Player Protection: New Slot Rules Decrease Gaming Revenues
By Joerg Hofmann

In 2007, casino operators in Germany were only obligated to control entry to live and mixed gaming areas. Gamblers had free access to separate slot machine areas without having to show identification. This was not enough for the German Federal Court. Pursuant to a Nov. 22, 2007, decision (BGH, III ZR 9/07), the German Federal Court committed casino operators to controlling entry to all gaming areas. If a casino operator does not meet this obligation, he is exposed to high risks of liability due to the fact that, pursuant to this jurisdiction, gamblers who had barred themselves from gambling but who were later able to access uncontrolled slot areas may sue the casino operator for reimbursement of their losses – and with big chances of success.

The court decided on the following matter:

In January 2000, the plaintiff asked the operator of Casino Bad Oeynhausen (a midsize city in North Rhine-Westphalia) for suspension. As reason, he stated gambling addiction. In the following 18 months, he played in the slot area of this casino and lost about €60,000 in total. At the time, the casino did not control entry to its slot area, as it was not compulsory to do so. The gambler sued the casino for reimbursement of his losses, stating that the casino should have supervised the agreed suspension with effective controls. In the last instance, the court agreed with the plaintiff. The court stated that the casino operator made a contractual agreement with the gambler, and due to this agreement, there was an obligation to effectively suspend the gambler from participating in gambling, exercising proper controls to protect him from damages caused by his gambling addiction.

However, the court did not grant the gambler €60,000, instead crediting the casino operator that he could trust in the jurisdiction applicable at the time of the gaming participation, which did not stipulate an entry control to slot machine areas. In 2005, the German Federal Court decided that casino operators must do everything possible and reasonable to control any banned persons from gambling (BGH, III ZR 65/05). Up to that moment, casino operators could trust in the same court’s opposite decision of 1995 (BGH, XI ZR 6/95), which denied the casinos’ duty to control gamblers in slot areas. As the case happened before this period of time, the casino’s fault was missing. However, the lawsuit is not finished, as it has to be checked whether the plaintiff is partly incapacitated due to this gambling addiction and, therefore, whether a valid gambling agreement was made. The German Federal Court remanded the decision on this matter.

The German Federal Court’s November 2007 decision is a milestone in the development of the jurisdiction that strongly aligns with the prevention of gambling addiction. This development can be traced synchronically to the present tendencies in Germany to prevent and combat gambling addiction, which are apparent in the new State Treaty on Gaming. The State Treaty on Gaming came into force at the beginning of 2008 and specifically stipulates that casino operators have to control entry to all slot areas.

All casinos complied with the decision in due time. The risk of liability is much reduced, as it can be excluded that banned gamblers get unrealized access to these areas. In the future, the casino operators’ risk of obligation will be identified at an earlier stage. Pursuant to the new jurisdiction, they will be obligated to block gamblers as soon as they recognize a reason for suspension (e.g., gambling addiction, insufficient economic means) and to put this ban effectively into practice. If the operator violates this law, any actions for damages will be based on this infringement. Casino operators will have to train their staff how to recognize and deal with a problem gambler in terms of the amended requirements.

Referring to the liability, the German Federal Court’s new decision really effects only the period between Dec. 15, 2005, and Dec. 31, 2007. However, it could be the beginning of a development that extents the aspect of banning gamblers from casinos to other fields of gambling. Besides gambling in the casinos licensed by the state, a kind of slot machine gambling is offered through electronic amusement, with cash prize machines or coin-operated entertainment machines in amusement arcades, restaurants and bars. This business so far has neither a banning system nor entry controls. The German Federal Court, however, does not differ between the gambling types when pointing out the danger of gambling addiction and the necessary steps to combat it. In Germany, gaming law is governed by the individual federal states and stipulated in 16 single laws. Running casino slot machines is a matter of each and every law of the state. The amusement machines outside the casino business are treated as part of commercial law; gaming law is not applicable. The federal legislator is the only one responsible for the commercial law, and so far he has made no regulations referring to entry control or banning systems.

The purpose of the German Federal Court’s decision, however, may not allow a differentiation between the two fields of gambling in a wider sense. It has to be anticipated that amusement games or games of skill, if they can be considered dangerous with regard to gambling addiction, can only be offered in the long-term under comparable regulations. While the State Treaty on Gaming stipulates an obligation for land-based casino operators and state-run lotteries to establish a common blocking system and a common database for the first time, it is obvious that there is a political mainstream to protect gamblers from the threat of gambling addiction as much as possible. Up to now, the entertainment industry has had no codified legal obligation to block players from their coin-operated machines; consequently, they also have no legal obligation to control their customers at the entrance. But the German Federal Court confirmed the need for entry controls in a time when the casinos were also not forced by law to guarantee them. If the jurisdiction in Germany will not deny that gambling addiction can happen in both worlds, it may soon be expected that access to slot machines in casinos and arcades will be treated equally.

Casino operators are suffering from the consequences of the total entry control, as they realized a decrease of their gross gaming revenues in January 2008 – up to more than 40 percent in some areas. This effect is not influenced by the entry controls alone, but is subject to the fact that in most casinos a statutory smoking ban came into force as well. These figures will probably improve again in the course of the year, but experts anticipate that the decrease will remain in a scale of 20 to 25 percent.

Dr. Joerg Hofmann is a Senior Partner with the German Law firm Melchers in Heidelberg, Frankfurt and Berlin. He is the Secretary of the International Masters of Gaming Law and can be reached at j.hofmann@melchers-law.com.