Friday, March 09, 2007

The European Court of Justice in Luxembourg today ruled Italy can't use
criminal law to stop gaming companies licensed in other EU nations,
including the UK's Stanley Leisure Plc, from taking bets in the country. A
law barring publicly traded companies from obtaining licenses restricts "the
freedom to provide services." State monopolies in France, Germany and other
countries have been criticized by companies such as Ladbrokes Plc for
blocking their cross-border online gaming business. Shares of providers such
as Austrian Web bookmaker Bwin Interactive Entertainment AG surged after
today's court decision, which may remove some restrictions on the EU's ?50
billion ($66 billion) industry. "This is a step further toward a
liberalization of the European gambling markets," said Lode Van Den Hende, a
lawyer in the Brussels office of Herbert Smith. "Overall this is very good
now for the gaming operators. If this had gone against them they could have
closed shop." A spokesman for Italy's state monopoly, which oversees gaming
in Italy, wasn't immediately available to comment. Massimiliano Placanica
and two other people who operated shops in Italy where people could place
online bets with Stanley's office in Liverpool, England, faced criminal
charges under Italian law because Stanley didn't have a local gaming
license. Stanley argued its UK license should be recognized by all EU
countries. The court prohibited the use of criminal law in particular in
cases where foreign betting companies were refused the required license by
the country, as was the case for Stanley. "The Italian criminal penalties
for the collecting of bets by intermediaries acting on behalf of foreign
companies are contrary," to EU rules, an 11-judge panel of the court said.
The tribunal today left it to the national courts to decide whether by
restricting the number of operators in the gaming and betting industry in
the country, Italy was "genuinely" contributing to the goal of preventing
crime. Stanley said it was a "landmark" decision that will put pressure on
governments and the European Commission, the EU's executive arm in Brussels,
to end national protectionism. "We think it's time that the commission and
national lawmakers act now to end this protectionism," said Adrian Morris,
deputy director-general of Stanley. "This judgment is another step along the
road to fairer competition in Europe," Christopher Bell, chief executive of
Ladbrokes, said in an e-mailed statement. "We have already seen Italy and
Spain move to open up their betting markets and this judgment supports our
view that the policies of many EU governments are inappropriate and
disproportionate in restricting free and fair competition." Bwin said the
decision was a "milestone toward the opening of the European gambling
market." The commission last year started probing 10 EU countries including
Italy, Germany, the Netherlands and France for discrimination by barring
rivals from offering the same services as their state lotteries. They face
being taken to the EU court depending on the outcome of the investigation.
Stock in Bwin, whose co-CEO were detained for three days in September by
French authorities, rose as much as ?5.20, or 21%, to ?29.60, heading for
its biggest one-day gain in almost seven years. They traded at ?28.49 as of
3:54 p.m. in Vienna. Unibet advanced as much as 15.50 kronor, or 9.2%, to
183.5 kronor in Stockholm, the biggest jump since December 2005. The company
sponsors a professional cycling team whose members were barred last month by
the organizers of a French race from wearing uniforms that displayed
Unibet's Web site address. Ladbrokes shares gained as much as 3.1% to 408.75
pence in London trading. Sportingbet Plc, the online bookmaker that owns
Paradise Poker, advanced as much as 4.25 pence, or 8.7%, to 53.25 pence in
London. Gaming VC Holdings SA, a Web casino company that gets most of its
sales from Germany and Austria, rose as much as 8 pence, or 7.8%, to 111
pence. Still, lawyers including Quirino Mancini at Sinisi Ceschini Mancini
and Partners in Rome said today's decision may be limited to the
circumstances in this case. The court focused on Stanley's business, which
"isn't pure online betting," he said. "Those who will now claim this is a
big ruling for the whole online betting industry may be wrong," he said.
Other bookmakers, including Bwin have a different model and may not directly
benefit until another round of court proceedings. The decision won't have
any effect on Germany's state monopoly, said Friedhelm Repnik, spokesman for
the association of the Lotto corporations, Germany's lottery. "The situation
in Italy is a completely different," he said. "They have a partially open
market, here in Germany we have a clear state monopoly, whose central goal
it is to prevent gambling addiction." The court has previously backed gaming
monopolies if they're designed to prevent gambling addiction, he said. Italy
had already opened up its gaming market by introducing new rules in July
2006, said Mancini. Three months later it offered 16,000 licenses, which
"caused a major change in the whole gaming distribution network in Italy,"
he said. British operators Ladbrokes and William Hill Plc are just two
non-Italian companies that got a license to set up betting shops in Italy,
he said. The case numbers are C-338/04, C-359/04, C-360/04 Procuratore della
Repubblica v Massimiliano Placanica, Christian Palazzese and Angelo
Sorrichio Placanica.