Reservation of permission for lottery sales is legally permissible

On 14 August 2008, the Cartel Senate of the Federal Court of Justice (BGH) ruled that the German Lotto and Totoblock (DLTB) may not require the lottery companies controlled by the federal states to reject gaming orders from commercial gaming brokers that were accepted in stationary acceptance points, such as petrol stations or supermarkets (so-called terrestrial distribution). However, the lottery companies are entitled to refuse to cooperate with gaming brokers if they do not have the licence required by state law. The lottery companies may refrain from extending their activities to other federal states on the basis of their own decision, but they are not allowed to reach an agreement on this among themselves. The Cartel Senate of the Federal Supreme Court has thus partially upheld an appeal by the DLTB and the lottery companies.

In Germany, the organisation of lotteries is generally reserved for the lottery companies controlled by the federal states, which have joined forces in the DLTB.

They have regulated their cooperation in the so-called Block Treaty. According to § 2 of the Block Treaty, the lottery companies may only organise lotteries within their respective territories (regional principle). § Section 4 of the so-called State Treaty on Regionalisation stipulates that the lottery companies divide the lottery revenues generated through commercial lottery agents among themselves in accordance with the stakes they otherwise generate. After commercial lottery brokers had started to accept lottery stakes also via acceptance points in branches of large retail companies and petrol stations, the Legal Committee of the DLTB requested the lottery companies to reject such sales.

The Bundeskartellamt has prohibited the DLTB and the lottery companies from making or complying with such a request. Furthermore, the Bundeskartellamt prohibited the lottery companies from restricting their distribution to their respective federal state in compliance with the principle of regionality and the laws of the federal states on gambling and, for this reason, from opening their Internet distribution to players from other federal states. The Bundeskartellamt also objected to the involvement of the lottery companies in the distribution of revenues under the State Treaty on Regionalisation.

The Düsseldorf Higher Regional Court (OLG) dismissed the appeal against the Bundeskartellamt's order by a large majority. The DLTB's and the lottery companies' appeal against this decision has now been partially successful before the Bundeskartellsenat of the BGH.

The Cartel Senate first confirmed that the DLTB's Legal Committee had unlawfully restricted competition between the lottery companies with its call directed against the terrestrial distribution of commercial lottery agents. In this respect, it is irrelevant whether this decision was legally or factually binding on the lottery companies. Furthermore, the BGH assumed that the request of the legal committee led to a concerted practice of the lottery companies to the detriment of the lottery agents, which is prohibited by Article 81 EC and Section 1 GWB. This does not affect the possibility of the lottery companies to refuse cooperation with commercial gaming intermediaries on the basis of their own decision for factual reasons. They are also entitled to refuse cooperation if gaming brokers do not have the licence required under national law.

This permission, as prescribed by the State Treaty on Gaming (GlüStV) and the state laws enacted to implement it since 1 January 2008, may not be denied for extraneous reasons - such as to restrict competition or increase the state's revenue - but only to enforce the regulatory objectives of gaming supervision - such as the protection of minors and combating gambling addiction.

The Cartel Senate has already provisionally confirmed its legal opinion in the summary proceedings (see BGH, WuW/E DE-R 2035 para. 24 et seq. Lotto im Internet, see press release of the BGH No. 85/2007) that the regionality principle of the block contract violates Article 81 (1) EC. The lottery companies have the autonomy to decide whether they want to expand their distribution to other federal states and, if necessary, to obtain the necessary authorisations for this.

At present, this also applies in particular to internet sales. However, after expiry of the transitional period, this will be generally prohibited from 1 January 2009 in accordance with Section 4 (4) GlüStV.

The European Commission has raised Community law objections to this prohibition. However, until the Court of Justice of the European Communities decides otherwise, the lottery companies must assume that § 4 (4) GlüStV is effective.

As the Federal Court of Justice further recognised, the lottery companies could be prohibited by the Federal Cartel Office from participating in the redistribution of revenue from gaming brokerage provided for in the so-called State Treaty on Regionalisation. This redistribution largely removes the incentive for the lottery companies to compete for prospective players.

Order of the Federal Court of Justice (BGH) of 14 August 2008 - KVR 54/07 - Lottoblock

Previous instances: Bundeskartellamt - Decision of 23 August 2006 - B 10 - 148/05 see also: WuW/E DE-V 1251 OLG Düsseldorf - Decision of 8 June 2007 - VI Kart 15/06 (V) see also: WuW/E DE-R 2003

Source: Press release no. 155/2008 of the press office of the Federal Supreme Court of 14 August 2008, Herrenstr. 45 a, 76133 Karlsruhe, Tel. 0721-159-5013, Fax. 0721-159-5501, E-Mail: Rechtsanwälte

Michael Ullrich, LL.M. (Information Law);