CZECH POSSIBLITIES FOR ONLINE GAMBLING ARE ATTRACTIVE

18 May 2007

European betting companies may be licking their lips, but there are legal uncertainties

The Czech Business Weekly carried an intriguing interview with corporate lawyer Jindøich Rajchl, who does work for the giant Austrian-listed betting group Bwin Interactive among others.

The article claims that foreign online gambling companies are betting they’re onto a Czech business jackpot because government officials will never be able to stop their Internet activities run from abroad. Austria-based Bwin Interactive Entertainment AG is one enterprise benefiting from laws that have only served to block competition from domestic entities, the report reveals.

Rajchl is a big fan of the European Court of Justice (ECJ) when it comes to the Internet business-without-borders "exploited" by gambling firms such as Bwin. Recent ECJ rulings for free movement of trade and services - an online betting firm legal in its home European Union country may do business in all EU markets - are music to his ears.

Czech Business Weekly reports that Czechs gambled some K 3.5 billion (Euro 124.04 million) through Bwin alone last year, according to server iHNed.cz, with domestic betting firms such as Fortuna unable to get a piece of the action. The frustration generated by the situation led to the Office for Protection of Economic Competition (ÚOHS) in March this year threatening to challenge the state over the discrimination while Fortuna said it might try to offer online services from an “asylum” office created abroad (see previous InfoPowa report).

CBW says Bwin has run its Czech Web site, www.bwin.cz, since 2002, drawing its main income from sports betting, while also offering poker, casino, no-download games, table tennis and golf options. While it and Gibraltar-based daughter company bwin International respect online gambling bans issued by non-EU countries – two months ago the group terminated its activities in Turkey – it is confident Czech Internet gambling law will remain subordinate to the European courts’ line on the issue.

In the piece, Rajchl emphasised the extra transparency the company offers because its stock is publicly traded on the Vienna Stock Exchange and said company growth will be spurred by the increasing Internet and digital television penetration.

Rajchl revealed that Bwin has more than 3 million clients worldwide and is number one on the European online betting market. Asked about the company's financial losses of Euro 539.6 million last year, the lawyer said that this stemmed from Bwin's acquisition of Ongame, the third biggest online poker operator with large poker venues like Pokerroom.com in its stable. "This investment has a long-term recoverability," he stressed.

He also referred to [apparently still ongoing] negotiations between Bwin and the London-based Sportingbet group, which could result in the largest online betting group yet if brought to fruition.

Rajchl explained to CBW that Bwin preferred to operate legally in countries where it is possible to license, but added: "In the Czech Republic, the problem is with the Ministry of Finance. They tell us our business is illegal as we don’t have a licence, but at the same time they say they’ll never permit online betting."

Asked which countries take the toughest line toward online betting, Rajchl named France, saying "France, for instance, is very aggressive. In Germany the situation is different from state to state. If you look at [German football club] SV Werder Bremen, which we have a sponsorship contract with, then you see that if the team plays in Stuttgart the team can have the bwin logo on its strip, whereas when it plays in Munich it can’t.

"The European Commission (EC) has already initiated discussions with the most problematic countries such as France, Germany and Italy, asking these countries to explain why they regulate the online betting market. But, for instance, in non-EU state Turkey we had to end our online betting activities as they are prohibited."

Taxed with the Czech Ministry of Finance argument that there is inadequate control of underage online betting, Racjchl argued that this was a smokescreen hiding the government's real reason for objecting to online gambling - competing with state monopolies that harvest tax revenues.

"I have to say we have better guarantees in [the age control area] than some [land] betting offices. If you want to obtain your prize you have to send a copy of your passport or ID card, he said. "Another thing is we don’t accept cash and younger people don’t have credit cards. In Czech betting offices nobody asks after a person’s age or identity. In addition, nobody regulates the slot machines, which any child can play.

"We can only ask why as last year the income of the state budget from these slot machines was K 50 billion, which is five times more than the income from the whole betting business."

Rajchl dealt with measures against problem gambling used by Bwin, which included maximum limits and monitoring heightened gambling patterns. "We can be very interactive. If the client bets regularly, we send an e-mail with questions the client has to answer. If we conclude from the responses that there’s some sort of addiction, we’re able to work with the client further," he revealed, adding that this was not a frequent occurrence.

The lawyer made a generous offer to any Czech gambler charged by the authorities for illegal gambling, saying: "If there is any legal proceeding against any citizen of the Czech Republic I’m ready to represent the person personally for free and to guarantee a victory in the court proceeding – even at the European Court of Justice if necessary.

"My certainty derives from the fact that so far all such initiatives [of the Ministry of Finance] have been postponed by police and state attorneys. Today, only one such civil proceeding is taking place. (CBW Editor’s note: according to the Ministry of Finance, a person can be fined up to K 50,000 for taking part in online gambling.)

Presumably with the benefit of Bwin experience and the results of surveys by the company, Rajchl said that traditionally South European nations bet the most. "Greeks follow their heart more, whereas, for instance, Czechs follow rather their minds," he generalised. "I always give the example of if [Greek football club] Olympiacos C.F.P plays Barcelona, half of Greece will bet on Olympiacos, whereas if [Czech football club] AC Sparta Praha plays Barcelona, I won’t know of any Czech person betting on AC Sparta Praha!"

Bwin's potential in the Czech market is good, according to Rajchl, who referred to some 400 000 Czech clients. "It’s typically 4 percent of the population [in a European country]. You can immediately subtract all women - 96 percent of men bet and 4 percent of men bet on the credit cards of their women," he revealed.

Online Casino News courtesy of InfoPowa