Brussels, 22 Jaruary 2014 Case No: 73436 EventNo: 693160 Dec. No: l4ll4lCOL
Ministry of Culture Postboks 8030 Dep N-0030 Oslo Norway
Dear Sir or Madam,
Subject:
Leffer of formal notice to Norway for establishing an authorisation procedure in the field of lottery contrary to Articles 3L and 36 of the EEA Agreement
I Introduction letter dated 6 March 2013 (Event No 664971), the EFTA Surveillance Authority (the "Authority'') informed the Norwegian Government that it had received a complaint against Norway regarding the authorisation procedure in order to organise lotteries in Norway.
l.By
2. After having examined the complaint, the Authority considers that by maintaining in force the national rules, Norway has failed to fulfil its obligation arising from the freedom of establishment (Article 3l EEA), and the free movement of services (Article 36 EEA).
2
Correspondence
3. On 27 February 2013, the Authority received a complaint against Norway concerning the authorisation procedure to set up a lottery for private operators. According to the complainant, the authorisation procedure under Norwegian law is not designed and conducted in accordance with EEA law requirements and the case law on the freedom of establishment and free movernent of services.
4. On 28 May 2013, the Authority sent a request for information (Event No 672964) in order to investigate on the Norwegian lottery's legislation. 5. On 24 J:gIrIe 2013, the Norwegian Government requested an extension to the deadline to the request for information. On 25 June 2013, the Authority granted the extension.
6. On 4 July 2013, the Norwegian Govemment replied to the Authority's initial letter (Your Ref:t:f tOZ7, Event No 677915). In the letter, the Norwegian Government provided information on a number of specific issues regarding the Norwegian legislation. 7. The reply from the Norwegian Government raised other issues. On 6 September 2013 the Authority therefore sent a letter inviting the Norwegian Government to provide additional information (Event No 682063).
Rue Belliard 35, 8-1040 Brussels, tel: (+32)(0)2 286 18 I
l, fax
(+32)(0)2 286 l8 00, www'eftasurv'int
8. On 7 October 2013, the Norwegian Government replied to the Authority providing all the requested information (Event No 685900).
9. On 22 November 2013, the case was discussed at the package meeting.
Relevant national law 10. The Norwegian Penal Code (Straffeloven)r sections 298 and,299 explicitly prohibits
offgring all kinds of games of chance to the public, without a licence granted under specific conditions in statutory law. There are three acts that comprise the framework of the statutory exceptions.for game of chance: the Norwegian Lottery Act2, the Gaming Act3 and the Totalisator Act.a
11.The Gaming Act covers all games held by the govemment owned company Norsk Tipping. The scope of the Gaming Act covers gambling in connection with sports and other competitions, numbers game and gaming machines.5 The Totalisator Act regulates betting and gambling in connection to horseracing.6 12. The complaint concerns the Norwegian Lottery Act (the "Lottery Act"). The other legislation is not relevant for this case.
Act covers all forms of games and lotteries offered by private operators. The Lottery Act does not regulate govemment lotteries or gaming schemes run by Norsk Tipping. These activities are regulated in separate statutory legislation.T The purpose of the Lottery Act is to ensure that lotteries are under govemmental control, with the aim of preventing the negative social consequences of lottery, and to make sure that lottery stays a reliable source of income for charitable and humanitarian organisations.s 13. The Lottery
14. Section l, first paragraph a) of the Lottery Act defines lottery as any activity where the participants can, against payment of a stake, win prizes as a result of a random draw, guessing or other method that in whole or in part provides a random result.
15. Section 7 of the Lottery Act specifies which lotteries can be held without a lottery this includes certain cash prize and lottery games with a turnover up to NOK 200
licen_ce,
000.e
16. Section 6 of the Lottery Act provides that lottery cannot be held without a licence.r0 Section 6, second paragraph specifies that lottery licence may be awarded to nationwide, regional or local, organisations or associations that through their business safeguard the pu{pose of lottery, which is to raise money to charitable and humanitarian purposes.'l Section 4 provides that the Gaming Authority is in charge of issuing the lottery licences, and to supervise that lotteries are held within the purpose and function of the Lottery Act and the Lottery Regulation.12
' Original title: Lov av 22.Mai 1902 nr. l0: Almindelig borgerlig Straffelov. Original title: Lov av 24.Februar 1995 nr. I I om lotterier m.v.3 Original title: Lov av 28. August 1992 w.103 om pengespill. o Origirral title: Lov av l. Juli 1927 w.3 om veddemil ved totalisator. 5 Section I of the Gaming Act. 6 Section I of the Totalisator Act. 2
7
Section 3 of the Gaming Act. Section 1a of the Lottery Act. e Section 5-l of the Gaming Authority and Lottery register Regulation (original title: Forskrift" av 2l Desember 2000 nr. 1366 om Lotteritilsynet og Lotteriregisteret). r0 Except for lofteries governed by Section Z of tne Lottery Act. " See Section 5 of the Lottery Act. 12 Original title: Forskrift u, i4.F"bruur l995 nr. 185: forskrift til lov om lotterier m.v. 8
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for obtaining a lottery licence are provided by the Lottery Regulation.r3 Section 6 of the Regulation gives the Gaming Authority the power to determine the general conditions under which a lottery authorisation can be granted. Unless the Gaming Authority decides otherwise, Section 6 sets out 12 general conditions 17. The terms and conditions
under which a lottery licence can be granted.
