On august 14, 2008, the Cartel Senate of the Federal Court of Justice (BGH) ruled that the German Lottery and Toto Block (DLTB) may not instruct the lottery companies controlled by the federal states to reject betting slips from commercial betting intermediaries that were accepted at stationary points of sale, such as petrol stations or supermarkets (so-called terrestrial distribution). However, lottery companies are entitled to refuse cooperation with betting intermediaries if they do not possess the license required by state law. While lottery companies may decide on their own not to extend their activities to other federal states, they are not permitted to enter into agreements with each other on this matter. The BGH's Cartel Senate thus partially granted an appeal on points of law filed by the DLTB and the lottery companies.
In Germany, the organization of lotteries is generally reserved for the lottery companies controlled by the federal states, which have united within the DLTB.
They have regulated their cooperation in the so-called Block Agreement. According to Section 2 thereof, lottery companies may only organize lotteries within their respective state territories (principle of regionality). Section 4 of the so-called Regionalization State Treaty stipulates that lottery companies shall distribute lottery revenues generated through commercial betting intermediaries among themselves in proportion to their other betting stakes. After commercial betting intermediaries began accepting betting stakes through acceptance points in branches of large retail companies and petrol stations, the DLTB's Legal Committee urged the lottery companies to reject such transactions.
The Federal Cartel Office prohibited the DLTB and the lottery companies from issuing or complying with such a request. Furthermore, it prohibited the lottery companies from restricting their distribution to their respective federal states in observance of the principle of regionality and state gambling laws, and consequently from not opening their internet distribution to players from other federal states. The Federal Cartel Office also objected to the participation of the lottery companies in the distribution of revenues according to the Regionalization State Treaty.
The Higher Regional Court Düsseldorf largely dismissed the appeal against the Federal Cartel Office's order. The subsequent appeal on points of law by the DLTB and the lottery companies was partially successful before the BGH's Cartel Senate.
The Cartel Senate initially confirmed that the DLTB's Legal Committee, with its request directed against the terrestrial distribution by commercial betting intermediaries, had unduly restricted competition among the lottery companies. In this respect, it is irrelevant whether this decision was legally or factually binding for the lottery companies. Furthermore, the BGH held that the Legal Committee's request led to concerted practices by the lottery companies, prohibited by Article 81 EC and Section 1 of the German Act against Restraints of Competition (GWB), to the detriment of betting intermediaries. This does not affect the ability of lottery companies to refuse cooperation with commercial betting intermediaries based on their own decision for objective reasons. They are also entitled to refuse cooperation if betting intermediaries do not possess the license required by state law.
This license, as prescribed by the State Treaty on Gambling (GlüStV) and the state laws enacted for its implementation since January 1, 2008, may not be denied for extraneous reasons – such as restricting competition or increasing state revenues – but only to enforce the regulatory objectives of gambling supervision, such as youth protection and combating gambling addiction.
The Antitrust Senate has confirmed its preliminary legal opinion, already expressed in expedited proceedings (cf. BGH, WuW/E DE-R 2035 para. 24 et seq. Lotto on the Internet, see BGH Press Release No. 85/2007), that the regionality principle of the block contract violates Article 81(1) EC. The lottery companies must autonomously decide whether they wish to expand their distribution to other federal states and, if necessary, obtain the required permits.
This currently applies in particular to online distribution. However, after the expiry of the transitional period, from January 1, 2009, this will be generally prohibited pursuant to Section 4 (4) of the State Treaty on Gambling.
Although the European Commission has raised concerns under Community law regarding this prohibition, the lottery companies must assume the effectiveness of Section 4 (4) of the State Treaty on Gambling until a contrary decision is rendered by the Court of Justice of the European Communities.
As the Federal Court of Justice further determined, the Federal Cartel Office was able to prohibit the lottery companies from participating in the redistribution of revenues from game brokerage, as stipulated in the so-called Regionalization State Treaty. This redistribution largely eliminates the incentive for competition among lottery companies for prospective players.
Decision of the Federal Court of Justice (BGH) of august 14, 2008 – KVR 54/07 – Lottery Block
Previous Instances: Federal Cartel Office – Decision of august 23, 2006 – B 10 – 148/05 see also: WuW/E DE-V 1251 Higher Regional Court Düsseldorf – Decision of June 8, 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 BGH dated 14.08.2008, Herrenstr. 45 a, 76133 Karlsruhe, Tel. 0721-159-5013, Fax. 0721-159-5501, E-Mail: pressestelle@bgh.bund.de.Goldberg Attorneys at Law
Attorney-at-Law Michael Ullrich, LL.M. (Information Law);
E-Mail: mailto:m.ullrich@goldberg.de%20
