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White Paper

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11Jul

White Paper Series: Update from the Gambling Commission

11th July 2023 Jessica Wilson Harris Hagan, White Paper 224

On 7 July 2023, Tim Miller, Executive Director of Research and Policy at the Gambling Commission, published an update on the Gambling Commission’s plans for implementing its 24 key actions as detailed in the Government’s White Paper. The update follows the Gambling Commission’s virtual briefing held on 5 July 2023 for operators.

Web content

Miller reiterated that the Gambling Commission has already completed its first deliverable by launching its White Labels Hub, which gives a consolidated guide to White Labels. Please see our blog for further details. Miller confirmed that the Gambling Commission intends to publish web content regarding its approach to vulnerability in July 2023.

Data and evidence

Miller explained that the Gambling Commission is progressing its work to improve evidence and data for gambling in Great Britain, which is a part of its commitment to the Gambling Review. Miller highlighted the publication of the Gambling Commission’s three-year Evidence Gaps and Priorities Review as evidence of its progress.  

Consultations

The most anticipated next step is publication of the Gambling Commission’s consultations. Miller confirmed that the Gambling Commission intends to publish six consultations later this month (July 2023), four of which relate to measures detailed in the White Paper. The Gambling Commission expects most of the consultations to last 12 weeks, with closing dates in October.

The consultations relating to the White Paper measures are as follows:

  1. Age-verification in land-based premises: Including test purchasing by small bingo premises, adult gaming centres and betting operators, and updating the ordinary code from Think 21 to Think 25.
  2. Remote game design: Including changes to the Remote Technical Standards and building on the Gambling Commission’s previous work on online slots.
  3. Direct marketing and cross-selling: Including proposals to amend the social responsibility code regarding marketing to enhance consumer protection.
  4. Financial risk and vulnerability checks for remote operators: Including the proposed defined thresholds for financial risk checks, transparency requirements and a timetable for implementation.

The two additional consultations are:

  1. Rules about Personal Management Licences: Proposal to clarify and extend the requirement to hold a PML for certain functions.
  2. Procedures for Regulatory Panels: Proposal on a package of changes in relation to regulatory panels, including amendments to the Statement of Principles.

Miller explained that the second tranche of White Paper consultations will take place before the end of the year, likely in Autumn 2023, including consultations on socially responsible inducements and gambling management tools. Pre-consultation engagement is expected to begin in the coming weeks.

Statutory levy

Miller’s blog highlighted the Gambling Commission’s role regarding the statutory levy, a pillar reform from the White Paper. He confirmed that whilst the Government will lead the creation of the statutory levy, the Gambling Commission’s role will be about administration of the levy, including collection and distribution. Miller explained that, once the levy is introduced, the Gambling Commission’s list of approved organisations for RET payments will likely no longer be relevant or needed. The Gambling Commission also needs to consider the impact of a levy system on the destination of any future regulatory settlements.

Gambling Commission’s role

Miller reiterated that the Gambling Commission continues to support Government with the work on the White Paper and Gambling Review, and that they will continue to monitor the progress of the industry to deliver voluntary commitments.

“Full implementation of the will be a job of several years, especially when you include evaluating the impact of any changes. But that doesn’t mean we don’t want to progress things as quickly as possible. We are determined to make progress at speed”.

We look forward to seeing the next steps of the Gambling Review being put into action. Once the first tranche of consultations is launched in July 2023, we strongly encourage the industry to participate and would be delighted to assist with preparing responses.

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05Jul

White Paper Series: Gambling sponsorship of sport – a modern endemic or just the weapon du jour in political warfare?

5th July 2023 Chris Biggs Marketing, White Paper 225

Twenty years after the first partnership between a Premier League football team and a gambling company, the Premier League clubs released a statement on 13 April 2023 confirming that they had “collectively agreed to withdraw gambling sponsorship from the front of clubs’ matchday shirts…” with the aim to reduce the prominence of gambling sponsorship in the Premier League from the end of the 2025/26 season (the “Voluntary Ban”).

Two weeks later, the UK Government released its White Paper High stakes: gambling reform for the digital age, in which the Government commended the Voluntary Ban and also endorsed the creation of a new cross-sport gambling sponsorship code (the “Sponsorship Code of Conduct”) to ensure sponsorship deals are socially responsible.

Critically, however, the White Paper did not – despite calls to the contrary from anti-gambling campaigners – ban gambling sponsorship of sports. For many, this raised eyebrows and prompted the question: did the Premier League and the Government go far enough?

Some say not. Indeed, in the most recent survey by the Football Supporters Association (the “FSA”), 73.1% (nearly three quarters) of respondents agreed with the statement:

“I am concerned about the amount of gambling advertising and sponsorship in football.”

In this White Paper Series blog, we delve deeper into the Voluntary Ban and the Sponsorship Code of Conduct and consider the effectiveness of these methods of self-regulation.

1. Background

The liberalisation of gambling advertising was one of the major changes introduced by the Gambling Act 2005 (the “2005 Act”). Before the 2005 Act, only bingo and lotteries were permitted to advertise on television. Since then the landscape has shifted significantly and gambling marketing, including by means of sponsorship, has become both highly visible and lucrative. Gambling brands provided 12% of sports sponsorship revenue according to a 2019 estimate.