to section 5 of the Lottery Regulation, the Gaming Authority's ability to grant licences is limited to lotteries of a certain size and of a certain type. Section 5 requires first of all that the Lottery ticket sales must not exceed NOK 100 mill, that the 18. Pursuant
lottery's main gain does not exceed NOK 2 mill, and that the sale period does not exceed 12 months. Second, Section 5, second paragraph, provides that in the case of lotteries with a cash pize, a licence can only be granted to bingo events approved by the Gaming Authority, lotteries where the Gaming Authority or the Ministry of Culture makes a draw after the sales period, pre-drawn scratch cards where the main gain does not exceed NOK 1 millla, or lotteries with a licence pursuant to Section 7 of the Lottery Regulation. Individual decisions made by the Gaming Authority by virtue of Section 6 of the Lottery Regulation may be appealed to the Lottery Appeals Board.rs 19. In special cases, the Gaming Authority can issue a lottery licence to lotteries that do not fulfil the requirements by virtue of Section 5. Lotteries with a tumover expected to exceed NOK 100 mill can apply for a licence. Section 7 provides a list of criteria to be fulfilled by the lottery for which a lottery licence is applied for. The criteria seek to ensure that 50o/o of the lotteries turnover goes to a humanitarian or charitable purpose, and that the lottery is held in proper forms. The lottery licence issued by virtue of Section 7 is limited to 3 years, but on the condition that it can be revoked if it is proven to have negative effects on health or social issues.16 The right to hold a lottery by virtue of Section 7 is uttimately dependent on the Gaming Authority's assessment, and consent from the Ministry of Culture." There is today only one lottery that has been issued a.licence by virtue of Section 7 of the Regulation, the ilorwegian Pantelotteriet ("Panto").18 Individual decisions made by the Ministry of Culture may be appealed to the King.
4
Relevant EEA law
20. Article 3l(1) of the EEA Agreernent states that:
of the provisions of this Agreement, there shall be no restrictions on the freedom of establishment of nationals of an EC Member State or
1. Within
the framework
an EFTA State in the territory of any other of these States. This shall also apply to the setting up of agencies, branches or subsidiaries by nationals of any EC Member State or EFTA State established in the territory of any of these States. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of Article 34, second paragraph, under the conditions laid down for its own nqtionals by the law of the country where such establishment is effected, subiect to the provisions of Chapter 4. 13
Section 3 of the Lottery Act. Regulation of 24 February 1995 no 185 concerning the Lottery Act (Forskrift
til lov om lotterier m.v la
The pre-drawn scratch card lotteries Regulation (Forskrift om forhindstrukne lotteries med skrapelodd). Section 4a of the Lottery Act. 16 Section 7, fust paragraph, litra 0 of the Lottery Regulation. r7 Section 7, frst paragraph of the Lottery Regulation. " Answer to the second request for information, 7 October 2013, Your ref. l3ll027 MEA43 RFS:elt, p. 4, Event No 685900. rs
21. Article 36(1) of the EEA Agreement states that:
Within the framework of the provisions of this Agreement, there shall be no restrictions on freedom to provide services within the territory of the Contracting Parties in respect of national of EC Member States and EFM States who are established in an EC Member State or an EFTA State other than thqt of the person for whom the services are intended.
5
The Authority's assessment
5.L Differences with previous chance in Norwav
cases adopted
by the EFTA Court regarding qames of
22. As a preliminary remark, the Authority would like to point out the differences between the current case and cases E-1106 (Gaming Machine case) and E-3106 (Ladbrokes case).re The Authority considers that there are two decisive elements which differentiate this case from the two former cases. 23. First, the previous cases concerned other tlpes of games of chance. In the Gaming Machine case, the EFTA Court had to deal with the Norwegian legislation related to slot machines. In the Ladbrokes caso,'o the request for advisory opinion arose in the context of a lawsuit over administrative decisions rejecting permission to operate and provide sports gaming, betting on horse and dog racing, betting on special events and random number games in Norway (betting activities).
24. The EFTA Court has acknowledged that different national measures could be developed by Member States depending on the type of games of chance;'oas the objectives pursued may not apply equally to all gqmes of chance covered by the Gaming Act, it may also be necessqry to distinguish between the dffirent games." 2r
25.The danger of lotteries cannot be compared with the danger of gaming machines and/or betting activities. Indeed, in the Gaming Machine case, the EFTA Court held that "(...) gaming machines are more dangerous in terms of leading to gambling adcliction than other garyes lawfully offered on the Norwegian market".22 Moreover, in the Ladbrokes case'3, the issue concerned large scale activities linked to betting activities, as well as the permission to actively provide and market the games which are offered from abroad on Ladbrokes' internet portal, with specific web pages targeted especially at the Norwegian market. 26. Therefore, it is essential to put the focus on games with comparable effects with respect to the negative impacts on consumers. The previous jurisprudence of the EFTA Court should therefore read in light of the games of chance under examination in those cases. Lottery is a special activity which can hardly be compared to gaming machine or betting activities. The possibility to become addicted to lottery is marginal. In addition, the development of illegal activities at national level involving lotteries is limited. Norway has explicitly acknowledged this difference in the Ladbrokes case.'o
E-l/06 EFTA Surveillance Authority v. The Kingdom of Norway EFTA Ct. Rep. [2007] p.8; Case ELadbrokes Ltd. v The Government of Norway, Ministry of Culture and Church ,lfiirt oia Un**y o7 p.86. fgriculture and FoodEFTA Ct. Rep. [2007] -Ct. nep. 1ZOOZ1 p.SO. '0 Case E-3106 Ladbrokes Ltd Ef'fa " Case E-3106 Ladbrokes Ltd. EFTACt. Rep. iZOOZj p.SO, paragraph52. " Case E-1/06 EFTA Surveillance Authoiity ,. fh" Kingdim'of Norway EFTA Ct. Rep. [2007] p.8, paragraph45. '3 Case E-3106 Ladbrokes Ltd. EFTACt. Rep. [2007] p.86. 'o Case E-3106 Ladbrokes Ltd. EFTACt. Rep. [ZOOZ1 p.AO, paragraph 57.
