Sweden and the long road to gambling market liberalisation.
The two main legal instruments governing gambling in Sweden, are, The Lotteries Act (1994)Lotterilagen and The Casinos Act (1999) Kasinolag. These Acts ensure that all gambling remains under the control of the Swedish state and its agencies.
The Gaming Board of Sweden (Lotteriinspektionen) has overall responsibility for licensing and supervision within the field of gambling. It is charged with issuing permits for: lotteries that are distributed by means of electromagnetic waves, lotteries that are to be arranged in more than one county, gaming machines and
games of roulette, dice and card arranged pursuant to the Lotteries Act. The Gaming Board also monitors compliance with the Lotteries Act and the Casinos Act.
The Lottery Act currently makes it a criminal offence to promote gambling services that are not licenced by the Swedish state. Underlying the Act is a belief that restrictions on private operators are justified on the basis of maintaining public order and preventing crime and addicition. The Act also aims to direct the surplus funds that accrue from gambling to the public, through the financing of social activities. (It is somewhat ironic perhaps, that the company A-lotterierna sells lottery tickets on behalf of the Swedish Social Democratic Party).
In 1934, the Swedish government, led by Per Albin Hansson, moved to counter illegal gambling through the establishment of Tipstj?nst, a private bookmaker subject to tight regulation. In 1943 the state bought up all of the shares in Tipstj?nst and nationalised the company. The nationalised company then merged with a smaller state lottery in 1997 and became known as Svenska Spel.
The operations of Svenska Spel include betting at sporting events and dog racing, the operation of gaming machines and the organisation of lotteries. The operations of ATG are betting at horse races. The public benefit organisations organise lotteries and bingo.
Changes to The Lotteries Act in 1 August 2002, enabled SvenskaSpel to embrace digital platforms; with customers now able to play the instant scratch card games Triss, Tia, Skrap-Bingo and Skrap-Pyramid online. The law also allowed AB Trav och Galopp (ATG), to market its services through digital media.
In November 2005 the Swedish Government also granted Svenska Spel the right to introduce online poker in conjunction with the online gaming software provider Boss Media. Sweden's Deputy Prime Minister Bosse Ringholm justified the decision by saying that it would ensure that those Swedes that chose to play online poker would do so with organisations that were under the control of the Swedish state. He was no doubt heartened when Ladbrokes, announcing their results for the six months to June 30 2006 stated that; "Poker gross win grew by 15% to ?21.3 million, impacted by increased competition, particularly in Sweden with the launch of the state lottery poker site."
There have been a number of judgements down the years, where the Swedish Courts have ruled in favour of the continuation of the Swedish monopoly. In Wermd? Krog, for example, the Swedish Administrative Supreme Court ruled that the monopoly existed to protect the individual and society at large and to pursue public interest objectives.
In response to a letter of formal notice sent by the European Commission on 19 October 2004 , which stated that gambling monopolies must have the objective of limiting betting opportunities in a consistent and systematic manner, the Court upheld the notion that Swedish betting laws were proportional and non-discriminatory; with a slight criticism of the nature and extent of Svenska Spel's advertising policy.
Also in October 2004, in a case concerning a restaurant that had acted as an intermediary for the bookmaker SSP, the Court again held that the restrictions placed upon foreign operators by current Swedish law were proportionate. Of note, was the fact that the Court did not assess Swedish gaming policy in concreto, in light of the Gambelli requirements laid down by the European Court of Justice.
In June 2005, the Swedish Supreme Administrative Court decided not to overturn a decision by the Swedish government to reject an application from Ladbrokes to be allowed to set up betting operations in Sweden. After the ruling, Douglas Roos, Ladbrokes' Nordic CEO, infamously told Svenska Dagbladet that the judgement was "made to order for the government, " and that "The judges are totally lacking in integrity." At the time of writing, Ladbrokes is still offering a Swedish language betting service.
