By Jana Sedlakova
Significant new barriers have been implemented by the Italian government against gambling advertising. The so called ‘Baduzzi’ decree lays down these restrictions. As Giulio Coraggio, Senior Associate at DLA Piper, specified*, “the decree banned any advertising aimed at “creating an incentive to gambling activity or to exalt the game”. This, when it is interpreted literally, could mean a practical ban on any ‘advertising campaign’. “Indeed, any ad of a gambling website per se encourages players to play on its platform and for instance the banner where a welcome bonus is promoted could be deemed to create an “incentive” to gambling.”
A fine in the case of a breach of these rules could be as much as €500,000. This obviously raises concerns in the industry as it may be applicable “against media owners on which the ads are shown. As a consequence, it is unlikely that any media owner (Google for instance) might accept to show a gambling ad without a prior favorable opinion of the Italian gambling regulator, AAMS.” Giulio expressed.
Giovanni Maria Riccio, Lawyer at Scorza Riccio & Partners (Rome, Italy), said* “I think that pathological gambling is a very important issue, but radical positions should be avoided (i.e. anti-gaming vs. pro-gaming). I agree with forbidding commercial communications for events where minors can be involved (e.g. commercials before movies), but the new law seems quite formalistic: for example, I sincerely doubt that the publication of payout percentages will prevent minors from playing. In my view, the State, rather than repressing activities which generate important economic benefits, should spread education about responsible gaming and train operators with a specialization on ludopathy [pathological gambling]. Higher fines are not the answer.”
The regulator for advertising in gambling will be the existing gambling regulator, AAMS. Giulio Coraggio commented* “a mere notification obligation of advertising campaigns was on operators, and therefore AAMS will all of a sudden have to decide on the legality of gambling ads without having any case law or precedents to rely on.”
It may be questionable whether the legislator itself understood clearly the implications of the new rules. Stefano Sbordoni, IT Law Professor and Lawyer, at Studio Sbordoni, said that “online operators are not used to this new regime, and will face difficulties but only in the initial phase”. It is believed that the market is doubtful about the impact of forthcoming Italian prohibition on gambling promotions. It is understood that confirmation of this is “the recent approval of a gambling advertising self-regulatory code which will govern gambling advertising together with the general advertising self-regulatory code and misleading advertising and unfair commercial practices regulations.”
Giulio Coraggio added*.
“If there was a risk that gambling advertising is almost completely banned, the approval of a self-regulatory code would not make too much sense. Also, given the lack of case law on the new gambling advertising provision just approved by the Government there is the risk that an ad is deemed to be compliant with the self-regulatory code, but then considered in contrast with the terms of the decree.” Giulio Coraggio added*.
“If there was a risk that gambling advertising is almost completely banned, the approval of a self-regulatory code would not make too much sense. Also, given the lack of case law on the new gambling advertising provision just approved by the Government there is the risk that an ad is deemed to be compliant with the self-regulatory code, but then considered in contrast with the terms of the decree.” Giulio Coraggio added*.
To this, Marcello Presilla, Expert in Italian Gaming Regulation, commented*; “self-regulation is important. I participated to write a Code of conduct of the Italian Gaming Industry Association, that was presented to the Italian Authority of regulation (AAMS). The code of conduct is important to channel the behavior of gaming companies in the right direction, but is not enough.”
The news might have been initially welcomed by the operators, but some say, that the extent was not fully understood by them. It might only have been believed that it would affect minors, whilst it addresses any gambling advertising. In addition the “AAMS will not be able to “correct” the scope of the provisions as its interpretation cannot beyond the limits of the primary law.” Giulio added*.
The news might have been initially welcomed by the operators, but some say, that the extent was not fully understood by them. It might only have been believed that it would affect minors, whilst it addresses any gambling advertising. In addition the “AAMS will not be able to “correct” the scope of the provisions as its interpretation cannot beyond the limits of the primary law.” Giulio added*.
To this question, Stefano Sbordoni commented* “on one side the online operators feel that they have been “sacrificed” for the interests of the off line operators. In fact the focus on advertising rules has allowed the State to cancel the proposed restrictions on gaming halls. On the other side these advertising rules where expected anyway.”
It is disputable that the industry growth would significantly be affected, let alone the barriers for those interested in entering the market. Another matter is the risk that unlicensed operators may take the advantage of the limitations that licensed operators face and to push hard their campaigns. Importantly the changes in question are more of a principle than “specific mandatory provisions”, highlighted Stefano Sbordoni*.
It is disputable that the industry growth would significantly be affected, let alone the barriers for those interested in entering the market. Another matter is the risk that unlicensed operators may take the advantage of the limitations that licensed operators face and to push hard their campaigns. Importantly the changes in question are more of a principle than “specific mandatory provisions”, highlighted Stefano Sbordoni*.