"
Case
3106
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27. Second, the previous cases concemed games of chance which were part of the State monopoly. In the Ladbrokes case,2s the request for granting a licence had been rejected because the field was operated exclusively by the State gaming company Norsk Tipping. The Gaming Act does not allow for the granting of licences to other operators: "the wholly State-owned gaming company Norsk Tipping AS has the exclusive right to operate gaming schemes in connection with sporting events, such as the football betting game Oddsen, and in connection with other competitions. In addition, the [Gam!1tgJ Act grants Norsk Tipping the exclusiv_e right to operate the numbers game Lotto".26 tn the case related to Gaming Machine,2T the litigation started because Norway decided to introduce an exclusive right for Norsk Tipping to run gaming machines. 28. In the current case, the field is governed by the Lottery Act and the Lottery Regulation which specifically allow the issuance of licences to private operators. The national legislation gives the possibility for private entities to develop and offer lotteries on the Norwegian market.
29. Consequently, there is no monopoly in the field of the Norwegian lottery market and Norsk Tipping does not have any exclusive right. The lotteries organised by Norsk Tipping compete with the lotteries from private operators. The market of lotteries is open to competition and governed by a restrictive legislation obliging private operators to request a prior authorisation.2s This case therefore does not aim at challenging the national monopoly of Norsk Tipping, but concerns the application of internal market rules to the market of lotteries in Norway.
5.2
The freedom to provide services and the freedom of establishment
5.2.1 The scope 30. Lotteries are considered as a service according to Article 37 EEA and fall within the scope of Article 36 of the EEA Agreement.2e 31. Regarding the application of the secondary legislation, Directive 2OO6ll23lEC30 lthe "Seryices Directive") is not applicable because its scope does not cover: "gambling activities which involve wagering a stake with pecuniary value.in games of chance, including lotteries, gambling in casinos and betting transactions;"." 32. There is no other harmonising sector specific legislation at EEA and EU level. 33. As a matter of consequence, the complaint is analysed under Article 31 of the EEA Agreement and under Article 36 of the EEA Agreement. assess the compatibility of the relevant principle free movement of services and freedom of of under the national legislation both
34.In the analysis below, the Authority will
's Case E-3106 Ladbrokes Ltd. EFT A Ct. Rep. [2007] p.86. 'u Case E-3106 Ladbrokes Ltd. EFTACt. Rep. [2007] p.86,patagtaph25. " Case E-1106 EFTA Surveillqnce Authority v. The Kingdom of Norway EFTA Ct. Rep. [2007] p.8, paragraph l. 28 Reply to the first request for information, 4 July 2013, Your ref. l3ll027 ME/M3 AsZa:MK, Event No 677915. "30 Ca." C-275192 Schindler ll994l ECR I-1039, paragraph 14. Directive 2O06ll23lEC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ L 37 6, 27 .12.2006, pp. 36-68 as incorporated in the EEA Agreement by Joint Committee Decision 4512009 of 4 April 2009, as adapted to the EEA Agreement by Annex X. 3' Article 2$2h of the Services Directive.
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establishment in parallel. In the Ladbrokes case, the EFTA Court ruled that "in a situation at issue, the case is to be examined under both provisions in parallel-.32
such as the one
35. The only significant difference, between the application of the freedom to provide services and the freedom of establishment, concerns the analysis of the proportionality of the measure. In the case of freedom to provide services, the Authority considers that Norway shall take into consideration the controls operated in the country of origin of the company.
5.2.2
The existence of a restriction
36. The Authority considers that the Norwegian legislation is non discriminatory. However, the EFTA Court and the Court of Justice of the European Union (the "Court of Justice") have held that Articles 31 and 36 of the EEA Agreement require not only the elimination of all discrimination based on nationality or place of residence, but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other States party to the EEA Agreement.33 37. Norway obliges private operators to request for a prior authorisation if they want to launch a lottery. In the field of games of chances, the Court of Justice has stated that prior authorisation mechanisms constitute a restriction on the establishment of the intemal market.3o However, such obstacles to trade can be justified by legitimate objectives.3s 38. In the current case, the Authority does not challenge the requirement of a prior authorisation from the administrative authorities but is of the opinion that the conditions set in order to obtain such authorisation amount to a restriction to the freedom to provide services and the freedom of establishment. 39. First, the type of lottery which can be organised in the territory is considerably limited. Section 6 of the Lottery Regulation lists the conditions necessary to be fulfilled to start a "normal" lottery (Section 6 authorisation). Section 7 of the Lottery Regulation which derogates to Section 6 states specific conditions for the establishment of "specific lottery" (Section 7 authorisation). The Norwegian legislation restricts the freedom to provide services by rendering the organisation of some lotteries more cumbersome than necessary. Norway creates an unnecessary obstacle for the development of the lotteries' market in Norway.
