U.S. laws restricting Internet gambling and the way they have been applied to prosecute European Web sites are discriminatory and therefore breach World Trade Organization (WTO) rules, the European Commission said Thursday, after a year-long investigation.
"The provisional conclusions of the report imply that WTO proceedings against U.S. measures would be justified," the Commission said in a statement. However, it added that it will try to negotiate a solution with the administration of President Barack Obama before seeking redress from the international trade arbitrator.
"It is for the U.S. to decide how best to regulate Internet gambling in its market, but this must be done in a way that fully respects WTO obligations," said Trade Commissioner Catherine Ashton.
The Commission represents all 27 European Union countries in trade issues. It began investigating the online gambling market in the U.S. following a complaint by a trade group called the Remote Gambling Association (RGA).
The RGA complained that while prosecuting foreign gambling Web sites, the U.S. continued to allow their U.S.-based competitors to continue operating.
U.S. laws banning foreign gambling Web sites have existed for some time, but the U.S. has also signed up to an international agreement called the general agreement on trade in services (GATS), designed to prevent countries from protecting their domestic service companies, including gambling outlets, from competition from abroad.
In 2006 the U.S. tried to clamp down on foreign gambling Web sites by passing the Unlawful Internet Gambling Enforcement Act (UIGEA). The U.S. Department of Justice is still investigating the activities of European companies that were active in the U.S. before the UIGEA came into effect, even though all of them exited the U.S. market following the measure's introduction.
At the end of 2007 it signed an agreement with the E.U. to compensate European companies affected by the UIGEA. However, it continued to sue European gambling firms, even though they quit the U.S. market in 2006.
Ashton said she hopes bilateral discussions with the new U.S. administration will find a "swift, negotiated solution to this issue."