Showdown in Italy

The European Betting Association (EBA), which promotes cross-border gambling businesses in Europe, and the Remote Gambling Association (RGA), an advocacy group for online gambling operators in Europe, are challenging the Italian government's assessment of the online gambling situation in Italy, claiming it shows total disregard for EU law.

Italy's draft Finance Act 2006, submitted to the government Sept. 29, 2005, includes a section (Section 66) requiring Italian Internet service providers (ISPs) to block access to all gambling Web sites not authorized by the government. The stipulation limits Italian punters to only six betting Web sites: Snsi.it, Toto2000.it, Pianetascommesse.it, microgame.it, gruppocore.it and puntobet.it.

ISPs that fail to comply with the regulation are subject to a fine of between €30,000 and €180,000 (US$36,000-$215,000).

The EBA and the RGA filed a joint resolution Nov. 2, 2005 with the European Commission warning the Italian government that Section 66 violates at least five categories of community rules or legislations of the EC Treaty, including:

Freedom of establishment and freedom to provide cross-border services, Articles 43 and 49. The complaint claims that by prohibiting foreign gambling operators from gaining access to Italian ISPs the rule violates these articles.
Freedom to supply telecommunications services, Directive 2002/20/EC. Italy is violating the rights of the ISPs by requiring them to block access to unauthorized sites.
Personal data protection, Directive 2002/58/EC.
State aids, Article 87.1 of the treaty.
Notification of technical standards and regulations affecting service of the information society, Directive 98/34/EC, which states that all members of the European Union must be informed of any proposed changes to another member's technical regulations.

Additionally, the treaty is designed to promote an internal market and free trade within Europe, and the EBA's position is that the gambling industry is boundless and should cross all EU borders. Italy's disallowing foreign betting companies negates the EBA point of view.

Didier Dewyn, secretary general of the EBA, said Italy is not adhering to the law.

". . . The Italian bill has no chance to survive, as even the most fundamental obligation to notify the European Commission about the cross border implications of the envisaged restrictions were not met," Dewyn said. "This lack of notification alone makes the law, once adopted, non applicable in the national law system of Italy. EBA has already informed the EC of this breach, and the EC is following this closely."

Dewyn opined that the motivation behind this move by the Italian government is purely economic. Last year Italy faced its largest deficit since 1991, brought on by a decrease in foreign spending.

Italian gaming lawyer Stefano Sbordoni says the provision, in its current form, is not a good one. Like Dewyn, he believes the government's motivation is clearly economic. He also believes the legislation won't stick.

"The motivation is to scare foreign competitors of online betting," Sbordoni said. "It is quite clear to the tax authorities that a lot of turnover (in the industry) is dedicated to foreign Web site operators. This substantial turnover, in terms of taxation, is a loss in Italy. This provision itself is obviously a controversial one, and in my opinion, is also weak."

Sbordoni predicts the legislation will face revision with the first challenge from the industry, although it will take up to a year to see any real changes because a case must go through the Italian courts before being heard at the EU level.

Foreign operators, therefore, risk being shut out of Italy for a period of at least six to nine months and would lose a lot of business during that period.

In the meantime, any foreign operator wishing to offer its services to Italians must purchase an Italian license and adapt to Italy's rules. Further, the business is subject to Italian taxes, which are somewhat elevated, but according to Sbordoni, slowly falling.

Several Italian ISPs were contacted by IGN for comment on the policy, but none replied.