40. Second, the list of conditions of Sections 6 and 7 of the Lottery Regulation is an open list. The Norwegian authorities may add, at their discretion, additional conditions to be fulfilled in order to grant a licence. This has been confirmed by the Norwegian Government:"Pursuant to $lj of the Lottery Act, the GamingAuthority may decide on specific conditions fo, o lottery. The general conditions are set out in 56 of the Lottery Regulation. The Gaming Authority may also decide on other conditiins".36 The same applies to Section 7 "the Ministry may consider the criteria listed in $ 7(l)a).fl, as
"
Case E-3106 Ladbrokes Ltd. EFTA Ct. Rep [2007].p.86, paragraph 40; Case C-4l}lll SIA Garkalns 12012) not yet reported, paragraph 29 . 33 Case E ll}3, EFTA Surveiilaice Authority v. Iceland,EFTA Ct. Rep [2003] p. l43,paragraph28. 'o Case C-47\lll SIA Garkalns l2Ol2l not yet reported, paragraph'3,4. Case C-338/04 Plicanica I2OO7I ECR I- I 89 lparagraph 42. " Case C-470/ll SIA Garkalns l2Ol2l not yet reported, paragraph 36 and Case C-42/07 Liga porruguesa [2009] ECR I-7 633, paragraph 57 . 36 Answer to the flrst request for information, 4 July 2013, Your ref. l3l1027 MEA43/ AsZa:MK, p. 5, Event
No 677915.
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described above under question 11.2. The Ministry may also take other criteria into '. ,,37 . consweranon'
As a matter of consequence, economic operators do not know in advance which conditions have to be fulfilled in order to be granted an authorisation. The legal
41.
uncertainty is an important element which might deter foreign operators from seeking a lottery licence in Norway. These elements run against the principle of legal certainty and create an obstacle to the freedom to provide services and to the freedom of establishment.
Third, as part of the licensing process, private operators must be selected by the Gaming authority (for lotteries entering into the scope of Section 6), and the Ministry of Culture (for lotteries covered by Section 7). However, it is important to note that these two bodies are directly involved in the management of the activities of Norsk Tipping. This has been confirmed by the answer provided by the Norwegian Government to the request for information: "Norsk Tipping is fully owned by the Norwegian Government, represented by the Minister of Culture. The company reports to the Ministry of Culture via the General Assembly and according to a scheduled dialogue with the Ministry in relation to thet Ministry's supervision and control of the company. The Gaming Authority supen,ises that the gaming activities of Norsk Tipping meet the requirements of the rilevant Acts and Regulations."38 Norsk Tipping organises lotteries which are in direct competition with lotteries developed by private operators. 42.
43. Such dual role can only lead to a conflict of interest to the detriment of private applicants. The lack of independence of the authorities in charge of selecting candidates has to be considered as an obstacle to the freedom to provide services and to the freedom of establishment. The Court of Justice has already considered the conflict of interest inherent in such a dual role is contrary to the internal market's fundamental freedorns.3e 44. Fourth, if Norsk Tipping wants to launch a new lottery, it has to follow different rules to the ones applicable to private operators. All new games that Norsk Tipping wishes to offer rnust be approved by the Kng, based on a proposal from the Ministry of Culture. Furthermore, the Ministry of Culture decides on gaming regulations for each individual game that Norsk Tipping is operating.oo [n case of lotteries organised by private operators, they have to follow obligation set in Sections 6 and 7 of the Lottery Regulation. 45. This difference of treatment has to be considered as a restriction to the freedom to provide services and the freedom of establishment.
46.lt follows from the above that the Norwegian legislation, by limiting the types of lottery, by imposing an open list regarding conditions to be fulfilled in order to obtain a license, by involving the supervisory authorities controlling Norsk Tipping in the authorisation procedure and by applyng different rules in the authorisation of lotteries organised by Norsk Tipping, has to be considered as a restriction under Articles 31 and 36 of the EEA Agreement.
Atticles 31 and 36 of the EEA Agreement require the abolition of all restrictions even if those restrictions apply without distinction to national providers of services and to those from other Member States. Therefore, if a national measure is liable to prohibit, impede or
47
.
" Answer to the first request for information,
4 July 2013, Your ref. l3ll027 ME/M3/ AsZa:MK, p. 6, Event
No 677915. 3t
Answer to the first request for information, 4 July 2013, Your ref. l3ll027 MEA43/ AsZa:MK, p.3, Event
No 677915. 3e
n0
C-qDq Thierry Tranchant and Tdldphone Store SARL ll995l ECR I-3911. Ansrve. to the first request for information, 4 July 2013, Your Ref. l3ll027 ME^I3I AsZa:MK, p.
EventNo 677915.
3,
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render less attractive the activities of a service provider established in another Member States in which it lawfully provides similar services, it needs to be justified.al
5.2.3 Justification 48. The national measure is non discriminatory, it applies in the same manner to nationals and non Norwegian companies. On this basis, it must be examined whether the restrictions may be justified by reasons of overriding general interest.
5.2.3.1Justifications in the field of sames of chance 49. The Court of Justice has held that the legislation on betting and gaming is one of the areas in which there are significant moral, religious and cultural differences between the Member States.a2 In the absence of harmonisation at EEA level, it is for each Member State to determine, in accordance with its own set of values, what is required in order to
ensure that the interests in question are protected. In the Ladbrokes case43, the EFTA Court listed six main justifications that Member States can use in the field of games of chance: "(1) prevent and protect the citizens against compulsive problem gambling; (2) keep the volume of gaming in society at a moderate and socially defensible level; (3) channel gaming desire into responsible outlets and ensure consumer protection; (4) protect public order and prevent crime and irregularities; (5) direct the revenues from gaming to humanitarian and socially beneficial causes and (6) prevent the operation of gamingfrom being a source of private profit.". 50. In the current case, Norway justifies its legislative framework by relying mostly on the same justifications. Norway indicates that "the purpose of the [LotteryJ Act is to cnsure that lotteries qre held in properforms subject to public control, with the aim of preventing negative social consequences of lotteries, while at the same time preparing the grounds to be a good source of revenues for socially beneficial and humanitarian for lotteries. ., 44 acnvtnes' .
