Monopolies Commission attacks German State Treaty

The German Monopolies Commission (Monopolkommission) has become the latest body to attack the controversial State Treaty on Gambling, concluding that a “fundamental overhaul” is necessary.

In a statement the Monopolkommission explained that the Treaty amounted to an “attempted monopolisation” of the market which is ineffective in combating gambling addiction. Under its terms, 20 sports-betting only licences will be issued to private operators, who will then be subject to a 5% tax on turnover, with online poker and casino banned, while lottery operators will be taxed on around 20% of turnover, effectively making it all but impossible for private operators to complete with the newly-formed national lottery, Gemeinsamen Klassenlotterie der Länder (GKL).

The 20% turnover tax imposed on lottery operators was condemned and described as “significantly suppressing” competition to State-owned organisations, which the Commission recommended by scrapped and replaced by private suppliers which are selected through a tender process. It explained that it “sees no sufficient reason why the sale of lottery products may not be socially acceptable in the private sector. State lottery operators should therefore withdraw from lottery sales, and private sales sites should be monitored by regulators by the granting of concessions.”

Speaking out against sports betting legislation, the Monopolkommission described the market as being “only partially liberalised,” condemning the restricted number of licences and the high rate of tax. The Commission goes as far as to advise the German Länder which signed the treaty to “follow the example of Schleswig-Holstein” in changing the tax rate to 20% of gross profit, and to scrap the limit on the licences, on the basis that fewer licences will have no effect on curbing gambling addiction.

The Monopolkommission also pointed out that the relaxation of advertising restrictions is inconsistent with measures to prevent addiction from developing, with the promotion of certain products less restricted than others.

It comes just over a week after the Treaty; signed by 15 of the 16 Länder in December last year with Schleswig-Holstein the only exception, came into force. Despite a number of revisions, the terms of the Treaty were strongly criticised by the European Commission in March this year. The EC explained that any restrictions imposed on egaming must be suitable and proportionate to satisfy the objectives of State law, but in Germany’s case the justifications for the terms of regulation were not clear.

While no clear plans for enforcing the State Treaty have been announced, and the process for private operators to apply for one of 20 sports betting licences not expected to open until the autumn, overseen by the central Land of Hesse, 188Bet has already announced its decision to withdraw from the German market, becoming the first operator to do so. It is unknown whether others are looking to follow, but bwin.party yesterday announced that it will continue to operate in the market until the licensing process begins, paying the 5% turnover tax on operations ““ a move which is expected to see group EBITDA fall by up to €10m in its full-year results.

Despite the Monopolkommission becoming the latest body to criticise the Treaty, a source close to the matter explained that its complaints were only likely to have “a limited effect”:

“On first impression, the Commission is an independent advisory board, and does not have a significant impact. I wouldn’t expect the comments to be ignored, but the government has no duty to react to this challenge.

“Many will say that it should have made these comments when the Treaty was originally put before parliament, but at least its comments are interesting. It will kick off some discussion, but there is no need for any government body to react,” eGR‘s source explained.

(Photo courtesy of ‘Luukas’ – obtained via Creative Commons)