Volume 11, Issue 2, September 2014

When The Dealin’s Done? Recent Developments in Online Gambling Law and Policy


Daithí Mac Síthigh*

Cite as: D Mac Sithigh, “When the Dealin’s Done: Recent Developments in Online Gambling Law and Policy”, (2014) 11:2 SCRIPTed 171 http://script-ed.org/?p=1541


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DOI: 10.2966/scrip.110214.171



©  Daithí Mac
Síthigh 2014.
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1. Introduction


2014 is turning out to be another year of activity
in relation to the regulation of gambling, particularly online
gambling. This sector is still evolving, and it has not been a decade
since the last major reform of gambling law in Great
Britain.
1 The
Court of Justice of the European Union continues to hear cases on the
topic of gambling every year. Meanwhile, both the European Commission
and UK Government have been reviewing the operation of current laws and
putting forward proposals that can broadly be characterised as either
new forms of regulation or the re-regulation of recently deregulated
fields. This short note reviews the most recent initiatives at both
levels.

2. European Commission
recommendation


The context for the interest of the Commission in
gambling is that gambling is clearly a field of relevance to European
Union law, but is not (yet) the subject of its own Directive. Gambling
is not itself cited in the Treaties, but it (and online gambling) is
easily characterised as a service and, therefore, subject to the
fundamental freedoms of EU law (article 56
TFEU).
2 Gambling is frequently mentioned in other Directives, but
typically in a way that avoids the said Directive applying to the
special case of gambling.
3


The CJEU has, unsurprisingly, filled in the gaps
through its regular consideration of challenges to national laws on
gambling. This was aptly characterised as a ‘tug of war’ by
Hornle in 2011;
4 initially deferential to national legislatures, then applying
closer scrutiny of the proportionality of member state regulation (i.e.
favouring liberalisation), but ultimately upholding a number of
restrictive measures in individual member states. Van den Bogaert and
Cuyvers, in a detailed analysis of the case law, concluded that the
Court “does not protect cross-border gambling activities with its
ordinary internal market vigour” and that member states
“are virtually given carte blanche to regulate gambling at
national level”.
5


The Court has subsequently shown itself willing to
find against national measures,
6 but
continually emphasises the acceptability of national licensing systems
without mutual recognition between states,
7
tolerance for different approaches to
regulation
8 and
the existence of moral (et al) differences between
states.
9 Indeed, because these cases are often focused on the narrow
question of whether a law is compatible with the Treaties there are
still significant differences between the overall approach to gambling
between member states, as well as differences in the treatment of
matters like advertising and the regulation of the player
experience.


The European Commission responded to the emergence
of gambling as a controversial issue in EU law through the publication
of a Green Paper in 2011.
10 The
paper (on ‘online gambling in the internal market’)
reflected on the growing body of CJEU caselaw and set out the
Commission’s intentions in this sector. This was followed by a
Communication in October 2012,
11 where the Commission promised to issue Recommendations on both
the protection of consumers and minors and on responsible commercial
communications (i.e. advertising and sponsorship). The Commission has
also considered infringement proceedings against member
states.
12


The new Recommendation,13
published on 14 July 2014, deals with both
‘protection’ and ‘promotion’ issues to some
extent. Its approach is interesting; it is framed as support for member
states in pursuing public interest objectives (defined as the
protection of consumers and health), and commends a preventive
approach. Specifically, the Recommendation addresses the registration
and protection of players; recommends actions in relation to
sponsorship and advertising; calls for information to be made available
on websites; seeks greater awareness of the risk of non-EU service
providers; and also sets out aspects of how the sector should be
regulated.


The Recommendation is a cautious one. The Commission
points out in its supporting material that players could ‘start
looking for competing gambling opportunities’ if unsuitable
services are unavailable,
14 and
repeats this point (or a version of it) frequently. It also
acknoweldges that while a Directive would be the best response to the
problems in this market there was insufficient support for one being
adopted.
15 A
table prepared by the Commission also leads the reader to the
conclusion that possible topics for inclusion in the Recommendation
(e.g. EU-wide self-exclusion and registration) were excluded because of
unacceptability to member states.
16
The European Parliament is unusually reluctant to
assert an EU role in this case.
17

Four
particular features of the Recommendation can be highlighted: the
protection of minors, provisions on registration, standards for
advertising, and consumer protection in general.

