Why when it comes to online gambling, the EU can’t simply take itself off the table
Single Market principles are important, apart from when the European Commission (EC) decides that they’re not. And it has decided they’re not when it comes to online gambling.
Last Thursday, the EC confirmed that it will no longer be intervening in the gambling sector, saying that it had a “political commitment to be more strategic in enforcing EU law” and that from now on it was “not a priority for the Commission to use its infringement powers to promote an EU Single Market in the area of online gambling services.”
But while it is championing a hands-off approach to the gambling sector in terms of enforcement, the EC has a very much more hands-on approach to taxation in the digital sector – which online gambling falls under. A new EU-wide digital taxation scheme will inevitably hurt online gambling companies and potentially be very damaging to countries like Malta, which generates a full 12% of its GDP from online gaming.
One hand seems to not know what the other is doing and – unsurprisingly – the result is likely to be a busted flush. To begin with, the EC seems to underestimate just what damage its attitude could do to national economies. Gambling is a growing industry. According to reports, the value of the online gambling market globally was $44.5 billion and that by 2020, it could hit almost $67 billion, with Europe accounting for half. But if the past is any indication, if the EU forces prohibitive levels of taxation, many online gambling firms could very well move their businesses to places that are more mindful of growth – this is precisely what happened when some Australian states chose to put up gambling taxes and pushed companies into neighbouring territories.
The other issue is that by not bothering to enforce EC rules on the industry, Europe is effectively turning a blind eye to countries choosing to restrict competition and keep outdated national monopolies in place. Despite the fact that EU countries need to abide by the rulings of the European Court of Justice in terms of transparency when awarding licences, the Court doesn’t legislate for how enthusiastic they have to be about handing them out. In 2014, for example, Germany said that it will only hand out about 20 licenses, despite the fact that there are almost 100 gambling businesses vying to operate in the country. Last month, a German Court found that the country’s state lottery monopolies are in breach of Article 56 of the Treaty of the Functioning of the European Union (TFEU), which allows monopolies only under certain conditions.
And it is not just big business that is suffering under the muddle-headed actions of the EU, but the ordinary consumer too, as industry and states alike are trying to figure out how to deal with the comparatively small, but growing numbers of problem gamblers. Had Brussels not washed its hands of the industry, this could have been an issue that could have been considered under the auspices of the EU. No matter how good the EC’s consumer protection principles may be in theory – it has issued lofty recommendations ‘[Encouraging] Member States to pursue a high level of protection for consumers, players and minors’ with the aim being to ‘safeguard health and to minimise the eventual economic harm that may result from compulsive or excessive gambling’ – they are useless if they are not enforced.
Sensing something of a vacuum, and willing to show themselves as responsible economic actors, some member states have taken it upon themselves to develop strong consumer protection frameworks. Earlier this year in Malta, for example, the Malta Gaming Authority took it upon itself to publish a White Paper proposing major reforms to the country’s framework surrounding gambling, including best-in-class consumer protections, including measures like self-exclusion databases for those who fear they may be developing a problem with gambling. The new legal framework being proposed would create “an environment where consumer protection, compliance and best practices are at heart”, said the country’s Parliamentary Secretary for Digital Economy, Silvio Schembri.
However, not all countries are taking such a rigorous view of the industry and a hotchpotch of differing attitudes across the EU will not do consumers any favours. Gambling – and online gambling especially – is a booming economic sector but one that requires both industry and national authorities to work together to create an environment that is conducive to economic growth, without compromising consumer protection.
What the EU has done is to essentially say that it doesn’t much care what the industry does but it would like its tax revenues thank-you-very-much. Problem gamblers should be able to self-exclude from access to gambling websites, but the EU should not. When it comes to gambling, Brussels needs to jump back in the game.