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German Gaming Law updated No. 26 |
Newsletter on Betting and Gambling Law
No. 26 of the 11th of November 2005
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Contents:
1. The hearing before the Federal Constitutional Court in the case of sports betting – Part 3: The complainant’s and the bookmakers associations’ arguments
2. The game “Millionaire by Call” is illegal gambling and therefore constitutes unfair competition
3. Masthead
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We continue our report on the hearing before the Federal Constitutional Court.
1. The hearing before the Federal Constitutional Court in the case of sports betting – Part 3: The complainant’s and the bookmakers associations’ arguments
The line of reasoning of the Free State of Bavaria and the other defendants of the state monopoly is relatively simple. Very self confidently the Bavarian under state secretary proclaimed that only the state could guarantee gaming without manipulation. With the state monopoly the “market model” of commercial profiteering was dismissed. Private operators pursued a “rampant expansion”. With a legal ODDSET offer one can prevent “illegal offers” by private operators (which does constitute a certain circular argument).
The president of the state lottery administration in Bavaria, Mr. Horak also referred to the social control when placing wagers in a receiving office. This was a room “familiar” to the customer. In addition one had printed an “addiction-flyer” referring to the federal agency for health protection. Advertising for state gambling simply constituted “ sovereign administrative action (this caused some exhilaration with the court). One had to advertise so intensely in order to keep up with the private operators.
The complainant’s (Mrs. Irene Katzinger-Köth’s) and the supporting bookmakers associations’ line of arguments proved to be more sophisticated. The complainant, a former stock broker having acting as a bookmaker for many years, referred to the inconsistent state behaviour. According to the states’ presentation gambling was not desired, whereas state operators constantly offered new products (like quicky) and advertised them massively. With regards to this inconsistent behaviour the case was also about restoring state credibility.
She was unable to further exercise her profession as a bookmaker when limited to offering horse bets (legal in accordance with the RWG). Horse bets had declined by about 70%. Since she had – probably as the only bookmaker - not conveyed any sporting bets with regards to the court’s authority, she was now in the red (as she mentioned in her final statement.
For the bookmakers associations Attorney-at-law Bongers referred to deficits in the execution of the constitution. Horse betting and sports betting were the same economically as well as from a point of view of their structure. After all one could simply extend the application of the RWG, which has been in place for over 80 years to sports betting. For sports betting one could apply the same criteria for dependability. In addition, sports betting did not pose an elevated risk potential. Therefore the unequal treatment were not justified.
With regards to addiction prevention the complainant referred to structural problems. The responsible minister of finance and the fiscal administration normally pursued other goals than the reduction of state revenues. There were almost 27.000 receiving offices (in comparison there are about 12.000 post offices). The state operators enlarged their offer constantly by offering new products. New customer groups were addressed. The state gaming offer is being advertised for massively. Even more massively than products of other private companies. More than 2% of the turnover (including sponsoring) is being spent for advertising ODDSET.
With regards to consumer protection and hazard prevention the complainant referred to the missing regulation concept. In the end a fox is set to keep the geese if the supervision is left to the ministry of finance. The consumer could be protected sufficiently by implementing licensing requirements such as the personal dependability of the bookmaker and by compulsory information- and transparency requirements. Consumer self-protection could be achieved by limiting the wager. Insolvency protection could be reached by obliging bookmakers to offer security (as implemented in the Austrian model) or by creating a security fund (as for Banks and investment service companies). Protection against betting fraud was the very own interest of private bookmakers. They had implemented an early warning system which has already proved its worth.
The execution of games by private operators under supervision of a supervising body and stipulations to be complied with issued with the license were definitively the milder means and therefore to be considered during the examination of the proportionality of the state monopoly. One did not want a “law free zone” but a stringent and transparent regulation equivalent to the successful model of the RWG.
Regarding the financing of projects of the general welfare, the complainant pointed out, that this could not constitute a justification for limiting the freedom to choose one’s profession. State could generate funds by other means. Insofar the “purpose yield model” could be imagined.
