30Jun

Judgement by the company you keep: Licensees’ responsibilities for third parties

30th June 2023 Chris Biggs 281

On 19 June 2023, the Gambling Commission released its new hub addressing licensees’ responsibilities for third parties (the “Hub”). In its announcement, the Gambling Commission explained that the Hub sets out its expectations and requirements for licensees which enter into business relationships with third parties. This includes white label and other unlicensed partners.

The announcement comes as a warning to licensees who contract with third parties. There is a strong undertone of compliance in the announcement, reminding the industry that the Gambling Commission’s release of the Hub follows its recent “enforcement action against operators for failures related to due diligence checks on third parties.”

What is included in the Hub?

Primarily, the Hub sets out the Licence Conditions and Codes of Practice (“LCCP”) including social responsibility code provisions (“SRCP”) that impose obligations on licensees relating to their business with third parties.

SRCPs

The Hub sets out the following relevant SRCPs:

SRCP 1.1.2 Responsibility for third parties – all licences

This SRCP applies to all licensees who contract with third parties for the provision of any aspect of their business related to their licensed activities, and makes clear that they are responsible for third parties. It also requires licensees to ensure any contracted third parties conduct themselves, in so far as they carry out activities on behalf of the licensees, as if they were bound by the same licence conditions and subject to the same codes of practice.

SRCP 1.1.3 Responsibility for third parties – remote

This SRCP applies to all remote licensees.

The Gambling Commission further explains the requirements imposed on licensees by SRCP 1.1.2. It reiterates that it expects licensees will: (1) conduct adequate due diligence on third parties to “ensure (amongst other things) that they are competent and reliable”; and (2) have sufficient oversight and controls in place to ensure all activities are carried out in accordance with the LCCP.

The Gambling Commission warns that a failure to maintain adequate control of third parties can result in regulatory action against licensees, including suspension or revocation of an operating licence.

White label partnerships

There is limited detail included within the Hub specific to white label partnerships. However, the Gambling Commission importantly reminds licensees that the responsibility for compliance of all B2C gambling websites, including white labels, sits with the licensee and cannot be transferred to any other party. Licensees must know their customers and implement their controls to minimise any risk to the licensing objectives. A failure to do so may bring into question the licensee’s suitability to hold a licence.

The Gambling Commission directs licensees to section 7 of its Compliance and Enforcement report 2019 to 2020 for guidance on how it expects licensees to conduct their white label partnerships.

Early action after the White Paper

Echoing the Gambling Commission’s commitment in its Advice to Government, the White Paper sets out that:

“To ensure all licensees fully understand their responsibilities when entering into such arrangement, the Gambling Commission will consolidate existing information and good practice for operators on contracting with third parties, including white labels.”

Given the Hub was released less than two months after the White Paper, the Gambling Commission will consider this announcement as a box ticked, despite the relatively basic information provided.

Additional requirements or new guidance has not been published. This is, as expected, following the Gambling Commission’s view (as stated in its Advice to Government) that it considers the existing legislative and regulatory framework provides sufficient controls to address the current risks.

The release of the Hub is a timely reminder to all licensees contracting with white labels or other unlicensed third parties for any aspect of their business in Great Britain, that they, as the licensees, are ultimately responsible for the third parties with whom they contract.

Key takeaway

We recommend that all licensees review their policies, procedures and controls relating to third parties, including due diligence processes and contractual agreements to ensure they are fit for purpose and mitigate the risk of regulatory enforcement action, as the Gambling Commission will judge licensees based on the company they keep.

Please get in touch with us if you would like assistance with any due diligence, compliance or enforcement matters, or any aspect of your business and its arrangements with third parties.

30Jun

Match or no match: the million-pound question for the High Court

30th June 2023 Gemma Boore 226

The High Court’s decision to dismiss an application for summary judgment in Parker-Grennan v Camelot UK Lotteries Ltd EWHC 800 (KB) is welcome news for B2C gambling operators.

Background

Ms Joan Parker-Grennan (“JPG”) first opened an online National Lottery account on 27 February 2009 and, in doing so, she ticked a box to confirm that she had read and agreed to be bound by Camelot UK Lotteries Ltd’s (“Camelot”) terms and conditions, as well as the rules for Instant Win Games (“IWGs”) and Game Procedures for specific games.

On 25 August 2015, JPG bought a £5 ticket to play the IWG, £20 Million Cash Spectacular, on Camelot’s website, with prizes ranging from £5 to £1 million. In accordance with the game rules, in order to win a prize one of JPG’s numbers in the “YOUR NUMBERS” section had to match another number in the “WINNING NUMBERS” section of the screen.

These are the screenshots used in the judgment to illustrate the game format and rules:

During the IWG, an interim (and optional) animated display appeared showing that JPG had matched two numbers:

a) one of the matches (15) would have resulted in JPG winning a prize of £10 and was flashing with a corresponding message to confirm the win;

b) the second match (1) would have resulted in JPG winning £1 million, but there were no flashing lights or message to reflect this.

This is the screenshot of the interim screen seen by JPG, that was presented as evidence in the High Court:

The final game outcome screen (which was not provided in the High Court’s judgment) showed that JPG had won £10 only.
Camelot refused to pay out the £1 million prize, arguing that the result of the game was predetermined as £10 and the second match on the interim screen was a coding-related error in the optional animated display.

JPG’s claim and Camelot’s defence

JPG applied for summary judgment on the basis that it was clear that she was entitled to £1 million in addition to the £10 prize.
In their defence, Camelot argued that JPG was entitled to the £10 prize only. As previously conveyed to JPG, Camelot reiterated that a coding issue had generated an error in the software responsible for the optional animations for the IWG and that the £10 prize had been “predetermined” by a computer as the prize that would be won in conjunction with JPG’s ticket.

In support of their defence, Camelot referred to the relevant Game Procedures, IWG rules and account terms, stating that these made it clear that the interim animated display was irrelevant to the question of whether a player had won a prize, which was predetermined by Camelot’s computer system as outlined in clause 3 of the IWG rules.

Clause 6 of the IWG rules went on to provide:

“Validation Requirements

6.1 Before a Prize can be paid on a Play, it must be successfully validated in line with Camelot’s reasonable validation procedures adopted from time to time. Camelot’s decision about whether the Play is valid will be final and binding.

6.2 Without limiting the effect of Rule 6.1, Camelot will declare a Play invalid (and will not, therefore, pay any Prize) if:

…(e) the outcome of a Play as displayed on the Game Play Window is inconsistent with the result of that Play as predetermined by Camelot’s Computer System;”

The Game Procures also provided that:

…”If You match a number from the WINNING NUMBERS Section to a number in the YOUR NUMBERS Section, the two matching numbers will turn white and flash in a green circle indicating that you have won the Prize for the matched YOUR NUMBERS.

When You have revealed all numbers and Prizes a message will appear at the top of the Game Play Window indicating the amount You have won, if any. The word ‘FINISH’ will appear underneath the message. You must select FINISH to complete the Game.”

Mr Justice Jay’s judgment

The High Court judge, Mr Justice Jay, dismissed JPG’s application for summary judgment on the following three grounds:

1. Incorporation

The relevant terms were properly incorporated into Camelot’s contract with JPG via accessible hyperlinks and drop-down menus. The terms on which Camelot relied to defeat JPG’s application for summary judgment were not “onerous or unusual”, and were “clearly drafted”, so did not require special treatment to draw them to JPG’s attention.

2.Fairness

None of the terms on which Camelot relied to avoid liability were unfair, as per the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”), which were the applicable consumer protection laws when JPG played the IWG.

Mr Justice Jay drew a contrast to the case of Green v Petfre (Gibraltar) Ltd (t/a Betfred) (the “Green Case”), in which Mrs Justice Foster DBE found for Mr Andrew Green (Betfred’s customer) on every point, holding that in the Green Case, Betfred’s applicable terms were too onerous to be incorporated into a contract with a consumer.

3.Interpretation

It was only the amount shown on the final game outcome screen and Camelot’s official list of winning numbers that was conclusive as to the amount won. Mr Justice Jay provided the following explanation:

“ submission that the Defendant may have intended an outcome of £10 but the actual outcome was £1,000,010 cannot be accepted. It entirely ignores: (a) what the Claimant saw after she pressed the finish button, (b) the Game Procedures, (c) the relevant parts of clause 6, and (d) the Defendant’s evidence about how its computer system worked. The outcome of £10 was both the intended and the actual result.”

Although JPG’s application for summary judgment was dismissed, this did not preclude JPG from continuing to trial. However, Mr Justice Jay’s concluding remarks strongly suggested that without further expert evidence, the High Court would be minded to dismiss her claim. It is now apparent that JPG has decided against pursuing to trial, ostensibly due to a lack of further evidence.

Conclusion

Although this case involved an interpretation of the UTCCRs, which have now been superseded by the Consumer Rights Act 2015 in the United Kingdom, the High Court’s finding in favour of Camelot in this case is great news for gambling operators. This is because (as many readers will know), the Green Case, which involved the application of the same principles in a different context, cast doubt over gambling operators’ ability to limit liability for software errors in a consumer context. However, in his judgment Mr Justice Jay clearly distinguished the present case with Betfred, noting that:

“In the Green case, Foster J found for on every point: the term was poorly drafted and did not provide the exclusion from liability which the Defendant sought, the term was too onerous to be incorporated; the term was unfair… …To my mind, Green is an example of an egregious case of bad drafting and unfairness at all relevant stages. In addition, Green was a strong case on the facts: there could be no dispute that had won; the issue was whether could avoid having to pay.”