Ladbrokes had previously tested Swedish law through launching an internet scratch card called "Trippel" designed to compete with Svenskaspel's own scratch card "Triss". Ladbrokes placed an ad for Trippel in the Swedish daily newspaper Aftonbladt, but it was not long before the Gaming Board reported the newspaper to the police and the ads were pulled. In January 2007, Ladbrokes acquired Sponsio Ltd, its online betting and gaming partner in Sweden, Norway, Denmark and Finland, in a deal worth up to 40 million sterling.
Sveska Spel's 2003 Annual Report was full of marketing references which very clearly suggested that the company had not been engaged in limiting the exploitation of the human passion for gambling;
" .......increased by 3.5%, not least due to energetic marketing........Svenska Spel did not actively market the (internet) channel until 2003. The results of the marketing campaign were not long in coming. Visitor impressions on the site tripled to about 600,000 a month and more than 100,000 new gaming accounts were registered in a very short time.........."
Gaming on Svenska Spel's internet channel increased sharply by slightly more than 60% in 2003 to SEK 495 million. The company has also openly embraced M-Betting, and, as previously noted, it launched an online poker website.
In January 2006, an official inquiry into the Sweden betting market, concluded that under Swedish law there is no realistic way of stopping offshore online betting companies from targeting Swedish consumers ; "I'm convinced that with today's legislation we'd have trouble with EU law, and we need a plan B for when the cruel winds start blowing from Brussels," said the reports author Jan Francke. The report, which also proposed a model which would allow foreign companies to apply for licences to organise online betting, was handed over to Sven-Erik ?sterberg, the Minister for Financial Market Issues, who was quoted as saying; " "I don't want to put my foot down today. What we have to do now is research this proposal further."
On 4 April 2006 the European Commission sent official requests for information on national legislation restricting the the supply of sport betting services to seven Member States - Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden. The Commission asks whether the measures in question are compatibile with Article 49 of the EC Treaty. This decision relates only to the compatibility of the national measures in question with existing EU law, and only to the field of sports betting. It does not touch upon the existence of monopolies as such, or on the matter of national lotteries. The request does however represent the first step towards the launching of a legal challenge at the European Court of Justice against those states that are seen to be violating EU law.
Charlie McCreevy, the EU internal market commissioner whilst acknowleding that there were national "sensitivities" surrounding gambling, was reported as saying; "The Commission has an obligation under [EU] treaties to ensure that member states' legislation is fully compatible with EU law."
In June 2006 Sweden's Gaming board reported the editors of the newspapers Expressen and Metro and the magazines Slitz and Spray to the police for publishing adverts from foreign gambling companies. Previous rulings at the district court level against Expressen editor Otto Sj?berg and Nerikes Allehanda editor Krister Linn?r had established the illegality of publishing such advertisements. In response to these rulings the Swedish Gaming Board's chief legal officer H?kan Hallstedt had stated; "These rulings mean that doubt is now eradicated....The law applies and we can act more forcefully against those that choose to ignore it."
An announcement by Svenska Spel in July 2006 that it intended to target Baltic States "to export knowledge, games and gaming responsibility" was met by the following comment by the redoubtable Oliver Drewes, spokesperson for the European Commission; "One could question whether the Nordic monopolies should enter into other markets while they are supposedly trying to protect their own monopolist positions."
In August 2006 a survey by industry newspaper Dagens Media revealed that a majority of Swedish MPs believed that Svenska Spel should be forced to reduce the amount that it spends on advertising.
Prior to the recent Swedish General Election, the leader of the victorious Moderate Party Fredrik Reinfeldt, stated that his party would consider getting rid of the current gambling monopoly and replacing it with a regulated betting market that allows private companies to apply for gaming licences. Following the election, Reinfeldt's coalition partners, the Christian Democrats and the Liberal Party expressed support for this view, with Sweden's new minister for financial markets
Mats Odell telling Swedish Radio that the current situation was'pure wild west', and simply unsustainable.
The smart money said that it would only be a matter of time before Ladbrokes was opening its first betting shop on Drottninggatan. A view strengthened, when in June 2007 the European Commission formally requested France and Sweden to amend their gambling laws following consideration of their replies to letters of formal notice sent in April and October 2006. These formal requests took the form of "reasoned opinions", the second stage of the infringement procedure laid down in Article 226 of the EC Treaty. If there is no satisfactory reply within two months, the Commission may refer the matter to the European Court of Justice.
