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New restrictions to cap the advertising spend of online operators in Colombia threaten to set a bad precedent for a regional leader in regulation, according to legal experts.
A resolution adopted last month by Colombian gambling authority Coljuegos will, among other things, limit licensed online operators to spending no more than 20 percent of their prior-year revenue net of taxes on marketing, in a first-of-its-kind advertising regulation in Latin America.
Speaking at last week’s SBC Summit Latinoamérica in Miami, Coljuegos president Marco Emilio Hincapié suggested operators had missed the opportunity to self-regulate, with officials also alarmed that around 80 percent of them were spending more on advertising than they were returning in tax payments to fund Colombian health services.
Hincapié also highlighted another provision of the resolution that will ban Colombian sports teams from being sponsored by unlicensed operators, adding that ongoing partnerships with offshore operators were something that Coljuegos “had to regulate”.
Still, several SBC panellists and summit delegates voiced concern about both the legality and consequences of the new restrictions, which would appear to hand an advantage in terms of available marketing budgets to incumbent market-leaders.
An agency resolution is not the appropriate instrument to establish advertising restrictions such as those adopted by Coljuegos, said lawyer Juan Camilo Carrasco of Asensi Abogados in Bogotá.
The resolution also includes various technical errors and was developed without objective statistics or research, with no obvious regulatory precedent for capping the annual advertising spend of each operator, Carrasco told SBC summit delegates.
“Moreover, it breaks the constitutional principle of free competition,” he said.
Carrasco noted that total advertising spend by online operators across Colombia would be limited to around US$70m in 2024, based on the approximately US$450m expected to be reported in total gross revenue this year.
Cristina Romero of Loyra Abogados in Madrid said the advertising resolution was further evidence that Colombia had become a “very, very regulated” market compared with Mexico or others in Latin America.
Further provisions of the resolution will apply new rules to advertising via digital and social media channels, with operators obliged to deploy mechanisms to detect potential signs of problem gambling and ensure flagged players are not targeted through marketing.
Romero noted Coljuegos had appeared to be inspired by Spain, which adopted a restrictive royal decree on advertising three years ago.
The new limits will affect many stakeholders such as Colombian sports teams, and not just operators themselves, she warned.
The new advertising restrictions will take effect on January 1, 2024, and industry groups hope to be able to discuss the rules with Coljuegos before then, according to SBC panellists.
Industry trade association Fecoljuegos is actively conducting a legal analysis of the new resolution, although it is too early to say what the group’s response will be, said president Evert Montero Cárdenas.
Fecoljuegos also expects to address the issue with Colombia media and sports groups, as well as with Coljuegos as part of formal industry roundtables that are hosted by the regulator.
The Fecoljuegos president acknowledged that the launch of legal online gambling in Colombia in 2017 led to an explosion of advertising that created concern among policymakers.
The association began discussions over self-regulation for advertising three or four years ago, he said, with research and analysis later presented to Coljuegos to consider.
“Regulation is necessary, but it should be done better,” Montero said.
The advertising limits will apply to each of Colombia’s 16 concession-holders for online gambling, including a latest new entrant in the shape of Stake.com.
Stake recently acquired the Colombian business of Flutter’s Betfair, according to a statement on its local website that is now being directed from Betfair.com.co.
Flutter inked a five-year concession agreement with Coljuegos in late 2020 but is understood to have left the market after evaluation of the competitive landscape in Colombia, as well as shifts in focus in its international division.