In our view, the opposite outcomes for Betfred and Camelot, albeit with slightly different facts, provide much needed clarity in this area and pave the wave for future success by B2C gambling operators in defending consumer claims in relation to software errors and malfunctions. They also underscore the importance of taking proper legal advice on customer terms and conditions and game / betting rules. Ensuring that these documents are clearly drafted, properly incorporated and fair, could make all the difference in the event of a consumer claim.

Next steps

We have a strong and experienced commercial practice at Harris Hagan. Please get in touch with us if you require any assistance reviewing and/or drafting website terms and conditions, rules of play or other commercial gambling contracts.

With credit and sincere thanks to EGR Global for publishing a version of this article in the EGR Global magazine (www.egr.global) and to Adam Russell for his invaluable research and co-authorship.

26Jun

White Paper Series: DCMS speaks at IAGA 40th Annual Gaming Summit in Belfast

26th June 2023 Harris Hagan 238

On 21 June 2023, Ben Dean, Director of Sport and Gambling from the Department for Culture, Media and Sport (“DCMS”) participated in the International Association of Gaming Advisors (“IAGA”) 40^th annual International Gaming Summit in Belfast.

Dean delivered a keynote and joined the subsequent panel discussion on the Government’s plan for reform of gambling regulation following the review of the Gambling Act 2005, and its potential impact on the future of the regulated UK gambling industry. This was the first time that DCMS had spoken publicly since the publication on 27 April 2023 of its White Paper: High stakes: gambling reform for the digital age (the “White Paper”).

Keynote – White Paper on Gambling Reform in Britain – Overview and Next Steps

Dean recognised the importance of the gambling industry in Great Britain and that gambling is enjoyed by a large percentage of the population each month, with the majority of gamblers suffering no ill effects. He made clear however that gambling comes with risks and that problem gambling can have a devastating impact, noting it was important that Government put their best efforts into making gambling safer. Dean acknowledged the delay in publishing the White Paper, attributed to the numerous changes in Prime Ministers, and underlined that the many Secretaries of State he had supported during the Gambling Act Review had consistently pointed out that it is not the job of a Conservative Government to tell people how to spend their money.

A key challenge faced during the Gambling Review was finding the balance between freedom and protection. Dean said DCMS believes that the balance is probably right because campaigners complain Government did not go far enough and industry believe it went too far.

Dean highlighted DCMS’ strong desire to keep working with the industry, continuing to hear views on both sides, and recognised the importance of getting the detail right as the 62 measures come into force to protect those most vulnerable without interfering with the freedoms of the majority. He noted that the under-25 cohort was of particular importance and focus for DCMS, and said that the White Paper includes specific protections taking into consideration the continuing brain development of that group.

One encouraging remark by Dean, regarding the proposed frictionless financial risk checks, was that:

“We know how important the frictionless commitment is and have said the measures won’t come into force until they genuinely are frictionless.”

Though they will not of course be frictionless for those customers in respect of whom flags are raised.

Dean said DCMS will launch two of its consultations, including one relating to land-based modernisation measures, before the summer recess (July) and a further consultation immediately following that recess over the Summer. Government aims to implement the majority of key measures by Summer 2024, but Dean acknowledged this will require Government to “keep their feet to the fire” and those requiring primary legislation will likely take longer.

In conclusion, Dean praised submissions in the call for evidence for the White Paper and encouraged stakeholders to engage in the consultations and speak with DCMS directly so as to ensure the successful implementation of the commitments in the White Paper.

Panel – The Long-Awaited White Paper on Gambling Reform in Britain

Moderated by Dan Waugh from Regulus Partners, the following panel of experts then discussed next steps in Great Britain following publication of the White Paper:

Andrew Herd, Managing Director, Lancashire Court Capital Ltd
Antony Gevisser, Senior Vice President – Legal & Operational Affairs, Super Group
Ben Dean, Director of Sport and Gambling, DCMS
Helen Rhodes, Director of Major Projects, Gambling Commission
Wes Himes, Executive Director, Betting & Gaming Council

The panel discussion was a lively and engaging debate. The panel agreed that credit should be given when it is due: the White Paper was balanced, proportionate and evidence-based and had generally been well-received by the industry and its stakeholders as a whole. However, the focus now is on implementing the many commitments therein in both a timely and an effective manner.

Rhodes noted that 24 of the 62 measures in the White Paper were in the Gambling Commission’s court, with many not involving consultations and some measures requiring increased resources at the Gambling Commission. Rhodes was “very confident” with the Gambling Commission’s structured consultation programme, which will include pre-consultation briefings and a phased implementation to ease the effect on the industry, and emphasised the Gambling Commission would keep communication lines with the industry open and that it was “absolutely keen to collaborate”. She also confirmed that financial risk checks would be in the first batch of consultations this summer.

It was also interesting to find out that the long overdue response to the Gambling Commission’s consultation on customer interaction guidance (about which we have previously written) would be published before the further White Paper consultations were launched in Summer 2023.

Dean confirmed that the Secretary of State wanted to get the consultations within its remit out as soon as possible and that it would not wait to release the consultations in one batch, preferring instead to keep the ball rolling.

It was noted by the panel that frictionless financial risk checks involved competing interests which need to align prior to the introduction of that requirement – and that it would be important to test the accuracy of the final methods that would be used to determine financial risk. Herd described this as an “existential issue”, and Gevisser emphasised the “need for th industry to survive and thrive”.

Himes stated that one of the biggest challenges is that the technology relating to frictionless checks is still evolving, with the accuracy of such checks needing to be tested. Himes notes that if it can be done right, there will be a positive future.

Rhodes acknowledged that checks could not be frictionless for every customer but considered that, if implemented properly, the introduction of financial risk checks would represent a positive change for the industry as a whole and would affect only c.5% of customers. Rhodes also said that the Gambling Commission is 100% committed to working with the finance sector and the Information Commissioner’s Office to deliver the frictionless checks. It will be for the operator to use the results of those checks to support identified customers and reduce their risk profiles. Dean also recognised that creating and implementing a system for frictionless checks would not be easy, particularly given the importance of proportionality and the risk of driving people to the black market.

All panellists agreed that it would be paramount that the industry continues to engage, and encouraged those present to participate in the various consultations being run by DCMS and the Gambling Commission and also to contribute to any supplementary work undertaken by industry bodies, such as the Betting and Gaming Council’s work on industry codes.

We extend our thanks to DCMS, the Gambling Commission and other panellists for their valuable contributions.

01Jun

White Paper Series: Gambling Ombudsman – a new approach to consumer redress

1st June 2023 Bahar Alaeddini 284

One of the cornerstone proposals of the White Paper is the formation of an independent non-statutory ombudsman to improve consumer protection and ensure fairness for consumers relating to social responsibility (“SR”) complaints about both land-based and online gambling (the “Gambling Ombudsman”). This means providing an independent, non-litigious, route to adjudicate complaints relating to SR or gambling harm where an operator is not able to resolve these.

Under section 116 of the Gambling Act 2005, the Gambling Commission has the power to investigate complaints and commence a licence review after receiving a complaint about a licensee’s activities. However, it does not have the power to: (a) adjudicate complaints; or (b) compel a licensee to return money to customers (note: the Gambling Commission uses the word “victims” in its Advice to Government), although licensees often propose divestment as part of a regulatory settlement.

We welcome Government’s acknowledgement of the important division between regulation and dispute resolution, emphasising the importance of the Gambling Commission not investigating customer complaints or forcing customer refunds. With the very clear expectation that the Gambling Ombudsman is established and ruling within one year, with the appointment process starting in Summer 2023, in this blog we explore this cornerstone proposal and unpick a handful of the knotty issues to be navigated.

What is an ombudsman?

The term “ombudsman” originates from the Old Norse word umboðsmaðr, meaning “representative”, and is a protected term in the UK. An ombudsman is a person appointed to receive complaints from a complainant (free of charge), providing recourse without the costs of complaining through the courts. Generally, complaints are against a public authority although schemes do exist for the private sector. Unlike the court system which generally considers lawfulness, an ombudsman’s role is much broader and will consider and resolve individual complaints about poor service or unfair treatment. As the Ombudsman Association (the professional association for ombudsman schemes and complaint handlers in the UK) acknowledges, “his is not an easy task, as it requires the scheme to balance the views of the complainant against those of the organisation and, based on the merits of the case, achieve a just result for both.”

The first ombudsman scheme in the UK was created in 1967 as a new type of public official, investigating complaints from citizens about government maladministration. There are now over 10 public and private sector ombudsmen in the UK – including the Financial Ombudsman Services (likely to be the closest relative to the Gambling Ombudsman), Parliamentary Standards Ombudsman, Pensions Ombudsman and Rail Ombudsman – and very soon there will be another one to add to the list.

