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Germany mulls online gambling ban

States want to protect their lotteries

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German states have postponed a decision on whether or not to ban online gambling. The federal states met today to discuss the plan to outlaw the activity in a move that could destabilise a Europe-wide plan to harmonise gambling.

Online gambling was controversially banned in the US in September of this year when a bill was attached to a port security law and passed quickly through the legislature.

The effect on online gambling companies was dramatic, with share prices dipping instantly and some fearing for their existence. PartyGaming and 888, for example, are said to be considering a merger in order to stay in business.

A European trend towards banning online gambling could hit companies further. Already two German states have acted and others may follow.

The heads of the individual German states met today to discuss a ban and decided to put off the decision. Already three German states, Bavaria, Saxony and Hesse, have instituted their own ban. Most of the states run monopoly lotteries and are keen to protect their position, said German paper Handelsblatt.

The European Commission is fighting to open up and liberalise the European gambling market, but faces opposition from local and national governments who want to preserve their lottery and gambling monopolies.

The three south German states who have outlawed online gambling were doing so because they ruled that an Austrian company, Bwin Interactive, infringed their monopoly. Bwin welcomed today's move.

“This decision is a very sensible one,” said Steffen Pfennigwerth, owner of Bwin in Germany, a 50 per cent joint venture with Austria's Bwin Interactive.

“The states will now have sufficient time to develop a legal framework for the German betting market in accordance with European law and the constitution," said Pfennigwerth.

Bwin was also involved in controversy in France when its two chief executives were arrested. Manfred Bodner and Norbert Teufelberger are jointly chief executive of Bwin Interactive Entertainment, the Austrian firm behind Betandwin, and appeared before a French judge in September accused of violating France's gaming laws.

The lawyer for the pair said that the action was "objectionable" and that it was commercially motivated. French company La Francaise de Jeux (FDJ) operates a sports betting and lottery monopoly. The company is 72% owned by the French state.

"FDJ has launched a full-fledge diversification campaign, boasts a two-digit annual growth rate and, through its Euro Million game, is reaching out to countries other than France. The interest of FDJ is solely financial. If you let FDJ grow, then other gaming companies should also be allowed into France," said the pair's lawyer Frederic Manin.

The arrest of the men followed a complaint by the company to Europe that France's gaming laws conflicted with the open competition principles of the EC Treaty. Should Europe find that to be the case it would likely apply to all countries, including Germany, if it changes its gambling laws.

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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