Malta’s booming gambling industry has suffered a setback after the European Court of Justice backed a French monopoly company in a case instituted by a Maltese firm.
According to the ECJ, a monopoly on off-course betting on horse racing may be justified if it pursues the objective of combating the dangers linked to games of chance (addiction to gambling, criminal activities) “in a consistent and systematic manner”.
The ECJ said that it is for national courts to assess the extent of the restriction to freedom to provide services constituted by this monopoly, taking into account all the marketing channels for that betting including traditional channels and online betting.
The case goes back to 2005 when Zeturf – a Maltese registered company, applied to the French authorities seeking the repeal of legislation which confers on the Groupement d’Intérêt Économique Pari Mutuel Urbain (PMU) a monopoly for the management of off-course betting on horse racing.
Zeturf argued that the existence of an over-riding reason of general interest justifying the monopoly was not demonstrated. It said the restriction on the freedom to provide services is not proportionate with the objectives pursued, particularly as the PMU is conducting an expansionist trade policy based on encouraging gambling and squandering of money, which is not consistent with the aim of the relevant national regulations.
The French authorities argued that, apart from the objectives of preservation of public and social order – tackling gambling addiction and combating fraud and money laundering in betting on horse racing – the policy of the PMU aims to make “attractive provision” so that gamblers use authorised and regulated activities.
The French Conseil d’état (court) asked the ECJ to state whether the restriction on the freedom to provide services constituted by this monopoly is justified. It also asked whether this justification must be assessed solely from the point of view of the restrictions placed on offering online horserace betting or in relation to the entire horserace betting sector, in whatever form such betting is offered and is accessible to gamblers.
In its judgement, the ECJ pointed out that EU member states are, in principle, free to set the objectives of their policy on betting and gaming and, where appropriate, to define in detail the level of protection sought. It said that a member state seeking to ensure a particularly high level of consumer protection may take the view that it is only by granting exclusive rights to a single body that it can tackle with sufficient effectiveness the risks connected with that sector and pursue the objective of preventing incitement to squander money on gambling and of combating addiction to gambling.
However, the ECJ emphasised that in deciding whether putting in place a measure as restrictive as a monopoly is admissible under the terms of Article 49 (freedom of movement) of the Treaty and is proportionate with the objectives sought by the national authorities, the national court must determine if, at the time of the facts, the national authorities indeed sought a particularly high level of protection and whether the creation of a monopoly was, in fact, necessary to ensure such a level of protection.
“European case law has already established that this body’s provision of services must be quantitatively measured and qualitatively adjusted to be in line with the said objective and subject to strict control by public authorities,” the ECJ said.
According to the ECJ, to be consistent with these objectives, especially in terms of tackling crime, the national legislation setting up the monopoly must be based on the observation that criminal and fraudulent activities linked to gambling constitute a problem within the member state concerned which could be remedied by the expansion of authorised and regulated activities. It added that careful advertising should be strictly limited to what is necessary to channel consumers towards supervised gambling networks.
As for whether the market for online betting on horseracing can be regarded as distinct from the sector as a whole, the court points out that the internet constitutes a simple channel through which games of chance may be offered.
To assess the extent of the restriction to freedom to provide services constituted by a monopoly, national courts should, in principle, take account of possible marketing channels for betting, unless the consequence of use of the internet is to aggravate the risks related to the games of chance concerned beyond what already exists in gambling marketed through traditional channels (through the isolation of gamblers or the increased opportunity for fraud on the part of the operators).
Consequently, where there is national legislation which applies in similar fashion to the supply of betting on horse racing online and that provided by traditional channels, restriction of freedom to provide services must be assessed from the view point of restrictions placed on the entire sector concerned.