Ladbrokes Cuts off German Customers

The dominos continue to fall in the aftermath of last month's Gambelli ruling in the European Court of Justice (ECJ).

Last week officials with Ladbrokes, one of the largest bookmakers in Europe, informed customers in Germany that its Web site and telephone betting services are now off limits to them.

The move is a surprise to some, but the company indicated that the decision was made as it awaits a ruling in a court case of its own.

In the Gambelli case, the ECJ ruled that Italian state provisions on betting constitute a restriction of free trade and that a licensed bookmaker in one part of the European Union has the right to operate in another country, even if a government monopoly is in place.

With that backdrop, Ladbrokes is hoping that a case in Holland brought by government-appointed lottery monopolies will be referred to the ECJ. And while Ladbrokes is focusing on its battle in the Netherlands, the company is confident it will resolve related conflicts throughout the European Union.

In the German case, the Westdeutsche Lotterie GmbH u. Co. oHG, a lottery operator in Germany, filed a complaint with the German courts to prevent Ladbrokes from operating in Germany and accepting wagers from German residents. The case is almost a carbon copy of the one Ladbrokes faces in Holland, so rather than fight the same battle on two fronts, Ladbrokes is pulling its German operations until the Dutch case is resolved.

The decision to pull out of Germany came fast and gave users little advanced warning. Ladbrokes sent e-mails Wednesday to all of its German users informing them of the decision. The note also said that after Wednesday, no bets at the company's sports book, casino and poker sites would be accepted from German residents.

Ladbrokes also decided to take down the German language section of its site and is advising German-speaking players who live outside Germany to use the English versions of its sites. The company said it's not economically feasible to operate German-language versions of the sites for such a small group.

Antonia Sharpe, the corporate PR manager for Ladbrokes said recent case law bodes favorably for the company.

"The Gambelli case proved that European states are prohibiting our business to protect their own tax bases and they can't do that," Sharpe explained. "They can't use the social argument policy either if they have gambling monopolies in place, and both Germany and Holland have them and advertise them in their own countries."

Sharpe said gambling monopolies are the only remaining monopolies in Europe and that it's only a matter of time before they are struck down. She also finds said the continuation of gambling monopolies in the current age of technology is unrealistic.

"It would be like us putting up signs in all of our betting shops that no Danes or Germans or others are allowed to bet because our government says so," she said. "That would just be mad."

Although the Holland case is ongoing most are waiting for a decision in the Italian courts now that a ruling has been made from the ECJ in the Gambelli case. Ultimately the ECJ made clear the circumstances under which it will give priority to the principles of free trade against a state licensed monopoly operator within the betting industry.

In the Gambelli case, the court ruled that restrictions are permitted if the aim is to reduce betting opportunities for consumer protection and preservation of social order. If participation in such activities is encouraged by a member state for benefit to its public purse, however, the state can't rely on the need to uphold public order to justify restrictive measures.

The Italian courts will now apply these principles to the facts of the Gambelli case.

In the meantime, Ladbrokes will be paying out remaining balances to German players as they request funds. Sharpe said the process could take months and the company is going to honor any future bets made by German players. Long term, she is sure German players will be able to gamble with Ladbrokes again.

"Our strategy has always been to follow the law," she said. "We just feel that in Germany and Holland, the law is superceded by what the EJC says, and it will just take some time to get those issues resolved."

Ladbrokes did not disclose what portion of its customers and/or turnover comes from Germany.