22 June, 2022

Affiliates in Germany: The lay of the land

Dr Joerg Hofmann, Partner at Melchers Law, discusses the forthcoming regulations he expects to be introduced for affiliates in the German gaming market

Forthcoming regulation of affiliate advertising 

The regulation of advertising for gambling in Germany is taking shape. For months, the publication of so-called ‘sample ancillary provisions’ for gambling advertising has been expected. For operators of virtual slot machine games and online poker, the expected content is gradually crystallising. For sports betting, this process will probably be delayed. Overall, however, the basic structures will be comparable. Above all, this applies to the area of affiliate advertising that is of interest here.

Let’s take a look at the crystal ball. What, in all likelihood, will the future hold for us?

Let us first recall the ‘first commandment’: 

‘Advertising unauthorised gambling is prohibited and punishable by law. ‘

Unauthorised gambling is gambling that is offered in Germany without a German licence.

With the beginning of a regulated, licensed market, advertising for online gambling offers became permissible, but it was bound to a very restrictive framework. Details of upcoming regulations go far beyond the wording of relevant provisions under the current Interstate Treaty on Gambling. Authorities are trying to achieve their regulatory goals.

Influencers, especially, have to expect massive restrictions. Their involvement is completely prohibited.

Classical affiliates, on the other hand, are generally allowed to advertise. However, they must be aware that in the regulated area they are very strongly bound to the licensed gambling operators. The licensed operators are responsible for the advertising carried out by their affiliates. They risk high sanctions, including the withdrawal of their licence if the advertising of their products – also by third parties – does not comply with the ancillary provisions. This is somewhat reminiscent of the development that began in England a few years ago, of not focusing on the affiliates but the operators behind the advertised products.

Some details:

Germany forces affiliates to choose between consistently serving only licensed operators or retreating into the black market. The authorities do not foresee a middle ground. Affiliate marketing is only permitted if the affiliate’s internet site exclusively offers links to gambling services of operators licensed in Germany. If the affiliate also advertises a game of chance that is not licensed in Germany, the advertising as a whole becomes not permissible. Affiliate marketing is understood as a marketing agreement in which an operator or broker of public games pays an operator for an external internet site. There is a fee for visiting its site or for registrations; or concluded contracts generated by the links of the external internet site.

Gambling operators must contractually obligate the third parties commissioned with advertising, as well as in the case of online advertising on third-party sites, to comply with legal provisions.

The explicit outlawing of influencer advertising for online gambling is completely new.

Influencer marketing is understood as the planned interaction of an operator of games of chance with social media multipliers, to increase the value of brand messages. This is done through recommendations to positively influence the gambling behaviour of the target group.

From the authorities’ point of view, it is problematic that, allegedly, in contrast to traditional advertising measures where the operators have a holistic influence on the content and the presentation of the advertising measures, this possibility of influence is not given when using influencers.

This is because the influencers would ultimately decide themselves on the content and the way of presenting their advertising.

Specifically, the advertising-targeted cooperation with persons who film themselves or others playing games, and distribute them via radio or social networks, is supposed to be inadmissible.

The regulations appear to be highly vague. Legal problems and technical implementation will have to be discussed here very soon.

Further details concern advertising content in the form of text, images, sound and moving images of the licensed operator on internet sites of affiliate partners. These must be marked as such. 

In addition, when the internet site is called up, a reference to the affiliate’s remuneration in the event of registration/betting with the gambling operators shown must appear in a clear, easily perceptible form and size. The duration of the display of the notice must be such that an average user can fully absorb this information. Paid publications must be designed in such a way that they are recognisable as advertising to the recipient. Advertising must be distinguished from the editorial part by clearly perceptible labelling and design. The operator is also subject to extensive documentation obligations concerning affiliate advertising. About advertising on the internet, the third-party sites, affiliates and social networks on which advertising is carried out, the advertising partners, the sending of newsletters and the respective advertising times must be continuously documented in an electronic table and kept for the duration of the licence. 

Not new is the interdiction to no longer base the remuneration of affiliates on a percentage
basis on success factors.

This means, for example, that remuneration based on deposits or gross profit is not permissible. Alternatively, one could, for example, consider staggering rates or CPA models.

There are still many questions to be answered. The main question is how far advertising must be restricted to achieve the objectives. In Europe, we see a range from a radical – and concerning the achievement of regulatory goals, completely unsuitable – total ban to clear commitments for an extended need for information on legal offers. Most recently, the annual report of the Dutch gambling supervisory authority published on 26 March 2022 could serve as an example. It provided a clear vote for informative gambling advertising. The industry will have to review the forthcoming regulation. This will be the time to measure individual regulations against the yardsticks of necessity and suitability.

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