6 Regulation
6.3 From unregulated to regulated: gambling policy
6.3.3 The stakeholders in the diverse gambling market
There is one more important difference between the tobacco and the gambling market. The tobacco market is dominated by one product: cigarettes. All other tobacco varieties (pipe tobacco, cigars, snuff, chew, snus, etc.) play a minor role. For gambling the market is much more fragmented and varied. It is divided in different segments, many of which have a substantial market share. This diversity is nothing new. The history of gambling in the UK shows that this diversity has been a characteristic for centuries. Dice and card games, lotteries, sport betting, all these forms of gambling have been there for ages (Munting 1996).
The current gambling market covers a wide variety of land-based gambling opportunities, which can be used in venues or by mail:
• Casinos (e.g., roulette, black jack, poker, slot machines)
• Gambling and bingo halls, amusement arcades, bars (e.g., slot machines)
• Lottery shops / outlets (e.g., lottery tickets and scratch cards)
• Betting shops (e.g., betting on horse and dog racing)
Next to these traditional forms of gambling there is the rapidly growing market of online gambling, covering gambling and gaming using digital access via internet, mobile devices or interactive TV.
Overall, one can find here various gambling opportunities which are also available as land-based gambling. Sometimes live sports betting is also possible.
The EU shows also a geographic diversity. The gambling market differs substantially between Member States. There are substantial differences in gambling preferences in different countries. UK has a traditionally strong sport betting market, while in France and Slovenia casinos play a prominent role.
Conflicting economic interests of politics and policymakers
A shared feature of tobacco and gambling control policies are economic arguments or interests against more restrictive control polices. The substantial revenues from gambling make the attitude of governments ambiguous: while the Ministries of Health and Social Affairs and other health agencies generally support more strict control policies – be it that in the case of tobacco this drive is stronger due to the high health toll of tobacco use – the Ministries of Finance and Economic Affairs are usually
86 These figures are for 27 Member States, Croatia is not yet included.
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against strict control policies aimed at limiting or reducing (certain forms of) gambling.
Nevertheless, in the case of gambling the situation is somewhat more complex. States profit in different ways from gambling. One can differentiate between two common ways of generating state income. One is through tax revenues from gambling by private, generally licensed entrepreneurs, which means the state takes a share of the total income or profit from gambling. The other way, more profitable, is ‘taking it all’, through a state monopoly, either for the total gambling sector or for certain areas. In the latter cases where the state is directly involved in providing gambling opportunities the contradictions between economic interests of the gambling entrepreneur and the interests of a regulating agency to protect gamblers from health and social harms are painfully clear.
A prominent part of gambling regulations in these countries are measures which have been developed with the primary aim of increasing the public share of revenues from the gambling market. These national economic interests are the reason that the gambling regulation policy is frequently under the authority of the Ministries of Economic Affairs or Finances (Brotherhood, Atkinson & Sumnall 2012).
These Ministries generally support strict regulation measures like a state monopoly, helping to secure state income, regularly using the argument that a state controlled system would be more able to protect citizens (Appendix 2, 4 and 8). In many countries the gambling revenues are an important and regularly scheduled contribution to public budgets.
Still, in most EU Member States a trend towards privatisation and further regulation of gambling can be observed. State monopolies tend to be abandoned. This does not necessarily mean giving up revenues from gambling. It seems to be rather a strategy aiming to secure or consolidate a certain level of revenues. A reduction of revenues from traditional land-based gambling is compensated by on-line gambling revenues through providing a legally regulated basis (see France under 6.3.2).
Absence of powerful proponents of stricter gambling control
There is another essential difference between gambling and tobacco policies. While in the case of tobacco we saw a fierce conflict between proponents and opponents of stricter regulations, a comparable open and heavily polarised conflict cannot be observed in the field of gambling. There are no powerful alliances of proponents, as in the case of smoking, where we found in the Netherlands the ‘smoke-free coalition’ or ‘The Netherlands Smoke-free’, both coalitions of fairly diverse organisations, which had joined forces to realise more rigorous control policies. The existing groups of anti-gambling activists are much less influential. The factors summed up under 8.3.2 may play a role here, too: Gambling is less visible than smoking. It is not a public activity as smoking is. It is predominantly an ‘indoor’ activity, either in designated venues or at home. Finally, gambling does not have direct negative effects on the social surroundings like passive smoking.
In the UK the National Anti-Gambling League (NAGL), formed in 1890, is reported to have had some influence in its early years. But through the years NAGL and its successor, the Churches’ Council on Gambling (CCG) founded in 1933, lost much of their power and influence from the 1930s onwards.
