The Romanian national gambling office updated its joint venture order at the end of August. For those that didn’t see it, could
you briefly summarise what the order entailed?
From the very beginning, the legislation regulated the possibility to operate under a joint operation. I would prefer to use the term joint operation rather than joint venture, because joint venture is a more general term. The law changed, and what changed in April, quite importantly, was an amendment saying that a joint operation can be conducted between a B2C licensed operator with one or several entities that hold a B2B licence. This is indeed a major change because before, we didn’t have a requirement for the partner in the joint operation to hold a B2B licence.
From my perspective, the legislator wanted to regulate a practice that has happened on the Romanian market for several years. Joint operations were conducted a lot in the land-based sector with B2C operators working with pubs, bars, cafes, etc, where they would place gaming machines, sign a joint operation contract and conduct their operations that way. Now, given the legislative change that was enacted at the end of April, you cannot do this anymore. Meaning cafes and so on must hold a B2B licence.
This is a major change because obtaining a B2B licence, first of all, means you need to somehow offer one of the services that fall under the B2B spectrum, like gaming software, affiliate marketing, etc. So, being a general cafe, it’s hard to say what services you fall in. Secondly, to get a B2B licence, you need to pay annual fees to the gaming office. Those fees are not insignificant - the annual cost to hold such a B2B licence is €35,000 ($38,400) per year. This change, from my perspective, was to limit the practice.
At the same time, it was written that the regulator was going to issue an order within 90 days to describe in detail what it means to have a joint operation. This deadline ended at the end of July - we got this new order one month later at the end of August. What this order says is that joint operation means a contract signed between a B2C operator with a class one licence, together with one or several B2B licensed entities or another B2C operator (but that’s not common), whereby the B2B provider is going to conduct some operations that are specific to gaming. The issue is that these specific operations are very general... The order says a joint B2B means a situation where the provider collects the stakes or pays the winnings. Another point is to fill in the documents that are specific to gaming - this is the exact wording - and the monthly statements describing the revenues that have been obtained, as well as filling in the reports that are, again, specific to gaming.
You’ve described the order as having “the same general wording from the already existing legislation.” In what ways are they similar?
They use the same words that already existed in the law from the beginning. As I said, operating gaming machines; I wouldn’t say it’s clear, it’s evocative. But, all the other points the order describes, like paying winnings or collecting stakes, are super general. You could say that about a payment processor involved in the payment of winnings or collection deposits, operators have accounting companies that help fill in monthly registers. This doesn’t equal a joint operation.
I believe this is perhaps on purpose to give the authority more flexibility, to have the liberty to decide on a case-by-case basis if a certain deal represents a joint operation or not.
How do you think the order could have been worded better to more accurately reflect the goals of the ONJN?
I think the goal here is, one, the core focus of a joint operation is, when you have this kind of a structure, the liability belongs to both parties; not only the operator, but also the licensed provider. Here it’s important to note, joint operation doesn’t mean joint venture. A joint venture is a contractual structure that is based on the general legislation in Romania where two commercial partners decide to do a venture together and split the results and assume the losses in certain percentages. You can have a lot of joint ventures drafted based on the general legislation, which would mean the provider contributes to the business of the operator in various ways and they split the results.
It’s important to emphasise that we can have a joint venture based on general legislation, which is not equal to a joint operation in gambling law. So, to make a clear distinction between these two, what should have happened? The order from the regulator should make it clear what kind of activities are so specific to gaming that they entail a joint operation and not only a joint venture.
If I’m a marketing affiliate, I may sign a deal with an operator saying, ‘I’m going to bring you this much traffic and you give me 10% of the traffic that I bring.’ This might be considered to a certain extent a joint venture, but it’s not a joint operation... I think what could have been done better was to describe in more detail how the provider is involved in the core business.
How much of an impact will the new order actually have on B2B / B2C joint ventures?
I don’t think it’s going to change much. As I said before, we’ve had this requirement of a joint operation with a licensed B2B since April. That changed a lot, because it excludes a lot of potential partners. But, this order in particular is saying, once again, something that everybody knew. The change produced in April was something significant. But, what has happened here is that the regulator has issued an order because they were required to do so under the law.
So, the one from April is the one operators need to know about. What are the key things gaming businesses in Romania should keep in mind when establishing joint operations?
First of all, you need to have a partner that has a B2B licence. Secondly, describe in the contract exactly how the provider is going be involved. Make it clear and specific to gambling. Take into account that you are going to have joint liability. So you need to have some sort of oversight on what the provider is doing because it’s also your licence at stake there. And, of course, they need to take into account it’s not only a formality; these joint operation contracts need to be notified to the regulator.
Looking ahead, are there any plans from the ONJN to release any further regulatory updates? Are there any that businesses should be keeping an eye out for?
There is one which is actually more major than this one. Also in April, another change was, in very general terms, new text introducing a law saying all B2B licence providers should take technical measures to block access against unlicensed platforms. So against the black market. Also here, the law says the regulator should issue an order clarifying what the B2B providers need to do. A draft order appeared at the end of July, the purpose being to clarify what all licensed B2B providers need to do.
It’s weirdly drafted and imposes super cumbersome requirements. I will give you some examples. All licensed B2B providers (it may be read in this sense, it’s not law yet) should notify all contracts that they sign, anywhere in the world, to the Romanian regulator. Somehow, providers should oblige all their B2C operators that don’t have a licence in Romania to sign an affidavit saying that they’re not going to offer their services unless they get a licence. You can imagine this is unbelievably cumbersome. It would mean, if I have an international business operating in various markets, and of course not all my clients have a Romanian licence, somehow the Romanian regulator would say, ‘Well, you need to do something in relation to them because I want to take more measure against the black market in Romania.’ All operators you are servicing, no matter where, the regulator should be made aware of them and they should somehow commit that they do not target Romania unless they have a licence.
This order is still in draft, and rumours on the market are the regulator might still consider the final wording. Also, something quite odd in this order, is these obligations are technically only applicable to B2B providers that are Romanian companies or have a permanent establishment in Romania. Whereas the law doesn’t say that; it says all licensed B2B providers. It’s important to know that in Romania we have a lot of international businesses that have this B2B licence. I think most of them servicing the online market are international, not local. So, this is, I wouldn’t say, a grey area. But, it’s something that is unfinished. Depending on the final version of this order, it can create a huge impact. One more thing. The law which prevails and is already in forced says providers should take technical measures against the black market. Whereas the order speaks about notifying contracts and giving affidavits; it’s not technical, it’s paperwork.
How do you think gaming regulation in Romania will change in a couple of years?
We have a lot of legislative proposals aimed against gambling advertising, so we might see more restrictions there. We have seen several restrictions throughout the years. The history is that we have had, at some point, aggressive out of home advertising. So political stakeholders want to do something about it. We don’t know how they’re going to succeed, but something might happen here.
I would say that taxation is not over. In the last three to four years, taxation for gambling has been changed more than five times - it has been increased more than five times... Taxation might be a focus, as well as responsible gaming. There are a lot of initiatives and requirements in the existing law trying to protect people that have problems with gaming. So, we’re going to see a lot.
What has happened here is that the regulator has issued an order because they were required to do so under the law