SOURCE: Bloomberg

State-run gambling companies in the European Union may find it harder to defend their monopolies after Europe's highest court lifted a barrier Italy used to keep out foreign competitors.

The European Court of Justice in Luxembourg today ruled Italy can't use criminal law to stop gaming companies licensed in other EU nations, including the U.K.'s Stanley Leisure Plc, from taking bets in the country. A law barring publicly traded companies from obtaining licenses restricts ``the freedom to provide services.''

State monopolies in France, Germany and other countries have been criticized by companies such as Ladbrokes Plc for blocking their cross-border online gaming business. Shares of providers such as Austrian Web bookmaker Bwin Interactive Entertainment AG rose after today's court decision, which may remove some restrictions on the EU's 50 billion-euro ($66 billion) industry.

``This is a step further toward a liberalization of the European gambling markets,'' said Lode Van Den Hende, a lawyer in the Brussels office of Herbert Smith. ``Overall this is very good now for the gaming operators. If this had gone against them they could have closed shop.''

Liverpool Bets

Massimiliano Placanica and two other people who operated shops in Italy where people could place online bets with Stanley's office in Liverpool, England, faced criminal charges under Italian law because Stanley didn't have a local gaming license.

The court prohibited the use of criminal law in particular in cases where foreign betting companies were refused the required license by the country, as was the case for Stanley.

``The Italian criminal penalties for the collecting of bets by intermediaries acting on behalf of foreign companies are contrary,'' to EU rules, an 11-judge panel of the court said.

Stanley, controlled by Genting Bhd of Malaysia, said today's ruling was a ``landmark'' that will put pressure on governments and the European Commission, the EU's executive arm in Brussels, to end national protectionism.

`Milestone'

``This judgment is another step along the road to fairer competition in Europe,'' Christopher Bell, chief executive of Ladbrokes, said in an e-mailed statement. ``We have already seen Italy and Spain move to open up their betting markets and this judgment supports our view that the policies of many EU governments are inappropriate and disproportionate in restricting free and fair competition.''

Bwin said the decision was a ``milestone toward the opening of the European gambling market'', confirming that ``state monopolies were not in compliance with EU legislation before'' and in light of the judgment can no longer be upheld.

Government-owned lotteries also welcomed the decision, which they said established countries' right to limit gambling and betting activities.

The court confirmed that countries have the right to decide on the number of operators allowed on their market, Winfried Wortmann, president of European Lotteries, the association representing state lotteries, said in an e-mailed statement. ``This includes the option to give an exclusive right to one operator,'' he said.

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