5l.In
addition, the Lottery Regulation indicates that one of the conditions to be granted the authorisation under Section 7(1) point b is that "the lottery is not expected to substantially affect turnover of other lotteries". Norway specifies that the rationale behind this provision is the underlying model for the Norwegian gaming and lottery sector according to which the major nationwide games and lotteries are to be organised exclusively b)a Norsk Tipping, in order to fulfil the policy aims of the sector and ensure state control.as Therefore, the main target is to e.r..rr" the profitability of Norsk Tipping. The Norwegian Government does not wish the development of competition against the Norsk Tipping's lotteries, because it will imply a drop in Norsk Tipping's revenues. 52. Following the analysis of the legislation, the Authority considers that the justifications brought by Norway read in the light of the jurisprudence of the EFTA Court and the Court of Justice cannot be accepted. [n order to analyse systematically all potential justifications,
ar
"' "'
a
Case C-42107 Liga portuguesa l2O}9lECR I-7633, paragraph 55. Case C-42107 Liga portuguesa [20091ECR I-7633, paragraph 57. Case E-3106 Ladbrokes Ltd. EFTA Ct. Rep. [2007] p.86,paragraph43.
Answer to the first request for informatfoo, +
Event No 677915.
f"ty ZO|J, youi
Ref. 13/1027 NlElM3lAsZa:MK, p. 4,
as
Answer to the frst request for information, 5 July 2013, your Ref. l3ll027 MEA43/ AsZa;MK, p. EventNo 677915.
6,
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the Authority will use the list provided by the EFTA Court in the Ladbrokes case and the specific justification mentioned by Norway.a6 53. The Authority is of the opinion that two justifications have to be excluded ab initio in pursuance of the jurisprudence of the Court of Justice and the EFTA Court. The Authority considers that the remaining legitimate justifications cannot be successfully relied upon because they fail to pass the proportionality test. 5.2.3.2 Justifications which have to be reiected 54. The Authority considers that the two following justifications cannot be used to uphold the restrictions to the fundamental freedoms resulting from the Norwegian legislation: (i) maintaining the market shares and profitability of Norsk Tipping and (ii) financing of non profi table organisation. 55. First, the Authority considers that ensuring profitability for Norsk Tipping amounts to an economic justification. It is settled case-law that economic grounds cannot be relied upon to justify restriction on the exercise of a fundamental freedom.aT 56. Accordingly, the Authority takes the view that the objective of protecting market shares of Norsk Tipping does not constitute an overriding reason in the public interest capable of justiffing the restriction to the free movernent of services entailed in the measure at issue. 57. Second, the justification linked to the obligation of ensuring that the money collected is given to non profit organisations cannot be relied upon by Norway. The Court of Justice has ruled on many occasions4s that the financing of benevolent or social or other publicinterest activities through a levy may constitute only an incidental beneficial consequence. It cannot be considered as the raison d'6tre of the national gaming legislation. 58. tn the Gaming Machine case,o' the EFTA Court ruled that, even if it is not irrelevant that lotteries and other types of gambling may contribute significantly to the financing of benevolent or public-interest activities, this motive cannot, in itself, be regarded as an objective justification for restrictions on the freedom to provide services. As a matter of consequence, the Authority considers that this justification cannot be used in this case. 59. To conclude, the two justifications referred to above are not acceptable under EEA law to justify a violation to the fundamental freedoms of the internal market. 5.2.3.3 Valid iustifications 60. Out of the 7 justifications developed in Ladbrokes and the Norwegian Government, there are 5 left. 61. First, (i) preventing and protecting the citizens against compulsive problem gambling; (ii) keeping the volume of gaming in society at a moderate and socially defensible level, (iii) channelling gaming desire into responsible and non fraudulent outlets and finally (iv)
ou
Case E-3106 Ladbrokes Ltd. EFTACt. Rep. 120071p.86, paragraph 43. Cuse E-1104 Fokus BankEFTA Ct. Rep. 120041p.11, paragraph 33 and the case law cited' ECR I-13031, '8 Case C-6ilg8 tl999l Zenatti ECR I-7289, paragraph 36; Case C-243101 Gambelli [2003] paragraph 62; Case C-347lOg Dickinger qnd Omer [2011] ECR I-8185, paragraph 6l and Case C-275/92 Schindler ll994l ECR I-1039, paragraph 60. n'
o' Case E-llO6 EFTA Surveillance Authority v The Kingdom of Norway EFTA Ct. Rep. [2007] p.8, paragraph 38.
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protect public order and prevent crime and irregularities. The Authority will use the wording "consumer protection" as encompassing all the elements mentioned above. 62. Second, the national legislation in the field of games of chance aims at (v) preventing the operation of gaming from being a source of private profit. The Norwegian legislation specifically provides that the revenues from the lottery do not go to private entities.s(' 63. The Authority is of the opinion that such justifications are valid. However, even if the above mentioned legitimate justifications can be used by Member States, obstacles to the internal market have to comply with the proportionality test in order to be compatible with EEA law.
5.3
Proportionalitv test
64. The proportionality test aims at ensuring that a national measure, which restricts the exercise of a fundamental freedom, is appropriate, necessary and proportionate for ensuring the attainment of the objective pursued. ln Case E-8104 EFTA Surveillance Authority v. Liechtenstein, the EFTA Court held:
*(...) In order to be so justified, (...) national legislation must be suitable for securing the objective which it pursues, and must not exceed what is necessary in order to achieve it, so as to accord with the principle of proportionality. If there are other ways of protecting the relevant public interest, which are less restrictive on the freedoms exercisable under EEA law, the national legislation must be deemed to exceed what is necessary in order to achieve its objectivu [...J)-.tt 65. In the specific field of lottery, the Court of Justice indicated that *if a prior administrative authorisation scheme is to be justified even though it derogates from such fundamentalfreedoms, it must be based on objective, non-discriminatory criteria lcrutwn in advance, in such a way as to circumscribe the exercise qf the national authorities' discretion so that it is not used arbitrarily (....)".s2 66. It is the opinion of the Authority that the legislation adopted by the Norwegian Government has failed to pass the proportionality test since it is neither appropriate nor necessary in order to achieve the pursuit of the various justifications mentioned above.
