The European Union put legal and ethical BetFair in the same bag as the black ducklings of Internet betting and gambling.

BetFair (PDF file):

BETFAIR CORPORATE STATEMENT ON THE SCHALDEMOSE REPORT

On 10th March there was a vote in the European Parliament by the Committee on Internal Market and Consumer Protection (IMCO). It voted favour of the Own Initiative Report produced by Danish MEP Christel Schaldemose – widely known as the ‘Schaldemose Report’ (SR). The report endorses the use of barriers to trade across Europe despite European law, under Article 49 of the EU Treaty, stating that EU operators should have the freedom to provide cross-border services.

You may have read strident and alarming reports about this, in particular that it is disastrous news for the online gambling industry. Unquestionably, it is disappointing that the report ignored the evidence of its own underlying study; that so few MEPs have engaged in the issues or appear to understand them; and that every single UK Labour MEP voted for the report. However, it is not the disaster it has been painted.

The following article was written by Betfair outlining its position in relation to the online gambling market within the EU:

‘APPLES AND ORANGES’: Parliament Magazine, November 2008

The European online gambling debate is not making much progress. At the heart of it, people claim to be looking to compare monopoly apples with regulated apples to find out which, if either, is better. In reality, however, they are comparing monopoly apples with illegal and unregulated oranges; and to make matters worse, they are putting the legal, licensed, European apples in the orange basket. Never has this been clearer than in the Schaldemose report (SR) currently being debated in IMCO, which makes a distinction between state-sponsored gambling and state-regulated gambling.

This is unfair and entirely arbitrary. The first is offered by the state itself; and the second is offered by private companies under licence from the state. Both, therefore, adhere to standards of regulation set by government in consumer protection and crime prevention. Both are accountable to an EU regulator or government, irrespective of their ownership structure. Yet, bizarrely, the SR links one to criminal activity and puts the other on the side of the angels. Dangers which relate to illegality and the failures of regulation are therefore wrongly linked to private online gambling operators.

The error of this is clear in a different context. If the EP were seeking to establish, within the pharmaceuticals industry, whether companies which are owned privately fail to maintain standards set by those which are in public (state) ownership, it would not start by equating licensed European operators to illegal drugs cartels. But the Schadelmose report blackens the regulated gambling industry in Europe with the unregulated industry further afield, making no distinction between gambling operators which are licensed by (and operate legally in) some Member States and those which operate, often unlicensed, from elsewhere in the world.

This fundamentally undermines the report…It is no great insight to suggest that illegal criminal activity is dangerous and damaging, or can breed corruption and danger; nor that there is a threat to EU citizens from unregulated and unlicensed companies engaging in criminal activity in any industry. But this is not the issue up for debate. The issue is whether standards regarding player protection, anti-money-laundering measures, protecting sport from corruption, keeping out crime and protecting consumers are higher, lower, or the same in the regulated industries and the monopoly industries.

A parallel report commissioned by IMCO from Europe Economics (EER) to provide some basic factual background does address the key questions: Is illegal activity prevented, facilitated, or exacerbated by monopoly systems of licensing? And do regulated systems of licensing reduce criminal behaviour by making it less likely that illegal operators will flourish? But if you read both the EER and the SR, you would be hard-pressed to realise that the two are in any way connected: not a single substantive point from the EER, nor any of the empirical evidence on which it is based, is included in the SR. And the series of counter-claims made in the SR, without any evidence being presented to support them, are predicated on the fundamental and misleading confusion of the regulated online industry with the illegal industry. The fact is that most European Member States have gambling industries; and to put those of one or two Member States on the same side as the criminals simply prevents the proper issues from ever being discussed.

If I wrote a report on the fidelity of politicians, and lumped an arbitrary half of Europe’s representatives in with despots like Robert Mugabe on the grounds that he also claims that job description, there would be an outcry. And yet consider this: my company is a bona fide British-licensed multi-award-winning organization which employs over a thousand people the EU, and abides by the EU’s 3rd Money Laundering Directive. Yet some people freely maintain that we are a money-laundering risk, and the EP has produced a report which links us to criminality. Where’s the logic in that? And how are we ever going to have real and effective regulation aimed at reducing crime and improving the protection of consumers if that is the level of the debate?