2.1 Minors


The Commission recommends that minors should not be
able to use an online gambling service (play or hold a player
account).
18 ‘Minor’ is not defined other than as the minimum
age set at national level,
19 depriving this recommendation of most of its meaning. The more
detailed provisions, however, do set out some significant principles,
including: avoiding inducing minors ‘to view gambling as a
natural element of their leisure time
activities’;
20 alcohol-style avoidance of associating gambling with youth
culture or transitions to adulthood;
21
and a recommendation that member states should
‘encourage’ (and here the double conditionality appears
deliberate, in contrast with other recommendations that member states
should ‘ensure’) that minors are protected from commercial
communications regarding gambling (for instance, by such communications
not being broadcast where minors are ‘expected to be the main
audience’).
22 It
is indicative of the lower priority given to action on gambling that
stronger versions of these provisions, in respect of alcohol and
tobacco, are already included in the (binding) Directive on audiovisual
media services.
23

2.2 Registration


Detailed sections of the Recommendation deal with
the relationship between the user and service provider. The Commission
calls for services to be based on registration, with verification of
identity where possible.
24 Players should be able to set their own limits (on money and
time), and be able to exclude themselves from further
participation
25.
Service providers should both provide information and highlight sources
of help regarding problem gambling.
26


Self-exclusion is a key part of the regulation of
gambling, but its impact in the digital age is weakened by
self-exclusion being specific to an operator or to a given nation. This
is addressed in part through a recommendation that national registries
be used,
27 although as noted above, an EU-wide approach was not proposed
due to member state objections.


Experimental research carried out for the Commission
includes the striking finding that a detailed registration form could
cause less experienced users to abandon an attempt to register with a
particular service.
28 The
report on the research suggests, more than once (and clearly with an
influence on the Commission’s final decisions) that this could
push users to websites regulated in a way that does not require this
level of detail. However, this point was not tested in the research in
any way and no evidence was provided in support of it.

2.3 Commercial
communication


A series of points on the content of commercial
communications (advertising, etc) are also set out in the
Reccomendation. These include carrying messages on the health risks of
problem gambling,
29 not
portraying gambling as a solution to financial or social
problems,
30 and
avoiding misleading the audience on chance and
skill.
31 On
sponsorship, a potentially wide-reaching recommendation is that event
sponsorship ‘designated for or mainly aimed at minors’ be
prohibited and (more significantly?) that where sponsorship is
permitted it not be used in merchandising designed for
minors.

2.4 Consumer protection in
general


It is apparent from the experimental research
carried out in preparation for this Recommendation that greater use of
‘warnings’ was under consideration. The research found,
however, that this had a limited statistically significant effect on
participation in online gambling, either in terms of the amount spent
or the time taken to act. This was particularly apparent in the case of
a wide range of forms of information presented before gambling (all
found to be ineffective),
32 although the use of alerts during gambling (e.g. time and money
spent) did appear to be more effective.
33

3. Offshore gambling and Great
Britain

While
the European Commission attempts to influence national regulation of
gambling through its Recommendation, there are other pressures on
member states. In Great Britain, the current regulatory system is
dominated by the Gambling Act 2005, and its enforcement by the Gambling
Commission.


The core concern of the 2005 Act was deregulation.
The Act swept away a complex, often inconsistent, set of
20
th century statutes on gaming, betting and lotteries (some of
which had been spectacularly ineffective due to workarounds like
members’ clubs), and also addressed the application of British
law at a time when services were starting to become more readily
available via the Internet. Applying for licences became much easier,
with historic restrictions on the operation and promotion of gaming and
betting services being broadly reduced or removed entirely. Operators
could apply for ‘remote gambling’
licences,
34 (with ‘remote communication’ including the Internet
as well as telephone, radio and TV) which were required if at least one
piece of ‘equipment’ for the service was located in Great
Britain. Prior to 2005, the provision of certain forms of online
gambling in Britain (gaming in particular) appeared to be unlawful,
although British users could readily use sites situated outside the
country.