The Gambling Ombudsman

The Government wants the Gambling Ombudsman to be:

“fully operationally independent”, in line with Ombudsman Association standards and commitments to complainants and organisations complained about, namely: accessibility, communication, professionalism, fairness and transparency;
“credible with customers”; and
provided by all “licensed operators…to ensure all customers are protected equally”.

If the scheme is not delivered as expected by Government or “shortcomings emerge regarding the ombudsman’s remit, powers or relationship with industry, will legislate to create a statutory ombudsman.”

Once the Gambling Ombudsman has been established, Government “will explore how best to require that all licensees ensure customers have effective access to the ombudsman” for SR complaints, potentially through licence conditions introduced by the Gambling Commission or Secretary of State. In our view, logically, this can only mean B2Cs, given that B2Bs do not have a contractual relationship with customers.

Potential scale of unresolved complaints

2021/2022 statistics:

200,000 complaints are made by customers directly to operators
5% of these are referred to an ADR provider, thereby becoming a dispute
6% of disputes referred to an ADR provider related to SR failings and therefore outside scope (there are limited circumstances in which an SR complaint can be considered)
The Independent Betting Adjudication Service (“IBAS”), the largest ADR provider, received 80% of all ADR disputes across the gambling industry
20% of all complaints referred to IBAS related to SR, with most of this outside scope
The Gambling Commission received 1,305 so-called SR complaints via its contact centre

Government acknowledge that current statistics are not necessarily representative of the likely volume of work that lies ahead for the Gambling Ombudsman. By way of example, it refers to the Financial Ombudsman Service that received 31,000 cases in its first year (2000/2001) rising to over 219,000 by 2021/2022. Whilst Government does not expect this overall volume, it believes “a significant increase is likely” and this seems inevitable to us, particularly with certain personal injury law firms already ready with webpages dedicated to “gambling harm claims”.

Potential issues

The concept of an ombudsman is a good one; however, it raises several knotty issues including:

Remit: The Gambling Commission’s Advice to Government recommended “a new single ombudsman scheme for consumer redress… replace all current ADR providers and consider all disputes between gambling operators and consumers”. Plainly, the Government decided otherwise with the Gambling Ombudsman being limited to SR issues only! Clarity of the purpose of the new ombudsman and the scheme’s role, intent and scope, including its clear objectives, types of disputes that will and will not be investigated, when complaints can be escalated to the Gambling Ombudsman (for example, after reaching “deadlock” through the operator’s internal complaints process and if/when an operator can refer disputes) and what is a legitimate concern, will be critical for complainants and gambling businesses (“Service Users”). The ombudsman concept is rooted in claims of maladministration and injustice, which whilst fitting in a public service setting does not lend itself, at least easily, to gambling. One risk is the confusion the Gambling Ombudsman may create in an already fragmented landscape given the number of different ADR entities.
“A just result for both”: More serious risks, to achieving quality outcomes and promoting the integrity of the scheme, are:
- How the Gambling Ombudsman will navigate the meaning of ‘excessive’ or ‘unaffordable’ gambling and determine the point at which the operator should have intervened, which is not an objective assessment, and it will be very heavily case specific. In its Advice to Government (at paragraphs 6.21-6.25), the Gambling Commission referred to a “helpful precedent” set by the Financial Ombudsman about irresponsible lending and considering what is “fair and reasonable”, taking into account relevant laws, regulations and regulatory guidance, standards, codes of practice and what is considered to be the good industry practice at the time. One of the biggest practical challenges for the Gambling Ombudsman will be getting to grips with ever-changing requirements for operators (which are sometimes opaque to say the least) and ensuring its decision-making process is consistent, something which will be critical for all Service Users.
- Whether operators have a duty of care to customers and what this means?
- Suggesting gambling is “risk-free” with customers using the scheme as a way to recover losses, reinforcing negative and harmful behaviours.
Complainant: Who will be able to refer a dispute to the Gambling Ombudsman? Will it be limited to the player, or could it include a family member, solicitor, claims management company or other appointed representative (including an executor in the event of death)?
Non-statutory: As a non-statutory body (again, against the Gambling Commission’s advice which considered legislation and a statutory body to be “essential for it to be implemented effectively”), the Gambling Ombudsman will not have the power to force operators to comply with recommendations. For the scheme to have credibility in the eyes of complainants, it will be vital for operators to accept findings and implement recommendations made by the Gambling Ombudsman, which was no doubt one of the drivers for the Government mandating the Betting and Gaming Council’s involvement in the “foundational aspects” to ensure “operators are held to account…and public confidence in the scheme is high”. Will it become a licence condition to implement the recommendations of the Gambling Ombudsman?
Time limit: Will there be a time limit to bringing a complaint? A reasonable cut off point (perhaps, 12 months) should be introduced.
Litigation: Complaints should not be considered if legal proceedings have commenced against the operator. It will be interesting to see if the scheme prioritises complaints where legal action is being contemplated.
Independence: How will independence from both the Gambling Commission and gambling industry be achieved? Whilst we acknowledge, as the Government does, the importance of the Gambling Commission having a “strong relationship” with any ombudsman, for the scheme to have credibility with operators it will be essential for it to be impartial.
Remedies: To secure its success, the Gambling Ombudsman will need to ensure remedies are “appropriate and take account of the impact any identified faults have had on the complainant” and explain what action can be taken if remedies are not implemented. Remedies could include practical action, an apology, a financial award (or fair compensation looking to put the complainant back in the position had the operator not “got it wrong”) and/or recommendations to the operator to prevent recurrence. The appropriateness and timing of certain remedies will need to be approached carefully, considering potential impact on therapy. Additionally, we will need to watch this space to see whether the scope of redress arrangements blurs the lines between powers typically reserved for the regulator.
Financial award or compensation: Assessing the quantum and recipient of any financial award or compensation will be very complex, and may include:
- the impact on a customer’s health (as is the case with the Financial Ombudsman Service);
- whether the customer could have done anything to reduce the impact of the operator’s mistake, acknowledging that sometimes – in a chain of events – it would not be fair to hold an operator responsible for all the resulting effects;
- in cases where the complainant is not the customer, whether certain remedies should be precluded; and
- directing an operator to make a payment to a problem gambling charity, or repay a debt, instead of a payment directly to the customer given the potential risk of fuelling their gambling addiction.
No appeal: Decisions will be final and not appealable. Also, as the Gambling Ombudsman will be a non-statutory body, its decisions cannot be judicially reviewed. So, in what circumstances, if any, will Service Users be allowed to request the Gambling Ombudsman to review the decision? This is likely to be limited to a mistake, or if the complainant has new information with a clear reason, why it was not submitted earlier.
Funding: As the scheme will be free for complainants, it will inevitably be funded by operators. This could involve a fee for each case reviewed, or per year. Although this detail did not feature in the White Paper, the Gambling Commission recommended “learly defined funding arrangements, including the power for to set the fees payable by licensees” which seems wholly inappropriate (especially with a non-statutory body).

Frontrunner

IBAS is the clear frontrunner to become the Gambling Ombudsman on the basis it is the largest ADR provider, handling about 80% of the ADR disputes. This is certainly a jolly good start, but only about 20% of their 860 complaints dealt with in the last year were SR-related, so a steep learning curve still lies ahead, despite advance planning.

Back in August 2022, no doubt following the leaks in July 2022, IBAS unveiled its roadmap for becoming the Gambling Ombudsman in the Fast Track to Fair Play briefing. This included an outline of its aims and governance framework setting out the remit of the new ombudsman, the need for new and compulsory funding from industry whilst ensuring “impartiality remains at the heart of all gambling dispute decisions” and a Fair Play Code with criteria for deciding complaints and “harmful gambling” (which remains unpublished at the time of writing). Although the White Paper is silent on funding, IBAS estimated an annual budget of approximately £3.5m and £1m to fund the transition process. In its first year, IBAS – as the Gambling Ombudsman – expects to:

receive approximately 7,500 complaints and resolve 5,000 complaints, anticipating that some 2,000 will need to be referred back to operators to complete their internal complaints systems and approximately 500 requests will fall outside an expanded redress remit;
receive a further 10,000 requests for advice or support from Service Users that do not progress to a dispute;
deal with claims management companies exploring historic complaints on behalf of customers; and
charge an average resolved case fee of £400 and a lower median fee and may charge an average handling fee of £25 per enquiry/request for assistance from operators.

Next steps

With the appointment process expected to begin in Summer 2023, we need to await the formation of (or transformation into) the Gambling Ombudsman to see how the scheme, challenges and risks will be navigated on this cornerstone proposal to improve consumer protection. Delay will only serve to antagonise the anti-gambling lobby and displease Government, increasing the possibility of a statutory ombudsman.

31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan 301

As the dust settles (at least temporarily) following the publication of the White Paper, we have “take time to think” so that we may share our insights in a series of blogs and vlogs on the many and varied aspects of the proposed gambling reforms. With the Gambling Commission already seeking to manage expectations by saying that the implementation of the White Paper “will likely take a number of years to fully complete” and urging “more haste, less speed”, this may be a long running series… We will focus on what we consider is important or interesting, ideally both, and our content will be concise and hopefully thought provoking.

