05 Sep Opening hours should not be subjected to delegation (Gioconews march 2015)

Municipal ordinances on time-slots for switching off gaming devices jeopardize state’s control over a proper and controlled game.

It has already been pointed out in other circumstances that, one of the main operator’s grievances against municipal ordinances that impose time restrictions on the powering of gambling equipment is the ineffectiveness of such measure from a health perspective (i.e. the decrease of hours does not reduce nor does it contain the spread of a pathology), and the fact that they satisfy a pure public relations need. Having said that, the operators noted another and perhaps equally worrying thing: the non-functioning of gaming devices imposed by municipalities during many hours per day, measure that was later identified as an actual switching-off of the equipment, in fact threatens to disrupt working devices rules / taxation monitoring as set by the national legislature, the Ministry of Economy and Finance and, more generally, by the applicable regulations in this field, which were enacted precisely to protect the regular, controlled, and manned performance of legal gambling. The following paragraphs explains the reasons why this is true.

The entire legal framework assumes that the Customs and Monopoly Agency and the licensee selected by the state, to whom the creation and management of the telematic network is entrusted to, monitor the proper collection of wagers and acquire the relevant data, which constitutes the basis for calculating taxes and additional charges due to the state, as well as a source for the verification of proper prizes disbursements.

Therefore, it is obvious that the constant monitoring of data has at least two main purposes: on the one hand, the need for revenues and to avoid the unlawful misappropriation of taxable income, and on the other, the need to deliver lawful gaming services in order to protect consumers.

Generally, it is possible to affirm that by observing state’s rules apropos of gambling equipment, as well as from concession’s conventions signed by both licensee and the State with regards to the management of the telematic network (in particular, articles 2, 5.7, 14.1, Article 14.7 b) 15.1 and Art. 15.2. f)), technical specifications (article 5) and its annexes: licensee are required not only to connect the equipment to the telematic network, but also to the continuous and automated control of it, and to constantly update meter reading data sent to the Custom and Monopoly Agency.

When analyzing the relevant regulation for video lottery devices, the Ministerial Decree of January 22, 2010 reveals that the operating system must provide “real-time dialogue with all its components; (…) storing and real-time tracking of gaming data together with the information that facilitate access to data needed for supervising and controlling (…) the constant monitoring of the correct functioning of the system components (…) the continuous powering.

If one considers the underlying rules of the double-checking system as provided by article 1, as well as by the art. 5.7 of the technical specifications, it is important to note that “The access gateway must ensure a constant conversation (…) between the AAMS control device and the telematic network”.

Art. 1 of technical specifications provides that the activities that the licensee must implement for the realization and management of the legal gambling telematic network by means of electronic devices must allow “continuous and precise control of gaming, and the submission of relevant data of the functioning equipment.”

By simply observing the levels of services required by the conventional rules, it can be noted that a constant verification of the data collection is always required.

Therefore, the reduction of time-slots during which meter reading is permitted (depending on application of the restrictive ordinances in that field) certainly reduces the time for the observation of the data needed and, therefore, this contrasts the likelihood that the licensee and operators of the industry can ensure a proper collection of it, as required by the law.

Furthermore, if one considers that the predicated mode of non-functioning of gambling equipment by the municipalities that, as anticipated, will be implemented by switching-off of the equipment, it is clear that the abovementioned concerns further confirms them, and are right on point.

Hence, the concerns that the switching-off of gambling equipment is capable of jeopardize the information flow thus undermining the effectiveness of both tax and legality inspections.

Furthermore, any missing meter readings could expose all of the subject involved in the supply chain (operators and carriers) to possible liabilities vis-à-vis both the Custom and Monopoly Agency and licensee.

Indeed, the license agreement act explicitly provides for the prohibition of engaging in any conduct, both direct or indirect, aimed at altering the functioning of the equipment and the information flow between the device and the telematic network (see art. 19, comma 2, letter f) and art. 20, comma 2, letter e)). Also, agreements between authorized operators often provide for the same obligations, and many time imposing strong contractual penalties.

However, it should be pointed out that, in case of litigation, be it between the parties for statutory reasons, or whether relating to the Custom and Monopoly Agency for taxation issues connected to meter reading, for administrative issue in case of any violations of levels of service or concession requirements, or due to challenges by the Audit Court for revenue or taxation revenue losses, the parties involved (either licensee, operators or carriers) are entitled to invoke such municipal regulations as the reason for revenue losses.

Only a thorough and substanced evaluation of the issue in court can expose the unnecessariness of the measure (which can be replaces by others and more effective remedies) and the illegality of the regulations enacted.  The impression is that both the central administration and the government agree that combatting addiction is necessary, but with effective means and not by means of propaganda as time-restrictions regulations do. As proof of that, the often-cited article 14 of the Enabling Act includes the following: protection of bona-fide, public order and security, the balance between fiscal needs with local ones and with general needs of public health, ensure the regular influx of taxation on legal gambling, the need to prevent the spread of pathological and underage gambling, creation of transparent and standardized laws in the field of licenses throughout the entire country, reserving to the State the competence of defining the necessary rules for public order and safety, ensuring the preservation of existing local regulations in line with the present law.

All of these principles, together with other ones which were left out for the sake of brevity, highlight how the state, the national legislator and the government are willing to standardize the many local initiative, and in particular those which are effective, non-propagandist and that actually meet the challenge of tackling pathological gambling. What is left next is to see how these principles will be laid down in the decree.

Geronimo Cardia