Germany recently decided to open up its sports betting market and grant up to 20 sports betting licenses. However, over a year later no licenses have been issued. The licensing procedure has been criticized for not being transparent or fulfilling EU criteria for fair competition. Specifically, the selection criteria have not been published in advance and favor existing state monopoly operators over new applicants. Several court cases are pending regarding the non-transparent nature of the licensing process in Germany.
Germany's Sports Betting Licensing Procedure: Still Facing Legal Uncertainty
1. G
ermany, like other EU member states,
recently decided to abandon the
state monopoly system with regard to
sports betting, and to start a licensing
procedure (as well as to tax sports betting with
a five per cent turnover tax on wagers).
The new Interstate Treaty on Gambling,
effective as of July 1, 20121
, contains an
experimentation clause in section 10a which
allows for up to 20 sports betting licences.
However, after more than a year, no licences
have been granted. It is also quite obvious that
this licensing procedure does not fulfil the
criteria of the Court of Justice of the European
Union (CJEU). So, the Administrative Court of
Wiesbaden described the procedure as non-
transparent.
Experimentation clause: up to 20 sports
betting licences
As the old Interstate Treaty on Gambling of
2008 turned out to be legally questionable after
the CJEU decisions of September 8, 2010, on
the German sports betting referral cases (Stoss,
Carmen Media Group2
and Winner Wetten), the
German states decided to open up the market
only for sports betting (in order to keep the state
monopoly on other forms of gambling, especially
lotteries which generate a considerable parts of
the state income). Therefore, the Treaty’s lack of
consideration of online poker and casino games
has been heavily criticised.
The Hessian Ministry of the Interior was
appointed to organise the sports betting
licensing procedure and to issue the licences
on behalf of the newly created gambling board
(Glücksspielkollegium), which consists of 16
members (one for each state). The tender for
the 20 sports betting licences was published in
the Official Journal on August 8, 2012. After the
second step, however, the procedure seemed
to have stopped in spring 2013. In a further
public tender for a law firm, Hessian Ministry of
the Interior recently declared that it expected
up to 80 court proceedings, involving both
unsuccessful applicants and licence-holders3
.
Criteria of the CJEU on the granting of
gambling licences
From the basic freedoms and the principles
of equal treatment and non-discrimination,
the CJEU formed a concept of how gambling
licences should be awarded under EU law. The
CJEU developed a very detailed obligation of
transparency. Especially after the recent Costa
decision4
, in which the CJEU recapitulated the
criteria, these guidelines can be regarded as
settled case law. According to the CJEU, “the
public authorities which grant betting and
gaming licences have a duty to comply with
the fundamental rules of the Treaties and, in
particular, with Articles 43 EC and 49 EC, the
principles of equal treatment and of non-
discrimination on grounds of nationality and the
consequent obligation of transparency.”5
According to EU law, requirements for
licence holders, which infringe the fundamental
freedoms, have to be proportionate. With regard
to the licensing procedure in Germany, there
is no factual basis for the maximum amount of
20 licences (as well as for the seven licences
mentioned in the first draft).
Secret selection criteria
Even more essential is the fact that the
detailed licensing criteria have not been
published yet. According to the CJEU, the
licensing procedure has to be transparent and
must be based on objective, non-discriminatory
criteria known in advance6
. Some selection
criteria were sent as a confidential document to
applicants that successfully passed the first step.
The European Commission already criticised
that the licensing criteria were not clear enough
and should therefore be specified in the tender7
.
However, the tender document only referred
to an “information memorandum” with more
detailed criteria, especially for the five concepts
which have to be elaborated by the applicants
in the second step of the licensing procedure.
This information memorandum has not been
published yet, so not all material information is
know in advance, as required by the obligation of
transparency.
Even the “reasonably informed tenderer”8
could not evaluate his chances in the licensing
procedure. Not only gaming operators from
other member states, but also potential market
entrants, like media companies, must have an
appropriate possibility to know the licensing
criteria (in order to decide whether to apply
or not). The secret selection criteria (a points
1) In 14 of the 16 Germans states: North Rhine-Westphalia followed on December 1, 2012. The state
of Schleswig-Holstein joined the new Interstate Treaty as of February 8, 2013, after revoking the
Schleswig-Holstein Gambling Act (under which about 50 licences were granted to bookmakers, as well
as to casino games operators). The Schleswig-Holstein licences will remain in force, so there will be a
completely incoherent regulation for the next years.
2) CJEU, judgment of 8.9.2010 – C-46/08. The plaintiff in the main proceedings, Carmen Media Group
Ltd, applied for a sports betting licence in the German state of Schleswig-Holstein.
3) http://wettrecht.blogspot.de/2013/05/sportwetten-konzessionsverfahren.html
4) CJEU, judgment of 16.2.2012 – Joined Cases Costa and Cifone - C-72/10 and C-77/10.
5) Costa decision, para 54.
Martin Arendts, M.B.L.-HSG, attorney-at-law
for Arendts Anwälte, provides an update on
licensing in Germany
Sports betting licensing
procedure in Germany:
a never-ending story?