Speaking about the White Paper recently in the House of Lords, Lord Grade referred to a saying in the film industry – “hurry up and wait” (also a song by Stereophonics and a military motto) – describing where you get to the location after being forced to spend a lot of time waiting, everybody is standing around, ready, but nothing happens. Having waited nearly 30 months for the publication of the White Paper, coupled with the latest (estimated) indication from the Gambling Commission that the first wave of consultations will not be seen until mid-July, this saying seems apt.

1. Spirit and intention of the White Paper

Throughout our White Paper Series, we will have as our touchstone the aim of the Gambling Review when it was published on 8 December 2020:

“The Government wants all those who choose to gamble in Great Britain to be able to do so in a safe way. The sector should have up to date legislation and protections, with a strong regulator with the powers and resources needed to oversee a responsible industry that offers customer choice, protects players, provides employment, and contributes to the economy.”

The White Paper is true to that laudable aim. As the Secretary of State says in her Ministerial Foreword, at the heart of the Government’s Review is making sure it has the balance right between consumer freedoms and choice on the one hand, and protection from harm on the other. The Government seeks to achieve this balance through an extensive package of measures across all facets of gambling regulation. If it is to be successful, the Government – and Gambling Commission – will need to retain an unerring focus on this balance, essentially the spirit and intention of the White Paper, as it is inevitably buffeted by vested interests through consultation, regulation, and legislation.

2. All things to all people

The first thing to say about the White Paper is that it has been broadly well received; when it was delivered in Parliament, within all sectors of industry, by the NHS, in the third sector and at the Gambling Commission. This was equally broadly unexpected, given the acrimony and divergence of views between stakeholders during the “hurry up” phase, so why has the White Paper been such a resounding success? At the risk of oversimplifying, but not wishing to overlook the obvious (including the lack of detail and long grass kicking), it is precisely because the Government has achieved a healthy balance in its proposed reforms, for which it deserves enormous credit, and it is because there is something valuable in the White Paper for everyone.

Responding to its publication, and demonstrating some of the “wins” for the respective stakeholders, comments on the White Paper included:

“Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry.” Gambling Commission CEO, Andrew Rhodes.
“BGC members will now work with Government and the Gambling Commission to deliver targeted and genuinely ‘frictionless’ enhanced spending checks to further protect the vulnerable, a new Ombudsman to improve consumer redress, and overdue plans to modernise the regulation of UK casinos.” Betting & Gaming Council CEO, Michael Dugher.
“..it should not be left to the health service to pick up the pieces left behind by a billion-pound industry profiting on vulnerable people, so I fully endorse the statutory levy set out in today’s White Paper and look forward to reading the proposals in detail.” NHS Mental Health Director, Claire Murdoch.
“At GamCare, our priority is making sure that people who need help receive it as quickly as possible. We therefore welcome the clarity the Government has provided on how research, education and treatment will be funded.” Gamcare CEO, Anna Hemmings.
“As chair of the all-party parliamentary group on gambling related harm, I welcome this long overdue White Paper. In the APPG’s 2019 interim report, we asked for affordability checks, parity between land-based and online stakes, an independent ombudsman, a curb on advertising and, most importantly, a statutory levy. Job done.” Carolyn Harris MP.

The introduction of a statutory levy paid by licensees and collected and distributed by the Gambling Commission under the direction and approval of the Treasury and DCMS ministers, is a flagship reform. The long debate as to whether there should be a statutory levy is at an end, there will be a DCMS consultation on the details of its design and, critically, the total amount to be raised. The statutory levy will fund research, education and treatment of gambling harms and is a load-bearing pillar of the reforms for those advocating the “polluter pays” principle.

Financial risk checks, maximum stakes for online slots and the creation of an independent gambling ombudsman have also been very warmly received by key stakeholders and will all be consulted upon by DCMS. The new non-statutory ombudsman will be the subject of our next blog in this White Paper Series.

The Gambling Commission most certainly did not get everything its own way, with Government not religiously following the advice from the regulator, but the Gambling Commission will be the recipient of powers and resources intended to make sure that all gambling is overseen by a “beefed up, better funded and more proactive” regulator. Licence fees will be reviewed (upwards of course) to ensure it has the resources to deliver the commitments across the White Paper. When Parliamentary time allows, it will even get greater power to set its own fees. Detailed analysis of the Gambling Commission’s additional enforcement powers will be the subject of one of our early blogs in this White Paper Series, including some which may have passed below the radar in all the excitement.

The industry positives from the White Paper are more nuanced. The land-based industry can certainly look forward to the long overdue modernisation of casinos and bingo clubs – including greater machine entitlements, credit in casinos for non-UK resident customers, sports betting in all casinos, and additional opportunities for customers to win on the main stage bingo game – and cashless payments across all land-based gambling sectors (following consultation by the Gambling Commission on the player protections which would be required).

From an online industry perspective, the White Paper is arguably as good as could reasonably have been expected in the present political, media and regulatory environment. The Government has resisted calls for bans on advertising, rejected demands for blanket and intrusive low-level affordability checks, and will consult on maximum stakes for online slots at higher levels than leaked previously. However, in outlining the Government’s vision for the future of gambling in moderately business-friendly terms, the White Paper does provide policy direction to which to hold the Gambling Commission accountable, the beginnings of some certainty and a glimpse of what political and regulatory stability might look like, not to mention the hope that the next gambling review might be a generation away.

3. The upcoming consultations

Yes of course everyone wishes the White Paper had gone further (in their direction, naturally). Yes of course there is a lot of work to be done to implement the reforms, once we are no longer “waiting”. Yes of course the devil will be in the detail. But as even the Gambling Commission and the Betting and Gaming Council (the “BGC”) agree in their welcoming press releases, the White Paper is a “once in a generation” opportunity for change. All the key stakeholders will now be seeking to secure their respective prize and imploring Government to prioritise their interests and deliver on its promises at the earliest opportunity, not least through Government and Gambling Commission consultations.

If the risk of the reform process descending into warring factions and reaching a standstill is to be mitigated, and this would not be in anybody’s interests, it is imperative that the process itself remains balanced and that all the key stakeholders see comparable progress in relation to their interests. From an industry perspective, this means engaging positively, constructively, and wholeheartedly with the upcoming consultations, proposing pragmatic and sensible solutions to the difficult challenges the Government and the Gambling Commission face, not least in relation to cashless solutions and frictionless checks, substantiated by evidence wherever possible. It also means holding the Gambling Commission to account on what is expected of it by the Government in the White Paper, with fair prioritisation of its (no doubt stretched) resources and no reforms being left far behind, even when the Gambling Commission is not in favour of them. It means focusing on its prize and not seeking to “re-litigate” settled issues or actively seeking to frustrate other stakeholders, or indeed otherwise antagonising Government which has delivered upon a balanced vision.

The proposed reforms are going to take longer than any of the stakeholders want as they seek to claim their prizes, but they are worth waiting for, the consultation phase will be critical, with both Government and the Gambling Commission under immense pressure to listen, and we will of course be happy to assist clients with their responses where that would be helpful, as we did in the last once in a generation opportunity in 2005!

19May

Summary of first-ever inquiry into crime linked to gambling

19th May 2023 Adam Russell 251

Background

The Howard League for Penal Reform (“Howard League”), which is the oldest penal reform charity in the UK, launched a Commission on Crime and Gambling Related Harms (the “Howard League Commission”) in June 2019. The primary objective of the Howard League, which extends beyond gambling, is “less crime, safer communities and fewer people in prison”.

The Howard League Commission, chaired by Lord Goldsmith KC with a team of 12 Commissioners, was the UK’s first-ever inquiry into the relationship between crime and gambling, and focused on understanding/determining:

the links between gambling related harms and crime;
the impact these links have on communities and society; and
what steps could be taken to reduce crime and make people safer.

A call for evidence was issued, attracting submissions from a range of stakeholders including the gambling industry, academics, practitioners, policy makers and people with lived experience. Evidence sessions took place with Ministers and senior stakeholders; minutes from these sessions can be found here.

The Howard League Commission published its final report in April 2023. It has also published its submission to Government’s call for evidence as part of the review of the Gambling Act 2005, and related research projects, for example, on sentencers’ understanding and treatment of problem gamblers and prison culture and gambling.

The Commission found that there is “an urgent need for ownership to be taken to reduce gambling harms related to crime both at political and strategic level and at operational policy and professional stakeholder level” and that there is “appetite for reform” within the police, courts, prisons and probation, but found an “apparent absence of scrutiny” within Government.

Key findings

The Howard League Commission found that:

The impact of gambling-related harm and crime touches all aspects of life, for example, finances, employment, relationships, health.
There are a high number of people committing a wide range of crimes as means to fund their gambling. These include white-collar/acquisitive crimes, as well as street robbery, domestic abuse and neglect, criminal damage and drugs offences.
Victims of gambling-related crime include employers, as well as social/familial networks.
There is scope to improve understanding of gambling-related harm among criminal justice agencies including in relation to sentencing, rehabilitation, recovery and support.
Certain criminal justice responses, such as Proceeds of Crime Act (POCA) orders, are counterproductive.
The impact of gambling-related harms and crime on affected others, women and individuals from ethnic minority communities is disproportionate and poorly understood.

