Europe on a slow road to nowhere

I spoke yesterday at the International Casino Conference in London.

The audience comprised regulators from monopoly countries and operators of monopoly businesses in Europe, so I didn't turn up expecting to have many friends. But I was struck, at the end, by how many people came up and told me that they agreed with the position I outlined, and how they find the position adopted by leaders on their side of the business frustrating.

The main thrust of my brief talk was one which will not be news to other online betting operators: that while European governments either sit on their hands or legislate in a way which outlaws internet gambling, consumers vote with their feet and go and bet wherever they choose. The impact of aggressive legislation is not to stop people betting, but to make them bet with operators other than the 20 or 30-odd brand names that we have all heard of. Given that the French government's own analysis estimated that there are around 5,000 gambling sites on the web, it's not as if they are spoilt for choice.

My comment that it would be helpful if European regulation took into account the reality of consumer behaviour was answered by Paul Herzfeld, the CEO of Casinos Austria International, with the statement: "Consumers might want to drive at more than 130kph, but that is the law."A sentence earlier, Mr. Herzfeld had also said that the difficult part of the debate between the state operators and the "private" industry (many of whose members are actually listed on the stock exchange) was that his company was regulated and the others were not.

It seems to me that in those successive sentences, Mr. Herzfeld summed up why this debate is not moving forward. On the assumption that the comments were based on a lack of knowledge rather than a conscious effort to misinform, I'd like to set the record straight on both issues.

To take the second, first: Casinos Austria may be licensed in Austria; but Betfair is licensed in the UK, as well as Australia, Italy and Malta. In other words, not only are we licensed, but we are licensed by more places, and therefore more heavily regulated (by virtue of different countries having different requirements) than his company is.

As regards the first, the analogy completely misses the point. No-one is suggesting that consumers should be allowed to travel at more than 130kph if 130kph is deemed to be the speed at which they are safe. But once we've established that the speed limit is set, would any government insist that a consumer had to drive a Volkswagen but couldn't drive a Volvo? Or could travel by car, but not by train? If not, on what basis must a consumer be allowed to bet with a State-owned operator but not a non-State-owned operator regulated to the same standard?

The implication of Mr. Herzfeld's statement was that Betfair somehow tries to avoid regulation, and wants to break the law. Nothing could be further from the truth: we set our business up making clear statements that we would stick to the law even if we thought it was stupid (we never, for example, took bets out of the United States, but instead blocked access to us from there); ;and we have made quite clear that we will submit ourselves to regulation and tax in states around the world, providing that regulation is equitable and consistent across all operators and does not seek to single us out.

The point is not, therefore, that the online gambling industry is seeking to avoid being regulated. It is that operators are being told that they cannot have a licence. The reasons we are given for that do not bear scrutiny. We are told, for example, that we 'cannot deal with problem gambling issues', when it is manifestly clear that we do so at least as well, and normally better, than existing monopolists. Let's not forget, for example, that the PMU in France introduced a means of ensuring its customers are over 18 only in June last year !

While operators like us are denied licences (and the French, for example, have said that they want to ban 'our way of betting', as if the fact that we manage our risk perfectly through technology is somehow problematic: you would think that it was a bonus, given what is going on in the world), consumers are voting with their feet. If they can't find the product they want at a fair price within their own jurisdiction, they go and find it on the web. They don't think of it as breaking the law: they think of it as exercising their consumer right to a fair product at a fair price. It's not as if they are buying something that isn't sold in their home country; it's that they are buying it in a package that attracts them, at a price which they think is fair value.

The impact of this in the longer term is going to be significant. Governments that think they are protecting their tax revenues by protecting their monopolies and keeping out competitive product are simply losing consumers to sites much further afield. We know from our own commercial experience that once you have lost a customer by seeing him sign up to a different site, it is very difficult to get that customer to move. In short, this game is a land-grab, and, by legislating (on purpose) to keep out best product and best price in order to protect slower-moving national operators, European governments are not even pitching for the business.