European Court of Justice rules in favour of Italy’s Lotto concession model

On 19 December 2018, the European Court of Justice (ECJ) confirmed that Italy’s “sole concessionaire model” for managing the concession for its computerised national lottery and related fixed-odds numerical games (the Lotto) and the conditions for its tender in 2016 complied with EU law. This decision provides strong support for the exclusive concession model and certain tender conditions for national lotteries and clarifies when relevant national rules are consistent with the Treaty on the Functioning of the European Union (the TFEU).

Background

In Italy, the Lotto is regulated under a dual system of concessions which distinguishes between the exclusive concession for the management of the Lotto, for example drawing lottery numbers and computerised management of the sales network, and the multiple concessions available for the sale of Lotto products. Anglo-Maltese Stanleybet challenged the Italian national gaming authority (the ADM) in relation to its tender in 2016 for the exclusive concession which was won by a consortium led by Italian IGT-Lottomatica.

Challenge

Stanleybet challenged the (1) sole concessionaire model and the tender conditions for participation, namely (2) the high basic contract value and (3) a condition which enabled the ADM to withdraw the concession if the concessionaire committed an indictable offence which ADM considered precluded its reliability, professionalism and moral quality, or if the concessionaire infringed licensing requirements or rules on the prevention of irregular or unlawful and covert gaming. Stanleybet argued that these were excessive and constituted a means of dissuading participation in the tender, thereby restricting market access.

Stanleybet’s case was referred to the ECJ by the Italian Council of State to make a preliminary ruling on the interpretation of EU law in relation to Italy’s Lotto concession rules, in particular the right of establishment (Article 49), the freedom to provide services (Article 56) and certain fundamental principles under the TFEU.

Preliminary Ruling

The ECJ ruled in favour of the ADM and Italian Council of State. It held that the right of establishment and the freedom to provide services (and the principles of non-discrimination, transparency and proportionality for question 2) do not preclude rules allowing for:

1. a sole concessionaire model, provided that national rules actually pursue a legitimate aim in a consistent and systematic manner. Following previous EU case law, the ECJ confirmed that consumer protection and the prevention of fraud and incitement to squander money on gambling (and not administrative inconvenience and economic reasons) were overriding public interest reasons to restrict the rights under Articles 49 and 56 in relation to the specific market of games of chance.
2. a high basic contract value which is unjustified in relation to economic and financial standing, and technical and organisational ability, provided that the value is objectively justified and formulated in a clear, precise and unambiguous manner.
3. the withdrawal condition, provided it is transparent, justified and proved to be proportionate to the objective pursued.

The ECJ confirmed that, to be transparent, tender conditions must be clear, precise and unambiguous to enable all reasonably informed tenderers exercising ordinary care to understand their scope and application in the same way, and to circumscribe the regulator’s discretion and enable it to ascertain effectively whether the tenders submitted satisfy the criteria applying to the relevant procedure.

Comment

The ECJ's ruling provides clear support for the sole concessionaire model for concessions for games of chance, such as national lotteries, across the EU. Of further interest and wider implication, it raises the prospect of, and underpins, even stricter conditions in future gambling licensing tenders in line with increasing regulation in the sector across the EU to promote and enforce consumer protection. While the outcome of the Stanleybet case will be determined by the Italian courts in time, (prospective) licensees should take note now of the clear guidance from the ECJ to European gambling regulators on how they may legally pursue stricter regulatory objectives in gambling procurement.

Co-authored by James Colvin.