EU MONOPOLIES HAVE TO GO

28 September 2007

Benefits of a more open-border Union are substantial for gambling industry


State gambling monopolies among European Union member nations came under the media microscope this week in an interesting article published by the Bloombergs business news organisation.

The article underlines the determination of the European Commission - headed by former Irish finance minister Charlie McCreevy (58) - to open up markets in the 27 nation EU, if necessary resorting to European Court of Justice actions to enforce compliance with the Union's requirement for the free movement of trade and services. Thus far, the Commission has taken action against 10 of the 27 member nations in an initiative to clear away traditional state monopolies.

Most recently, McCreevy's staff warned France and Sweden to welcome foreign sports betting companies or face lawsuits as soon as this year, and news reports indicate that France has responded by meeting EU officials to negotiate on the issue.

Bloombergs quotes McCreevy as commenting: "We're supposed to have an open market."

The rewards for ending state-run monopolies on sports betting and lotteries could be considerable, increasing the European market 23 percent to about $117 billion, the UK-based Global Betting & Gaming Consultants, calculate in a report.

London-based William Hill plc could boost earnings before interest and taxes by GBP 35.7 million ($72 million), Numis Securities wrote earlier this month, by breaking into as many as five additional countries, including Germany and Greece, where the Commission is trying to strike down restrictions.

The campaign is a "potential benefit'' to the shares, Gavin Kelleher of Merrion Stockbrokers in Dublin told Bloombergs. "We are definitely seeing positive first steps.''

The Commission has also warned Denmark, Finland, Hungary, the Netherlands, Austria and Italy to address the issue or face legal proceedings. McCreevy's staff sue at the European Court of Justice, the EU's highest court, which can overturn national laws and fine countries.

While the EU has no directive specific to gambling, McCreevy and the Commission argue that the bloc's treaty generally prohibits discrimination against businesses in other EU nations.

The Luxembourg-based court has supported efforts to open gaming markets. Countries can't bar foreign companies to protect tax revenue, the EU's highest court ruled in a 2003 decision against Italy. Italy lost again on September 13, for awarding bookmaking licenses without a competitive auction (see previous InfoPowa report).

Bloombergs opines that freeing up more national markets could aid shares of major EU public companies such as Ladbrokes plc, which is expanding through the Internet after more than a century running betting shops; and Paddy Power plc, the largest bookmaker in Ireland.

Ladbrokes has applied for licenses in Sweden and Denmark, as well as Norway, which follows the bloc's internal market rules. The company is suing in national courts to strike down barriers posing "a huge restraint on our ability to compete'' with state monopolies, John O'Reilly, head of Ladbrokes's remote gaming unit told Bloombergs. "The commissioner's officials have been very supportive,'' he added.

On the other side of the issue, monopolistic states argue the need to regulate gambling to control addiction and money laundering.

"We are open to discussion but so far we haven't seen other means, and convincing means, of reaching those public interest objectives, and at the same time opening the market,'' said Stanislas Pottier, special adviser to French Finance Minister Christine Lagarde. "It is a sector we think cannot be regulated as any other sector.''

The Swedish government opened a review of its gaming laws last June, a week before the commission's latest warning.

"We are looking into this matter in the proper manner,'' said Joergen Lunenark, a press assistant at the Swedish finance ministry. "We still think that we are following the rules.''

Sweden's four casinos and sports-betting monopoly took in 4.8 billion kroner ($730 million) in 2006, more than a quarter of the 18 billion-kroner national budget surplus.

"People in the business, they know what the law is and they want to have it enforced,'' McCreevy said. "Policy makers see it from different angles, and maybe they're reluctant to change."

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