Not only eCommerce Affiliate Marketing currently has its problems with browser regulations and the upcoming ePrivacy Regulation. The gambling affiliates are also threatened by the end of the new State Treaty on Gambling.
New regulation of gambling: Less protection for gamblers
introduction
The most recent draft of the State Treaty on Gambling New Regulation which is to come into force in 2021 as an amendment to the previous State Treaty on Gaming was widely acclaimed, as many hoped that it would bring about sensible regulation of gaming in Germany.
However, the following post will show that the changes envisaged in the draft are not aimed at fair regulation that would benefit the digital industry and the customer. In fact, the adjustments are extremely restrictive and, should they come into effect, they will have a severe impact on all online retailing.
The strict requirements and the strict prohibition of some marketing channels can put many, especially smaller, gaming providers at a severe disadvantage. The market will also develop extremely unfavorably for consumers due to the resulting lack of fair competition. The limited choice will drive many gamblers onto the black market, leaving them less protected from the risks involved in gambling.
We believe that the new rules will make objective, independent information less accessible, making it impossible for consumers to make informed decisions about which gaming company to play with. The largest operators can thus force the smaller ones out of the market and form a pseudo cartel at the top. Ultimately, this will result in a higher risk for habitual gamblers.
In this article, we examine why the draft of the new regulation may not be in the best interests of the consumer, what restrictions this will entail in detail, and show an alternative solution to the problem with which performance marketing & affiliate partners in particular in the gambling industry are facing. We are also looking at the potential impact of the reform on the consumer market outside of the iGaming industry.
The gambling reform in detail
While the State Treaty on Gambling is praised in many places, you quickly get a completely different picture if you take a closer look at the fine print, especially the restrictions on marketing and especially performance marketing & affiliation.
The strictest restrictions can be found in Section 5, Paragraph 3 of the draft law: According to this, all Affiliate Marketing for the German gaming market is to be prohibited. In addition, during the day gambling should only be allowed to be advertised to a very limited extent - this applies to both radio and internet advertising.
In particular, the following paragraphs apply:
“Every day between 6:00 am and 9:00 pm, no advertising for virtual slot machine games, online poker, and online casino games is permitted on the radio or on the Internet; Paragraph 4 remains unaffected. "
"Immediately before or during the live broadcast of sporting events, advertising for sports betting on this sporting event is not permitted."
"(6) For advertising for games of chance, in which banned players are not allowed to participate according to § 8 paragraph 2, on the Internet, in particular in the form of affiliate links, no variable remuneration, in particular sales-, deposit- or bet-dependent, remuneration may be agreed or paid become. Live intermediate results from sporting events may not be combined with advertising for sports betting on this sporting event; this does not apply to a betting provider's own websites. "
Each of these paragraphs aims to limit the amount of information available to the consumer regarding gambling, particularly through online channels. The last paragraph even completely rules out any form of affiliate marketing. The time restriction cannot have the aim of directing consumers to blocked websites in search of information, for example in the afternoon. So Scott Longley quoted on Gambling Compliance in a recent article "Affiliate Marketing in Germany - according to the new draft, illegal '?" Dr. Jörg Hofmann, partner and gaming law expert at MELCHERS Rechtsanwälte:
"The prohibition of performance-based remuneration may not originally have aimed at the prohibition of affiliate businesses in general, but in connection with the applicable advertising regulations it will restrict the channeled acquisition of new customers."
"However, the authors of the draft did not take into account that the proposed restrictions will affect an entire industry, and that affiliate marketing is extremely valuable in attracting players to licensed gambling offers."
If the proposed restrictions are based on concerns about an increase in the risk of gambling addiction, especially if gambling is advertised online via affiliate programs, we consider this point of view to be too brief. The advertising landscape has changed a lot in recent years, and it would be greatly simplified to see a clear correlation between the increase in advertising measures and the increase in gambling addicts, especially since, in addition to specific offers, responsible, information-based content is also advertised on the web the same restrictions would be affected. There is a clear difference between a push advertising medium such as a TV spot or radio advertising and a pull channel such as digital advice content that consumers can access on the Internet.
We can therefore only agree with attorney Jörg Hofmann. In our opinion, the downright "ostracism" of gambling advertising is counterproductive. A ban on any form of affiliate marketing in the gaming industry would create an environment in which there would be fewer objective sources of information, with catastrophic effects on the entire consumer market beyond the iGaming industry. The days when affiliates only advertised using flashy banners are long gone; Affiliates have long become an important source of independent information, comparison of offers, and decision-making support for consumers.