They did not form a unified block and received limited support from public opinion. Gambling was not seen any more as social evil, it was rather widely accepted. Government and political establishment showed an increasing tolerance towards gambling, as the reports from the two Royal Commissions on Lotteries and Betting 1932-33 and 1949-51 show (Munting 1996).
Nowadays gambling is not much of an issue in most of the EU Member States, neither in the political arena nor in the public debate. It also plays a modest role in the media in all three countries we selected for our studies (Appendix 2, 4 and 8). It is ranked low on the priority list of political parties.
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Still, gambling has been taken on board of the European Commission’s agenda, be it in moderate steps. The European Commission commissioned an extensive “Study of Gambling Services in the Internal Market of the European Union” to better understand the impact of laws regulating gambling on the internal market, both in the field of gambling as such and in related areas like charity and tourism. This study shows how seriously the economic aspects of gambling and gambling regulation are taken (Swiss Institute of Comparative Law 2006).
The focus of the European Commission is mainly on online gambling. This has to be understood as a response to the strong growth of online gambling, which started to cause serious concerns (see 6.3.2). In 2011 the European Commission published a Green Paper87, launching a “public consultation on all relevant public policy challenges and possible internal market issues resulting from the rapid development of both licit and unauthorised on-line gambling offers directed at citizens located in the EU” (European Commission 2011). Exploring the views on regulatory measures is one issue in this paper, though very carefully formulated and integrated in a much broader range of issues, apparently to avoid any appearance of bias. In 2012 the European Commission published a communication to the European Parliament and other European Union bodies, exclusively focussing on the regulation of online gambling. The focus is on the following five key challenges:
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 (European Commission 2012b).
Compared with the EU efforts in the field of tobacco control policy, which resulted after a long struggle in an at least partly quite explicit Tobacco Products Directive (Directive 2014/40/EU …), gambling control policies play a rather marginal role in EU policy debates with accordingly weak outcomes.
Absence of a unified, powerful front of opponents of stricter gambling control
The resemblance between the gambling and tobacco control policy goes further than the development towards stricter control policies. There is also the substantial investment in lobbying and the strong influence of the gambling industry on policy making. The substantial efforts of the gambling lobby in Member States and in Brussels are a sign of the economic importance and the lucrativeness of gambling. Gambling is very profitable business (see 6.3.2). It is easy money in the sense that one can earn substantial sums of money with limited investments. While certain forms of land-based gambling might require serious starting capital, making a gambling website does not need a lot of investment.
The diversity of the gambling market is reflected in a fragmentation of the gambling lobby, promoting a liberalisation of the market. Still it is seen as a strong lobby, divided over different branches for different types of gambling. There is a wide variety of lobby groups for casinos, for slot machines, for bookmakers, for online gambling, etc. There is even a website where one can find an
87 “Green Papers are documents published by the European Commission to stimulate discussion on given topics at European level. They invite the relevant parties (bodies or individuals) to participate in a consultation process and debate on the basis of the proposals they put forward. Green Papers may give rise to legislative developments that are then outlined in White Papers.”
http://europa.eu/legislation_summaries/glossary/green_paper_en.htm [accessed 25 June 2014].
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impressive list of gambling lobbyists. It proudly states: “We track every lobbyist, firm and client that lobbies Gaming Gambling Casino issues.”88 These different lobby groups sometimes have conflicting interests, as can be taken from the decision of the casino lobby in the US to stop advocacy for online gambling. Background for this decision was a conflict in the casino lobby between proponents and opponents of a law that aimed at a federal ban on online gambling.89
Lobbying in the field of gambling has a long tradition. The same goes for the diversity of the lobby.
Munting refers in his book to different lobby groups in the UK that have emerged from the late 19th century onwards. He also refers to a conflict between the National Bookmakers Protection Society (NBPA), a merger of a number of regional organisations which came into being in 1932, and small bookmakers about the legalisation of off-course cash betting shops. The NBPA was against this legalisation, whereas the small bookmakers were in favour (Munting 1996).
These are just two examples of conflicting interests of different gambling lobby groups. There are many more. However, there are also commonalities. They all try to secure their economic interests.
One prominent shared theme of the gambling entrepreneurs and their lobby groups is privatisation or liberalisation of the gambling market. At the same time entrepreneurs and lobby groups do their utmost to maintain their privileges. The clash between the providers of land-based and of online gambling opportunities is one example. But there is also competition between different land-based gambling opportunities (see the last paragraph of this section).
