanica,

[92] E.g. EFTA Court in Case Gambing machines; CJEU in Läärä and
Dickinger and Ömer.

[93] E.g. Sporting Exchange, Stoß and Others, Zeturf.

[94] See Dickinger and Ömer, par. 48, and case-law cited.

[95] See Dickinger and Ömer, par. 49 and cited case-law.

[96] Stoß and Others, par. 81-82.

[97] Par. 51 of the judgment.

[98] This was for example illustrated by the government's involvement in
appointing the members of its administrative organs and by the powers of the
Gaming Department of Santa Casa - the licence holder - to open, institute and
prosecute proceedings involving offences of illegal operation of games of
chance to which Santa Casa had the exclusive rights.

[99] Liga Portuguesa, par. 62-72.

[100] Par. 56 of the judgment.

[101] Dickinger and Ömer, par. 71; Case Zeturf, par. 47.

[102] Stoß and Others, par. 71; Dickinger and Ömer, par. 54.

[103] See par. 49-52 of the judgment.

[104] Par. 59 of the judgment.

[105] Case Gaming machines, par. 43.

[106] See, in particular, the judgments in Gaming machines, Ladbrokes,
Gambelli, Placanica, Stoß and Others, Carmen Media Group, Dickinger and Ömer
and Zeturf.

[107] Zeturf, par. 59, 60.

[108] Idem, par. 61.

[109] Idem, par. 58.

[110] Ladbrokes, par. 52.

[111] See the decisions in Case Placanica, par. 55, Stoß and Others, par.
101-102, Dickinger and Ömer, par. 63 ff,  and Ladbrokes Betting & Gaming
and Ladbrokes International, par. 25.

[112] Ladbrokes, par. 54.

[113] See, to that effect, the judgments of the CJEU in Ladbrokes
Betting & Gaming and Ladbrokes International, par. 29, and in Case
Dickinger and Ömer par. 66.

[114] Ladbrokes Betting & Gaming and Ladbrokes International, par.
30; Dickinger and Ömer, par. 67.

[115] Ladbrokes Betting & Gaming and Ladbrokes International, par.
31.

[116] See for instance Case Zeturf, par.70, on the black market for
betting on horseracing.

[117] Case Placanica, par. 56-57.

[118] Case Dickinger and Ömer, par. 63-64; Ladbrokes Betting &
Gaming and Ladbrokes International, par. 25; Case Placanica, par. 55.

[119] Case Dickinger and Ömer, par. 61.

[120] Stoß and Others, par. 100; Case Gaming machines, par 43-45,
Ladbrokes, par. 52-54, 59-62, Carmen Media Group, par. 67, Zeturf, paragraph
65.

[121] Stoß and Others, par. 103; Dickinger and Ömer, par. 68.

[122] Dickinger and Ömer, par. 69. Advocate-General Mazák concluded in
the Stanleybet International & Sportingbet case that it is apparent
from the observations referred to the Court that the expansionist commercial
policy pursued by the monopolist OPAP and the exclusive right granted to it are
"manifestly inconsistent" with the purported objective of reducing
the betting and gaming opportunities in that Member State, see par. 51 of his
Opinion.

[123] Stoß and Others, par. 95. The CJEU has also clarified that
(prohibited) lotteries and (authorised) other games for money, such as football
pools or "bingo" might give rise to comparable stakes but they may
differ in their objects, rules and methods of organisation in which case those
games are not in a comparable situation and they cannot be assimilated. (Case
Schindler, par. 50 and 52; Stoß and Others, par. 94)

[124] Stoß and Others, par. 96.

[125] Stoß and Others, par. 106.

[126] Case Gaming machines, par. 43.

[127] Case Gaming machines, par. 44.

[128] See Sporting Exchange, par. 50, and the case-law cited,  and
Garkalns, par. 42. It should be also noted that service concessions are
currently not governed by any EU directives on public procurement (see, for
instance, Sporting Exchange, par. 39).

[129] Garkalns, par. 43.

[130] See, to that effect, most recently Costa and Cifone, par. 54 and
the case-law cited.

[131] Case Commission v Italy, par. 24 and the case-law cited; Case Sporting
Exchange, par. 40 and 41; Case Engelmann, par. 50, 55; Costa and Cifone, par.
55-56, 72.