However, in August 2007, the Swedish Government surprised many observers, when it refused to bow to demands from the European Commission that it should throw open its betting market to non-Swedish companies.
In its official response, to a Commission request of June 2007, the Swedish government said that while it has and will consider such demands, it has no intention to implementing changes to Sweden's gambling laws. Moreover, the Swedish government went on to say that it sees those aspects of Swedish law that are deemed to be incompatibe with EU law, as actually being totally acceptable, in as much as they serve their stated purpose of strengthen social security and countering criminal activity?.
A visit to Expressen's website on Friday 12 October 2007, meanwhile, reveals that the warnings to it to cease carrying adverts for online gambling groups has gone unheeded, with adverts for Unibet, Sportingbet and Expekt clearly visible. Expressen, meanwhile, has now entered the online betting market, through the establishment of an online bingo website, Sting.se, in association with Folkspel and the software provider NYX Interactive.
A report by Dr Kalle Tryggvesson, published in October 2007, highlighted the fact that a significant preportion of Swedish gamblers were becoming addicted to online poker. Not soon afterwards, it was reported that Svenska Spel now had 110,000 active poker players, with rake of SEK283 million (?31.0 million) during the first nine months of the year.
In the perverse logic that underpins Sweden's gambling policy, it can be stated that at least they are getting addicted to online poker provided by the Swedish State (sic).....Svenska Spel's very own home grown addicts.
On October 27 2007, Sweden's governing party, the Moderate Party voted at its annual conference in G?vle on Saturday to come out in favour of the liberalisation of the Swedish betting market; including the sale of Svenska Spel and ATG.
In January 2008, the editor and former editor of Sweden's largest daily newspaper, Aftonbladet, asked Charlie McCreevy to step up his legal action against the country over their discriminatory gambling restrictions. Aftonbladet, which is facing threats from Sweden's gaming board and prosecutors for accepting advertisements from rival gaming operators, said that the enactment of the gambling ban against it would deprive it of 8.5 million euros ($12.7 million) a year in revenue.
On January 31 2008 the European Commission said that it had decided to send an official request for information on national legislation restricting the supply and promotion of certain gambling services to Sweden.
In this new case the Commission wishes to verify whether all national measures relating to poker games and tournaments are consistent and therefore compatible with Article 49 of the EC Treaty, which guarantees the free movement of services. The Commission said that its decision does not touch upon the existence of monopolies as such, or on national lotteries. Nor does it have any implications for the liberalisation of the market for gambling services generally, or for the entitlement of Member States to seek to protect the general interest, so long as this is done in a manner consistent with EU law i.e. that any measures are necessary, proportionate and non-discriminatory.
This latest inquiry into Swedish national gambling restrictions focuses on various issues relating to poker games and tournaments. The Commission said that a Member State cannot invoke the need to restrict its citizens? access to betting services if at the same time it incites and encourages them to participate in state lotteries, games of chance or betting which benefits the state?s finances.
On 6 February 2008, the Swedish Supreme Court granted the editors of Aftonbladet and Expressen the right to appeal against their criminal prosecutions for accepting advertisements from foreign online betting companies. The decision obliged the Swedish Court of Appeal to consider whether Swedish gambling laws are compatible with Europena legilsation and the opinions laid down by the European Court in recent cases such as Placanica.
It was anticipated by many, that Sweden's Ministry of Finance would announce on 15 December 2008, a new set of measures that would put an end to Svenska Spel's monopoly of the Swedish betting market. Jan Nyren, the person responsible for the new plans, was said to have favoured an open door licencing system, that would see foreign betting operators enter the Swedish market for the first time. However, when the time came for the Ministry to make its announcement, it was clear that there was nothing new on the table, as regards the Swedish Government's position
regarding the opening of its betting market to outside operators.