Key recommendations

A strategic approach should be developed. The report calls on the Government, health bodies and criminal justice agencies to take a strategic approach to tackling the issue of gambling-related crime. It also recommends the creation of a national board to address crime linked to gambling – including senior representatives from the police, police and crime commissioners, prosecution, courts, probation, prisons, public health, victims’ advocates, and representation from those with lived experience of gambling-related harms related to crime.
Further funding. More funding needs to be provided locally and regionally, to develop a treatment and support infrastructure through the police, courts and prisons, which would help to reduce crime and enable more people to access services. For example, Gambling Commission revenues could be channelled into funding criminal justice and health infrastructure around treatment and support.
The role of criminal justice agencies should be enhanced. Examples include further development of the screening and assessment processes for problem gambling, integrating the voice of individuals with lived experience and improving sentencing guidelines in relation to gambling disorder. The Equal Treatment Benchbook should also be reviewed and gambling disorder considered alongside drug and alcohol use.
Gambling-related crime should be integrated into cross-government action. This could include the development of a Parliamentary select committee inquiry and cross-departmental oversight body. The report also recommends an external review regarding regulator/operator steps to address criminal activity, gambling-related harms, and provision of support.
Areas for further research should be explored. Examples of topics include the prevalence and drivers of the relationship between gambling and crime, the nature and efficacy of support/treatment (what constitutes effective support/interventions; upstream prevention; affected others; appropriate outcome measures) and the wider societal and system impact (the financial costs to society of gambling-related harms in the criminal justice system; impact on prosecution practices e.g. culpability, mitigation).

Concluding thoughts

The report comes as the Government announces planned reforms in its long-awaited White Paper, High stakes: gambling reform for the digital age. Although the niche areas of development/focus arising from the final report of the Howard League Commission will be a helpful ancillary to the proposals in the Government’s White Paper, its timing is not fortuitous given that the attention of the UK Government and the Gambling Commission will be on implementing the numerous reforms set out in the ambitious White Paper. We therefore suspect that the most likely avenue for change will be via the criminal justice agencies. They may be best placed to use the evidence presented in the Howard League Commission’s report to promote positive change in relation to the identification of gambling-related harm during the sentencing process, and provide appropriate support to affected offenders during their prison sentences and subsequent rehabilitation into society.

Download the Howard League Commission final report

16May

Reporting of Deaths by Suicide: consequence and practical implementation

16th May 2023 David Whyte 224

The Gambling Commission’s consultation on three changes it proposes to make to its Licence Conditions and Codes of Practice (the “Consultation”) is due to close on 23 May 2023 and there is one issue to which licensees should pay careful attention: the proposal to add a specific reporting requirement to Licence Condition 15.2.2 requiring licensees to notify the Gambling Commission when they become aware that a person who has gambled with them has died by suicide.

The Gambling Commission’s proposed wording is:

“The licensee must notify the Commission, as soon as reasonably practical, if it knows or has reasonable cause to suspect that a person who has gambled with it has died by suicide, whether or not such suicide is known or suspected to be associated with gambling. Such notification must include the person’s name and date of birth, and a summary of their gambling activity, if that information is available to the licensee”.

There is no question of licensees not wishing to prevent suicide and ostensibly, the arguments in favour of this proposed requirement are logical and reasonable. However, this is an incredibly sensitive issue about which stakeholders will have opposing views. Indeed, we have some concerns ourselves: that a gambler commits suicide does not necessarily mean that the gambling is a contributory factor, nor is the Gambling Commission qualified to make such a judgement. It is therefore questionable whether it is appropriate for the Gambling Commission to require the provision of information of this nature.

As has been the case on many occasions in the past, the Gambling Commission is likely to proceed with imposing this requirement, irrespective of the responses it receives to the Consultation. Consequently, rather than explore the basis of the proposed requirement, this article considers its wording and impact, which as presently drafted potentially exposes licensees to a risk of regulatory bias, imposes a disproportionate burden upon them and is likely to be interpreted inconsistently.

Intention and consequence

The Gambling Commission explains in the Consultation that, in the past, some licensees have notified it when they have become aware that a customer has died by suicide; likely under ordinary code provision 1.1.1 which suggests that, as a matter of good practice licensees should inform the Gambling Commission “of any matters that the Commission would reasonably need to be aware of in exercising its regulatory functions”. However, to enable it to “assess the licensee’s compliance with conditions of its licence” and to help “inform ongoing consideration of policy” the Gambling Commission has determined it necessary to make this notification a licence condition, the breach of which would enable it to commence enforcement action and if appropriate impose a regulatory sanction.

The Gambling Commission also states in the Consultation that, to avoid placing a burden on licensees to determine which deaths by suicide they should notify it about, it proposes that “licensees are required to notify us where a person who has gambled with them has died by suicide irrespective of whether any link between the person’s death and gambling has been established or suggested” and that “the death should be notified to the Commission irrespective of the period of time that has elapsed between the death and the most recent gambling activity.”

The Gambling Commission, many of its key stakeholders, and indeed many of its critics, have made it abundantly clear that gambling related suicide must be a key focus, and rightly so. However, suicide is almost invariably the result of a complex array of factors, and it cannot be the case that irrespective of the time that has lapsed between an individual’s gambling and their suicide, gambling will necessarily have been a contributory factor. An investigation is therefore inevitable, and care needs to be taken by the Gambling Commission when conducting that investigation to ensure that there is no internal regulatory bias on its part: its focus should be on licensee’s adherence to their regulatory requirements and not to the tragic circumstances that have led to the notification being submitted.

A regulatory bias in relation to gambling related suicide, or at least an indication of it, is evident in the Gambling Commission’s consultation Customer Interaction – Guidance for remote operators, where the Gambling Commission tells licensees that their staff “need to be trained on the skills and techniques they need to help them carry out customer interactions, including what to do if a customer becomes distressed or there is a risk of suicide”. Wording such as this suggests that, in the Gambling Commission’s view, it is the responsibility of licensees or their employees to identify the risk of suicide, and to act upon it. As we have set out in a previous article, this cannot be right: it is the responsibility of qualified professionals to identify that risk, not licensees, and it is dangerous on multiple levels, including in relation to the wellbeing of licensees’ employees, to suggest otherwise. Further, this risks suggesting there is a duty of care at law on the part of licensed gambling operators to prevent suicide, which is a dangerous precedent.

Whether or not licensees are expected to investigate, the Gambling Commission will be doing so. The extent of that investigation is likely to extend beyond the licensee who has submitted the notification: how else will the Gambling Commission ensure that all licensees are adhering to the licence condition and/or that the individual concerned has not gambled elsewhere? Having been identified it is therefore inevitable that the Gambling Commission will have to request information from other licensees; the burden on licensees potentially extending considerably and a consistent and proportionate response difficult to maintain. If gambling is a contributory factor, we suggest it is more likely than not the individual will have gambled with many operators.

As most licensees who have been through a burdensome compliance or enforcement investigation process with the Gambling Commission have experienced, the Gambling Commission can be very unforgiving in its approach, 20/20 hindsight is applied and it is rare that such a process leaves a licensee unscathed. Many licensees have found themselves subject to criticism, and in some cases may have agreed a regulatory settlement, in cases where theirs and the Gambling Commission’s view about some failings identified are not perfectly aligned. Following a notification under this proposed requirement, licensees might be forgiven for being concerned about how any Gambling Commission investigation will be conducted and any consequences of that investigation, particularly given the risk of unintentional bias and the imbalance of power between the regulator and its licensees.

Practical implementation: expectation versus reality

The Gambling Commission states in the Consultation that:

its “current view is that licensees should notify when they become aware that a person who has gambled with them has died by suicide”;
it proposes a specific reporting requirement that “would impose a requirement on gambling licensees to notify the Commission if they become aware that a person who has gambled with them has died by suicide”;
that licensees “would only be able to notify us that a person who has gambled with them has died by suicide if they themselves are aware of this, either through direct contact or other means, such as media reports”; and
it “would not expect licensees to actively investigate or verify the information in order to make such disclosures – rather, would expect licensees to notify the Commission if they become aware of a death by suicide of any person who has gambled with them (for example, through media reports or notification from relatives of the deceased).”

However, the draft wording of the proposed license condition is ambiguous and goes further than the Gambling Commission’s stated intention in the Consultation. It not only refers to actual knowledge but also to a much broader “reasonable cause to suspect”. This risks imposing a disproportionate regulatory burden on licensees. What amounts to reasonable suspicion will almost certainly be interpreted differently and will ultimately be determined by the Gambling Commission subjectively and in hindsight. Further, the breach of a licence condition amounts to a criminal offence under the 2005 Act, and can lead to various regulatory sanctions, including revocation and the imposition of a financial penalty. Licensees are therefore likely to take a precautionary approach when considering whether a notification is required.

Unlike actual knowledge, which is precise and unambiguous, a licensee’s reasonable cause to suspect that a customer who has gambled with it has died by suicide could be considered to arise in various ways, for example: (1) if they are informed by a customer that they are having suicidal thoughts following which all customer contact ceases without any known explanation or reason; (2) if public information about an individual who has died by suicide exists; or (3) if a licensee is informed that a customer who has self-excluded with them has died, but the cause of death is unknown. To avoid criticism in hindsight from the Gambling Commission about what amounted to reasonable cause to suspect, licensees will inevitably carry out an active investigation or verification exercise. The draft provision therefore appears to conflict with the Gambling Commission’s stated position in the Consultation that an active investigation is not required and this imposes a disproportionate burden on licensees.