Giovanni Maria Ricco believes that there will be an impact, however* “we’ll have to analyze the controls made by the public authorities in the long run. We shouldn’t forget that the major operator in the Italian gaming sector is the State, so we’ll have to understand if the State is really aiming at reducing the ludopathy [pathological gambling] and, at the same time, reduce its revenues.”
Marcello Presilla believes there will be negative impact on revenues, but it will not be a catastrophe in the short term.
It will be interesting to see whether the industry has sufficient time to prepare for the changes, as it comes into force fairly soon after Parliament’s ratification. The legal changes are unlikely to affect software providers but more so the gambling operators. Furthermore, Stefano Sbordoni commented that* “software providers shall follow the indications of the operators, so they will have to wait the operators reaction to the new advertising rules.”
Prior to the decree ratification by the Italian Parliament earlier this month the hope was for the amendments to have the gambling advertisement judiciously regulated and not prevented. Indeed, it implemented some changes.
It will be interesting to see whether the industry has sufficient time to prepare for the changes, as it comes into force fairly soon after Parliament’s ratification. The legal changes are unlikely to affect software providers but more so the gambling operators. Furthermore, Stefano Sbordoni commented that* “software providers shall follow the indications of the operators, so they will have to wait the operators reaction to the new advertising rules.”
Prior to the decree ratification by the Italian Parliament earlier this month the hope was for the amendments to have the gambling advertisement judiciously regulated and not prevented. Indeed, it implemented some changes.
Giulio Coraggio in his blog [Italy: Gambling Advertising Regulations and Self-regulatory Rules Ratified] addresses the changes implemented and that, “the major change implemented compared to the decree approved by the Government relates to the fact that it is now prohibited the broadcasting of gambling ads not only during the course of TV, radio, cinema programs mainly addressed to minors but also in the 30 minutes before and after them. Also, the regulations now stress even more that the percentage of payout shall be specified in the ad. However, the regulations still prohibit any advertisement aimed at “creating an incentive to the gambling activity or to exalt the game” which is very broad wording that might include any type of gambling advertisement. For this purpose together with Roby we are working with AAMS in order to issue some guidelines that will clarify the scope of the regulations and the types of ads that are prohibited.”
Note
* prior to the Parliament’s ratification
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* prior to the Parliament’s ratification
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Additional industry comments on this topic
“I do not see many positives as no gambling operator has ever thought about targeting minors in their ads. Likewise the same principle set forth in the regulations was already incorporated in the regulations on unfair commercial practices whose breach is sanctioned with fines up to € 500,000 i.e. just the same amount provided by the new regulations on gambling advertising. My view is that the solution to gambling advertising issues would have been a more careful action of the Italian competition authority – that has jurisdiction also on advertising matters – on gambling advertising. Indeed, the competition authority has developed a deep knowledge of the advertising sector during the last years and they are the most appropriate authority to deal with these matters. The negatives of these advertising rules are that a strict interpretation of them would prevent operators to promote their business that is good news for the market leaders but very bad news for new entrants and also for players as this limitation would restrain competition.” Giulio Coraggio commented [prior to the ratification]
Marcello Presilla, Expert in Italian Gaming Regulation, said
“First of all, the fine is very high, as you know, minimum 100 K maximum 500 K (DL 13 September 2012, No. 158, Art.7 c. 6). Certainly, in the near future, all the gaming companies will be more cautious with ads, especially about the quality and the content of the sales promotion. Certainly, we can consider that the fine is too high, but the key point is, for the gaming companies and the media, that the ads don’t have to incite gaming (Art. 7, paragraph 4 Law No 158/2012). This is a very controversial point. Actually, it will be difficult to understand if and when an advertising message is compliant to the new Law or not. It will not be easy, in concrete terms, to promote a product and at the same time to avoid inciting the consumers to purchase it and to spend more money (it will be difficult to find the balance point). There is a large and discretionary evaluation power by the Authority.”
However, this strict and severe regulation is the consequence of a period of excess (in which many times the ads targeted youngest, and used incorrect messages etc.). During last 3/4 years, there was a big pressure on the Italian market, especially among the online companies to conquer new slices of the market. After the Law No 88/2008 that offered new licenses for the online market, dozens and dozens of new companies arrived in Italy: the competition was strong and consequently the temperature of the ads rose on the battlefield. This situation has provoked a big pressure on the consumers, targeted continuously and in every manner, every hour and day, without any serious attention to minors and vulnerable people.”
The companies have made large investments, for millions and millions of euro (tv, internet, magazine, ect.), to promote their brands. This big wave of money was good for the media in a period of economic crisis, and was oxygen for the ads and media companies.
