22 February 2006

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Business Today

A disservice to i-gaming

The European Parliament has to discuss the real issues: the gambling issue

Last week, the EPP-ED and PSE groups reached a compromise to ensure the European Parliament reaches an agreement on the services directive with the broadest possible support.

The compromise was reached not a moment too soon as unions threatened to bring 25,000 demonstrators onto the streets of Strasbourg ahead of a key vote on the issue. The legislation dubbed the “Bolkenstein directive” after its Dutch ex-commissioner author came under fire for potentially threatening services at the heart of public interest, like health and social services, through cross-border competition. The Directive as amended is expected to increase competition rules in businesses, expanding job opportunities and as a result tackle inflation.

The compromise was reached after certain sectors were excluded. These include financial services, online gaming services, communication networks and transport services.

Let us examine why online gaming services were excluded. It is not surprising that the French have strongly opposed any liberalisation of gaming services which are a challenge to the existence of its state monopoly. They have a history of trying to protect their companies from competition. Last December the French government announced that it would protect industries in 11 areas from foreign takeovers. Where sports betting is concerned, the French are at the forefront to cocoon and protect themselves from foreign competition.

Unfortunately, the directive which provides safeguards for competition to be on a fair basis, does not provide a good starting point for Malta to build its case against the French state’s attempt at stifling Malta-based operators.

Many would argue that if the consumers are not given the possibility to freely access other Community products and services, they will look for better offers and new products outside the Community. This may well result in the proliferation of unlicensed and badly regulated offshore alternatives. It is important that the services directive considers the opening of the barriers to entry provided a common standard of self regulation is assured by the member states licensing the provider. Regrettably this has not happened and one cannot but wonder why the lobbyists for maintaining the status quo have garnered so much support.

But as each member state has its own interests to safeguard we notice that realistically it took more than three years for the Bolkestein directive to surface albeit in a diluted version. So, has the die been cast against free cross-border provision of gaming services? The finest answer can be given by Didier Dewyn, Secretary General of the European Betting Association (EBA). He comments that: “if the European Parliament would address the gambling issue seriously, it would raise real questions such as: which countries have introduced by law age limits to gambling? Another pertinent question is: how much do State monopolies spend each year to advertise and promote their games, compared to the amounts spent on gambling prevention?”

These are the real issues that the Parliament refuses to tackle by excluding, without real justification, gambling services from this Directive. According to an article written by the European Betting Association, the European Parliament seems ready to caution the protectionist gambling models existing in several Member States and to maintain the legal status quo of a system, which in most Member States is not only in breach of internal market rules but also completely obsolete considering the recent technological developments on the market. In truth nothing can stop the internet revolution and as most gaming services are provided over cyberspace, it is highly debatable whether unbridled protectionism is justified. EBA wants a liberalised market where consumers can be protected, yet free to choose their cyberspace sites provided they are backed by properly regulated jurisdictions. Only thus can a competitive market guarantee fair play. The services directive as recently approved does not reduce the possibility of State monopolies to block entry of gaming services from other EU licensed operators.

As can be expected the powerful lobby of monopolistic regimes within certain EU member states have won their battle to block entry to competition. As quoted in the media, in the opinion of EBA the European Parliament seems reluctant to open cross-border trade that will pave the path for a well regulated market of licensed gaming providers. 

Naturally, while protecting itself against unfair tax competition, in theory the EP is expected to ensure its member states compete freely while providing a fair and regulated gambling market. One hopes that another attempt is made by the member states to review the position before they meet next March for a vote on the final version of the services directive.

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