This complication is most likely caused by ambiguous drafting, rather than by a malicious desire by the Gambling Commission to extend the reach of the draft provision. However, to ensure clarity of understanding, mitigate the risk of inconsistent interpretation by the Gambling Commission, and prevent the unreasonable or disproportionate use of the draft provision in the future, the Gambling Commission should be encouraged to address this ambiguity. Clarity could easily be achieved either by including additional wording in the draft provision that expressly states that active investigation or verification by licensees is not required, or by amending the draft provision entirely. Alternative and more appropriate wording that will retain the Gambling Commission’s desired objective might be:

“The licensee must notify the Commission, as soon as reasonably practicable, if it knows that a person who has gambled with it has died, and knows or has reasonable cause to suspect that the person has died by suicide.”

Please get in touch with us if you would like assistance with any compliance or enforcement matters.

28Apr

Gambling Commission Advice to Government

28th April 2023 Harris Hagan 266

The Gambling Commission has published its advice to Government (the “Advice”), as part of the review of the Gambling Act 2005 terms of reference and call for evidence, providing advice on each of the following topics:

effectiveness of the regulatory system;
online protections, players and products;
safer gambling and public health messaging;
advertising, marketing and sponsorship;
the Commission’s powers and resources;
wider funding for research, prevention and treatment;
consumer redress;
age limits and verification;
protections for young adults; and
land-based gambling.

In the Introduction, the Gambling Commission explains:

“In forming our advice, we have considered the widest range of evidence and applied a rigorous, consistent, and transparent evidence assurance process. The evidence assurance process enabled us to determine the strength of the evidence base and the weight that could be applied to the formulation of our recommendations. Where there was a lack of conclusive evidence, we took the position that this did not automatically mean that conclusions could not be reached or that action should not be taken. In some of our recommendations we have applied the precautionary principle where the potential for harm existed. We have, however, been transparent in our advice where we are advocating a precautionary approach.”

Andrew Rhodes, Gambling Commission CEO, said:

“The gambling industry has changed significantly since 2005 and our advice sets out changes that will ensure Britain is the safest and fairest place to gamble in the world. The review is a once-in-a-generation opportunity to deliver positive change for gambling in Great Britain and for all people impacted by it. Everyone at the Commission welcomes today’s publication of the White Paper and is determined to work with Government and partners to make these changes a reality. Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry. As the detailed implementation of the review now begins, we will also be reiterating to all operators that the Commission will strongly maintain its focus on consumer protection and compliance.”

The Advice was published very shortly after the long-awaited publication of the Gambling White Paper on 27 April 2023.

We will review the Advice in detail and will be publishing our insights over the coming weeks and months.

Download the Advice to Government

22Mar

Getting it right: how to comply with the “strong appeal” test when using sports personalities to advertise sports betting

22nd March 2023 Gemma Boore 292

Nearly half a year has passed since the introduction of the “strong appeal” test for gambling advertisements in the United Kingdom, and it has been a whirlwind of a six months for sport:

the Rugby League Men’s and Women’s World Cups took place in October and November 2022 after being postponed due to Covid-19 and the Cricket ICC World T20 (Men)’s event was hosted in Australia at the same time;

the FIFA World Cup took the world by storm between November and December 2022; and

2023 has not disappointed yet either – sports fans have been treated to numerous events in Q1 including the Tennis Australian Open, the Rugby Six Nations and the Cricket ICC World T20 (Women)’s event.

For betting operators, the resurgence of live sports presents a rich (and well overdue) opportunity to re-engage with existing and attract new customers. However, regulatory restrictions on advertising gambling products in Great Britain have tightened in recent years and operators must be mindful not to fall foul of current advertising rules including the new “strong appeal” test, which came into force on 1 October 2022.

In this article, we explain the strong appeal test, consider the impact of recent rulings by the Advertising Standards Authority (“ASA”) concerning its implementation, and share our top tips for gambling operators, marketing agencies and affiliates that want to ensure they comply with the strong appeal test when advertising sports betting to UK customers.

The strong appeal test – how does it work?

The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the “CAP Code”) and the UK Code of Broadcast Advertising (the “BCAP Code”) (collectively, the “UK Advertising Codes”) set out the rules relating to marketing communications in broadcast and non-broadcast media in the UK.

Parts 16 of the CAP Code and 17 of the BCAP Code set out rules bespoke to gambling advertisements. In particular, since 1 October 2022, each section has contained the following requirement (in rules 16.3.12 and 17.4.5 respectively):

“Advertisements for gambling must not be likely to be of strong appeal to children or young persons, especially by reflecting or being associated with youth culture.

They must not include a person or character whose example is likely to be followed by those aged under 18 years or who has a strong appeal to those aged under 18.

Where appropriate steps have been taken to limit the potential for an advertisement to appeal strongly to under-18s, this rule does not prevent the advertising of gambling products associated with activities that are themselves of strong appeal to under-18s (for instance, certain sports or playing video games).”

These ‘strong appeal’ tests effectively prohibit content (including imagery, themes etc.) that has a strong level of appeal to under-18s regardless of how it is viewed by adults. It extends to the use of celebrities (including footballers) to promote sports betting or convey responsible gambling messaging.

The new strong appeal tests replace the ‘particular appeal’ test in the previous edition of the UK Advertising Codes, which generally allowed marketing communications regarding gambling to feature celebrities (including footballers) who were well known to under-18s, provided the vast majority of their fans were adults. A typical barometer used was the proportion of the celebrity or footballer’s fans on social media: if 25% or less of their fans and followers were under 18, it was generally accepted that they did not have a particular appeal to children and could therefore feature. The new “strong appeal” tests are much stricter as they focus only on whether there is strong appeal to children – appeal to adults is irrelevant.

The guidance published by CAP and BCAP relating to the strong appeal tests: “Gambling and lotteries guidance: protecting under-18s” Advertising Guidance (non-broadcast and broadcast) (the “Guidance”) notes that “determining the likely appeal of a marketing communication is not always straightforward and is, to an extent, subjective… …Advertising approaches or pieces of creative content of ‘strong’ appeal to under-18s can take a variety of forms”.

The Guidance goes on to give several examples of approaches that are likely to be problematic, two of which are of particular relevance to sports betting advertisements:

Content linked to activities that are very popular or common among younger people (both in terms of their direct participation and viewing)

In its Guidance, the ASA confirms that it considers certain subjects and activities to be of inherently strong appeal to under-18s and gambling advertisements relating to these subjects and activities will be prohibited unless they fall under one of the exemptions. Two examples of sports with strong appeal are cited in the Guidance: football and eSports.

Other national sports such as cricket and rugby are also discussed and it is noted that by comparison, these sports have low-to-moderate levels of participation and interest among under-18s. However, the national teams in these sports attract more media interest and are more likely to be considered of inherent strong appeal. Conversely, sports such as horseracing, greyhound racing, darts, snooker, boxing, motorsports and golf are noted to be more adult-orientated and unlikely to be of inherent strong appeal.

In order to advertise betting opportunities concerning sports that strongly appeal to under-18s, gambling operators must ensure that their product falls within one of the exemptions cited in the Guidance, five of which are of relevance to sports betting:

Exemption A: Products in general terms. This permits betting advertisements to promote licensed products in general terms. The Guidance notes that the rules focus principally on imagery, themes and characters that are of strong appeal to under-18s. They are not intended to restrict simple text or audio references to sports, teams or individuals generally held to be popular with under-18s.

Example: An advertisement stating that bets are available on the outcome of a particular football or eSports match would not be prohibited as this falls within Exemption A.

Exemption B: Generic descriptions. This permits generic depictions of or references to the subject of the licensed product. The Guidance notes that the generic depictions must be suitable and not, of themselves, likely to appeal strongly to under-18s.

Example: An advertisement using suitable characters or CGI to depict a sport held to be of strong appeal to under-18s (e.g. football or eSports) or generic items or places associated with the sport (e.g. a ball, goal post, trophy, or stadium) would not be prohibited as this falls within Exemption B provided that the depictions are not stylised to appeal strongly to under-18s (e.g. cartoons).

Exemption C: Logos and other identifiers. This permits the use of logos and other identifiers for the subject of a betting activity.

Example: An advertisement showing that bets are available on the outcome of a particular match, tournament or other event that includes the logo for the event or the teams playing in it would not be prohibited as this falls within Exemption C.

Exemption D: Branding. This permits material relating specifically to an advertiser’s brand identity. The Guidance notes that this exemption does not extend to brand characters, which will need to be assessed under the strong appeal test for persons and characters (discussed below).

Example: An advertisement including the brand or livery of the operator advertising the bet (e.g. an advertisement featuring the logo of Mr Green in green and white colours) would not be prohibited as this falls within Exemption D. However, the use of the character “Mr Green” would need to be assessed separately to see whether it is of strong appeal to under-18s.

