Last month Italy threw a curveball into the gambling arena as the Council of Ministers approved a blanket ban on gambling advertising in the country, which has now been confirmed to include sponsorships.
Despite not taking effect until January 1, 2019, many advertisers are worried about the legalities of such a ban, as they have contracts that go well beyond that date.
Although the Council has the power to pass decrees with legal force in cases such as this, it seems a complete about turn after calls for progress in Italian betting just a few months ago.
Who will this ban harm?
The ban was put in place to help, but it could be more of a headache. Instead of looking at countries such as Malta that practice self-exclusion, Italy has gone head-first into a blanket ban on advertising, which they believe will protect the vulnerable.
However, sponsorship is also mentioned in the fine print. This means that this ruling could potentially have a ripple effect, from football teams to the Giro d’Italia.
The decree says: “…any form [of gambling advertising] even indirect … is prohibited; however carried out and on any means, including sporting, cultural or artistic events, television or radio broadcasts, daily and periodical press, general publications, billboards, and internet.”
The report adds that the ban “also applies to sponsorship.” The ban prohibits all promotional activity of gambling in Italy and so prevents clubs from displaying any marks or branding from the gambling sector.
Why has the council done this?
The legislation aims to fight gambling addiction by banning betting advertisements across all media platforms, including television, websites, radios and the sponsorship of sports clubs. The government hopes that prohibiting advertising will reduce the number of vulnerable members of society who engage in gambling.
Deputy Prime Minister Luigi Di Maio has championed this change in the law and has also expressed his intention to lobby the European Union for EU-wide gambling advertising restrictions. As it stands, these restrictions only apply to Italy.
What will happen to sponsorship?
It’s a severe threat to football because about €120m ($140m; £106m) a year is spent via the gambling industry. The domestic football league on its own secures lucrative partnership and sponsorship details; 12 teams in the Lega Serie A have sponsorship deals with businesses in the gambling sector.
The ban could seriously limit the ability of Italy’s football clubs to comply with UEFA’s Financial Fair Play (“FFP”) rules, especially the break-even requirement. Only a few weeks ago, UEFA declared a two-season ban on AC Milan for exceeding its FFP obligations. With a lack of sponsorship opportunities and matches to play, this lucrative industry could start to stagnate.
Another aspect is that televised matches might soon be relegated to a thing of the past, as expensive half-time adverts fail to sell to non-gambling companies.
Indeed, Serie A released a statement to this effect, stating that this ban would bring about “competitive disadvantages to Italian clubs, diverting advertising budgets abroad.”
What if clubs don’t enforce the ban?
They are facing a penalty of at least €50,000 ($58,000; £44,231) or 5% of the value of the advertisement or sponsorship. The good news is that the decree currently requires that fines will be used to fund efforts to fight gambling addiction.
It’s still unclear whether the fine will fall on the gambling company, the club, or both. Amazingly, it could also land on the media platform that airs the advertisement. This is to deter the risk of “carrying on regardless,” given the earning potential of televised matches and sponsorship deals. Perhaps in the future factoring in the fines will become part of the deal.
The government hopes to get around this by imposing a separate fine on each violation, which would soon stack up as the season went on.
What has been the reaction?
Serie A released a statement expressing “extreme concern” over the impact of the edict on Italian football and Bologna’s chief executive summed it up concisely as “crazy.”
In previous seasons, all players and technical staff on the first teams received training about match-fixing, which went on to become positive and prevent gambling addiction. Serie A is continuing to call for more awareness of the potential risks and reverse the blanket ban.
Deputy Prime Minister Di Maio responded that the act of gambling is still legal; it is only the public promotion of gambling that will be subject to the ban. He went on to say his anti-establishment Five Star Movement had long promised the ban and criticized “famous people,” such as retired star footballer Francesco Totti, who appear in betting ads.
Serie A continues in its fight to water down the ban; it has invited “all interested parties” to an open discussion in the hope of reviewing the already approved provision. But there is also a legal path to consider. The Italian constitution guarantees freedom of enterprise, which gives companies licensed in Italy the right to advertise in the country. There are already suggestions that the ban might breach Italian constitutional protections and operators could well challenge the ban in constitutional courts.
Then there is the option of seeking refunds for license fees paid up before the announcement of the ban. In April this year, the Italian Customs and Monopolies Agency received many online gambling license applications from 80 operators worth €200,000 ($234,000; £176,551) each. This is pretty steep when the advertisements will be banned halfway through the year.
There is a small reprieve in that Italian clubs already engaged in sponsorship agreements will benefit from a last-minute amendment, meaning that advertisers with existing contracts that run past January 1, 2019, will still be allowed to carry these out in full.
And for overseas matches?
Herein lies the problem: When Liverpool, sponsored by beer company Carling, played France in the Champions League in 2003, they did so in an entirely sponsor-less free kit because France stipulated that no alcohol promotion could be continued during matches. Will premier league teams still be so obliging in 2019? That is the question.
Often, sponsorship contracts include a provision that if an element of the agreement is determined to be prohibited by law, it will not constitute a breach of contract. But if this provision is not present, foreign clubs playing in Italy could find themselves breaching existing sponsorship agreements by not wearing the brand on their kit.
The way around it? Negotiating with two sponsors, one at home and one abroad, and rotating the kit for the various matches. Of course, this means a lot more negotiation and probably less cash because the exclusivity is lost.
What we do know is that, despite the blanket ban, there are still some questions for the council to answer from the multitude of sports that this ban will affect. Football is just one of them.