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Quebec Wants ISPs to Block Access to Gambling Sites Competing Against Its Monopoly

The province is mulling legislation which would block users from accessing sites which compete with their monopoly.
July 8, 2015, 9:01pm

Gambling! Photo via Flickr user Michael Dorausch

In its ongoing quest for a balanced budget, Quebec's government has taken on some pretty fierce adversaries. Students, feminists, physicians, and even police have protested the Liberal government's aggressive austerity measures, which are behind massive cuts to public spending.

And Quebec is now tackling another source of lost revenue—the internet.

More specifically, and more disturbingly, it will be targeting websites that compete with Loto-Québec—its state-owned gambling monopoly.

Quebec's online gambling market is worth $250 million according to Loto-Québec, yet their online gaming portal Espacejeux only has a 20 percent market share. The rest of the market is dominated by unlicensed websites, which are based out of the US and offshore countries like the Cayman Islands.

"Under our current business model... we do not believe that we will be able to increase this share in any major way," Loto-Québec declared, adding that "the government is losing significant amounts of money" because of unlicensed competition. Last year's online gambling report concluded on an ominous note: "Illegal online gaming is a growing problem. Loto-Québec believes that a solution must be implemented."

So instead of creating a more competitive gambling interface with its $3.5 billion in revenues, Loto-Québec is relying on its state power to nudge the market in a preferable direction. Buried deep within the province's 620-page 2015 budget are measures which would force internet service providers to block access to a list of "illegal" websites compiled by none other than Loto-Québec. In a system like Quebec's, any gambling activity that does not fall under the umbrella of Loto-Québec is necessarily illegal or unlicensed.

Quebec's Finance Minister Carlos Leitão, who tabled the budget, has said that unlicensed websites like Poker Stars and Full Tilt Poker "circumvent our laws, generally offer no guarantees with respect to responsible gambling and deprive the Québec government of substantial revenue." The minister argues that these sites have an unfair advantage over Espacejeux because they operate illegally and are unregulated. In essence, the Quebec government wants to use its legislative arm to black out websites that compete with its slot machine arm.

By definition, a monopoly kills competition, yet Quebec is calling for even more regulation in order to control unlicensed alternatives—in the name of competition. This has led many critics to suspect that the proposed law has more to do with crushing competition than balancing it.

Michael Geist is professor of law and Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa. He has written extensively on this issue and thinks it sets a dangerous precedent.

"I think the Quebec government was pretty transparent about the fact that it wants the blocking in order to commercially benefit its licensed alternative. I think this is a very dangerous approach that will be subject to legal challenges," he told VICE.

Allen Mendelsohn agrees. He is a lawyer from Montreal whose private practice deals with a wide array of internet-related legal issues.

"Quebec, through Loto-Québec, has a monopoly on gambling in this province and they want to protect that particular monopoly. I want the government to be financially healthy but at the same time there are larger issues here like setting bad precedents and website blocking, at the provincial level especially," Mendelsohn says.

"They say they want to block illegal gambling websites but are they doing it for that particular purpose or are they doing it just so they can protect their own monopoly through Loto-Québec's own gambling service?"

But as Geist pointed out and Mendelson reiterated during our conversation, the Quebec government is stepping on to a legal minefield.

For starters, there is the possibility that these legislative measures would violate the Charter, which protects freedom of expression. "Any time there is some sort of government blocking access to any form of media or art, a freedom of expression Charter issue is going to emerge," Mendelsohn says.

But even more salient for lawyers we spoke with is the fact that telecom (like internet) is a federal jurisdiction under our Constitution, as are criminal matters like gambling, so both of these spheres of activity may be outside the realm of Quebec's legislative authority. In other words, the province may be illegally overstepping its boundaries in order to protect a cash cow—a sick and tired cash cow.

Financially, the Crown corporation has been in rough shape for years despite literally being the only game in town. But this reality seems to have more to do with mismanagement than competition from illegal gambling websites.

Earlier this week, the Journal de Montréal reported reported massive losses by Loto-Québec in its clumsy attempt to revitalize the Charlevoix area by building a casino. That foray into regional development cost taxpayers $127 million over the course of 15 years and generated a paltry $9.7-million return.

The private sector, on the other hand, seems to be thriving in the digital age of gambling.

Eric Hollreiser is head of communications for Amaya Inc., a Quebec-based company which bought the parent company of online gambling juggernauts Poker Stars and Full Tilt Poker last year for a cool $4.9 billion.

Hollreiser told VICE this issue is not regulation per se, but rather the proper role for the state in that area of business. "I think the crux of the issue is what we think is the appropriate role of government in our technology-based industry."

In recent years, Quebec bureaucracy has not hesitated from blocking Internet traffic in order to achieve a policy end. The Office de la langue francaise—commonly and misleadingly referred to as the "language police"—has blocked access to websites that do not adhere to its language laws. As the National Post reported in November, BCBG and Anthropologie were blocked until their French websites were up and running, while major retailers like Urban Outfitters and Club Monaco still have no Quebec websites.

Poker Stars say they are willing to work within legal framework and coexist with Loto-Québec. "We encourage and welcome regulation, which is why we hold more online poker licenses than any of our competitors. We've always been a leading proponent of regulation for online gaming that meets the key public policy issues." Regulation which Eric Hollreiser says creates "a viable, secure and competitive marketplace."

This is ironic considering that giving more licenses to private companies like Amaya was one of the suggestions made by experts hired by Quebec to evaluate its online gambling presence. In its report, the working group recommended that the provincial government "explore the possibility of also offering the games of private operators to Québec online gamblers exclusively through a government website," especially given the legal hurdles "linked to the amendment of the Criminal Code."

So while the experts hired by the province clearly anticipated the constitutional issues of amending the criminal code and recommended that Loto-Québec give private enterprise a slice of the pie instead, these recommendations apparently fell on deaf ears—recommendations which the finance minister claims he "read with great interest."

Instead of heeding the advice of experts, Leitao plowed ahead and told reporters at a press conference that "public health" implications of gambling were sufficient to make it fall within his government's jurisdiction and that he would be lobbying other provinces to approach online gambling the same way—by forcing ISPs to block websites.

But this approach essentially amounts to censorship for Geist.

"I think it's dangerous because once blocking Internet content is established, it is easy to envision governments moving down a slippery slope," Geist says. "If that happened, the open internet in Canada would be placed at risk of unprecedented government intervention into how ISPs manage their networks and what sites Canadians are able to access."

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