July 08 2010 saw the Court provide a ruling in Joined Cases C-447/08 and C-448/08, "REFERENCES for a preliminary ruling under Article 234 EC from the Svea hovr?tt (Sweden), made by decisions of 8 October 2008, received at the Court on 13 October 2008, in criminal proceedings against Otto Sj?berg (C-447/08) and Anders Gerdin (C-448/08)."
At the material time, Mr Sjoberg was the editor-in-chief and the publisher of the Expressen newspaper. In that capacity, he had sole responsibility for the publication by that newspaper, between November 2003 and August 2004, of advertisements for gambling organised abroad by the companies Expekt, Unibet, Ladbrokes and Centrebet. Mr Gerdin, for his part, was, at the material time, the editor-in-chief and publisher of the Aftonbladet newspaper. In that capacity, he had sole responsibility for the publication by that newspaper, between November 2003 and June 2004, of advertisements for gambling organised abroad by those companies.
The klagaren (Public Prosecutors Office) subsequently took proceedings against Mr Sjoberg and Mr Gerdin for infringement of Paragraph 54(2) of the Loterrilagen, for having promoted, unlawfully and for profit, the participation of Swedish residents in gambling organised abroad. On 21 June and 6 September 2005, Mr Sj?berg and Mr Gerdin were each ordered by the Stockholms tingsr?tt (District Court, Stockholm) to pay a criminal penalty of SEK 50 000 in respect of infringement of the Lotterilag. Mr Sj?berg and Mr Gerdin both appealed against the judgment concerning them before the Svea hovr?tt (Court of Appeal)and the Svea hovr?tt decided to stay the proceedings and to refer to the Court.
The Court in this instance ruled that Article 49 EC must be interpreted as not precluding legislation of a Member State, such as that at issue in the main actions, which prohibits the advertising to residents of that State of gambling organised for the purposes of profit by private operators in other Member States. However, the Court also said that if it is ture that persons carrying out the promotion of gambling organised in Sweden without a licence incur penalties which are less strict than those imposed on the persons who advertise gambling organised in other Member States, then those arrangements are discriminatory and the provisions of Paragraph 54(2) of the Lotterilag are contrary to Article 49 EC and, consequently, unenforceable against the persons being prosecuted in the main actions; "Article 49 EC must be interpreted as precluding legislation of a Member State subjecting gambling to a system of exclusive rights, according to which the promotion of gambling organised in another Member State is subject to stricter penalties than the promotion of gambling operated on national territory without a licence. It is for the referring court to ascertain whether that is true of the national legislation at issue in the main actions."
In June 2012, the Swedish National Audit Office published a report; "The Government's role on the gambling market: are targets achieved?" in which it reviewed the Swedish Government's performance vis a vis the regulation of the Swedish gambling market and the stated aims of the Swedish parliament to "safeguard social protective factors and meet demands for gambling services in a controlled manner."
The Swedish Audit Office noted that "The overall assessment of the Swedish Audit Office is that the development seen to date is in danger of moving towards a rise in pathological gambling, which is not in line with the objectives of the Swedish Parliament."
The Swedish Audit Office also noted that in their opinion, the monopolist operator Svenska Spel was not currently taking sufficient account of the risks involved with pathological gambling and that there was a need for it to better meet the stated parliamentary objectives on gambling more effectively.
In its recommendations to Svenska Spel the Audit Office said that the company should; "Ensure a moderate and restrictive marketing of the company." and also "Make gambling responsibility measures mandatory to a greater extent but allow for gamblers to set their own gambling restrictions."
Noting that "The licence terms relating to the gambling responsibilities and marketing of legal gambling operators in Sweden are vague and differ in part between various forms of gambling with the same level of risk" the Audit Office called for a more coherent regulation system, whereby license terms are more precise and adapted to the level of risk associated with different forms of gambling.
The Swedish Audit Office also said that the regulatory authority must be imbued with new powers,such that it can effectively supervise and target illegal gambling operators based in Sweden as well as unregulated online gambling activities.
In November 2013 the Commission asked Sweden to take action to ensure compliance of its national rules with EU law in the areas of online betting services and online poker services (IP 13/1101).
