LUXEMBOURG--Europe's highest court rebuked Germany for its gambling restrictions on Wednesday, saying they breach European Union law and boosting hopes the country may fully open up a lucrative market.
The verdict by the European Union Court of Justice was a rare victory for companies seeking to break domestic monopolies in a multi-billion euro industry. The Court had in previous cases backed national monopolies.
Austrian bookmaker bwin, its British merger partner PartyGaming and Germany's Tipp24 posted substantial gains after the ruling to far outperform the STOXX Europe 600 travel and leisure index. Ruling on three cases referred to it by German courts, the Court found that while monopolies were sometimes justified, Germany's actions to promote gambling were inconsistent with its goal of protecting consumers.
"The German rules on sporting bets constitute a restriction on the freedom to provide services and the freedom of establishment," the Court found.
"The public monopoly of the organisation of sporting bets and lotteries in Germany does not pursue the objective of combating the dangers of gambling in a consistent and systematic manner," it added.
The Court said intensive advertising campaigns by the German monopolies and policies to encourage casino games and automated games--all designed to maximise profit--were inconsistent with objectives to protect the public interest. "In such circumstances, the preventive objective of that monopoly can no longer be pursued, so that the monopoly ceases to be justifiable," the Court said.
The ruling is good news for proponents of a free gambling market, said lawyer Geoff Nicholas at Freshfields. "It is possible that this could lead to an opening up of the German gaming market, as happened in Italy and France in similar circumstances. Some German states have already argued for this," said Nicholas, who has advised gaming companies. "The timing of this is interesting on the wider stage, as the U.S. is currently considering the possible enactment of a federal licensing regime."
The European Gaming and Betting Association (EGBA), a lobby whose members include PartyGaming and bwin, welcomed the ruling. "This is a landmark ruling which will have a decisive impact on the much needed reform in Germany," Sigrid Ligne, the organisation's secretary general said in a statement. "Other member states have opened or are opening their markets. They show that consumers can be better protected in a market that is both regulated and open to competition."