Under the
2005 Act some operators not regulated by the Gambling Commission can
legally advertise their services to audiences in the UK (Great Britain
and Northern Ireland alike). An operator regulated in any of the
applicable locations
specifically the
EU/European Economic Area; Gibraltar; a ‘whitelisted’ state
(such as Antigua & Barbuda) approved by the UK Government as having
adequate regulation of gambling; or, of course, an operator regulated
by the Gambling Commission in Britain
is permitted to advertise their
services.
35 In
practice, few remote operators have been licensed by the Gambling
Commission (taking the view that they did not need to do so because no
equipment was located in Britain), no major overseas operators
relocated to Britain, and household names operating online or offline
in Britain rapidly opened online services in (or moved existing
services to) other jurisdictions, particularly
Gibraltar.
36


The advertising of gambling in the UK is clearly a
growing phenomenon; in respect of television alone, it has grown from
90,000 spot advertisements in 2005 (representing 0.5% of the total TV
advertising) to 1.4 million in 2011 (4.1% of the
total).
37 Advertising of ‘online casino and poker’ services
is close to a third of this total. A power to regulate gambling
advertising through secondary legislation does exist in the 2005 Act
(i.e. above and beyond the normal co-regulatory and self-regulatory
systems for the control of advertising, and in respect of any
medium),
38 but
it has never been exercised.


The Gambling Commission estimated in 2013 that 85%
of the remote market in the UK was not licensed by the
Commission.
39 The
Gambling (Licensing and Advertising) Act 2014 attempts to change this,
requiring that service providers must both register with and comply
with the conditions of the Gambling Commission if they wish to do
business with British consumers. This is achieved by extending the
requirement for registration to facilities that an operator knows, or
should know, are ‘used’ (including where the operator
knows, or should know, that they are ‘likely to be used’)
in Great Britain, even if no equipment is situated in Great
Britain.
40 This was first identified as a preferred option in a UK
consultation paper in 2010 (under the previous
Government)
41 It
is clearly the Government’s intention to bring within the scope
of the Act those online services where a server is located outside
Britain but is accessed by a player within Britain.


Furthermore, the system for allowing the advertising
of services established in the EU, EEA, or the
‘whitelisted’ jurisdictions (determined by the UK as having
sufficient regulatory protection) has been
abolished.
42 Only remote services regulated by the Gambling Commission will
be able to advertise in Britain (or indeed Northern Ireland). Again,
this option had been floated in 2010.


These provisions are due to come into force on 1
October 2014,
43 with transitional arrangements set out in detail in secondary
legislation.
44 Around 150 operators are expected to register with the Gambling
Commission. However, the legislation is being challenged by
Gibraltar-based operators who argue that the legislation is
incompatible with EU law.
45 These operators, of course, are objecting not just to the
regulatory changes but also to the proposed tax
changes.
46


The 2014 Act was faciliated in part by decisions of
the CJEU, which has accepted the compatibility of potentially
comparable restrictions in other member states. For instance, in

Sjöberg47
a Swedish prohibition on the advertising of services
not licensed in Sweden was upheld in 2010. More recently, the Court
upheld (in a non-Internet case:
Hit Hoteli & Hit Larix48) a
provision of Austrian law which only allowed the advertising of casinos
located in other member states if the other state’s regulatory
system was equivalent to the Austrian one. In these cases the measures
were found to restrict the freedom to provide services (article 56
TFEU) but the Court accepted that the restriction was justifiable from
the point of view of EU law.

3. Conclusion

The lack
of support for a Directive on gambling and the hands-off approach taken
by the CJEU are both at the heart of the two recent initiatives
discussed above. The Commission’s Recommendation deals with
important matters, but they are only a subset of the matters that a
national regulator of online gambling deals with. The principles do,
however, highlight some of the risks associated with the popularity of
online gambling and, as such, they provide us with an insight into the
Commission’s thinking and the research it is relying upon.

The
‘space’ created by the cautious approach of both Commission
and Court also has interesting consequences for member states. The
deregulatory 2005 Act in Great Britain clearly had one eye on the
European position; the explicit protection of the right of licensed
operators from other member states to advertise, and the desire to see
international operators opt in to the modernised British regulatory
system demonstrate this. As such, the realisation that the Court of
Justice would tolerate a wide range of national (restrictive) measures,
and that in terms of legislation neither general Directives nor
specific binding rules would affect the gambling sector, meant that the
2010 change of position and the 2014 Act became much easier to defend.
Of course, the Gibraltar challenge to the 2014 Act may provide the
English courts with an opportunity to consider the CJEU jurisprudence,
perhaps contemplating a preliminary reference.