[132] See Costa and Cifone, par. 73 and the case-law cited.

[133] Costa and Cifone, par. 57.

[134] See Costa and Cifone, par. 74 and the case-law cited;

[135] Case Costa and Cifone, par. 58, 63-64.

[136] Sporting Exchange, par. 39-51.

[137] Sporting Exchange, par. 59, 62, dictum.

[138] Sporting Exchange, par. 60, 30.

[139] Sjöberg and Gerdin, par. 33.

[140] Sjöberg and Gerdin,, par. 43.

[141] Sjöberg and Gerdin , par. 45.

[142] Par. 48, 75 of the judgment.

[143] Par. 75 of the judgment.

[144] Case Placanica, par. 50.

[145] Case Placanica, par. 52 et seq. In this
context, the Court ruled in Zeturf that the mere fact that the
authorisation and control of a certain number of private operators may prove
more burdensome for the national authorities than supervision of a single
operator is irrelevant. It is apparent from the case-law of the CJEU that
administrative inconvenience does not constitute a ground that can justify a
restriction on a fundamental freedom guaranteed by EU law. (par.  48 of the
judgment)

[146] Par. 53-54 of the judgment.

[147] Placanica, par. 55-58.

[148] HIT and HIT LARIX, par. 28-32.

[149] C-546/07 Commission v Germany, par. 39.

[150] See, inter alia, Case C-452/04 Fidium Finanz AG, ECR [2006]
I-09521, par. 46.

[151] Dickinger and Ömer, p.79, Engelmann, p. 34.

[152] Par. 82 of the Dickinger and Ömer.

[153] Engelmann, par. 37, with reference to, inter alia, the judgments in
the cases Gambelli and Placanica.

[154] Engelmann, par. 38-39.

[155] See par. 83 and 84 of Dickinger and Ömer.

[156] Dickinger and Ömer, par. 76; Engelmann, par. 28-30.

[157] Dickinger and Ömer, par. 77.

[158] Commission Decision 2012/140/EU of 20 September 2011 on the measure
C 35/10 (ex N 302/10) which Denmark is planning to implement in the form of
duties for online gambling in the Danish Gambling Duties Act, OJ L 68/3 of
7.5.2012. Two appeals to the General Court have been submitted against this
decision:  T-601/11 submitted by the DAB (Danish Amusement Machine Association)
and T-615/11 submitted by the Royal Casino Aarhus. To be noted, in this
context, that the Commission has received other complaints against Member
States' regulations  imposing different taxation on online and off-line
gambling services.

[159] State aid C 34/10 (ex N 140/10) – Levies to finance the public
service mission of improvement of the equine species and the promotion of horse
breeding, training in the horse racing and breeding sector and rural
development. See the invitation to summit comments ex Article 108 (2) TFEU in
OJ C 10/4 of 14.1.2011.

[160] Conclusions on the framework for gambling and betting in the EU
member states, 3057th COMPETITIVENESS (Internal Market, Industry, Research and
Space) Council meeting, Brussels, 10 December 2010

[161] http://ec.europa.eu/internal\_market/services/docs/gambling/workshops/workshop-v-conclusions\_en.pdf

[162] http://www.gref.net/

[163] http://www.iagr.org/

[164] http://www.arjel.fr/IMG/pdf/20110628CP.pdf

[165] http://www.lga.org.mt/lga/content.aspx?id=319936

[166] About IMI: http://ec.europa.eu/internal\_market/imi-net/index\_en.html

[167] 3057th COMPETITIVENESS (Internal Market, Industry, Research and
Space) Council meeting

[168] The proposal for a Regulation is envisaged to be adopted by the European
Parliament and the Council before the end of 2012.

[169] Regulation (EC) No 2006/2004 of the European Parliament and of the
Council of 27 October 2004 on cooperation between national authorities
responsible for the enforcement of consumer protection laws (the Regulation on
consumer protection cooperation)

[170] ftp://ftp.cen.eu/cen/AboutUs/Publications/GamblingMeasures.pdf

[171] COM (2011) 942 final

[172] See for more details: http://ec.europa.eu/internal\_market/e-commerce/notice-and-action/index\_en.htm

[173] "A ban for Norwegian companies to provide payment services to
gambling services on the Internet will significant help to reduce the
availability of such gaming" (Proposition. No. 80 2007-2008, p. 19).

