The Liga Portuguesa Decision of the European Court of Justice - An Economist's View

Why are gambling markets treated so differently to other markets? This apperently trivial question is far from having a generally accepted scientific rationale and continuously gives reason for controversial academic and political debates. In most European countries gambling markets, including markets for sports betting, are subjected to a very strict regulation up to the degree of being entirely controlled by the government. For example, this is the case in Germany, ehere the state monopoly has recently been inforced by a new law (Glücksspielstaatsvertrag), which was put into force in 2008. But also in other major European countries the state monopolies still hold despite of the Euopean competition las and despite of the changing techinical environment, especially the rising importance of the internet, which makes it more and more difficult to protect the monopoly. In the past ten years, the European Court of Justice (ECJ) has heavily influenced the national regulatory settings on gambling markets across Europe with several landmark rulings. The overall view expressed in those judgements can be rougly summarized by the following points: 1. The restictions imposed by the national legislations were found to be in contrast with the idea of a free common market in EU. 2. Such restictions could nevertheless be motivated by the aim of enforcing matters of general public interest like protection from gambling addiction or fraud. 3. However, the restrictions would have to be appropriate to pursue these aims (which is still a matter of debate) and should be imposed to all market participants in a non-discriminatory manner. Although the court didnt declare state monopolies as incompatible with European competition law, it forced national legislations at least to be coherent and non-discriminatory. This gave, for example, the impetus for a complete realignment of the Italian gambling market. A coherent European legislation regulating the gambling sector is, however, still missing and this is regarded as the main cause for the perceived ongoing legal uncertainty throughout Europe. This paper analyses the last judgement of the court in the case C-42/07 published on the 8th of September 2009, which we will call Liga Portuguesa decision. The verdict was expexted (like many others in the past) to give a clear direction for dozens of pending cases in the EU member states. As far as we can observe, this hope was clearly dashed. Especially the expected clarification of the proportionality criteria for justifying a state-monopoly suggested in the Gambelli and Placanica rulings did not occur. In this paper, we will not deal with legal questions primarily, but will rather follow an economic approach by trying to give a statement on the economic rationality of the Liga Portuguesa decision. With the object in question being an issue of market regulation, an economic assessment is in our opinion as necessary as a legal evaluation and may give valuable insights for further policy recommendations.