In return, we take the view that the ban on this advertising channel will lead to the two or three largest gaming providers dividing the entire market among themselves by investing heavily in the marketing channels that are still accepted. Ultimately, it is mainly habitual gamers who suffer from this: less freely available, independent knowledge, resulting in fewer options, which will ultimately lead to less protection against fraud, since the information for comparing game operators on the basis of essential factors will no longer be easily accessible. Customers with in-depth knowledge of foreign languages are very likely to visit foreign sites with a need for information, partly in the belief in a uniform European harmonized market. That cannot be a goal to strive for. In this way, consumers can no longer make an informed, independent decision about a product that is then regulated nationally. Or they have too little choice and ultimately satisfy their needs in unregulated markets or deeper buried, dark sides of the Internet.
The Age of Monopoly? - Impact outside the iGaming industry
The iGaming industry is of course only one of many in a huge consumer landscape, but the restrictions can have far more far-reaching consequences. That should be cause for concern across the board.
While we believe that the planned restrictions will significantly weaken the iGaming affiliate industry, they primarily limit the decision-making ability of consumers and damage fair competition: Consumers trust digital tools and advice on how to compare offers when buying services from whatever industry. Almost all transaction-oriented industries work according to a similar affiliate model and could therefore sooner or later also be affected by a similar regulation.
If we think of industries such as insurance, travel, flights, internet and telecommunications, financial service providers - we really want to get a process going that inevitably leads to the formation of segment monopolies and a killer for digital innovation, also due to the possible lack of start-ups Will contribute to startups? Can you imagine an online world in which you cannot compare flight connections or prices and instead only book trips directly through two or three different flight providers?
The importance of using information websites and tools for comparison purposes for consumers is shown by a study by the British Competition and Market Authority (CMA) carried out in 2017 (based on a survey by the Kantar Group) ( A Digital Comparison Tools Market Study ): 97% of all respondents were familiar with online tools for comparing offers, and 85% also used them.
In the past year, 71% of all respondents used tools to compare offers in eight different sectors, from car insurers to hotels, electricity, or internet providers, in order to: 'To save costs, to compare many different providers, to save time, and to gain a better overview of the price structures.'
There is a clear need for objective information to help make purchasing decisions. It is to be feared that the GlüNeuRStV could mean the end of freedom of choice for consumers and that these restrictions could also be transferred to other industries over time.
The role of the affiliate partner in a well-regulated market. The job of any good affiliate partner, regardless of the industry, is to provide consumers with objective information and data to help them make decisions.
Without the important access to independent information, players would have no choice but to rely on the information of a few large providers who have the largest advertising budget for the corresponding, still permitted channels. As a consequence, they cannot make a conscious, independent decision and may get involved in offers and promotions that can mean a considerable financial risk for them. So you are less protected from fraud or other risks.
The example of Great Britain shows that a well-regulated market can work. There is a healthy relationship here between the official licensor, operator, and affiliate partners, with the latter having played a major role in the further development of the market.
In 2017, GBP 301 million (around EUR 357.97 million, as of January 31, 2020) were spent on the UK gaming market via the affiliate channel; This corresponds to around 20% of the total expenditure for online marketing of 1.5 billion GBP (1.78 billion EUR, as of January 31, 2020) in the same year.
The introduction of the License Conditions and Codes of Practice (LCCP) by the UK Gambling Authority (UKGC) has tied third-party providers more closely to licensees. As a result, affiliate partners have improved their content and services. This ensures that both affiliate partners and the gambling providers cooperating with them adhere to the advertising regulations. If they act contrary to this, they will be removed from the partner programs and the operator may be subject to heavy penalties. As a result of this regulation, the knowledge and implementation at the operator level and at the same time the framework conditions for affiliate partners have improved and the market has also developed significantly more trustworthiness.
Players will also benefit from these improvements, which will give them more objective, independent information than ever before. So you can decide on a much more informed basis which operator you want to play with.
Some states in the USA, otherwise considered to be overly cautious, have opened their market to gambling in the past few months. They seem to be aware of the advantages of the affiliate model for the industry. The regulations in the USA differ from those in Great Britain in that affiliates in New Jersey, for example, need a state license in order to be allowed to advertise as partners in the gaming sector. This ensures a consistently high quality of content so that players have access to more information and operators can benefit from an emerging market.
Conclusion: regulate the market fairly, give consumers options, let the industry grow
In summary, it can be stated that a complete ban on all affiliate marketing in combination with a severe restriction on further online marketing activities will ultimately only lead to a weakening of the online gambling industry and less player protection, and at the same time a dangerous precedent for the restriction of variable remuneration models and content-based consumer information in other consumer-oriented online industries is created.
We advocate an open discourse on the regulation of gambling but believe in the indispensability of fair regulations that are suitable to promote competition between operators and platforms for freely available, objective information such as can be provided by a flourishing affiliate industry.
Ultimately, we are convinced that there are alternative, easily implementable solutions under which affiliate partners can continue to offer and advertise content in the gaming industry and also serve the intent of the State Treaty on Gambling, and are confident that legislators, operators, and affiliates will find a way to work together successfully.