[174] Directive 2007/64/EC of the European Parliament and of the Council
of 13 November 2007 on payment services in the internal market amending
Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing
Directive 97/5/EC.

[175] See Chapter 5 of this document

[176] Council Presidency Progress report 'Gambling and betting: legal
framework and policies in the Member States of the European Union', 27 November
2008, 16022/08

[177] See Chapter 3 of the Summary of Responses

[178] ftp://ftp.cen.eu/CEN/AboutUs/publications/GamblingMeasures.pdf

[179] See Chapter 3

[180] Commission Communication to the European Parliament, the Council,
the Economic and Social Committee and the Committee of the Regions 'A European
Consumer Agenda – Boosting confidence and growth COM (2012) 22 final

[181] Green Paper: out of 14,823 active gambling sites in Europe more than 85% operate without any licence

[182] See Chapter 6.3.1 'Inform
players about the available legal offer'

[183] E.g. The Commission has adopted  a proposal for a Directive on
consumer Alternative Dispute Resolution and a proposal for a Regulation on
Online Dispute Resolution COM (2012) 19 final, http://ec.europa.eu/consumers/redress\_cons/adr\_policy\_work\_en.htm

[184] See Chapter 6.3 on 'Appropriate
reporting obligations and supervision of licensees'

[185] Directive 95/46/EC

[186] Directive 98/48/EC

[187] http://ec.europa.eu/eahc/consumers/tenders\_2011\_cons\_01.html

[188] Digital Agenda for Europe COM(2010)245

[189] Communication from the Commission to the European Parliament, the
Council, the Economic and Social Committee and the Committee of the Regions,
Single market Act, Twelve Levers to boost growth and strengthen confidence,
"Working together to create new growth" COM(2011) 206 final

[190] Public consultation:
http://ec.europa.eu/information\_society/newsroom/cf/itemdetail.cfm?item\_id=6732

[191] COM(2012)
238/2

[192] http://cms.skat.dk/SKAT.aspx?old=2035321&lang=US

[193] http://www.eid-ssedic.eu/

[194] http://ec.europa.eu/consumers/strategy/cons\_satisfaction\_en.htm

[195] Presidency Progress Report 2008

[196] 2011/2084(INI)

[197] Background Report on Cross Media Rating and Classification, and Age
Verification Solutions, Safer Internet Forum, 25-26 September 2008

[198] Commission Communication to the European Parliament, the Council,
the Economic and Social Committee and the Committee of the Regions COM(2012)196
final

[199] Decision No 1351/2008/EC of the European Parliament and Council of
16 December 2008 establishing a multiannual Community programme on protecting
children using the Internet and other communication technologies

[200] Proposal for a Regulation of the European Parliament and of the
Council establishing the Connecting Europe Facility COM(2011) 665

[201] COM(2010)245

[202] The Coalition builds on, inter alia, the Safer Social Networking
Principles, Framework for the Safer Use of Mobile Phones and the Principles for
a Safer Use of Connected Devices

[203] Directive 2005/26/EC

[204] The data cannot be compared because the range, scope and criteria
of terms used differ, and the surveys are a mix of online and offline offers
and regulatory situations in the individual Member States. Link to
contributions: https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.jsp

[205] Carried out by Lottomatica in collaboration with La Sapienza university of Rome and Eurisko

[206] http://english.inserm.fr:
Institut National de la sante' et de la recherche medicale

[207] http://www.forschung-gluecksspiel.de/pdf/AsTERiG.pdf

[208] http://www.gamgard.com/

[209] Co-financed by the Seventh Framework Programme for research and
technological development, under the theme  'socio-economic sciences and
humanities' and coordinated by a team in the Fundació Clínic per la Recerca
Biomèdica (Hospital Clínic de Barcelona)

[210] Directive 95/46/EC of the European Parliament and of the Council 
of 24 October 1995 on the protection of individuals with regard to the
processing of personal data and on the free movement of such data

[211] Communication from the Commission to the Council, the European
Parliament, the European Economic and Social Committee, the European Central
Bank and Europol of 20 October 2004 - A new EU Action Plan 2004-2007 to prevent
fraud on non-cash means of payment [COM(2004) 679 final – Official Journal C 49
of 28.6.2006].

