Ladbrokes battles to become a big bookie in the rest of Europe

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The Independent Online

When it comes to betting, the concept of a European single market goes out of the window.

Ladbrokes - Britain's biggest bookmaker - is fighting a lonely legal battle with six countries to try to change that. And in the case of Sweden, the case has now reached the European Court of Human Rights.

The multi-coloured betting shop fronts that can be found on any high street in Britain are unknown on the Continent, where state-owned monopolies rule the roost. European countries have also started to crack down on online operators, as two executives from Austria's Bwin found out to their cost when they were arrested in France earlier this year.

Ladbrokes is determined to change this. Britons are Europe's biggest gamblers - at £17bn, our turnover is nearly twice the second placed country, Italy. But if some of the restrictions imposed on gambling in other EU member states were lifted, the gap between them and the UK could swiftly narrow. The growth prospects for a business like Ladbrokes would be simply mouth-watering.

In the last few days, the ECHR in Strasbourg has instigated an inquiry into whether there is a case to answer over the Swedes' ban on Ladbrokes. The UK Government has also been invited to respond.

Legal actions in Norway, Finland, Holland and Germany are at various stages of development. Just last week Denmark rejected an appeal against the decision not to grant Ladbrokes a licence. The progress of these cases is being closely watched, not just by other bookies but also by the online gaming companies, which have been shut out of America since President George W Bush signed an act banning banks and credit card companies from transacting with them. Europe has suddenly become a key marketplace.

EU trade directives are supposed to outlaw economic monopolies within member states.

Unfortunately for Ladbrokes and its peers, gambling is carved out of this and EU case law states that while gambling monopolies are not acceptable from an economic perspective, those that can be justified on social grounds are.

The gambling companies' great hope comes in the form of one Charlie McCreevy, the EU's Irish trade commissioner.

Mr McCreevy is one of the most liberal commissioners when it comes to free markets - compared with some of his colleagues he looks like a latter day Milton Friedman.

His department is currently investigating eight countries which he believes could be unlawfully protecting economic monopolies. Another seven were handed warnings in the spring, bringing the total to 15.

But Paul Leyland, leisure analyst at Arbuthnot Securities, says it would be dangerous for gambling companies to put big bets on Mr McCreevy riding in on a white horse as a liberalising hero.

For a start, it is likely to take over a year before the issue reaches the European Court of Justice. Then there is the matter of whether the EU really has the stomach to mount a sustained assault on member states' restrictive gambling laws.

Mr Leyland says: "It is unclear whether the EU has sufficient appetite or teeth to push through meaningful liberalisation from a top-down perspective."

In fact, Mr Leyland warns that Mr McCreevy's opening of the issue - and Ladbrokes' legal battles - could ultimately have the opposite effect to what the gambling industries in both Britain and offshore are hoping for.

"Current pressure could actually be a catalyst for member states to 'modernise' their interpretation of gambling laws within the context of a remote crackdown, in much the same way as the US," Mr Leyland warns.

"The broadly liberal stance of the EC is therefore by no means a panacea for the offshore companies." Mr Leyland believes that state, rather than EU, law will rule "for the foreseeable future".

Mr Leyland also points out that Ladbrokes has not won itself any friends in the chancelleries of Europe by resorting to the courts.

He says: "Given what is at stake, it would look sensible to push it through the courts but the likelihood of success is small.

"There is also a huge danger that fighting a court case will remind administrators to clamp down. If they have it in their head that they don't like you, they will take steps to stop you."

Mr Leyland adds: "With gambling, people do have to be protected. The gambling cultures in different EU member states are very different and so it's difficult to see how the EU could take on that role."

He also argues that the way the British Government deals with gambling stifles competition to the likes of Ladbrokes.

"The amount of red tape you have to get through to be licensed by the Gambling Commission means there is a high barrier to new entrants," he says.

Mr Leyland thinks that if the EU were really keen to break down the legal barriers that block a free market in gambling, it would have to take Britain to task as well.

So perhaps it is no wonder that Ladbrokes has been ploughing a lone furrow in its battle to crack the European nut.

The other bookies are watching its efforts with interest. In fact, they are quietly cheering their rival on. But they are unlikely to be calling on their lawyers any time soon.

As Wilf Walsh, managing director of Coral, says: "We are already big in Spain, Greece and Italy. As for the other countries that aren't so open, we're happy to let Ladbrokes fight the battles. With countries such as France or Holland where it is more difficult, we don't see much advantage in being first mover anyway."

Ladbrokes, though, is unrepentant. Its head of communications, Ciaran O'Brien, argues that there is a simple reason why Ladbrokes and its peers are being shut out of Europe: tax. The state monopolies provide huge tax revenues to their owners. They might argue that their laws are framed to prevent the growth of gambling as a "social evil" but, in Ladbrokes' view, their real aim is to keep the tax revenues rolling in.

Mr O'Brien says: "What we are doing is brave in one sense but we are quite cautious. Where we are told to stop we will stop, but we will fight in the courts at the same time."

This is what has happened in countries such as Holland and Germany, where the company has acted to stop residents from placing bets over its website.

Mr O'Brien continues: "The reason we continue to fight is we think the law is on our side. There are conditions under which governments can restrict competition to restrict 'harmful activities'. But that is not the reason they are doing it.

"The reason they are doing it is to protect revenues. Many state monopolies actually promote gambling far more aggressively than we do here in the UK. Dutch residents get free lottery tickets when they reach their 18th birthdays. There are also clear contradictions in the current set-up. We compete with the Euro Millions lottery here, which is run by the French. They can promote their services here but we can't do the same in France."

On this Ladbrokes makes a good point, and at least the company has had the courage of its convictions.

Some markets are now showing signs of a willingness to open up. They include Spain and Italy, although the latter has also successfully disrupted the market for all but a few internet gambling companies by forcing internet service providers to block them.

Will Ladbrokes' bold bet pay off or will Mr Leyland's fears of a US-style crackdown in Europe be realised? Given the speed at which the wheels of justice turn in Europe, the answer will be a long time coming. This is more a long-distance steeplechase than a five- furlong sprint. But it will be a fascinating race to watch, and there are likely to be several twists to come before the company has its day in Strasbourg.