Ironically, if the UK succeeds in effectively re-enclosing its market
this could support the arguments (especially at Commission level) that
something stronger than a Recommendation is necessary so as to protect
the internal market. Only a seasoned gambler would bet on whether the
2014 changes mark the end of an era or not.

*
Reader, Newcastle Law School, Newcastle University,
UK. Email:
daithi.macsithigh@ncl.ac.uk. Title with apologies to Kenny Rogers, who turned 68 on the
day this note was submitted.

1
Gambling Act 2005. By and large, recent gambling laws in the UK
(in particular, the 2005 Act) extend to England, Wales and Scotland
only. Gambling in Northern Ireland is governed by an adaptation of
older UK laws. See Betting, Gaming, Lotteries & Amusements
(Northern Ireland) Order 1985
; Northern Ireland Executive,
“McCausland announces plans to update gambling laws” (10
January 2013) available at
http://www.northernireland.gov.uk/index/media-centre/news-departments/news-dsd/news-releases-dsd-january-2013/news-dsd-100113-mccausland-announces-plans.htm

(accessed 21 Aug 14).

2
Gambelli, [2006] 1 CMLR 35 [52]-[55] (online), following
Schindler [1995] 1 CMLR 4 (import of lottery tickets).

3
Directive 2006/123/EC of the European Parliament and of the Council
of 12 December 2006 on services in the internal market,
[2006] OJ L
376/36, recital 25 and article 2(2)(h); 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
[2010] OJ L 95/1, recital 22;
Directive 2011/83/EU of the European Parliament and of the Council
of 25 October 2011 on consumer rights
, [2011] OJ L 304/64, recital
31 and article 3(3)(c).

4 J
Hörnle, “Online Gambling in the European Union: a Tug of War
without a Winner?” (2011) 30 Yearbook of European Law
255-297.

5
Stefaan Van den Bogaert and Armin Cuyvers, “‘Money for
nothing’: The case law of the EU Court of Justice on the
regulation of gambling” (2011) 48 Common Market Law Review
1175–1213, 1209.

6 See
for example Pflager, Case C-390/12, [2014] OJ C343:
Austrian regulation of gaming machines not justifiable, on the grounds
that it does not actually pursue the legitimate objective of addressing
gambling-related crime or do so consistently.

7
Stoss, [2011] 1 CMLR 20 [112-116]

8
Liga Portuguesa de Futebol, [2010] 1 CMLR 1 [58].

9
Hit Hoteli / Hit Larix, [2012] 3 CMLR 39 [25]; Pflager,
see note Error: Reference source not found above, at [44-46]; Liga
Portuguesa de Futebol
, see note Error: Reference source not found
above, at [57].

10
European Commission, “On-line gambling in the Internal
Market” COM(2011) 128 (24 March 2011)

11
European Commission, “Towards a comprehensive European framework
for online gambling” COM(2012) 596 (23 October 2012).

12
European Commission, “Commission requests Member States to comply
with EU law when regulating gambling services” IP/13/1101 (20
November 2013).

13
Recommendation 2014/478/EU on principles for the protection of
consumers and players of online gambling services and for the
prevention of minors from gambling online
, [2014] OJ L 214/38.

14
European Commission, “Impact assessment accompanying
Recommendation 2014/478/EU” SWD(2014) 233, executive summary, p
1.

15
Ibid 4.

16
Ibid 3.

17
See for example resolution 2012/2322(INI) on online gambling in the
internal market (10 September 2013), following the report of the
Committee on the Internal Market and Consumer Protection (11 June
2013).

18
Recommendation 2014/478/EU, art 8.

19
Recommendation 2014/478/EU, art 3(e).

20
Recommendation 2014/478/EU, art 11.

21
Recommendation 2014/478/EU, art 14(d).

22
Recommendation 2014/478/EU, art 13.

23
Directive 2010/13/EU, articles 9 and 22.

24
Recommendation 2014/478/EU, arts 15-20.

25
Recommendation 2014/478/EU, arts 24 and 29.

26
Recommendation 2014/478/EU, arts 25-26.

27
This appears to mean systems like that in Denmark: Register over
frivilligt udelukkede spillere, available at https://rofusweb.spillemyndigheden.dk
(accessed 21 Aug 14).