5.3.1 Appropriate/Suitable 67 .ln order to be justified, the Norweglan
legislation must be suitable to attain the aims
pursued.
Concerning the limitation of lotteries 68. The limitation imposed by Norway is appropriate in order to limit the expansion of games of chance in Norway, ffid more specifically the development of lotteries. In addition, this should increase the protection of consumers in general. 69. However, the burden of proof is on the Member State to provide sufficient proof that the measure is appropriate and proportionate.53 Recently the EFTA Court stated in the context of public policy that:
s0
t'
"t3
Section 7 of the Lottery Regulation. Case E-8104, EFTA Su:rveillance Authority v. Liechtensteiz EFTA Ct. Rep. l2O05lp.46,paragraph 23. Cu." C-46IOB Carmen Media Group l2}iOl ECR I-8149, paragraph 55.
case c-254105 Commission v. Be$iim t20b7l ECR r-4269 ,paragraphs 36
and.37
.
Page l1
"the reasons which may be invoked by an EEA State in order to justify such a derogation must be accompanied by an appropriate analysis of the expediency and proportionality of the restrictive measure adopted by that State, and precise evidence enabling its arguments to be substantiatet'.sa 70. The Authority considers that the Norwegian Government has failed to substantiate how the current system is appropriate for ensuring that the number of lotteries does not grow in Norway. Indeed, no reports and documentation was submitted attesting the existence of specific threats to consumer's protection.
71.ln addition, in the case at stake, the Norwegian Government has to substantiate further the reasons which have led it to limit the development of lotteries. Indeed, lotteries cannot be compared to gaming machine or betting activities. tn the fi4_d of games of chance, the Court insists on the necessity to compare what is comparable.ss The dangerous nature of lotteries has not been identified. On the contrary the Norwegian Government has acknowledged that lottery cannot be considered as dangerous.s6
72. The same reasoning is applicable to the justification linked to prevent the operation of gaming from being a source of private profit. If the Norwegian Government argues that the development of the activities of the monopoly has to be increased in order to avoid the operation of gaming from being a source of private profit, this has to be sustained by factual evidence.
73.\n addition, the Authority considers that the Norwegian legislation is conlrary to the consistency test. The consisiency argument has been developed in Gambellisl regarding the use by Italy of the justification aimed at reducing game addiction. The Court of Justice stated that:
far as the authorities of a Member State
incite and encourage consumers to to the financial benefit of the public betting games and of chance participate in lotteries, purse, the authorities of that State cannot invoke public order concerns relating to the need to reduce opportunities for betting in order to justify measures such as those at issue in the main proceeding.".ss
"In
so
74. Thesame approach has been used by the EFTA Court in the Gaming Machine case.S' In order to be consistent, the Defendant may not at the same time endorse or tolerate measures, such as extensive marketing, which could lead to an increase of gambling opportunities.60
75. Following the analysis of the national systern, the Authority considers that Norway's actions fail to comply with the consistency test. Norway is actively promoting the development of lotteries as part of an official expansionist policy, which is not consistent with the consumer protection justification it intends to rely on.
76. This goal is evidenced in the 2010 Norsk Tipping's report where it is specified that it will intend to attract 150 000 new customers through active advertising by 2015.61 This advertising policy of Norsk Tipping has always been very aggressive. Proof of this is the number of prices attributed to Norsk Tipping by its peers in order to reward its creativity v. Iceland EFTA Ct. Rep' [20] l] p'l17. Rep. Case E-3106 Ladbrokes Ltd. EFT A Ct. 120071p.86, paragraph 57. I-13031. ECR Gambelli [2003] "tt Case C-243lOl Case C-243101 Gambelli [2003] ECR I-13031, paragraph 69; Case E-3106 Ladbrokes Ltd. EFTA Ct. Rep. l2oo7l p.86, paragraph 52; Case C-46108 Cqrmen Media Group l20l0l ECR I-8149, paragraph 30; Ct. Rep. [2007] p.8. "60 cur" E-llo6 EFTA Surveillance Authority v. The Kingdom of Norway EFTA Case E-llO6 EFTA Surveillance Authority v. The Kingdom of Norway EFTA Ct. Rep. [2007] p.8' 6r Annual Report for 2011, p. l, English version.
5o
5u
Case
E-lzll0, EFTA Surveillance Authority
Page 12
in order to attract new
This expansionist policy is also illustrated by the organised by the State monopoly or the development of
customers.62
development of internet games63
the possibility to participate to games through mobile phones.
