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Monday, July 2, 2018

Italy’s Proposed Gambling Ads Ban Could Open Pandora’s Box of Trouble for the Industry

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Italy’s Proposed Gambling Ads Ban Could Open Pandora’s Box of Trouble for the Industry

With a brand new, very populist, and very anti-gambling government, Italy seems to be on the cusp of completely banning gambling advertising, thus opening what many would consider a Pandora’s box of nasty consequences for its gambling industry.

The debate over the potential prohibition of any gambling-related promotional content on any Italian media outlet has been part of Italy’s political scene over the past several months, but it has escalated into a war of words between politicians and gambling industry stakeholders over the past few weeks as more details about the actual prohibition have emerged.

The latest series of developments involved LeoVegas Italy Managing Director Niklas Lindahl and Italian Deputy Prime Minister and Minister of Economic Development, Labor, and Social Policies Luigi Di Maio, with the two of them using local media outlets and social media to exchange opinions why the ban would or would not be effective.

Here it is important to note that Minister Di Maio was actually the politician who opened what could happen to be a Pandora’s Box of horrors for Italy’s gambling industry. The Deputy Prime Minister, who leads the populist Five Star Movement, introduced earlier this year his Dignity Decree that focused on the provision and promotion of gambling services in the country and how activities of this type could be curbed so that the number of gamblers and people suffering from gambling addiction be reduced.

The absolute ban on gambling advertising is one of the main points in the legislative piece. The decree is set to be discussed by Italy’s Council of Ministers later today. If adopted, the prohibition will apply to all forms of advertising of real-money gaming and betting activities. Ads will thus be banned from all Italian media outlets. What is more, no sporting, cultural, or artistic events will be allowed to feature any materials that secure brand exposure for companies providing gambling services.

The ban will also apply to sponsorship agreements between gambling companies and other entities, including football clubs.

According to a last-minute update of the bill, the ban would not apply to already existing advertising contracts, which means that Minister Di Maio and other politicians supporting the gambling ban proposal might be ready to a certain amount of compromise.

Industry vs. Government – a War of Words

In an open letter to Minister Di Maio, the LeoVegas Italy Managing Director urged the top politician to change his mind, as an absolute ban on gambling ads could and would produce the exact opposite effect of what was desired by the introduction and potential implementation of the Dignity Decree.

Minister Di Maio has previously said that an advertising ban would reduce the exposure of people, particularly vulnerable members of the Italian population, to gambling. And the measure is hoped to reduce the number of gambling addicts in the country.

It is believed that around 1 million of Italy’s population of over 60 million people are struggling with gambling addiction or are showing symptoms of problem gambling behavior. According to Minister Di Maio, the aggressive promotion of gambling services across different outlets is encouraging people to gamble excessively.

Mr. Lindahl has argued in his letter that the only party that will benefit from a complete ban on gambling ads will be the black market. According to the LeoVegas Italy executive, advertising is the only advantage regulated operators have over unregulated ones. Once this advantage is nixed, black market providers will become more aggressive in their attempts to lure customers and it will be much easier for them to succeed in that endeavor.

Responding to Mr. Lindahl’s letter, Minister Di Maio has said in a recent Facebook post that the proposed prohibition will actually result in people gambling less not only with regulated but also with unregulated operators, as there will be no promotional content to encourage and tempt them to gamble. The politician has also emphasized on the fact that a ban on advertising would not ban gambling products, as a whole, and that Italy could still have a profitable industry.

In his letter, Mr. Lindahl has pointed out that a full ban on gambling ads could actually be unconstitutional as it would clash with an essential element in licensed operators’ agreement with Italy’s gambling regulator. This, in turn, would run afoul of the freedom of enterprise under Article 41 of the Italian Constitution. Bearing this in mind, it can be said that the latest update to the Dignity Decree could actually be aiming to address that exact issue, to some extent.

Commenting on gambling addiction as an issue that indeed needs to be addressed properly by both politicians and industry stakeholders, Mr. Lindahl, responding to previous comments by Minster Di Maio citing the effectiveness of the ban on tobacco products, has said in his letter that smoking addiction rates have not changed that much in Italy, according to data.

Mr. Lindahl cited a 2017 ISTAT report, according to which smoking addiction tops the country’s addiction chart with 10.3 million people still being addicted, despite the ban on tobacco products advertising. The gambling executive admitted that issues arising from gambling and its excessive advertising need to be taken care of by both the country’s legislature and the industry. He further pointed out that both stakeholders and lawmakers need to get to the discussion table quickly and seek an alternative solution that would not involve a complete ban on advertising.

Facts, Figures, Expected Impact

According to information from Italy’s gambling regulator Agenzia delle Dogane e dei Monopoli, Italy’s gambling industry saw cash flow (turnover) of €96.142 billion in 2016, up from €34.718 billion from a decade earlier when the regulatory body published its first report.

In terms of revenue, the country’s regulated operators generated a total of €19.499 billion before tax and of €9.014 billion after tax during the 12 months ended December 31, 2016. That makes the country Europe’s second largest regulated market.

Minister Di Maio has previously said that while a ban on gambling advertising would certainly have a negative impact on tax revenue from gaming and betting activities, the fact that fewer people would be tempted to gamble would offset the losses. The Minister has pointed out that most of the money contributed the coffers are used for the treatment of people with gambling-related problems, but as the number of problem gamblers is hoped to be reduced thanks to the advertising prohibition, the tax revenue losses would not have such of a great negative impact.

While there are no official figures on how much operators spend on promoting their services and products across Italian media, local gaming news outlet AGIMEG reported that the amount of €45.9 million was spent on gambling advertising in the third quarter of 2017. Here it is important to note that there was no major sporting event over that period. In other words, companies’ advertising budgets are certainly much larger this year with the ongoing World Cup championship.

According to gambling experts, Italy’s regulated betting and gaming industry will receive a quite a heavy blow in the event of a full ban on gambling advertising. Its online sector, estimated to have been worth €1.03 billion in 2016, would suffer the most as it relies heavily on advertising and promotions to lure customers. It is also important to note that a full-blown ban on ads would effectively kill Italy’s iGaming affiliate sector.

Today’s update of the decree certainly comes as a positive development. However, it is yet to be seen how the Council of Ministers will react to the proposed changes to the current status quo and whether Minster Di Maio and the supporters of his idea would be ready to compromise and reintroduce a less conservative solution to gambling addiction issues, one that would not overregulate what seems to be a relatively well-functioning industry and throw gamblers in the hands of black market operators.

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