Exemption F: Certain persons and characters. This permits the use of persons or characters associated with subjects of strong appeal (e.g. football and eSports) provided marketers are satisfied that they are not, in and of themselves, of strong appeal to under-18s. Again, this will be assessed separately under the strong appeal test for persons and characters.

Example: An advertisement featuring a football player would not be prohibited as this falls under Exemption F provided the football player is not themselves of strong appeal to under-18s. See below for further discussion.

2. Persons and characters who have a strong appeal to under-18s

As set out above, the UK Advertising Codes require that gambling advertisements must not feature any person or character who has a strong appeal to those aged under 18.

Persons and characters generally fall into one of five categories: (a) personalities/celebrities, (b) brand ambassadors, (c) licensed characters (e.g. a movie or video game character), (d) characters played by actors; and (e) brand-generated characters (e.g. characters created by the advertiser).

The ASA makes its assessment of appeal of these persons and characters to under-18s based both on (i) their appearance and behaviour in the advertisement, and (ii) their profile and relevance outside the advertisement for personalities, brand ambassadors and licensed characters (but not characters played by actors and brand-generated characters as these have no external profile).

In determining the extent of a person’s appeal to under-18s, advertisers are encouraged to use as many insights and sources of data as they can. Having determined what a person or character is known for (in terms of activities, roles or associations) marketers can then identify information and data sources that provide insights on the likely level of a person or character’s appeal to under-18s.

For example:

Profiles outside the context of the advertisement. In determining whether a person or character is likely to appeal strongly to under-18s on the basis of their profile, the ASA will consider factors such as: (a) whether they have obvious and direct links to activities for, or highly popular with, under-18s; (b) the general audience for, and popularity of, what the person or character is known for; and (c) the likelihood that their inclusion in an advertisement will strongly attract the attention or interest of under-18s.

Example: Persons and characters with obvious and direct links to under-18s should be avoided (e.g. current or recent children’s TV personalities, popstars associated with youth culture, licensed characters from popular board games and influencers that focus on youth-related themes).

If a person or character does not have an obvious and direct link to under-18s that would render them of ‘strong’ appeal, advertisers must still assess their likely level of appeal. Social and other media audience demographics are an important and quantitative source of data.

Example: Football players in national or other well-known teams such as Manchester United may be viewed in an aspirational or influential way among under-18s and should be avoided. The same principle applies in relation to leading sportspeople in other sports and those involved in World Cups or other high-profile tournaments. Players in lower-level teams and other individuals involved in sports (e.g. managers) are more likely to be acceptable if it can be demonstrated that the individuals have a negligible following of under-18s on social media and/or there is a negligible proportion of under-18s in the audience (either for their sport or other programmes in which they feature).

The ASA notes that more weight should be attached to present and recent activities. Personalities whose appeal has shifted away from under-18s over time are less likely to fail the strong appeal test.

Example: An individual that played in a national sports team in 2002, such as David Beckham, is less likely to appeal to under-18s now compared to an individual that played in a national sports team in 2022, such as Raheem Sterling.

Appearance and behaviour within the advertisement. The second part of the ASA’s assessment of ‘strong’ appeal for persons and characters is how they appear and behave in advertisements.

Marketers must avoid featuring behaviour that is likely to strongly appeal to under-18s. This includes youth culture themes (e.g. disregard for authority, rebelliousness, immature adolescent or childish behaviour and participation in practical jokes), speech and language (e.g. sounding like a child or using slang terms or text abbreviations), humour (e.g. slapstick or juvenile jokes) and other behaviour (e.g. dancing, singing or reciting rhymes).

Example: A person that is behaving in a manner associated with under-18s (such as Simon Bird from The Inbetweeners) is more likely to appeal to under-18s.

In addition, persons and characters played by actors must not be presented in a way that renders them likely to be of ‘strong’ appeal to under-18s. They should not wear clothing, accessories, jewellery, body art, piercings or hair styles that are obviously associated with a current trend or style popular with under-18s.

Example: A person that is wearing clothing associated with teenagers (e.g. a crop top, oversized hoodie, baggy jeans or a bucket cap) should typically be avoided.

Finally, characters that are colourful or have exaggerated features are more likely to be of strong appeal to under-18s and this includes ‘cuddly’ or ‘cute’ animals. Licensed characters (for example, from games and movies) will be assessed based on the popularity of the game or movie with under-18s.

Example: Characters with similarities to soft toys and exaggerated features such as enlarged eyes should typically be avoided. Characters related to stories or themes that are popular among children like pirates, princesses, superheroes, robots and fairy tale characters should also be avoided unless they are from traditional fairy tales, not stylised with exaggerated features and are not otherwise associated with childhood (e.g. characters such as Santa Clause, the tooth fairy and the Easter bunny are cited in the Guidance as being associated with childhood and should therefore be avoided).

There is a helpful checklist at the beginning of the Guidance that summarises the risk-based scenarios of featuring different types of persons in gambling advertisements:

High risk	o Anyone with direct connections to under-18s through their role like children’s TV presenters or film stars o Anyone with a significant under-18 following on social media o UK footballers who play for top clubs, UK national teams or in high-profile competitions – this would apply also to managers o Non-UK ‘star’ footballers, particularly those at top European clubs – this would apply also to managers o Other prominent sportspeople involved in sports like cricket, tennis and rugby that, at the highest levels, have a significant national profile o Leading eSports players

Moderate risk	o Footballers from teams outside the top-flight will be assessed on the basis of their social and other media profile o Footballers with lower profiles at top Euro/world clubs might be acceptable o Retired footballers who have moved into punditry/commentary will be assessed on the basis of their social and other media profile o Other eSports players dependent on their social media and general profile o Sportspeople involved in clearly adult-oriented sports who are notable ‘stars’ with significant social media and general profiles making them well-known to under-18s o A small but notable following of under-18s on social media will be considered alongside the personality’s general profile and could contribute to an ASA decision to categorise the individual as being of ‘strong’ appeal

Low risk	o Footballers at lower league and non-league clubs o Footballers at lesser Euro/world clubs o A long-retired footballer now known for punditry/commentary o Sportspeople involved in sports like cricket, tennis and rugby that don’t have a significant role in the sport or general profile o Sportspeople involved in clearly adult-oriented sports (e.g. darts, snooker, golf, horseracing, and motorsports)

Exception for narrowly targeted advertising

There is one key exception to the strong appeal rules: they do not apply in media where under-18s can, for all intents and purposes, be entirely excluded from the audience.

Principally, this applies in circumstances where the marketer can robustly age-verify the potential recipients of the advertisement as being 18 or older such as:

direct mail, email and SMS communications sent to recipients who have been verified as being 18 or older;
areas of websites and applications that can only be viewed/accessed those who have been verified as 18 or older on sign-up; and
online platforms (such as social networks or publications) that provide advertisers with functionality enabling them to target users that have been age-verified to a very high degree of accuracy.

In the event of challenge, the ASA expects advertisers to provide evidence to demonstrate that the systems used to identify audiences from which under-18s are, for all intents and purposes, excluded are robust. Gambling Commission licensed websites are cited as a good example of a media environment where under-18s are extremely unlikely to form part of the audience. Other sources of marketing data may also be acceptable where robust means of age verifications have been employed (e.g. payment data or credit checking). More general marketing data, such as that inferred from user behaviour, is unlikely to be sufficient.

Recent ASA rulings – what do they tell us?

To date, there have been three ASA rulings regarding the strong appeal tests, each of which provides helpful context – particularly in relation to footballers who, as noted as above, can be potentially low, medium or high-risk depending on the individual.

Philippe Coutinho, Jesse Lingard and Kalidou Koulibaly – of strong appeal

In December 2022, the ASA upheld a complaint for a promoted Tweet featuring the text “Can these big summer signings make the question marks over their performances go away?” and an embedded video that featured three current Premier League footballers: Philippe Coutinho, Jesse Lingard and Kalidou Koulibaly, set against a background of question marks.

The advertiser argued that although football and topflight footballers could strongly appeal to under-18s, targeting and age-gating tools had been used to remove under-18s from the advertisement’s audience. This included self-verification by the audience and targeting techniques designed to ensure the advertisement would only reach users aged 25 or over.

The ASA did not accept these arguments and upheld the complaint. In its view, both football and the players used (who were Premier League and international footballers at the time) were likely to be of strong appeal to under-18s; and the targeting techniques were not sufficiently robust to exclude under-18s from the audience with the highest level of accuracy, as required.

Peter Crouch and Micah Richards – not of strong appeal

In February 2023, the ASA did not uphold two complaints regarding advertisements featuring retired footballers.

The first complaint concerned two TV advertisements featuring Peter Crouch conducting a choir and celebrating (amongst other activities) with the text “COMPLETELY FREE BET BUILDER ON ALL ENGLAND GAMES”. During the advertisement, a voice-over was heard saying, “You hear that? That’s the sound of Christmas and the world cup colliding. So come on all ye faithful, let’s be having ya. Glory to the king of headbutts. Knit those kits. Cross those sprouts. Stuff those turkeys. And attack those carols. Cause from this day we’ll forever ask where were you in twenty-two.”

