1

Practical implications of the BWin judgment by: Justin Franssen

2

Practical implications of the BWin judgment

– Background of Bwin

– Existing case law on gambling

– Bwin highlights

– Practical implications

3

1. Background of Bwin

• Santa Casa - 500 y.o. Monopoly

- very strong government involvement

- combined regulator/operator

- acts against infringements via admin. law

• Bwin/La Liga - private (listed) operator with Gib. License

- sponsorship agreement with La Liga

- active marketing in Portugal

Santa Casa imposes fines op Bwin/La Liga

Q: is the monopoly of Santa Casa + expansion to internet complaint

With EU law?

4

2.1 Existing case law on gambling

• Schindler, Laara, Zenatti, Gambelli, Placanica, C-260/04, the EFTA cases (Gaming Machines/Ladbrokes)...and Bwin! have a common denominator:

• MS enjoy a fairly large margin of discretion to organise its gambling markets

• Schindler (total ban)/ Laara (single operator)/Placanica (multiple licensing)

• Condition: overriding principles in the general interest + non-discriminatory, proportionate (suitability / necessity test)

5

2.2 Existing case law on gambling

• Main Difference: application of proportionality principle (+ burden of proof)

- rather “light” proportionality test in early ECJ cases (Schindler/Laara): total ban/single license system

- ECJ seemed to have intensified the proportionality test in the Italian cases.

Gambelli case (para 73)

- criminal prosecution of an operator is (likely) disproportionate as it goes beyond what is required to combat fraud. Reason: operator licensed abroad. (NO MUTUAL RECOGNITION)

- criminal prosecution of a punter is disproportionate in the light of encitement of players by Italian operators (compare: para 69)

6

2.3 Existing case law on gambling

• Main Difference: application of proportionality principle

-(para 74) Total exclusion of foreign operators in licensing process is disproportionate as it goes beyond what is required to prevent fraud. There are (other) means to check the activities of these (licensed) operators.

-compare para 62 of Placanica: there are “less infringing alternatives” than total exclusion from the market. No criminal sanctions allowed (para 72)

-compare C-260/04: ECJ steps in proportionality test and leaves no room for national Court (automatic renewal licenses)

Conclusion: no mutual recognition but license is of certain value in relation to the proportionality test (in Italian situation)

7

3. Bwin highlights (1)

Rephrases question of the referring Court (on monopoly) to the principle of MR

• What is new: first explicit rejection of MR principle

• Observations regarding proportionality

- (67) a strictly controlled operator like Santa Casa can (in the situation at hand) be a suitable measure to protect consumers against fraud

- (69) necessary because the MS of establishment cannot assess

integrity of its licensed operators (in relation to the prevention of fraud)

- (70) no direct contact between consumer and operator > online gaming involves substantially more risks for fraud compared to offline gaming

- (71) sponsorship may lead to fraud

8

Bwin highlights (2)

- (67) a strictly controlled operator like Santa Casa can (in the situation at hand) be a suitable measure to protect consumers against fraudNothing new (compare Laara)

- (69) necessary because the MS of establishment cannot assess integrity of its licensed operators (in relation to the prevention of fraud) New (and improved?) License issued by other MS seems not to be of any relevance in the Bwin case. No mutual trust between the MS’s.....Question remains: are there no practical (less infringing) alternatives (compare EFTA Ladbrokes: para 55 is this restriction “functionally needed”?

- (70) no direct contact between consumer and operator > online gaming involves substantially more risks for fraud compared to offline gamingrigged roulette wheel, fraudulent algorithm in slotmachine?

- (71) sponsorship may lead to fraudequally true for terrestrial operators and online operators

9

4. Practical implications

Implications for the pending ECJ cases (and possibly infringement cases of the ECJ

• Principle of Mutual Recognition has peacefully gone to heaven

• But.....no defenitive answer to specific restrictions in individual Member States (compare Italy vs Portugal)

• Example: (listed private operator, mainly private gain, non-existant operational control, private operator from other MS has been excluded from licensing process and does not market in MS of destination.....)

Implications for MS

• Debate has already shifted to local licensing (Italy: is it that bad?)

• In reality: more and more MS are looking for some form of regulation (France, Denmark, Belgium, Spain etc.)

10