Microsoft Google Yahoo Pay $31.5 Million in Fines for Online Gambling Ads

Microsoft, Google and Yahoo, without admitting or denying liability, have agreed to settle longstanding accusations that they promoted illegal Internet gambling, the U.S. Department of Justice announced yesterday, saying that the companies in total will pay USD $31.5 million (approx. EUR 22m, GBP 16m) in fines.

The companies were accused of receiving money from online gambling businesses to advertise illegal betting from 1997 through 2007, which the Justice Department considers to be an accessory to a crime.

U.S. Attorney Catherine Hanaway, who prosecuted online gambling company BETonSPORTS Plc earlier this year, said that the settlement ends years of investigative work and 12 to 17 months of negotiations with these online giants.

She also noted in her statement that, "These sums add to the over $40 million in forfeitures and back taxes this office has already recovered in recent years from operators of these remote-control illegal gambling operations."

As part of the settlement, the companies will pay cash to the U.S. government and provide millions of dollars worth of public service advertisements informing young adults and teenagers that Internet gambling is illegal.

U.S. Atty. Hanaway agreed to waive any additional liability of the Internet companies.

INDIVIDUAL FINES

Microsoft will pay $4.5 million to the U.S. government, $7.5 million to the International Center for Missing and Exploited Children, and provide $9 million worth of public service advertising.

David Bowermaster, a Microsoft spokesman, said that Microsoft stopped accepting ads from online gambling sites nearly four years ago. "This agreement reflects our ongoing commitment to online safety," he said.

Yahoo's settlement of $7.5 million includes forfeiting $3 million to the U.S. government and providing $4.5 million worth of online ads for a public service advertising campaign. Google will pay $3 million, the department said.

CONTINUED US CRACKDOWN ON ONLINE GAMBLING

The agreements are evidence that the U.S. crackdown on online gambling continues. It has included the arrests of several top executives of publicly traded British companies that have accepted online bets from Americans, as well as the arrest of the co-founders of Neteller this past January.

The government had also reached an earlier multimillion-dollar settlement with EBay's PayPal subsidiary for processing gambling transactions.

Last October, with the signing into law of the Unlawful Internet Gambling Enforcement Act (UIGEA), the United States made it illegal for financial institutions to handle transactions between U.S residents and online gambling operators (except for carve-outs for lotteries, and betting on horse racing and fantasy sports, which legitimized them).

This effectively closed the market to foreign companies, and caused the loss of millions by many European-based companies such as 888 Holdings (parent of Pacific Poker), PartyGaming (parent of PartyPoker) and Sportingbet (parent of Paradise Poker).

The World Trade Organization (WTO) has repeatedly ruled that such protectionist practices violate the international trade treaties the U.S. signed in 1994 (click here for related article).

But instead of opening their market, the U.S. decided to pull online gambling from their trade treaties, which entitled billions in compensation to nations adversely affected.

On Monday, U.S. trade officials announced that it had reached a deal with the European Union, Japan and Canada to keep its Internet gambling market closed to foreign companies, but is continuing talks with India, Antigua and Barbuda, Macau and Costa Rica.

The European Commission accepted a U.S. offer to open U.S. markets for courier services, storage and warehouses (click here for related article), which disappointed European-based gaming companies who hoped the U.S. would be pressured to re-open their lucrative gaming market.

Read Related Articles: