Bundeskartellamt issues warning to lottery companies

The Bundeskartellamt has issued a warning letter to the regional lottery companies and the German Lotto and Toto Block (Deutscher Lotto- und Totoblock, DTLB) on account of several violations of German and European competition law. The warning concerns three forms of conduct:

1. The call of the German Lotto and Toto Block on lottery companies not to accept any stakes collected through commercial lottery agents at retail outlets;
2. The lottery companies’ agreement to offer lotteries and sports betting services only in those Länder in which they are authorised to do so (“principle of regionality”);
3. The provision of information by the lottery companies to the Länder on stakes, processing fees collected and the proportion thereof collected through commercial lottery agents.

Already in 1999 the Federal Supreme Court prohibited the lottery companies from generally excluding commercial lottery agents from participating in the lottery market and thus confirmed a prohibition decision by the Bundeskartellamt. The activities of commercial lottery agents are therefore in principle admissible. They do not violate the state monopoly on lottery games either, because the lottery agents merely act as intermediaries between customers and lottery companies against payment of a commission and do not enter into any agreement with the customers themselves. The commercial lottery agents first confined their activities to the acquisition of customers via the Internet, call-centres or by mail order. Now, they intend to also acquire customers through retail outlets, e.g. in supermarkets or petrol stations. In the Bundeskartellamt’s current view the request not to accept any stakes collected through commercial lottery agents at retail outlets violates competition law because it considerably restricts the business activities of commercial lottery agents.

In addition, the so-called “principle of regionality”, according to which lottery companies may only offer lotteries and sports betting services in those Länder in which they are authorised to do so, violates competition law. In the Bundeskartellamt’s view this constitutes an allocation of territory which is inadmissible under competition law and prevents competition between the lottery companies.

Finally, the lottery companies inform the Länder on their revenues and distribution of winnings through commercial lottery agents to enable the Länder to divide the revenues among each other under the “treaty on the regionalisation of proportions of revenue generated by companies of the DLTB” (Regionalisation Treaty). The quota allotted to the individual Länder mirror the existing regional market segmentation between the lottery companies. Due to this „regionalisation“ the individual stakes are allocated to the respective Land where the person participating in the lottery is a resident. This restricts the incentive for lottery companies to also enter into player agreements with customers from other Länder.

The companies concerned have until the end of June 2006 to comment on the warning.