Enforceability of the internet prohibition in section 4 subsection 4 ITG 2008

An article by attorney-at-law Susanna Münstermann, Associate, Law Firm Hambach & Hambach

With the State Treaty on Gambling1 (Glücksspielstaatsvertrag – ITG 2008), aimed at maintaining the gambling monopoly for lotteries and sports bets, the German Federal States decided to take radical measures against new forms of products. Pursuant to section 4 subsection 4 ITG 2008, the operation and brokering of public gambling on the internet is therefore prohibited2. In the meantime, it has also become apparent that the Federal States’ supervisory authorities are looking for new ways of actually implementing this prohibition in 2009.

Importance of internet sales for state-run and private providers

The prohibition primarily affects private providers, commercial lottery brokers such as Tipp24 as well as German and foreign providers and brokers of sports bets. The state’s sales of lotteries and sports bets, however, continue to be handled through the dense network of lottery counters without any problems. State-run lottery providers had only in recent years recognised the possibilities of internet sales, and some of them made considerable investments in attractive internet offers. As an example, I would like to refer to the setting-up of the Bavarian internet offers, which the annual report 2007 issued by the Bavarian audit court described as follows:
“In 2000, the SLV (state lottery administration) initially began offering the Oddset bets via the internet (…). From the end of May 2001 onwards, the internet offers were extended to Lotto, Glücksspirale, Spiel 77, Super 6, and also to Keno. (…). Subsequently, the SLV continuously developed and improved its sales via the internet: Additional personnel were employed specifically for the gaming offers on the internet, and several million Euros were invested in software and hardware. (…). Although the operation of games on the internet has in the meantime been ceased, these resources (technical equipment and personnel) continue to be maintained3.”
Some state-run providers have spared neither cost nor effort, even during the transition period of only one year4, to fulfil the strict requirements resulting from section 25 subsection 6 No. 1 ITG 2008. This can, for instance, be seen in the fact that KJM issued a positive evaluation of the lottery identification system (Lotto-Identverfahren) incl. Lotto- Stick for Nordwest Lotto and Toto Hamburg, as well as of the text message PIN system for utilisation by closed groups of users for Lotto Bayern.

Blocking orders against access providers

From 2009 onwards, the intention is to strictly monitor the internet prohibition. Recent press releases show that foreign internet offers are now meant to be blocked by corresponding orders against the access providers5. In some cases, access to the offers could already be blocked by taking action against the Admin-C or the registrar6.

What remains unconsidered in the context of the actions taken by the gambling supervisory authorities are the concerns which had already been raised during the discussions regarding blocking orders for websites with child-pornographic content. In a study commissioned by the KJM, Prof. Sieber, for instance, came to the following conclusion: “The present legal situation (…) does not allow any blocking measures which would interfere with the secrecy of telecommunications as provided for in Art. 10 GG (German Constitution), section 88 TKG (German Telecommunications Act)7.” Prof. Pfitzmann examined the technical side for KJM and came to the result: “Summing up, onecan state that blocking on the internet is feasible in principle, however, it is often connected with considerable (and usually unforeseeable) side-effects8.”

Borders of the Federal States on the internet?

In addition to this very critical evaluation of the legal and technical feasibility of blocking orders against access providers, all providers, supervisory authorities and courts will also have to face the problem of the implementation in the internet area of prohibition orders specific for the individual Federal States. Inconsistent court decisions provide proof of the difficulty of the technical and legal evaluation of the situation9.

Even though the provision in section 9 subsection 1 sentence 4 ITG 2008 would allow the Federal States’ supervisory authorities to take coordinated action, individual state authorities frequently issue prohibition orders with legal effect only for the Federal State concerned. For instance, providers of internet poker and sports bets received prohibition orders from the Bezirksregierung (district government) in Düsseldorf, regarding participants in the Federal State of North-Rhine Westphalia only. In order to fulfil the authority’s order, the provider would therefore have to be able to exclude all participants located in the Federal State concerned10. As the decisive factor is the current location of the player, not the place of residence, a one-time inquiry regarding the place of residence would not be sufficient. Rather, it would be necessary to enquire about the player’s current location each time he logs onto the gambling offers, and the reply would have to be checked by geo-localisation. When examining the justification of the prohibition order, it must therefore be evaluated whether the provider, using state-of-the-art technology, is able to determine the present location of the participant in the game. In a study11, TÜV Rheinland discussed this question in detail, after Prof. Hoeren, in a study12 commissioned by the Deutsche Lotto-Block, changed his previously voiced opinion13.

Summing up, it can be stated that the localisation of the participant in the game is determined by the location of dial-in. However, this is not necessarily close to his actual current location. However, according to various examinations, even the determination of the point of access with the required exactness of 90 % is only possible for a larger radius14, so that a restriction of the participants from specific Federal States cannot be carried out with ultimate reliability15. This means that the prohibition order would impose upon the internet provider the problem of violating this order through no fault of his. However, it is the authority’s obligation to show the recipient of an order a way to fulfil his obligations16.