77.ln addition, the Norwegian Authorities seem to use the licensing procedure as a rvay of involving Norsk Tipping in the most interesting lottery projects. Norway has explained that that "Borsen, Fairchance and Quick were put on hold as the applicants were encouraged to enter into an agreement with Norsk Tipping regarding the establishntent new lotteries in Norway for the benefit of these as a group".64
of
78. This approach can hardly be considered as an appropriate means to achieve the protection of consumers against the negative effects of games of chance. It can even be considered contrary to consumer protection because it aims at developing extensively the number of attractive lotteries in Norway. 79. The Court of Justice has accepted in some instances that a monopolistic entity expands
its activities in order to draw players away from clandestine bettering and gaming. However, it is up to the State to demonstrate that such channelling measures lower the amount of unlawful activity and related crime problems and that they assist in drawing players away from highly addictive games which are hard to suppress.6s 80. However, the Authority is of the opinion that fraudulent activities in the field of lottery of expansion measures are not necessary in the context of organisation of lotteries. are unlikely and that such type
81. To conclude, the Authority is of the opinion that the expansion policy of Norsk Tipping run counter to the objectives pursued by the legislation at issue and that, as a result, such legislation is not suitable for achieving the intended objective. Concerning the existence of an open list 82. Concerning the existence of an open list regarding conditions to be fulfilled in order to grant a licence requirements, the Norwegian Government explained that such mechanism gives them enough flexibility to incorporate political elements into the decision making process. This approach ensures that the Norwegian Government can always intervene in the authorisation mechanism in order to control that the legitimate aims that Norway intends to protect are in.fine looked after.66 83. The Authority raises the same arguments as above: Norway has to substantiate its reply in order to explain why the existence of an open list could ensure consumer protection and prevent the operation of gaming from being a source of private profit.
Concerning the participation of the main competitor's controlling authorities authorisation process of potential private operators
62
in the
Annual Report for 2011, p.6, Best advertisement World Lottery Association Congress in Australia in
2010.
well Answer to the second request for information, 7 October 2013, Your ref. l3ll027 MEA43 RFS:elt, p.4 event No 685900. ut
Cas" E-3106 Ladbrokes Ltd. EFTACI. Rep. 12007) p.S6,paragraph 54 ; Case C-338104 Placanica 12007) ECR I-l89lparagraph 55 and Case C-347109 Dickinger and Omer [20] l] ECR I-8185, paragraph 63. 66 Answer to the first request for information, 4 July 2013, Your ,"i. tlttOZl MEA43/ AsZa:Uk, p. 6, Event 677915.
Page 13
84. The Authority fails to understand how the participation of the main competitor's controlling authorities in the authorisation process of potential private operators could ensure the achievernent of one of the legitimate objective put forwards by Norway.
The application of Tipping
dffirent rules in the authorisation of lotteries organised by Norsk
85. The Authority fails to understand how the application of different rules in the authorisation of lotteries organised by Norsk Tipping could ensure the achievement of one of the legitimate objective put forwards by Norway. 86.
To conclude, the Authority is of the opinion that the Norwegian legislation, by
limiting the tlpes of lottery, by imposing an open list regarding conditions to be fulfilled in order to obtain a licence, by involving the supervisory authorities controlling Norsk Tipping in the authorisation procedure and by applying different rules in the authorisation of lotteries organised by Norsk Tipping, has to be considered as a restriction that is not suitable to achieve its objective.
5.3.2
Necessitv
87. The Authority considers that even if legitimate objectives are appropriate to justiff the national measures, these measures are not necessary in order to achieve these legitimate objectives.
Concerning the limitation of lotteries 88. The Authority considers that the limitation regarding the types of lottery cannot be considered as a necessary mechanism in order to ensure the legitimate aims that Norway wants to achieve. The Authority considers that the assessment of the necessity of the measures adopted by a Member State in order to achieve a legitimate objective depends on the type of games of chance at stake. The EFTA Court stated this point in the Ladbrokes case: "a,s the objectives pursued may not apply equally to all games of chance covered by the Gcming Act, it *oy ilro be necissary n-distiiguiih benvein the ffirent games.".67 89. The EFTA Court also stated in the field of games of chance that: Ytlhether and to which extent a given game can lead to gambling addiction must be evaluuted by taking into account the specific circumstances, including its features, its
"(...)
presentation, the reactions
of
its potential consumers and the broader socio-cultural
environment.".66 90. On the one hand, the balance test necessitates quantiffing and apprehending the danger that a measure is supposed to avoid and, on the other hand, it shall take into consideration the obstacle to trade created by the measure. In the current case, the danger is low because the measures apply to lotteries. This was acknowledged by the Norwegian Government which admitted during the oral hearing of the Ladbrokes case that lotteries pose no appreciable danger of causing gambling addiction.6e 91. The Authority considers that the national measures limiting the tlpes of lotteries are not necessary in order to achieve the protection of the consumers, to prevent the operation of gaming from being a source of private profit and to avoid fraudulent activities.
u'Car"
E-3106 Ladbrokes Ltd.EFTACt. Rep. l2007lp'86, paragraph 52. Case E-3106 Ladbrokes Ltd. EFT A Ct. Rep. [2007] p.86, paragraph 57. u'Case E-3106 Ladbrokes Ltd.EFTACt. Rep. 120071p.86, paragraph 57. 68
Page 14
Concerning the existence of an open list 92. The Authority considers that the existence of an open list of conditions to be fulfilled in order to be granted a licence is not necessary in order to achieve the legitimate airns put forward by Norway. Indeed, there are less trade restrictive measures. 93. Norway justifies the absence of legal certainty by indicating that it gives enough flexibility to the Norwegian authorities to incorporate political elements into the decision taken regarding each licence's request.'0 This approach ensures that Norway can always intervene in the authorisation mechanism in order to ensure the protection of the legitimate aims in question. The lack of legal certainty does not appear to be necessary in order to enforce the legitimate aims pursue by Norway. 94. Indeed, the Authority is of the opinion that the Norwegian Government could easily draw up a fixed list of conditions to be fulfilled in order to obtain a licence whilst still ensuring the protection of the legitimate aims. This will address the concerns raised by Norway and, at the same time, it will not lead to a disproportionate burden on service providers, nor hinder or render less attractive the exercise of the freedom to provide services.
