Gaming law in Finland – a regulated monopoly contrary to the EU Treaty?

03 December 2008

Daniel Stranius, Jesper Nevalainen

In Finland all gambling and betting arrangements require a licence, including both online and mobile games of chance.  Additionally, promoting and advertising gambling and betting arrangements in Finland without a gaming licence is prohibited.  We discuss whether this prohibition complies with the EU Treaty, considering especially whether this regulated monopoly restricts the freedom to provide services within the EU.

Current gaming regulation in Finland

Gambling and betting activities in Finland are regulated by the Lotteries Act (23.11.2001/1047). Under the Lotteries Act, all gaming arrangements in Finland require a gaming licence. A gaming licence is issued separately (i) for running money lotteries, pools and betting; (ii) for keeping slot machines, operating casino games and running casino activities; and (iii) for operating totalisator betting. Only one licence is granted at a time for each of these purposes. The official justification for this limitation, which in fact creates a regulated monopoly, is to protect those who engage in gaming activities, prevent abuse and criminal activities and reduce social problems created by gaming, such as gaming addiction.

Gaming licences may be issued for a maximum of five years at a time and the licences are granted and revoked by the Finnish government. The current gaming licences, which are in force until 2011, have been granted to the following three gaming operators: Veikkaus Oy (state-owned), Raha-automaattiyhdistys (state-owned) and Fintoto Oy (privately owned). Due to current legislation no other gaming operators are allowed to offer gaming services in Finland.

Advertising of gaming and betting services

Under the Lotteries Act, there are criminal sanctions for promoting a lottery arranged without a gaming licence by, for example, publishing or distributing advertising material. The wording of the Lotteries Act (as well as the wording of the new bill of the Lotteries Act) covers only the promotion of a lottery arranged in Finland.

The concept of promoting and arranging lotteries has been interpreted widely in enforcement practice. For example, several international betting companies have websites available also in Finnish (thus targeting the Finnish audience), and the local advertising of these websites has led to criminal prosecutions against the Finnish spokesmen of these companies as well as the editors of publications that included the advertisements. Therefore, current Finnish practice is to consider that promotion of lotteries arranged abroad, but targeted at a Finnish audience, is prohibited. It could be argued that this stretches the territorial applicability of the Finnish Lotteries Act; this has been the subject of debate and is considered to be a problematic and grey area of the Act.

To address this inconsistency, a new bill (HE 96/2008) amending the Lotteries Act was presented to the Finnish Parliament in June 2008. One of the main amendments in the bill is to introduce a definition of marketing into the Lotteries Act.  This will broaden the scope of activities which are considered to be marketing and to directly prohibit such activities.  Under the bill, the definition of “marketing” includes direct marketing as well as indirect marketing and any kind of sales promotion of the gambling society or its games.  Indirect marketing includes promotion of lotteries in connection with advertising other products and any sponsoring in which the name or logo of the operator is mentioned.  If the bill is passed, it will clearly prohibit any kind of marketing of lotteries arranged, whether in Finland or abroad, without a gaming licence.  This amendment would make it clearly illegal for any foreign gaming operator to offer or advertise its services in Finland.

Compliance with the EU Treaty

There are reasons to question whether the Finnish Lotteries Act and its implementation and enforcement comply with the EU Treaty.  The provisions of the Lotteries Act which state that only one gaming licence may be granted at a time, appear to restrict the freedom to provide services within the EU (the licence holder gets a monopoly position and other operators cannot offer their services in Finland).  For this to be justified under the European Court of Justice’s practice, the Finnish monopolistic system must be used to effectively reduce and prevent gambling opportunities.

However, in practice the restrictions of the Lotteries Act do not clearly limit or prevent gaming.  On the contrary, the state controlled licence holders spend large amounts on advertising campaigns on the television and other media and also in actively encouraging Finnish consumers to gamble.  Additionally, to forbid foreign gaming operators which are licensed in another EU Member State from advertising their services on the Finnish market may not be deemed as a “proportionate” measure in line with the prerequisites set forth by the ECJ.

The European Commission has challenged the Lotteries Act’s compliance in its Reasoned Opinion of March 2007, where the Commission took the decisive position that several sections of the Finnish Lotteries Act did not comply with EU law.  In its response Finland repeated its opinion that the Lotteries Act is in conformity with EU law.  The Commission has not, to our knowledge, initiated any further proceedings against Finland following the response of the Finnish government.

The legality of the present Finnish gaming monopoly and the compliance of the Finnish Lotteries Act with EU law has been recently confirmed on a national level in a decision of the Finnish Supreme Administrative Court (decision KHO 2007:28).  The Supreme Administrative Court dismissed Ladbrokes’ application to arrange sports betting in Finland, the application was explicitly argued on the basis of EU law.  The Court agreed that the marketing and advertising campaigns of the licence holders are “problematic” as regards the prevailing ECJ practice, but still decided that the Lotteries Act complies with EU law.

Conclusions

The licensing system should not be criticised in itself.  The current system allows the licensing authority to ascertain that the gaming operator applying for the gaming licence is reputable and secures the safety of gaming and consumer protection in every form of its business. During the period where the gaming licence is valid, the licensing authority may also, by supervision and possible sanctions, make sure that the gaming operator takes care of the safety of gaming and consumer protection.  However, the objectives of the restrictions of the current system could be achieved with measures other than the arrangement based on a monopoly of state-owned gaming operators.

The current licensing system does not allow Finnish authorities to oversee and supervise gaming operators that are operating from abroad.  In reality, Finnish users of gaming services can easily use the services of gaming operators that do not have a Finnish gaming licence. Therefore, it could be argued that letting these gaming operators into the Finnish market would allow the authorities to regulate and supervise the gaming services much more effectively.

It could also be argued that gaming operators, which have already been granted a licence to provide gaming services in another EU Member State, have demonstrated that they are reputable and that they can secure the safety of gaming and consumer protection in their activities. Such gaming operators should be allowed to provide their services freely in other EU Member States, without having to obtain a local gaming licence in every country they want to operate.

Although the EU Commission is expected to take action against Finland (and several other EU countries), the current legal position in Finland seems clear even if this decision is open to serious criticism, and will most likely not change in the near future.  This was recently confirmed by the Supreme Administrative Court in its decision of 2007. The Finnish state is also fiercely fighting to maintain the monopoly to preserve the vast income gained to the Finnish state.  The income is allocated for example to supporting sports, music and other culture which has led to a quite large public acceptance of the prevailing gaming monopoly.

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