[212] The Stockholm Programme: An open and secure Europe serving the
citizen, is a five-year plan with guidelines for justice and home affairs of
the member states of the European Union for the years 2010 through 2014.

[213] Council conclusions on preventing and combating identity related
crimes and on identity management, including the establishment and development
of permanent structured cooperation between the Member States of

the European Union, adopted on 2 and
3 December 2010

[214] Communication from the Commission to the Council and the European
Parliament of 28 March 2012 Tackling Crime in our Digital Age: Establishing a
European Cybercrime Centre COM(2012) 140 final, Council Conclusions of 4 June
2012 on the establishment of a European Cybercrime Centre

[215] Directive 2005/60/EC

[216] Communication from the Commission to the EP, the Council, the Economic
and Social Committee and the Committee of Regions "Developing the European
Dimension in Sport, 18/1/2011 COM(2011) 12 final

[217] Package of anti-corruption measures adopted by the Commission on 6
June 2011, http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/678

[218] Commission's Green paper on online gambling in the Internal Market
COM (2011) 128 final

[219] 2008/2215(INI)

[220] 2011/2084(INI)

[221] Motion for a European Parliament resolution on the European
dimension in sport (2011/2087(INI))

[222] Recommendation CM/Rec(2011)10 of the Committee of Ministers to
member states on promotion of the integrity of sport against manipulation of
results, notably match-fixing (Adopted by the Committee of Ministers on 28
September 2011)

[223] IOC recommendation against match fixing of 2 February 2012

[224] Research by the Centre for the International business of Sport at
the University of Coventry shows that 57.89% of proven match fixing cases between
200-2010, which were subject to analysis, were betting related and 42.11% of
them non-betting related.

[225] According to its Integrity Report 2010, the European Sports
Security Association (ESSA) identified 58 incidences across its members in 2010
that were deemed to be irregular. Only 4 of these 58 alerts were suspicious and
their case files were sent to the relevant sports governing bodies. In 2011,
there were 69 alerts leading to 8 referrals of suspicious betting patterns to
the relevant sports governing and gambling regulatory authorities. The European
Lottery Monitoring System (ELMS), founded in 1999, investigated 5000 matches
between January and April 2011 and raised 93 alerts. According to research by
the Centre for the International business of Sport at the University of
Coventry cases out of 2089 proven cases of corruption over the period 200-2010,
which were subject to analysis, only 57 concerned match fixing (both betting
and not betting related).

[226] These dens handled more than $2 billion worth of bets.

[227] According to research conducted by Sport Athletes, in the UK 40% of football players and 60% of rugby players are not aware of rules/limitations on
self-betting enshrined in statutes or contracts with sport federations.

[228] In March 2012 the Commission adopted the 2012 Annual Work Programme
on "grants and contracts for the Preparatory Action - European Partnership
on Sports and for the Pilot Project - Knowledge Partnerships". On this
basis, the Commission launched a call for proposals to support transnational
projects presented by public bodies or civil society organisations in the field
of sport. See http://ec.europa.eu/sport/news/20120417-2012-call-for-proposals\_en.htm

[229] Section 3.2, COM(2011) 12 final

[230] Judgment of 4 October 2011 in joined cases C-403/08 and C-429/08 Football
Association Premier League and Others, par. 98-100.

[231] Open Call for tender EAC/18/2012, Study on sports organisers'
rights in the EU Contracting Authority: European Commission Directorate-General
for Education and Culture

[232] Council Framework
Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private
sector

[233] Conclusions on the framework for gambling and betting in the EU member
states, 3057th COMPETITIVENESS (Internal Market, Industry, Research and Space)
Council meeting, Brussels, 10 December 2010

[234] E.g. Stoß and others. See also Section 04 of this document.

[235] E.g Zeturf. See also Section 7 of this document

[236]
http://ec.europa.eu/internal\_market/top\_layer/docs/Executive-summary\_en.pdf

[237] £16.4 million

[238] COM(2011) 12 final

[239]http://www.consilium.europa.eu/uedocs/cms\_data/docs/pressdata/en/educ/122118.pdf

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