The Commission stated that Swedish rules for the establishment of an exclusive right for the offering of gambling services do not comply with EU internal market rules. Moreover, the Commission found that the restrictive policy in the area of gambling services is not applied in a systematic and consistent manner and that the holder of the exclusive right is not subject to strict state control.
On 16 October 2014, the European Commission, noting that it did not consider the Swedish reactions to its requests as satisfactory, referred Sweden to Court of Justice of the EU for her lack of compliance with EU law;
"The Commission considers that the way that the Swedish exclusive right system for sport betting is organised is inconsistent with the aim of achieving the public policy objectives of preventing problem gambling and criminal activities and lacks the necessary state control. Changes to the Swedish gambling law in order to make it compliant with EU law have long been envisaged but never implemented. "
In the second case, the Commission focused upon the restrictions that are in place in Sweden vis a vis the provision and promotion of online poker games. The Commission contends that the exclusive right holder is not subject to adequate control by the Swedish authorities and that the restrictive policy in the area of poker games is not consistent as the Swedish authorities tolerate the unauthorised offer and promotion of poker games.
In February 2015, Sweden's Minister for Public Administration Ardalan Shekarabi stated that the deregulation of the Swedish gambling market was not something that was on the government's agenda. However, in September 24 2015, he announced that the Swedish government would now infact investigate the abolishment of the gambling monopoly and the introduction of a Swedish licensing system. In March 31 2017, Mr. Hakan Hallstedt, handed over a 1,340 page proposal regarding the licensing system to Shekarabi. At the core of the proposal
is the suggestion that private companies will at last be able to obtain licenses for online casinos, betting, poker and bingo, as well as land-based horse race betting and sports betting.
In the interim period the Swedish courts moved to uphold the Swedish gambling monopoly. On 15 March 2017, for example, the Supreme Administrative Court of Sweden rejected an appeal from Tranell International Ltd, that it had been unfairly refused a licence to operate in the horse race betting market. The Court found that the monopoly position of ATG in the horse race betting market remained in line with the principles set out in the caselaw of the ECJ as regards the notion of proportionality.
New gambling regulation finally came into effect in Sweden on the 1st January 2019. Under the new legislation, the state reserves control over land-based casinos, the big lotteries and gaming machines positioned outside casinos, but the online sports betting market, online casinos, online bingo and other digital products such as virtual sports will be open to those that qualify for a licence. Licenses, which will cost between 400 000 – 700 000 SEK will be valid for a maximum of five years, and licensed operators will pay 18% tax on their gaming revenue. The biggest challenge which the new law will bring will be the restriction of bonuses to just one welcome bonus.
Be careful what you wish for; you just might get it. Announcing 1st Qtr results Betsson said that that both revenue and operating profit had been negatively impacted by the new betting regulations that were introduced in Sweden at the start of the year. The company reported that taxed revenue had increased by 36 percent compared to the first quarter last year and amounted to SEK 422.2 (310.0) million, corresponding to 31.7 (25.6) per cent of Group revenue. The increase was mainly due to revenue from Sweden. Betsson said:"The gaming industry is changing and Betsson’s assessment is that larger revenues from regulated markets will have an impact on operating profit as betting duties increase." Shares in Betsson have been hammered recently and are currently trading down 32% yoy. How much easier lifer was in the days of unregulated betting markets. Check the latest Betsson Share Price.
Kindred Group also recently announced that profits for the first quarter had been significantly impacted by its new local licence in Sweden.
"Other significant items affecting the quarter was the Swedish betting duties paid of GBP 5.2 million but also marketing investments increasing with GBP 3.8 million. This has significantly influenced the Gross winnings revenue in the quarter but also EBITDA. The total effect on Group EBITDA from the Swedish market opening in the first quarter was a reduction of GBP 18.9 million compared to the first quarter last year." Shares in Kindred Group have also been hammered recently and are currently trading down 27% yoy. How much easier lifer was in the days of unregulated betting markets for them also. Check the latest Kindred Group Share Price.
To cite this article: Niall O'Connor (2019) "Sweden and the long road to gambling market liberalisation."