Martin Arendts, Arendts Anwälte
THE SPECIALIST international GAMING law MAGAZINE
18 | Issue 1 2013 intergamingLAW www.intergameonline.com
GLOBAL REPORT
“The public authorities which
grant betting and gaming
licences have a duty to
comply with the fundamental
rules of the Treaties”
2. www.intergameonline.com intergamingLAW Issue 1 2013 | 19
6) Sporting Exchange decision, para. 50; Carmen Media Group decision, para. 87; Costa decision, para.
56.
7) European Commission, letter of March 20, 2012, in the notification procedure 2011/0188/D
(reaction of the Commission to the response of a member state notifying a draft regarding a detailed
opinion).
8) The CJEU refers to a ‘reasonably informed tenderer exercising ordinary care’ as a standard.
9) Engelmann decision, para. 51.
10) Costa decision, para. 57.
11) Verwaltungsgericht Wiesbaden, decision of April 30, 2013, file no. 5 L 90/13.WI.
12) Hessischer Verwaltungsgerichtshof, decision of June 28, 2013, file no. 8 B 1220/13.
scheme of maximum 5,000 points) are applied
retroactively and its weighting is also obviously
not based on the aims of the Interstate Treaty.
It also will be very hard to argue that the
licensing criteria are unequivocal, as required
by the CJEU. Until now, the Hessian Ministry of
the Interior collected more than 800 questions
of applicants and sometimes quite contradictory
answers of the ministry (220 Q & A in the first
step, 587 Q & A in the second step).
The grant of a concession, in the absence
of any transparency, to an operator located in
the member state of the awarding authority
constitutes a difference in treatment to the
detriment of operators located in other
member states, who have no real possibility
of manifesting their interest in obtaining the
concession in question. Such a difference in
treatment is contrary to the principle of equal
treatment and the prohibition of discrimination
on grounds of nationality, and constitutes
indirect discrimination.9
Level playing field for established licence
holders and new applicants
The principle of equal treatment requires
that all potential tenderers be afforded equality
of opportunity and accordingly implies that
all tenderers must be subject to the same
conditions10
. In its Costa decision, the CJEU
expressly requires a level playing field for
established licence-holders and new applicants.
In Germany, the principle of equal treatment
is clearly infringed by the fact that the former
monopoly operators (one for each of the 16
German states) can use their distribution
network of about 26,000 agencies, while new
licence holders will be allowed to have only a
very limited amount of betting shops (e.g. in
Berlin 10 betting shops for each licence holder
and three betting shops in Saxonia-Anhalt).
A grandfathering clause provides that the
monopoly operators and their agencies do not
need a licence in the transitional period of one
year after the 20 licences are issued (section 29
para. 1 sentence 3 Interstate Treaty).
Other provisions do not seem to apply
to state operators. Section 21 par. 3 of
the Interstate Treaty commands that the
operation and intermediation of sports bets
are strictly separated (“Trennungsgebot”).
No “organisational, legal, economic or staff
connection” is allowed. Several of the 16 state
operators do not fulfill this requirement.
At least four operators are partly owned by
sports associations. The most blatant example
is Lotto Rheinland-Pfalz GmbH, the operator for
the State of Rhineland Palatinate. This operator
is partly (49 per cent) owned by three sports
associations. The biggest member of one of
these associations, Sportbund Pfalz, is 1. FC
Kaiserslautern (known as the “Red Devils“). This
football club is playing in the Bundesliga (at the
moment, in the second division) and bets are
offered on matches with 1. FC Kaiserslautern.
The proposed new sports betting operator of
the state operators, ODS Oddset Deutschland
Sportwetten GmbH (which applied for one of the
20 licences), is partly owned by Lotto Rheinland-
Pfalz. So, ODS does not fulfil the requirement of
separation and should have been excluded from
the licensing procedure for this reason.
While a bank guarantee (in the amount of
€5m, up to €25m), originally required for the
second step of the licensing procedure (suddenly
this requirement was withdrawn), might be
justified to protect customers, the additional
insurance which the applicants have to verify,
is questionable (as one insurance company,
mentioned by the ministry, declined to offer such
insurance protection).
Several court cases with regard to the
licensing procedure are already pending. Until
now, only two interim protection decisions have
been published. In its BetVictor decision11
, the
Administrative Court of Wiesbaden granted one
applicant to the up-to-20 sports betting licences
interim protection. The court mentioned that the
whole procedure was not transparent.
As described above, the CJEU expressly stated
that interested operators must have a fair chance
to evaluate their chances at the beginning of
the procedure. The Administrative Court held
that there was no such possibility in the current
procedure: “(...) the requirements with regard to
a transparent procedure are not fulfilled.”
The Hessian Administrative Court of Appeal
overturned this decision12
, but did not decide on
the merits of the case. The court mainly argued
that BetVictor could not claim an immediate
need for judicial relief. The applicants should wait
for a final decision in the licensing procedure and
then ask for interim protection.
“The principle of equal
treatment requires that
all potential tenderers
be afforded equality of
opportunity”
Reichstag, Berlin