Bwin Interactive Entertainment AG, an online bookmaker, lost a challenge to Portugal’s sports- betting monopoly after a European Union court said gambling restrictions are legal as long as they target fraud and crime.
Bwin had challenged Portugal’s national gambling monopoly and its extension to online wagering. The ruling today by the European Court of Justice could affect other pending cases including a suit by Ladbrokes Plc against the Netherlands.
The EU’s highest court said restrictions such as in Portugal may be justified to meet certain policy goals, including the fight against crime, as long as they aren’t discriminatory and don’t go beyond what is necessary to achieve their aim.
“The verdict is a major setback,” Alfred Reisenberger, an analyst at CA Cheuvreuxin Vienna, who rates Bwin at “outperform,” said by telephone. “Bwin has lost a battle, not the entire war. They will continue to fight and in the long term they will be successful.”
The Court of Justice said that restrictions may be necessary for Internet gaming because of missing EU rules.
“Because of the lack of direct contact between consumer and operator, games of chance accessible via the Internet involve different and more substantial risks of fraud by operators against consumers,” the court in Luxembourg ruled.
‘Market Reality’
The ruling is a “clear message to politicians to finally provide a regulatory framework for online gaming,” Thomas Talos, a lawyer for Vienna-based Bwin, said after the ruling. “Market reality shows that an Internet monopoly in the 21st century does not work.”
Bwin fell for the first time in three days, declining 27 cents, or 0.9 percent, to 28.50 euros in Vienna. They had fallen as low as 26.05, or 9.5 percent, after the ruling.
The rapid pace of technological development has created a “legal vacuum” for Internet gaming, Norbert Teufelberger, co- chief executive officer of Bwin, said in a statement, referring to more than 12 cases pending at the EU’s top court and lawsuits that the European Commission is planning against countries.
The commission, which has threatened to sue France, Germany, Austria and at least seven other countries over gambling restrictions, is “working towards a solution” in some cases, including those against France and Austria, said Oliver Drewes, a spokesman for the Brussels-based commission.
Too Narrow
The Remote Gambling Association, whose members include Ladbrokes, Betfair Ltd. and 888 Holdings Plc, said the ruling’s scope was too narrow to apply to other cases.
“Nothing in it should stop the European Commission from pursuing ongoing infringement proceedings,” said Clive Hawkswood, the association’s chief executive, in a statement. EU countries shouldn’t “construe this ruling as permission to enact protectionist regulations.”
Peter Szopo, an analyst at Sal. Oppenheim Jr. & Cie, told clients in a note today that the “the ECJ decision is worse than we expected.”
“The investment case for online operators such as Bwin has now to focus on the market potential in states which are expected to introduce a more liberal regime,” Szopo said.
The decision is a “great victory,” said Friedrich Stickler, president of European Lotteries, in a statement. It “explicitly states that governments can prohibit commercial online gambling operators such as Bwin from offering games of chance via the Internet.”
Portuguese Football League
Portugal’s gambling authority had fined a unit of Bwin 74,500 euros ($107,000) for concluding an August 2005 sponsorship deal with a Portuguese football league. The agency in Lisbon said the deal breached the nation’s exclusive gambling rights.
Santa Casa, the agency in Portugal, in an e-mailed statement said the decision defends the public interest and the legality of the Portuguese legislation. A Portuguese court, which had sought the EU tribunal’s guidance in the dispute, will give a final ruling in line with today’s judgment.
The case is C-42/07 Liga Portuguesa de Futebol Profissional (CA/LPFP) and Baw International Ltd. v Departamento de Jogos da Santa Casa da Misericordia de Lisboa.
(Source: Bloomberg)
