European Union launches investigation into US Internet gambling laws

[jcrei]

BRUSSELS, Belgium — The European Union launched an investigation Monday into U.S. laws on Internet gambling, after European betting companies complained that Washington's actions against them were infringing world trade rules.

The investigation could lead the 27-nation EU to file a complaint at the World Trade Organization in the latest international tussle over a growing business worth more than US$15.5 billion a year.

"The U.S. has the right to address legitimate public policy concerns relating to Internet gambling, but discrimination against EU companies cannot be part of the policy mix," said EU Trade Commissioner Peter Mandelson. He said he hoped the issue could be resolved amicably.

European companies claim a U.S. ban that forced them out of the lucrative American market discriminates against them in violation of WTO rules, while permitting domestic gambling companies, particularly those offering betting on horse races, to flourish.

In 2006, the WTO had ruled against a U.S. ban that stops American banks and credit card companies from processing payments to online gambling businesses outside the country.

Washington responded by doing a deal with the EU, Japan, Canada and others in December to allow it to effectively opt out of WTO rules on gambling in return for offering them compensation in other areas.

Meanwhile, European gambling companies were forced out of the U.S. market by President Bush's October 2006 ban on transferring payments.

The companies complain that, before that ban, they had the right to operate under international trade laws, and that therefore ongoing U.S. Justice Department investigations into their previous activities in the U.S. violate WTO rules.

The Remote Gambling Association, which represents several European gambling companies, says the U.S. action is hurting their revenues and stock value as well as making them run the risk of substantial fines. It welcomed the EU's decision to act on its complaint.

"We cannot simply sit on the sidelines and watch while our members, who are already badly bruised by unlawful U.S. acts, suffer the double whammy of being prosecuted for activities whilst U.S. industry is not," said Clive Hawkswood, chief executive of the London-based RGA. "By any analysis, the U.S. policy is fundamentally unfair, and we are delighted that the commission shares our concern."

The U.S. underscored its battle against the industry when it arrested two British Internet gambling executives who were travelling through the United States in 2006.

The 2006 WTO ruling found the U.S. had the right to prevent offshore betting as a means of protecting public order and public morals. But it said Washington was breaking trade law by targeting online gambling without equal application of the rules to American operators offering remote betting on horse and dog racing.

In December, the WTO awarded Antigua and Barbuda the right to impose $21 million a year in sanctions on the United States in retaliation for the restrictions on online betting, but the sum was a fraction of the $3.4 billion sought by the Caribbean nation.