A search on Google reveals how active, widespread and diverse gambling lobbying is. There are websites of a variety of interest and lobby groups for different types of gambling and gaming. It shows that lobbying is not a hidden activity but happens in broad daylight. The following, extensive quote on the European online gaming law from the website of the ‘C5 Group – Business Information in a Global Context’ is illustrative for this:
“2013 will be a year of incredible opportunity for online gaming operators and industry service providers. European member states such as Germany, Netherlands and Sweden are in the process of liberalizing their markets, while recent developments in America are also set to further enhance the global value of the gaming industry by opening the doors to online gaming in the world’s largest gaming market.
Lucrative commercial opportunities exist, however there remains a great level of disparity in online gaming regulations, between both individual member states and at a European level. Coupled with the commencement of infringement proceedings against operators who do not hold valid licenses, it is imperative that operators and their business partners fully comprehend the regulatory landscape in order to assess their risk profile and identify the opportunities for lawful commercial expansion.
C5’s 3rd European Online Gaming Law Forum is the only online gaming conference in Europe written directly for the in-house counsel and private practice lawyers dealing with the regulatory and commercial challenges facing the industry. Here industry leaders share their expertise and real-life experiences on:
Positioning yourself to take advantage of the commercial opportunities presented by newly liberalised markets in Europe and America
Deciphering the current regulatory standards for online gaming in Europe and the inherent risks when operating in a grey market
88 http://lobbydata.com/Directory/Issue/Gaming-Gambling-Casino [accessed 25 June 2014].
89 “Casino lobby drops pro-Internet gambling advocacy”. http://finance.yahoo.com/news/casino-lobby-drops-pro-internet-175205271.html [accessed 25 June 2014].
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Managing the complexities of multi-jurisdictional licenses
Staying one step ahead of the social gaming revolution
Utilising your online gaming expertise in strategic partnerships with US companies
Minimising your operating costs through the implementation of legally compliant taxation structures
Capitalising on additional revenue streams through the utilisation of mobile gaming
Developing commercial strategies to strengthen your online gaming presence.”90
However, besides these blunt business organisations also generally more serious and respected firms seem to find the gambling business too tempting to ignore it. PricewaterhouseCoopers (PwC) knows how to carefully formulate their economic interests:
“In the last few years, a large number of internet gaming operators have established themselves in Malta. The Lotteries and Gaming Authority has to date issued over 400 licences. The industry is in a trail-blazing stage. Several countries are changing their policies in order to find a balance between citizen freedom and protecting that same citizen from possible fraud, crime and addiction.
PwC recognises the importance of the industry to the economy of Malta and supports the concept that good governance and regulation is the solution to protecting players and particularly vulnerable groups. History has shown that protectionism generally serves the unscrupulous more than the righteous.”91
After this display of serious concern PwC offers its services, praising Malta among others as follows:
“Apart from a stable and comprehensive regulatory framework protecting both operators and players, there are various factors which have contributed to Malta's success in attracting remote gaming operations. Some of the principal advantages include:
Attractive gaming licensing fees, gaming taxes and beneficial effective corporate tax rates on gaming operations
Rapid, efficient and relatively low cost licensing application procedures
Availability of an English-speaking skilled work-force and highly competitive salaries
Malta has a sound reputation as an ICT hub with global operators present such as IBM, Oracle, Microsoft, and Cisco Systems.”87
Finally, here is one example that shows how active and alert the gambling lobby operates. Albert &
Geiger, a lobbying law firm based in Brussels and Berlin, representing “the Gauselmann Group, a German manufacturer of gambling machines and operator of gambling halls, active in several EU-Member States”, contacted by mail all the ALICE RAP experts working on gambling. In this mail they stated that they had heard about ALICE RAP’s work in the field of gambling addiction and would like to share their views with the ALICE RAP experts involved in this subject: “It is our position that slot machines shall be treated differently from other gaming activities, considering their lower pathology potential and their lower impact, in terms of number of players and of amount of money (as it has been demonstrated by recent studies, carried out in particular in Germany).” On request the ALICE RAP researchers were sent three documents that underpinned this view, one of which was with an ALICE RAP expert as principle author.
This mail is also a nice example of the competition between providers of different gambling
90http://www.c5-online.com/2013/539/european-online-gaming-law [accessed 25 June 2014].
91 http://www.mondaq.com/x/236594/Gaming/Remote+Gaming+In+Malta+Our+Service+Offering [accessed 2 April 2014].
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opportunities, emphasising that slot machines are much more innocent than other forms of gambling.