The second complaint concerned a promoted Tweet featuring the text “Club football returns following the international break… Get £20 IN FREE BETS when you place a £5 bet!” and an image of Micah Richards.

Both Crouch and Richards had retired in 2019 and the ASA took a pragmatic approach that although this meant “not long retired”, the teams and the games in which the players featured during the later years of their career (e.g. Burnley and Stoke City for Crouch, and Aston Villa for Richards) meant that they were unlikely still to be of strong appeal to under-18s. The players were therefore assessed on the basis of their social and other media profiles:

Peter Crouch
Crouch did not have public accounts on TikTok, Facebook or Twitch at the time the advertisements were broadcast, and his Instagram account had not been updated since 2014. He did have a public account on Twitter that, at the time the advertisements were seen, had almost 1.5 million followers but demographic data from September to December 2022 showed that 0.46% of his followers were aged 13-17 years. Even though Twitter is a media environment where users self-verify, the ASA accepted this as evidence that a very small number of Crouch’s followers on Twitter were aged under 18.

The ASA further noted that the TV programmes in which Crouch appeared (such as BT Sport, the documentary ‘Save Our Beautiful Game’ and Crouch’s own TV shows, ‘Peter Crouch: Save Our Summer’ and ‘Crouchy’s Year Late Euros’) and his podcasts were primarily aimed at adult audiences and not of strong appeal to children. The exception being ‘The Masked Singer’ in which Crouch appeared as a panellist. The ASA noted this to be a family entertainment programme and of appeal to children. However, Crouch appeared as one of four panellists, the programme was of broad demographic appeal and there was no evidence that his role in the programme had led to him being viewed in an aspirational or influential way by under-18s. Accordingly, the ASA concluded that Crouch’s appearance in this programme was unlikely to make him of strong appeal to under-18s.
Micah Richards
Richards did not have active public accounts on YouTube, TikTok or Twitch and audience demographics on Instagram and Twitter showed that: 0.07% of Richards’ Instagram followers were aged 0-16 years and 2.19% were aged 17-19 years; and 0.04% of his Twitter followers were aged 0-16 years and 2.15% were aged 17-19 years. Again, the ASA accepted that this data demonstrated that his social media profile was unlikely to make Richards of strong appeal to under-18s.

In terms of TV programmes, the ASA noted that Richards was a regular and well-known pundit on Match of the Day but BARB data in the lead up to the advertisement confirmed that a significant number of children had not watched live. The regulator also noted that Richards appeared as a pundit on Sky’s live coverage of Premier League matches which would be of strong appeal to under-18s, but that the strong appeal did not extend to the pundit-based discussion that took place around the game. Accordingly, Richards’ appearance in this context would be unlikely to hold strong appeal to under-18s.

Aside from his role as a football pundit, Richards had appeared on ‘A League of their Own’ and ‘Gogglebox’. Both programmes were scheduled post 9pm and primarily aimed at an adult audience.

In addition, Richards appeared on a CBBC programme ‘Football Academy’, which was considered likely to be of strong appeal to under-18s but the episode had not aired at the time the advertisement was seen. The ASA noted that if Richards had appeared regularly and prominently on such a programme, it was likely he would have been considered to have strong appeal to under-18s.

Top Tips

Below are our key takeaways for operators, marketing agencies and affiliates that want to comply with the strong appeal rules when advertising sports betting in the UK.

Be careful of using anybody in the advertisement that has an active presence on YouTube, TikTok or Twitch. These platforms are known to have particular appeal to under-18s. Although recent rulings do not expressly state that an active account on these platforms would denote someone as having strong appeal, it is notable that neither Crouch nor Richards had a presence on these platforms.

Do not assume that retired players will automatically fall outside the strong appeal category.Consideration should be taken of the individual’s complete career history including the time since they played topflight sport, when they stopped playing completely, and whether they played for a national team during their career, as well as recent appearances on television and other media. The sport that was played is also relevant: football and eSports are highest risk, whereas adult-orientated sports such as darts, snooker, golf, horseracing, and motorsports carry a much lower risk and the use of current or more recently retired players in these sports may be acceptable.

Do not automatically exclude football pundits. Even recent appearances as a football pundit covering football matches that are of strong appeal to under-18s, do not automatically mean that the individual will be of strong appeal themselves. Consideration should be taken of their overall appeal to under-18s.

Be cautious of links with children’s or family entertainment programmes, but do not assume this precludes all individuals featuring in them. Although an appearance in the television show that is aimed at children or is otherwise of strong appeal to under-18s is relevant and should carefully be considered, this will not automatically preclude an individual from appearing in a gambling advertisement provided the advertiser can demonstrate this did not alter the individual’s appeal to under-18s as a result.

Make use of available, verifiable data regarding social media and other followings. Be prepared to defend selections by use of robust data including individual’s social media followings and audience demographics for other media appearances. The ASA’s recent rulings on the strong appeal test are lengthy by usual standards and it is clear significant data was considered. Being able to produce relevant data is going to be vital in cases like this going forward.

Keep the position under review. Where advertisements appear on multiple occasions and/or an individual is used to represent a brand on an ongoing basis (e.g. as a brand ambassador), evidence that the individual does not strongly appeal to under-18s should be kept under regular review. An individual that did not appeal strongly to under-18s yesterday may do so today if they have featured in a new children’s or reality TV show, for example. To mitigate this, consider adding restrictive covenants to commercial agreements with brand ambassadors and others used in gambling advertisements, restricting them from participating in other programmes or media that appeals strongly to under-18s before or during the period that an advertisement is broadcast.

Review commercial scripts to ensure advertisements do not feature characters that appear or behave in a way that is likely to strongly appeal to under-18s. Avoid behaviour, speech / language and humour that is associated with youth culture. Ensure the individuals are dressed in an adult manner and do not feature other characters (e.g. cartoons or licensed characters) in the advertisement that may strongly appeal to under-18s.

If you are not satisfied that you can demonstrate that the advertisement is unlikely to appeal strongly to under-18s, exclude under-18s from the audience. It is imperative that reliable age-gating mechanisms are utilised. These may include validation by payment data and credit checking, but do not extend to self-verification or the use of data inferred by user behaviour.

Summary

This article has explained the strong appeal test, considered the impact of recent rulings by the ASA concerning its implementation and outlined key takeaways for gambling operators, marketing agencies and affiliates that want to ensure they comply with the strong appeal test when advertising sports betting to UK customers.

If you would like to discuss any of the matters raised, please do get in touch with us.

21Mar

The Gambling Commission’s consultation on proposed changes to the Licence Conditions and Codes of Practice

21st March 2023 Adam Russell 275

On 28 February 2023, the Gambling Commission launched a consultation proposing three changes to the LCCP (the “Consultation”), in relation to: (1) the scope of the requirement for gambling operators to participate in GAMSTOP; (2) events explicitly listed by the Gambling Commission as “reportable” in the LCCP; and (3) the technical wording of an LCCP provision in relation to payment method services.

The Consultation is open to all stakeholders, including gambling operators, to share their views on the proposals. The Consultation opened on 28 February 2023 and will last 12 weeks, closing on 23 May 2023. We outline below the three topics on which the Consultation focuses, and the practical considerations for licensees who wish to submit responses as part of the Consultation.

Proposed changes to the LCCP

1. Extending the multi-operator self-exclusion scheme to additional categories of betting licensee

Since 31 March 2020, the Gambling Commission has required all remote gambling operators to participate in GAMSTOP, which is an online multi-operator self-exclusion scheme.

The Commission is “consulting on changes to social responsibility code provision 3.5.5 to “extend the requirement to participate in the GAMSTOP scheme to all licensees that make and accept bets by telephone and email.”

2. Reporting deaths by suicide to the Gambling Commission

Licence condition 15.2.2 outlines a range of events which licensees must report to the Gambling Commission via their eServices account.

The Gambling Commission is “consulting on adding a requirement to Licence Condition 15.2.2 that would require all licensees to inform when they become aware that a person who has gambled with them has died by suicide.”

3. Payment services – technical update

Licence condition 5.1.2 prescribes the method by which certain operating licence holders accept payment from customers using their gambling facilities in Great Britain.

The Gambling Commission proposes to amend the text of licence condition 5.1.2 to “ensure that the condition reflects the current legislative provisions”. In particular, the Gambling Commission wishes to ensure that it mirrors any “future legislative amendments to the Payment Services Regulations”.

Responding to the Consultation

There are practical steps and considerations which licensees should consider should they wish to respond to the Consultation. Whilst it is not intended to be exhaustive, a list of key factors is provided below:

The Gambling Commission will consider all responses submitted, whether or not all the questions in a given survey have been answered.

Licensees can respond to the Consultation using the online survey. Alternatively, responses can be submitted by post to: Policy Team, Gambling Commission, 4^th Floor, Victoria Square House, Birmingham, B2 4BP.

When responding to the Consultation, the Gambling Commission will request your consent to publish your name (if responding in a personal capacity), or the name of your company (if responding on behalf of your organisation) on their website. The publication of such details would indicate that you responded to the Consultation exercises.

We encourage licensees to respond to the Consultation, which closes on 23 May 2023, to express their views on the proposed changes.

Please get in touch with us if you would like assistance on any licensing matters.