The cost of going Dutch
Betsson and MRG were the latest operators to be hit with six-figure fines from the Dutch regulator, but were they unfortunate to be singled out and will the sanctions severely dent their chances of securing future licences in the Netherlands?
The tortuous and drawn-out process of regulating online gambling in the Netherlands seems to have been dragging on for an absolute eternity. So, with the legislative wheels turning frustratingly slowly and the prolonged inertia when it comes to rolling out a robust regulatory framework, it was inevitable that unlicensed gambling websites would swoop in and fill the vacuum. After all, this is a country with a population of 17 million, GDP per capita over $45,000 and internet penetration in excess of 90%, making it a particularly attractive market for gambling operators.
From time to time, though, the country’s regulator, Kansspelautoriteit (KSA), bares its teeth in a show of strength. This summer, for instance, Bet-at-home was slapped with financial penalties totalling €410,000 for targeting Dutch citizens without a licence. Then, in August, the KSA fined Corona, a subsidiary of Betsson, €300,000 for allowing players in the Netherlands to gamble via its Malta-licensed casino sites, OrangeCasino.com and KroonCasino.com. Lastly, in September, a €312,500 penalty was handed down to MRG for failing to prevent Dutch citizens from placing bets with its flagship brand, Mr Green.
With the power to fine offending operators as much as €820,000, or 10% of turnover, the latest punishments meted out by the KSA were another warning shot aimed at those Dutch-facing sites continuing to roll out the welcome mat to players in the Netherlands. “Other gambling providers that focus on the Dutch consumer will certainly have to worry about the current prioritising policy of the gaming authority,” suggests Mark van Weeren, a gaming attorney for Amsterdam-headquartered law firm Blenheim.
He follows up by suggesting the regulator “does not have the convincing means of power”. “To be able to collect fines abroad, there must be international agreements, and they are missing. The Netherlands is one of the few countries that distributes these kinds of fines – many are not paid.” In fact, van Weeren points out that since 2012, the KSA has imposed fines amounting to €1.69m. Yet just €530,000 has been collected.
Flying below the radar
According to Bas Jongmans, a Dutch lawyer at Gaming Legal Attorneys, it appears to be an arbitrary decision as to which operator the regulator sanctions. “It’s symbolic politics – they need to show they are tough,” he asserts. Indeed, he says the regulator seems to simply pick on the more compliant and respectable international operators rather than targeting the “more covert” overseas sites.
“The covert websites – guys who are so smart not to show up on the radar of the regulator – see that this Dutch regulator doesn’t have any capacity [and] no intelligence whatsoever to provide a stable, regulatory regime,” Jongmans states. “They probably should be aiming at the more covert companies, although they cannot be as easily fined as respectable parties like Mr Green.” He also criticises investigations into gambling websites featuring typical Dutch symbols. “The colour orange, windmills, wooden shoes… that’s a ridiculous way to establish if someone is focused on Holland.”
Besides the financial penalties and knock-on effect to share prices for listed companies, the harm to reputation is perhaps the most damaging repercussion, Jongmans suggests. “It’s not really about the fines, [although] a few hundred thousand euros is a lot of money, of course. It’s far more important for respectable companies that the Dutch regulator respects their privacy. They just put it on the internet and it’s out there, so this is the real fine, the real punishment. It’s out there, but what can you do? It’s shared [online] and the damage has been done.”
In its defence, Betsson and Corona stressed that its operations “comply with applicable laws and regulations in the absence of an EU-compliant gambling legislation in the Netherlands”. Meanwhile, MRG argued that Dutch gambling policy was inconsistent with EU rules on the restriction of trade and that Mr Green had complied with Dutch guidelines, except for the use of IP blocking.
The operator said geo-blocking was expensive and complicated, would violate privacy regulations, and that most gaming firms do not adhere to this practice in the Netherlands. The KSA acknowledged that it does not oblige Mr Green to apply IP blocking; only that the operator complies with the law. A simple way to prevent offering games of chance in the Netherlands would be to apply geo-blocking, the KSA noted.
Furthermore, the regulator discovered during its investigation between 13 July and 7 November 2017 that the Nasdaq Stockholm-listed operator offered a Dutch language version of the site, had Dutch-speaking customer support, and accepted payments using iDEAL.
Persona non grata
The Dutch market accounts for around 6% of MRG’s total revenue, so it’s impact on profitability is “insignificant”, the company suggested in a statement responding to the KSA’s ruling. (Q2 revenue from the Netherlands amounted to roughly SEK26m). Even so, MGR voiced concerns during the investigation that punitive measures would impact the company’s chances of obtaining a remote gaming licence once legislation passes.
“The imposed fine will make obtaining a future permit more difficult, if not impossible,” van Weeren notes. “The Bill on remote gambling shows that an integrity assessment takes place before the application for the granting of a permit. Providers who have violated the rules in the past in the Netherlands may no longer be eligible for a permit.” Meanwhile, Jongmans sums up the situation bluntly: “Pissing off the Dutch regulator is probably not going to improve any chances of getting a licence.”
What appears more likely now, though, is a ‘bad actor’ clause will be included in legislation rather than an outright ban similar to the so-called Bouwmeester motion (first adopted in 2011) that permanently shuts previously sanctioned operators out of the Dutch market. Indeed, the Minister of Justice and Security, Sander Dekker, recently said the regulator would be asked to create a policy that allows penalised operators to apply for egaming licences after a certain period of time.
Law and order
In the meantime, key stakeholders are desperately waiting for egaming regulation, which would complement the €2bn in legal turnover generated annually by the land-based industry in the Netherlands. The government moved to modernise the Betting and Gaming Act back in 2010, yet 2016’s Remote Gambling Bill, while approved by the lower house of the Dutch parliament, still hasn’t been given the green light by the Senate. Willem van Oort, founder of Gaming in Holland, a leading business community for gambling, urges lawmakers to expedite the process.
“There are one million [Dutch] players at the moment, [so] bringing them into a regulated environment is a win-win situation – better protection for the players, better control over the operators by the KSA, and more tax income.” He adds: “It’s time for all decision-makers to make that happen sooner rather than later.” Others, though, aren’t holding their breath. “There is no end in sight for the introduction of online gaming in the Netherlands. Advancing online gaming is going nowhere,” Jongmans concedes.
As for the time being, MRG and Betsson have vowed to appeal their fines. Like all operators sanctioned by the regulator, the Swedish duo each have a six-week window to lodge an appeal. Yet, van Weeren doesn’t think they have much chance of succeeding. “Given the circumstances of the cases, I consider the chance of success not very high.” So, it seems, both ran the risk of being caught in the regulator’s net and look set to pay the price. However, the biggest cost will probably be the fact they’ll be locked out of the market for an undetermined period when regulated egaming eventually launches – whenever that may be.