With respect to the special questions related with conveying sporting bets the bookmakers associations pointed to the fact that receiving offices for the state gaming offer did not possess a license either. Insofar the private betting-offices followed the state model. At the same time, conveying was not operating and therefore not liable to prosecution. For the rest it was more than questionable to continue to use the penal provision of Art. 284 GPC as a general provision in order to justify administrative action (notably orders of prohibition).
The future will show if and in how far the Federal Court of Justice will follow the invoked arguments. As we have already mentioned in our last newsletter “German Gaming Law updated” the Federal Court of Justice regards the state behaviour as contradictory after all. In fact one can hardly present sports betting as absolutely normal in advertisements and on the other hand argue this behaviour is socially undesired. Nonetheless the court sees the problem of an amplification of the addiction problem as a result of liberalisation. Therefore in my opinion, the complete liberalisation of sports betting seems unlikely.
The Federal Constitutional Court instructing the legislator to enact a regulation in conformity with the constitution seems more likely. This would constitute a term of expiration for the state monopoly. At the hearing it was discussed what such a future legal regulation could look like. The complainant and the bookmakers associations pointed out that it were not up to them to develop such a solution. In accordance with the legislator’s prerogative the design of the future regulation will be left to him. However, admitting private operators pro forma while not issuing licenses in practise (as suggested by the representatives of the state monopoly off the hearing) would probably not be sufficient. Such a regulation would be unsustainable with regards to Constitutional- as well as with Community Law.
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2. The game “Millionaire by Call” is illegal gambling and therefore constitutes unfair competition
- by attorney at law Alice Wotsch, Arendts Anwälte -
The Court of Appeal of Düsseldorf, in its decision of the 23rd of September (case-no.: I - 20 U 39/03) had to deal with the following question: Does the operation of a game, which consists of the players calling a value-added service-number in which every thousandth, ten-thousandth and hundred-thousandth and millionth caller would win illegal gaming in terms of Art. 284 GPC and did this constitute an anticompetitive behaviour?
The game “Millionaire by Call” was subject-matter of the proceedings. The decision is very interesting in the view of classifying games as games of skill or games of chance, as the caller who got through had to answer a question in addition in order to win the price.
The Court of Appeal, unlike the first instance court is of the opinion that the game “Millionaire by call” constituted a public game of chance in terms of Art. 284 GPC and therefore constituted an anticompetitive behaviour in terms or Art. 1 old version (Art. 3 new version).
As the Court of Appeal observes, the distinction between (legal) games of skill and games of chance is especially difficult in cases where a player chosen by chance takes part in a Quiz in order to win a prize. The opinion presented by the defendant during the proceedings assumed that an emphasis on gaming, away from skill, could not be established and that the possibility of winning was therefore not mainly dependent on chance. The Court of Appeal did not follow this opinion, but instead followed the opinion of Eichmann/Sörup (MMR 2002, 142) that is was sufficient to assume a game of chance, if overcoming the first level of the game was dependent on chance. The Court of Appeal explicated that it could not make a difference, whether one operated a pure game of chance or whether one “saddled” another game of skill on top.
The Court of Appeal misjudges as the game in question has to be seen as a whole, when classifying it as a game of chance or a game of skill. The decisive aspect is, whether a game as whole is mainly dependant on chance. If one would follow the arguments of the Court or Appeal Quizshows like “Wer wird Millionär” or “Das Quiz” would also fall under the term of public game of chance in terms of Art. 284 GPC, since there too the candidates are selected by a random generator after sending in an e-mail a postcard or after calling.
Furthermore the Court of Appeal assumes that telephone charges cannot be regarded as mere “entry costs” but as “stake”. This stake was not to be neglected as one could not only count the costs of one single telephone call (EUR 1,83) but had to consider the costs of several calls which surpassed the limit of what could be regarded as a “negligible amount”. However the court does not specify neither the number of telephone calls to be assessed nor does in mention a precise limit for a “negligible amount”.
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