Playtech and Danske Spil in online poker dispute

6/9/10 – The agreement between Denmark’s state gambling company Danske Spil and online gambling giant Party Gaming signed in January this (2010) year may have been temporarily derailed by a ruling from the Danish Complaints Board for Public Procurement following a complaint by rival industry company Playtech.
 
Announcing the deal back in mid-January, Party Gaming revealed that it had signed a five-year deal with Danske Spil.The agreement involved Party Gaming providing the Danish gambling firm with an online gaming platform for poker and casino games in Denmark, although the full terms had still to be finalised.
 
Jim Ryan, CEO  of PartyGaming, said at the time, “This is a landmark B2B deal for PartyGaming and validates our strategy to become a leading provider of B2B services to both corporates and governments around the world. Danske Spil is widely recognised as one of Europe’s leading gambling businesses, one that is pre-eminent in the Danish market.”
 
The first public intimation that the deal was in trouble came in the Danish publication Business.dk in late February, when it was revealed that Playtech had lodged a complaint regarding tender procedures with the Klagenævnet for udbud (Complaints Board for Public Procurement).
 
Few details on the complaint were available, and both PartyGaming and Playtech remained silent on the issue, a policy that extended to InfoPowa this month when comment was requested. The silence was possibly because the Complaints Board was studying the issue before making a ruling.
 
That ruling was released this week, prompting a press release from Danske Spil. The release reports that the Complaints Board ruling appears to favour the complainant (Playtech), in that it directs that the contract between Danske Spil and PartyGaming should have been put up for tender by Danske Spil, and will have to be annulled.
 
Commenting on the finding, H.C. Madsen, the chief executive of Danske Spil said: “We have not in any way tried to bypass the rules.
 
“Since the contract was supposed to be entered by a newly formed subsidiary, which was supposed to compete on a partially liberalised gambling market, we assumed that we were not obliged to perform a tender process as such, but chose a quicker and more flexible tender-like process instead.
 
“In the tender material forwarded to four participating companies, including Playtech Limited, it was specifically stated that the contract party would be a subsidiary of Danske Spil, and that the contract would be entered provided that the market for online casino and poker was liberalised and that Danske Spil was allowed to establish a subsidiary.
 
“The incorporation of these terms in the tender material should make it clear for the tenderers that Danske Spil acted on behalf of the future subsidiary and that the contract with the subsidiary could only be entered provided that the draft legalization was adopted.”
 
The Complaints Board for Public Procurement said in its judgment that when Danske Spil initiated the procedure in the fall of 2009, the draft legalization regarding liberalisation of the gambling market had not yet been adopted or even introduced.
 
Furthermore, the subsidiary was not even formed or established at that time. Based on this, The Complaints Board for Public Procurement found that there were insufficient facts to assume that the subsidiary when established would not be subject to the Public Procurement Directive.
 
Consequently, the contract should have been put up for tender.