28
European Commission, “Impact assessment accompanying
Recommendation 2014/478/EU” SWD(2014) 233, part 2, pp 11-12.

29
Recommendation 2014/478/EU, art 40.

30
Recommendation 2014/478/EU, art 41(e) and (f).

31
Recommendation 2014/478/EU, art 41(a) and (b).

32
European Commission, “Impact assessment accompanying
Recommendation 2014/478/EU” SWD(2014) 233, part 2, p 8.

33
Ibid 12.

34
Gambling Act 2005, s 4 (definition), s 33 (offence of providing
facilities for unlicensed gambling), s 67 (remote operating
licence)

35
Gambling Act 2005, s 331.

36
Department for Culture, Media & Sport (DCMS), “A Consultation
on the Regulatory Future of Remote Gambling in Great Britain”
(March 2010), [3.5]-[3.6] available at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/72860/remotegambling_consultation.pdf

(accessed 21 Aug 14). See also the statement announcing the
Government’s proposal to reconsider the 2005 Act: HC Deb vol 503
col 11WS (7 January 2010).

37
Ofcom, “Trends in advertising activity: gambling” (November
2013) 4, available at
http://stakeholders.ofcom.org.uk/binaries/research/tv-research/Trends_in_Ad_Activity_Gambling.pdf

(accessed 21 Aug 14).

38
Gambling Act 2005, s 328.

39
Philip Graf, “Keynote speech: IAGA International Gaming Summit
2013” (18 June 2013) available at
http://www.gamblingcommission.gov.uk/pdf/IAGA%20Gaming%20Summit%20-%20London%20June%202013.pdf

(accessed 23 Sep 2014).

40
Gambling (Licensing and Advertising) Act 2014, s 1, amending
Gambling Act 2005, ss 33 and 36.

41
DCMS, see note Error: Reference source not found above, at [4.27] (as
“the need to obtain a licence to transact with British consumers
and advertise in the UK”). The then proposal was for regulation
of services “transacting with” British consumers and/or
locating equipment in Great Britain. As noted above, the 2014 Act
follows the “or” rather than “and”, but refers
to “use” of facilities in Britain rather than transactions.
The 2010 proposal also included a plan for an improved whitelisting
system (rather than its complete abolition).

42
Gambling (Licensing and Advertising) Act 2014, ss 3-5, amending
various provisions of Gambling Act 2005, pt 6.

43
Gambling (Licensing and Advertising) Act 2014 (Commencement No.1)
Order 2014
, SI 2014/2444.

44
Gambling (Licensing and Advertising) Act 2014 (Transitional
Provisions) Order 2014
, SI 2014/1641.

45
Nathalie Thomas, “New gambling laws to be challenged through the
courts” (Daily Telegraph 20 June 2014) (letter before
action / intention to seek judicial review); “Gibraltar online
gambling firms challenge UK tax” (Daily Telegraph 20
August 2014) (judicial review sought); Olswang, “Judicial review
against the UK Government and the Gambling Commission” (20 August
2014) available at
http://www.olswang.com/articles/2014/08/judicial-review-against-the-uk-government-and-the-gambling-commission/

(accessed 21 Aug 14) (specifying article 56 TFEU and discrimination as
the grounds of complaint under EU law, and also
“irrationality” (presumably aspects of the secondary
legislation and/or Gambling Commission actions). The letter before
action itself is published at
http://gbga.gi/wp-content/uploads/2014/06/Letter-to-the-UK-Government-dated-18-June-2014.pdf

(accessed 21 Aug 14).

46
The UK has tried to emphasise the separate decisions, while still
pointing to the benefits of both changes coming into effect in
proximity to one another. This approach was clearly established as far
back as the 2010 consultation (where the DCMS document disavowed any
arguments on taxation, stating that this was the jurisdiction of the
Treasury), and in the separate announcement of a ‘point of
consumption’ tax on 21 March 2012 by the Chancellor: HC Deb, vol
542, col 803 (21 March 2012). In the light of the jurisprudence of the
CJEU, holding that the goal of increasing tax take cannot justify
restricting the freedom to provide services (e.g. Dickinger,
[2011] ECR I-8185), this is understandable.

47
[2011] 1 CMLR 11. In Sweden, only non-profit organisations are
licenced. The Court did however hold that applying harsher penalties to
advertising foreign services than to advertising unlicensed domestic
services would be unlawful.

48
Hit Hoteli, see note Error: Reference source not found
above.


When the Dealin’s Done: Recent Developments in Online Gambling Law and Policy

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