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Italian gambling advertising ban would be illegal?

Italian gambling advertising ban

Italian gambling advertising ban would be illegal?

The potential Italian gambling advertising ban raises considerable concerns as to its compliance with the Italian constitution which hopefully will help to avoid this risk.

One of the hottest topics of the last days in Italy is the potential gambling advertising ban which has been announced in several instances by the new Government.

The potential gambling advertising ban in the current draft

According to the draft that has been circulated, this ban would prohibit any type of advertising, sponsorship and promotion of both gambling trademarks and games with cash winnings both offline and online. The breach of such ban would be punished with fines between € 50K and € 500K against both the advertiser and the media on which the advertisement is disseminated.

No reference at all is made to either the timing of applicability of the ban, or on whether it applies only to gambling licenses that are not in place at the moment or for which a tendering process is already ongoing. Also, it is not made reference to the financial coverage of such law, but it is only made reference to the fact that it shall not have an impact on public financials.

Would this law be legal if applicable to online gambling operators?

From merely political standpoint, this prohibition would considerably foster illegal gambling since the possibility of performing advertisements is the main advantage of licensed operators over unlicensed operators. Unlicensed operators would continue advertising on foreign affiliate websites since it will be very difficult to enforce the ban against them and their affiliates, while licensed operators would be obliged to comply with prohibition. This would vanish the efforts made by the Italian gambling authority during at least the last decade to regulate online gambling.

However, under a legal standpoint, this prohibition is so broad that might prevent any communication to the public of the activity of online gaming operators. Indeed, unlike land-based operators that have gaming halls/sportsbetting shops in the streets through which they can attract players, online gaming operators are obliged under their license agreement with the Italian gambling authority to market their products only through remote channels of communication. This means that such prohibition would prevent operators from actually running their business, while the current Italian gambling advertising law only regulates the practice setting timeslots and restricted TV channels.

In this respect, it should be considered that:

  1. Operators hold a public license/concession under which they were granted the power (and the obligation) of offering the games regulated therein which was paid by operators and that also sets out obligations in terms of service levels. If operators cannot communicate to the public their games (ideally not even through their own websites) on the basis of conditions that were not in place at the time of award of their licenses and (in the case of new licenses) of filing of the application for their license, it could be considered that an essentional term of their license conditions changed opening an opportunity to claim potential damages;
  2. Such ban risks to go beyond what is allowed under the Italian constitution which preserves the freedom of doing business. Indeed, the Italian constitution provides that the freedom of doing business cannot be in contrast with “social utility” and cannot harm “security, freedom and human dignity“. But if the State has decided to regulate gambling, even setting a dedicated licensing regime, it reached the conclusion that gambling itself is not harmful. On the contrary, the gambling advertising ban would prevent online gambling operators to run their business which has been expressly authorized by the State that granted a dedicated license to each operator, even obliging operators to offer them;
  3. The draft law provides that the gambling advertising ban shall not have an impact on public financials. However, it should be considered that if online gambling operators cannot communicate their business to the public, this will inevitably have an impact on tax entries (to the benefit of unlicensed operators). Also, operators that hold a license (or just applied for a new license) might bring a claim seeking the refund of their license fees and investments which will lead to considerable disputes up to the Italian Constitutional Court and even in front of European courts with potential damages that the State might be obliged to refund. This means that the current draft could not be approved as it does not have a financial coverage.

I will update on the developments of the matter. If you found this article interesting, please share it on your favourite social media!

@GiulioCoraggio

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Giulio Coraggio
giulio.coraggio@gmail.com

I am the head of the Italian Technology sector and the global head of the IoT and Gaming and Gambling groups at the world leading law firm DLA Piper. Top global IoT influencer and FinTech lover, finding solutions to what's next for our clients' success.