A First Glance at the Swiss Institute Report

After 12 months of research, the Swiss Institute of Comparative Law today released the draft report of its "Study of Gambling Services in the Internal Market of the European Union."

The massive legal and economic study, prepared for use within the European Commission, spans 1,498 pages. (The executive summary alone consumes more than 60 pages.)

The draft, which covers conditions in Europe up to Dec. 31, 2005, will be discussed by the meeting of stakeholders to be held on May 8, 2006 in Geneva. Afterward the definitive study will be presented to the EU Commission.

The Swiss Institute's stated purpose of the study was to "evaluate how the differing laws regulating online and offline gambling services, as well as games in the editorial content of the media and certain types of promotional games, impact upon the smooth functioning of the internal market for these and associated (e.g. media, sports, charity and tourism) services and, thus, could restrict the economic and employment growth associated with such services."

Its stated objectives were:

Describe all the relevant national rules and laws pertaining to the commercial communications, establishment and provision of services in the eight market sectors.
Describe, on the basis of information collected from member states, stakeholders and market analysts, the expected cross-border development of each of these market sectors and their associated markets in the light of the existing market trends taking due account of technological change and international market trends.
Determine, in view of these regulatory and market reviews, the existence and nature of Internal Market barriers in these market sectors and relevant associated sectors.
Describe all the relevant national rules and laws pertaining to the commercial communications, establishment and provision of services in the eight market sectors set out below.
Describe, on the basis of information collected from member states, stakeholders and market analysts, the expected cross-border development of each of these market sectors and their associated markets in the light of the existing market trends taking due account of technological change and international market trends.
Determine, in view of these regulatory and market reviews, the existence and nature of internal market barriers in these market sectors and relevant associated sectors.

Considering the report's length, a real assessment will require some time for studying and digesting, but at a first glance, a few observations come to mind:

The Swiss Institute of Comparative Law has defined most of the gambling matters. It is likely that the European Lotteries will object the use the word "gambling" throughout the report, and will urge that it is replaced by "gaming" because stakeholders in the charitable sector have indicated a fairly strong desire not to be associated with gambling.
It is disturbing that of the 1,020 potential stakeholders contacted by the Swiss research group, only 20 percent (around 200) responded.
Who says there is no humor in the gambling industry? The Consumers Protection Centre in Thessaloniki (Greece) was willing to fill in the questionnaire only if they were paid about €30,000.
The report has no good word for governments and stakeholders of Greece, Ireland, Luxembourg or the 10 new EU member states concerning their courts, which have not considered the compatibility of their gambling laws with EU law. The legislatures of these states have not expressly considered the need to comply with EU law when enacting national measures restricting gambling services.
Broad attention is given to the taxation of gambling services and the differences between the services between member states, and the inconsistency among the member states in their fiscal treatment of gambling services are presently enormous. National tax systems employ completely distinct and often incompatible structures.

The Swiss Institute also notes that "the ECJ expressly made clear how the notion of proportionality should be understood with regard to national measures restricting gambling activities:

National restrictions must in any event be applied without discrimination.
The justifications invoked by a member state must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that state.
In principle, the level of protection a member state wishes to provide does in itself not affect the proportionality of national provisions. On the contrary, the member states can decide for themselves upon the system of protection which can differ from that adopted by another member state."

The Remote Gambling Industry in the EU

The Swiss Institute had intended to report on the size of Europe's remote gambling industry; however, it did not receive enough cooperation from the industry to generate accurate figures.

The report states, "As part of the study leading up to this report, a survey instrument was developed and disseminated to all known remote gaming operators in the EU, as well as the regulatory authorities in Gibraltar and in Malta. As of mid February 2006, a total of 19 companies from Malta, Gibraltar, Finland and the United Kingdom had responded. Because researchers did not have any information on the size of the respondents relative to the size of non-respondents, they were unable to use the survey results to estimate the aggregate size of the remote gaming sector in the EU."

In the absence of such data, the report cites numbers from River City Group (originating from Christiansen Capital Advisors), indicating that the global interactive gambling market provided around €5.7 billion (US$7 billion) in revenues as of 2003, with the European share coming in at around €1.6 billion (US$2 billion). The global remote and Internet gaming industry is forecast to grow from about $9 billion 2004 to $25 million in 2010.

The executive summary of the report closes by stating, "Among other findings, it is clear from the results of this analysis that member states of the European Union need to sponsor or encourage additional scientific research to address many of these important social impact questions. In the interim, policy will have to be made based upon the limited research that is available, much of which was generated in other countries, with perhaps important social, political, and cultural differences."

Roughly translated: more work for analysts.

The report has been made available for downloading at the Web Site of the Swiss Institute of Comparative Law: www.isdc.ch.