In Italy, Lotto is the oldest game into gambling and betting area: it was created in 1500 and managed by the State since the Italian Unification, becoming part of the national budget since the 1863.
The Lotto’s management is organized by the Italian State and it is based on a dual model of concessions: (i) on the one hand, the multiproviding model, where the game sales is entrusted to a plurality of concessionaires; (ii) on the other, the exclusive monoproviding model, characterized by a solo concessionaire who manages the service.
The peculiarities of Lotto have prompted the Italian Legislator to confirm the monoproviding model for the current concession. This choice, in addition to the others made by the State in the award procedure for the current concession, had been the object of a dispute before administrative judges by a multinational company which provides sports betting services. The abovementioned company brought before the Italian judges an action for the annulment of the acts about the selection procedure, challenging the compatibility with EU law of Article 1(653) of Law no. 190/2014 – which set the main criteria for the awarding of the Lotto’s management – and certain conditions for the participation in the call for tenders provided for in the tender specifications and in the model contract.
During the first instance before TAR Lazio, the complaints moved by the claimant were rejected by the judge (TAR Lazio, 2nd Sect., decision no.4651/2016).
The claimant brought an action for that judgment to be varied before the Council of State.
To support his action, the claimant challenged the compatibility of the Italian Lotto’s managing approach with EU law. It submitted that the conditions for participation in the tender and the cases which could lead to the withdrawal of the concession were so unreasonable and so disproportionate to constitute a means of dissuasion from participation. Furthermore, it claimed that the gratuitous devolution of the network, at the end of the concession, to Italian State was contrary to the case-law resulting from the judgment of the 28th of January 2016, Laezza (case C-375/14).
The Council of State decided to stay the proceeding and to refer the following questions to the Court of Justice for a preliminary ruling:
- «Must EU law — in particular, the right of establishment and the freedom to provide services, and the principles of non-discrimination, transparency, freedom of competition, proportionality and consistency — be interpreted as precluding rules, such as those laid down by Article 1, paragraph 653, of Law [No 190/2014] and the relevant implementing acts that provide for an exclusive mono-concessionaire model for management of the Lotto, but not for other games, prediction games and betting?»;
- «Must EU law — in particular, the right of establishment, the freedom to provide services and, and the principles of non-discrimination, transparency, freedom of competition, proportionality and consistency — be interpreted as precluding a concession notice that stipulates a much higher basic contract value unjustified in relation to the requirements concerning economic and financial criteria as those set by documents for the award of the Lotto concession?»;
- «Must EU law — in particular, the right of establishment, the freedom to provide services and [Directive 2014/23], and the principles of non-discrimination, transparency, freedom of competition, proportionality and consistency — be interpreted as precluding rules that impose a de facto choice between being awarded a new concession and continuing to exercise the freedom to provide various betting services on a cross-border basis, a choice of the kind that results from Article 30 of the model contract, the effect being that the decision to participate in the tender for the award of the new concession would involve abandoning the cross-border activity, even though the legality of that activity has on several occasions been recognized by the Court?».
The Court of Justice (case C-375/17) deemed the national provisions not in contrast with the European norms, and it referred to the national judges the verification of the presence of some conditions necessary for the compatibility with the EU Treaty.
In accordance with the principles set out in the ECJ’s decision, the Council of State (Sect., 5th ), rules, with the decision no.5671 on the 12th August 2019, on the legitimacy of the Italian provisions about Lotto’s management. Two aspects of the decision deserve particular attention referring to the legitimacy of the following conditions (i) the monoproviding model; (ii) the free devolution of the network at the end of the concession’s period.
The Council of State clarified that, in the absence of harmonisation in the field of games of chance at EU level, it is up to the Member States to decide how to manage the services into the single State and therefore to choose the most suitable concession model. Whatever the model chosen, it must certainly not conflict with the principles of reasonableness and proportionality, both guaranteed and protected at a national and european level. In the Italian case, the monoproviding model was justified by the peculiarity of Lotto that is the only game in which the State bears the economic risk and where there is a strong distinction between the phase of the collection of bets and its management. Potentially, this choice could result in a restriction of freedom protected at European level, as in this case where the claimants complained of the violation of the principles established to protect right to establishment and the freedom to provide services (articles 49 and 56 TFUE). However, the Council of State clarified in this case that such restrictions were permissible and legitimate because placed to protect higher interests such as public order and health.
The Lotto’s characteristics justified the choice of monoproviding model which could reduce the costs linked to the coordination of the activities of multiple concessionaires and which promoted less competition within the marketplace and, hence, responsible game management. Indeed the restriction of the competition meant at the same time the reduction of the risk that the economic operators were intentioned to make more competitive their offers incrementing the risk of game’s pathology. Moreover, this type of model was able to reduce risks of fraud or interference.
About the free transfer of the network at the end of the concession’s period, the Council of State underlined the differences between this case and the Laezza’s one (case C-375/14). The case Laezza was about a concession of 40 month, instead in the proceeding under analysis the concession lasted nine years. So, at the end of the concession the infrastructure could be considered both outdated on the technical side and amortized on a financial asset. For this reason the transfer of the network under payment could even mean an unjust enrichment of the previous concessionaire. Opposite evaluations could made in the Laezza’s case, where the brevity of the concession couldn’t determine the outdated or neither the amortization of the costs.
The abovementioned ECJ and Council of State’s decisions have a significant impact on the concession’s regulation. Indeed, both the ECJ and the Council of State have made clear that, although it is conditioned by the presence of some requirements provided by the ECJ, the choice of the managing model of a concession is a national and discretional prerogative: as general rule, the State preserves its discretionary about the choice of the appropriate model (monoproviding or multiproviding) according to the primary public interests whom intends to protect and in respect of the principle of reasonableness and proportionality.