Austria: ECJ confirmed the Legality of Cross-border Advertising Restrictions

In a judgment handed down on 12 July 2012, the European Court of Justice has confirmed that the restrictions in Austrian gambling legislation, which potentially restricts the advertising to Austrian citizens of casino services supplied by land-based casinos located in other Member States, are not necessarily in contravention of the EC Treaty’s provisions provided such restrictions have the sole aim of protecting consumers.

The Federal Law on gaming (Glücksspielgesetz) of 28 November 1989 (the “GSpG“) includes a requirement for any casino located outside of Austria that wishes to advertise in Austria to obtain a permit from the Federal Ministry for Finance. Such a permit will only be granted when that casino operator can demonstrate to the Ministry’s satisfaction that:

(a) the licence to operate the casino conforms to certain corporate establishment and structural related requirements; and

(b) the legal provisions for the protection of gamblers adopted by the Member State in which the casino is established, “at least corresponds to the Austrian provision” (extract from Paragraph 56 of the GSpG).

Two local casino opertors established in Slovenia, Hit and Hit Larix, wished to advertise to Austrian citizens and applied for permits under the provisions laid down in the GSpG. Those applications were rejected by the Ministry on the grounds that the applicants had not shown that Slovenian levels player protection were comparable to the levels required in Austria. Hit and Hit Larix brought an action against those decisions stating that they were in breach of the right to provide services throughout the European Union.

The Austrian referring court questioned whether a restriction might be justified for overriding reasons of serving the public interest, provided that they were proportionate. In attempting to establish whether the restriction was permissible under the EU law, the referring court asked the following question of the European Court of Justice:-

“Is legislation of a Member State which permits the domestic advertising of casinos located abroad only where the legal provisions in those foreign locations for the protection of gamblers corresponds to the domestic provisions compatible with the freedom to provide services?”

It was accepted by the Court that the need to satisfy certain conditions constitutes a prima facie restriction on the freedom to provide services since it impedes the access of consumers resident in Austria to services offered by suppliers legitimately established in other Member States.

It does this by:-

“making the promotion in Austria of those activities subject to an authorisation scheme which requires, in particular, the operator of the casino concerned to prove the legal provision for the protection of gamblers adopted in the Members State where that casino is operated at least corresponds to the relevant Austrian legal provisions (referred to in the judgment as “the contested condition”)(Paragraph 18)”.

Citing various case law all now well-known to sector stakeholders (including Carmen Media (C-46/08), Sjoberg (C-447/08) and Santa Sasa (C-42/07), the Court confirmed, in a clear and concise way, the tests for determining whether a restriction of the freedom to provide services was justified in the context of the provision of games of chance. The Court confirmed:-

“The restrictions imposed by the member state must satisfy the conditions laid down in the case law as regarding to their proportionality that is to say, be suitable for assuring attainment of the objective pursued and not go beyond what is necessary in order to achieve that objective……in any event the restrictions must be applied without discrimination”

It is not in dispute that the Austrian law and, in particular, the contested condition were capable of constituting an overriding reason in the public interest to justify restrictions and freedom to provide services.

In several paragraphs (26 to 29), the judgment considered the restrictive nature of the monopolistic Austrian regime and the purported way that system has led to a reduction in gambling activity. The Court considered that limiting the advertisement in Austria of casinos located abroad, where the level of protection is considered to be incomparable with that provided in Austria, would be justifiable. It was accepted if restrictions were not directly related to the “protection against the risk of gaming” then the restriction would be disproportionate and prohibited.

Therefore, the Court confirmed that the restriction, in itself, was permissible provided that its sole aim was the protection of gamblers and no other restrictive purpose.

What now?

The cases now go back to the Austrian courts. The ECJ clearly stated that it is up for the Austrian courts to satisfy themselves that the contested condition is limited to pursuing a socially responsible agenda of player protection.

The Court emphasised the need for the Austrian courts also had to be satisfied that none of the elements of the contested condition (such as the minimal level of share capital) go beyond achieving an aim of consumer protection.

What does this mean?

The judgment eloquently restates the ECJ’s stance on the ability for Member States to restrict gaming operators from other Member States targeting their citizens if such restrictions were established in pursuance of protecting consumers. In that respect, is not really a surprise.

It will be interesting when the case goes back to the Austrian courts to see whether they do, in fact, satisfy themselves that “contested condition” was limited to the protection of individuals or whether any of the corporate structural requirements serve any wider protectionist purpose.

We will also wait to see what kind of evidence may be adduced to the Austrian court to illustrate whether (or not) Slovenia does, indeed, offer players a lower level of protection than that offered in Austria.

Furthermore, time will tell if the judgment is used as a basis for any other Member States to further embolden their own restrictive regimes when their citizens are targeted by gaming operators established outside their borders.

Read the full judgment here.