95.In the Stock Exchange case," the EFTA Court recalled that for a restriction of a fundamental freedom to be justified, the measures must satisff the principle of legal certainty.1z The EFTA Court stated that *(...) a system of prior administrative approval must be based, as a general rule, on objective, non-discriminatory criteria which are lmown in advance to the undertakings concerned."13 96. The same reasoning applies regarding the prevention that gaming operation being a source of private profit. Other types of measures could have been adopted to address this issue. For example, the obligation to give a higher percentage of the revenues to the State or charitable organisations.
Concerning the participation of the main competitor's controlling authorities authorisation process of potential private operators
in
the
97. Regarding the involvement of the supervisory bodies of Norsk Tipping in the authorisation process of potential competing lotteries, the Authority fails to understand how this measure can be considered as necessary in order to achieve the legitimate objectives raised by the Norwegian Govemment.
The application of Tipping
dffirent rules in the authorisation of lotteries organised by Norsk
98. The Authority fails to understand how the application of different rules in the authorisation of lotteries organised by Norsk Tipping is necessary in order to achieve one of the legitimate objectives put forwards by the Norwegian Government. 99. To conclude, the Authority considers that the national measures mentioned above are not proportionate and shall be considered contrary to the EEA Agreement.
"
Answer to the first request for information, 4 July 2013, Your ref. l3ll027 MEA43/ AsZa:MK, p. 6, Event
'r
Case
6779r5.
"
E-glll EFTA Surveillance Authority v. The Kingdom of Norway EFTA Cl Rep.l20l2l p.442. E-glll EFTA Surveillance Authority v. The Kingdim of iorway EFTA Ct. Rep.-[2.012] p.aa2,
Case
p^aragraph 100; Case E-1104 Fokus Bank EFTA Ct. Rep. [2004]
'3 Case
E-glll
paragraph 100.
p.l l, paragraph
37.
EFTA Surveillance Authority v. Thi Kingdim of tttorway EFTA Ct. Rep. l20t2l p.442,
Page 1 5
5.4
Controls in the Member State of establishment
100. In the field of the freedom to provide services, Member States have to take into account controls operated in the Mernber State of establishment.To The Court of Justice has repeatedly stated that:
"In that connection, it should be recalled that the Court has ruled that, by excluding consideration of the obligations to which the trans-frontier service provider is already subject in the Member State in which it is established, a national law goes beyond what is necessary to attain the objectives sought, namely to ensure close supervision of those activities (Case C-L71/02 Commission v Portugal [2004J ECR I-5645, paragraph 60, and Commission v Netherlands, paragraph 18)"7s. games of chances,'u th" EFTA Court indicated that the obligation to obtain a new licence is understandable due to the non mutual recognition of authorisations issued by EU and EEA States. However, in the same case, the EFTA Court stated that: 101. However,
in the field of
"This would be the case if the requirements to which the issue of a licence is subject coincided with the requirements in the home State. That means, (...) that it must take into account the requirements already fuffilled by the provider of the services for the pursuit of activities in the home State."11 . The Authority considers that the field of lottery should be treated differently. It cannot be compared to gaming machine or betting activities. tn that field, it should be possible for private operators to rely at least partially on authorisations already granted in the State of origin. Lotteries cannot be assimilated to other and more dangerous types of games of chances. The level of protection is linked to the level of dangerousness of the activity. Therefore, if it is highly probable that the activity might have fraudulent consequences, than no recognition from controls operated from the Member States of origin is acceptable. However, if the risk is low or even negligible, it should be possible to rely on previous authorisation / licences, at least partially. 102.
03. The Authority does not require for the application of the State of origin control to be automatically recognised, but it considers that the EEA State of destination (Norway) shoulcl take into consideration previous controls and licences granted in the EEA State of origin. This approach will not deprive the Member State of destination to operate controls but offer the possibility to take into account controls operated in the State of origin. I
Authority considers that the Norwegian legislation does not at all take into consideration previous controls operated in the EEA State of origin. This approach is 104. T'he
contrary to the freedom to provide services. 105. To conclude, the Authority is of the opinion that the national measures are contrary to
Articles 31 and 36 of the EEA Agreernent and that no valid justification has been put forward by the Norwegian Government.
6
Conclusion
Accordingly, as its information presently stands, the Authority must conclude that, by maintaining in force Sections 6 and 7 of the Lottery Regulation which limit the tlpes of
ll98ll ECR 3305, paragraphs 19 to 21. Case C-l34lO5 Commission v. haly [2007] ECR l-625l,paragraph25. paragraphs 84 to 86. 'u Case E-3106 Ladbrokes L/d. EFTA Ct. Rep. 120071p.86, 77 Case E-3106 Ladbrokes Ltd. EFTACI. Rep. 120071p.86, paragraph 86. 'o Case 279180 Webb
"
Page 16
lotteries offered to the public, impose an open list of conditions to be fulfilled in order to obtain a licence, involve the supervisory authorities of Norsk Tipping in the authorisation procedure and apply different rules in the authorisation of lotteries organised by Norsk Tipping, Norway has failed to fulfil its obligation arising from Article 31 and Article 36 of the EEA Agreement.
In these circumstances, and acting under Article 31 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice, the Authority invites the Norwegian Government to submit its observations on the content of this letter within two months following receipt thereof,
After the time limit has expired, the Authority will consider, in the light of any observations received from the Norwegian Government, whether to deliver a reasoned opinion in accordance with Article 31 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice.
For the EFTA Surveillance Authority
Fr'
C
*K/
ege Member