Under the new law, the owner of the media and gaming company are considered at the same level of responsibility in terms of violation. In my opinion this mechanism is severe, but is the only to guarantee the enforcement of the rules.
All this big pressure has provoked a reaction in the public opinion and at the political level. Many MPs had invoked and proposed the prohibition of any form of ads for the gaming products (several Bills were presented in the Italian Parliament similar to the prohibition of tobacco). Now the situation is complex. After a period in which the issue was totally unregulated the reaction of the public powers, as often happens, was too severe and too strong.
I think that the new rules could have the effect to cool the market of the ads and it’s possible to forecast negative consequences in terms of revenue growth for media companies and maybe also for the gaming companies, but I don’t think there will be nefarious effects, I don’t imagine a catastrophe in the short term.
I think that it’s important that advertising and every kind of promotional activity respects limits and fairness, especially to protect minors and vulnerable people. The new regulation will impose more responsible behavior.”
“First of all, the fine is very high, as you know, minimum 100 K maximum 500 K (DL 13 September 2012, No. 158, Art.7 c. 6). Certainly, in the near future, all the gaming companies will be more cautious with ads, especially about the quality and the content of the sales promotion. Certainly, we can consider that the fine is too high, but the key point is, for the gaming companies and the media, that the ads don’t have to incite gaming (Art. 7, paragraph 4 Law No 158/2012). This is a very controversial point. Actually, it will be difficult to understand if and when an advertising message is compliant to the new Law or not. It will not be easy, in concrete terms, to promote a product and at the same time to avoid inciting the consumers to purchase it and to spend more money (it will be difficult to find the balance point). There is a large and discretionary evaluation power by the Authority.”
However, this strict and severe regulation is the consequence of a period of excess (in which many times the ads targeted youngest, and used incorrect messages etc.). During last 3/4 years, there was a big pressure on the Italian market, especially among the online companies to conquer new slices of the market. After the Law No 88/2008 that offered new licenses for the online market, dozens and dozens of new companies arrived in Italy: the competition was strong and consequently the temperature of the ads rose on the battlefield. This situation has provoked a big pressure on the consumers, targeted continuously and in every manner, every hour and day, without any serious attention to minors and vulnerable people.”
The companies have made large investments, for millions and millions of euro (tv, internet, magazine, ect.), to promote their brands. This big wave of money was good for the media in a period of economic crisis, and was oxygen for the ads and media companies.
Under the new law, the owner of the media and gaming company are considered at the same level of responsibility in terms of violation. In my opinion this mechanism is severe, but is the only to guarantee the enforcement of the rules.
All this big pressure has provoked a reaction in the public opinion and at the political level. Many MPs had invoked and proposed the prohibition of any form of ads for the gaming products (several Bills were presented in the Italian Parliament similar to the prohibition of tobacco). Now the situation is complex. After a period in which the issue was totally unregulated the reaction of the public powers, as often happens, was too severe and too strong.
I think that the new rules could have the effect to cool the market of the ads and it’s possible to forecast negative consequences in terms of revenue growth for media companies and maybe also for the gaming companies, but I don’t think there will be nefarious effects, I don’t imagine a catastrophe in the short term.
I think that it’s important that advertising and every kind of promotional activity respects limits and fairness, especially to protect minors and vulnerable people. The new regulation will impose more responsible behavior.”
Gionata La Torre, CEO of Evolution Italy expressed [prior to the ratification]:
“By now we just have few articles on gambling advertising with a bigger focus on public health. Honestly I think that it is too early to jump to conclusions and we do have to await the discussion by the two chambers of the Parliament. In general I think that it is a lost opportunity for the Igaming industry (mostly operators) to have the Parliament ruling on advertising: it would have been better to have a joint proposal for self regulation coming directly from an industry which is so highly involved in Responsible gaming. The main concern of the legislator is protecting under 18 years old from exposure to the gaming advertising.”
“By now we just have few articles on gambling advertising with a bigger focus on public health. Honestly I think that it is too early to jump to conclusions and we do have to await the discussion by the two chambers of the Parliament. In general I think that it is a lost opportunity for the Igaming industry (mostly operators) to have the Parliament ruling on advertising: it would have been better to have a joint proposal for self regulation coming directly from an industry which is so highly involved in Responsible gaming. The main concern of the legislator is protecting under 18 years old from exposure to the gaming advertising.”
Giovanni Maria Ricco Lawyer at Scorza Riccio & Partners (Rome, Italy) would also support self regulation if applicable. He said that “instead of repressing a sector which is important during this crisis period, it should be better to find common solutions, adopted by both the gaming operators together and the public authorities.”