Conclusion

The internet prohibition of gambling raises many questions:

First of all, a conflict of generations becomes apparent, as the internet prohibition is only justified by an unwarranted and diffuse fear of the medium internet: “The player’s anonymity and the lack of any kind of social control make it seem necessary, under the aspect of preventing gambling addiction, to question the sales channel “internet”, for the area beyond sports betting.” Contrary to this, today’s generation is well aware of the fact that the average internet user is not anonymous, and that addiction prevention can be realised much more effectively by the provider of internet games than, for instance, on location at a casino where an individual’s playing behaviour cannot be recorded in a traceable way. Furthermore, the implementation of the prohibition beyond Germany’s borders requires censorship measures which usually are applied by countries such as China and North Korea, but are alien to a democratic and free society.

State supervision of gambling takes the easy way out in this context: by delegating its task of enforcing an internet prohibition to the internet providers, without providing themwith feasible and effective action proposals for the implementation. The risk of hitting legal internet services as well due to imprecise blocking measures, and of thus exposing oneself to incalculable risks of damage claims, is simultaneously passed on to the internet providers in an inadmissible way.

In order to safeguard state fiscal income, even concerns which are decisive in the discussions regarding blocking orders against websites with child-pornographic content are dismissed in the context of the planned restrictions of the internet in the area of gambling. It must therefore be anticipated that the gambling supervisory authorities, driven by the intention of realising income, will power past the initiative by the German Federal Government regarding the blocking of child pornography sites, which was based on reason and technical and legal know-how, and will make it permanently impossible to responsibly deal with the medium internet due to its inadmissible and infeasible “actionism”.

Susanna Münstermann, Associate
Hambach & Hambach

Source: TIME LAW NEWS 1/2009 (www.timelaw.de) by Law Firm Hambach & Hambach

1 Staatsvertrag zum Glücksspielwesen in Deutschland (State Treaty on Gambling in Germany), Gesetz- und Verordnungsblatt (law gazette) for the Federal State of Hesse, Part I 20.12.2007, p. 841.

2 Due to the legislative intent of the ITG 2008, this is to fulfil the requirements set by the BVerfG (German Constitutional Court) and by addiction experts, who held that the interests of youth and player protection would be jeopardised by internet offers.

3 Bayerischer Oberster Rechnungshof (Bavarian high audit court), Jahresbericht (annual report) 2007, http://www.orh.bayern.de
On the development of internet business, see data overview on page 90, recently: increase from 162 000 (2005) to 245 000 (2006) registered game participants.

4 In spite of contradicting allegations in the media, the transition period only applied to operators of lotteries and brokers of lotteries. Provided that strict requirements were fulfilled, operators and brokers were allowed to continue their internet sales up until 31 Dec. 2008, with permission by the responsible supervisory authorities of the Federal State concerned.

5 Compare press release in Focus Online: http://www.focus.de/digital/internet/internet-gluecksspielseiten-droht-sperrung_aid_351940.html.

6 Compare press release in Heise Online: http://www.heise.de/newsticker/Bezirksregierung-Duesseldorf-geht-gegen-Gluecksspielseiten-vor–/meldung/120252.

7 Sieber/Nolde, Sperrverfügungen im Internet (blocking orders on the internet), April 2008, p. 223 accessible at www.kjm-online.de

8 Pfitzmann/Köpsell/Kriegelstein, Sperrverfügungen gegen Access Provider (blocking orders against access providers), April 2008, p. 73 accessible at www.kjm-online.de.

9 The internet prohibition cannot be technically enforced: OVG (Higher Administrative Court) of Thuringia, resolution dated 3.12.2008, ref. 3 EO565/07; VGH (Higher Administrative Court) of Bavaria, resolution dated 7.5.2007, ref. 24 CS 07.10; VGH (Higher Administrative Court) of Hesse, resolution dated 29.10.2007, ref. 7 GT 53/07; however: VGH (Higher Administrative Court) of Bavaria, resolution dated 20.11.2008 ref. 10 CS 08.2399 – advertising prohibition with restriction as to region can be imposed – however, retaining the principles of the decision dated 7. 5. 2007; VGH (Higher Administrative Court) of Baden-Württemberg, resolution dated 5.11.2007, ref. 6 S 2223/07

10 Pursuant to section 3 subsection 4 ITG 2008, a game of chance is operated or brokered at the location where the player is provided with the opportunity of participating.

11 TÜV Rheinland Secure iT, short study on the topic geo-localisation of IP hosts, 12.8.2008, not published.

12 Hoeren, Zoning und Geolocation, MMR 2007, p. 4.

13 Hoeren, Geolokalisation und Glücksspielrecht (geo-location and gambling law), dated 24.4.2008 (ZfWG 2008,
229).

14 Between 250 and 500 km, according to a study by Gueye, Uhlig and Fdida (Investigating the Imprecision of IP Block-Based Geolocation, 2007) and a study for the IEEE-Institute (Constrained-Based Geolocation of Internet Hosts, 2006).

15 For self-test, with display of dial-in node: http://www.meineip.de/.

16 VGH (Higher Administrative Court) of Bavaria, resolution dated 7.5.2007, ref. 24 CS 07.10.