Aside from horse racing and greyhound racing, which have integral links to betting, gambling sponsors are most strongly present in top-tier football, where 8 out of 20 Premier League teams in the 2022/23 season had a front-of-shirt gambling sponsor and all teams had an ‘official betting partner’. In smaller sports such as darts and snooker, a substantial amount of sponsorship revenue also comes from gambling operators.

Potentially as a result of its visibility and the associated revenue, the questions on sponsorship in the call for evidence published by the Government in preparation for its production of the White Paper attracted a high number of responses, with strongly polarised views. Industry stakeholders (as well as representatives of sectors that benefit from gambling advertising, such as broadcasters and sports governing bodies) broadly took the view that the current regulatory regime was fit for purpose. These respondents also emphasised the contributions that gambling revenue makes to other sectors.

In contrast, many other respondents (particularly across the health, charity and academic sectors) argued that gambling advertising was in need of significant reform, with several stakeholders in this group advocating a complete sponsorship ban. Many of these responses expressed concern regarding the link between sports and gambling and a common theme was the need for a ‘precautionary’ approach to the regulation of advertising, arguing that the absence of evidence of harm must not be treated as evidence of an absence of harm.

In the end, the Government concluded that although the limited high‑quality evidence they received on sport sponsorship indicated that it does have a level of impact on gambling behaviour, this was not as marked as for other forms of marketing (such as seeing gambling advertising online or receiving direct marketing) and it was these latter advertising mediums that should be subject to reform following consultation – and we will discuss the proposed reforms in these areas in a later blog. 

Returning to sports sponsorship, the White Paper commended the steps taken voluntarily by the industry and other regulators to date, including the Voluntary Ban, sports governing bodies’ agreement to adopt the Sponsorship Code of Conduct and the introduction of the strong appeal test by the Advertising Standards Authority (the “ASA”); as well as the ASA’s recent high profile enforcement action in relation to the strong appeal test (which we have previously discussed) – but did not recommend the introduction of any more draconian measures to curb the prevalence of gambling sponsorship of sports.

The Voluntary Ban and the Sponsorship Code of Conduct appear therefore to have been well-timed pre-emptive strikes for self-regulation, but will they go far enough?

2. Voluntary Ban – the toothless tiger?

It is without doubt that the Voluntary Ban is a positive step in the right direction by the Premier League. The reduction of children’s exposure to gambling by way of sponsorship, advertising or otherwise is, as the Secretary of State Lucy Frazer noted in her speech to Parliament unveiling the White Paper, a key motivation of both sides of Parliament and the industry as a whole:

“We must do more, which is why we are taking steps to make gambling illegal, in many forms, for under-18s. I welcome the Premier League’s announcement on banning gambling advertising from the front of shirts. Footballers are role models for our children, and we do not want young people to advertise gambling on the front of their shirts…”

The Government’s decision not to recommend further measures to reduce gambling sponsorship of sports (and specifically, football) has not, however, come without scepticism. During the unveiling of the White Paper, several members of Parliament questioned the effectiveness of the Voluntary Ban and criticised the Government’s decision not to take further action. Below we consider some of these arguments and ask whether the Voluntary Ban has actually gone far enough.

First and foremost, it is undeniable that the Voluntary Ban will, once it is implemented, be an important step in reducing the prevalence of gambling advertising to children, for example in football sticker albums that are directly marketed to children. However, the ban does not come into force until the end of the 2025/26 season (theoretically permitting three more football seasons and associated sticker collections with front of shirt sponsorship, at the time of writing) and even when it does come into force, the Voluntary Ban does not extend to the backs of matchday shirts nor other parts of the playing kit. Indeed, the sceptics amongst us will probably expect to see a sea of sleeves adorned with gambling logos in 2026/27.

The second point to note is that shirts (front or otherwise) really are the tip of the iceberg of gambling sponsorship. In the absence of significant reform (for example, in the Sponsorship Code of Conduct, discussed below), we can expect to continue to see gambling sponsorship on pitchside hoardings and structures within football stadiums that are visible to the crowd and/or those watching the match broadcast on television or online.

Thirdly, the Voluntary Ban applies to the Premier League only – lower divisions in the English Football League will be free to continue to accept sponsorship, including on the fronts of shirts – from gambling operators if they choose.

The final argument raised during the Parliamentary debate was that, without a firm stance from the Government, the Premier League could change its tune and reduce the extent of the Voluntary Ban or reverse it entirely. This is of course, an inherent risk of advocating reform by means of self-regulation by an industry – the industry retains control but this risk is countered by the fact that self-regulation is invariably the quickest method to achieve change. During the debate, the Government countered the possibility that the Premier League would subsequently change its position with the reassurance that it “made position very clear to the Premier League” regarding the action it ought to be taking, and it will take any further steps as necessary in the event of further research into the issue.

3. Make the code, not war

In comparison, the Sponsorship Code of Conduct remained largely outside the focus of the Parliamentary debate surrounding the White Paper’s publication.

This may be because the White Paper is rather vague on the scope of the Sponsorship Code of Conduct. Although it recommends that the new code will be common to “all sports” apart from greyhound and horseracing, we do not yet know what this will mean in practice. Will motorsports or esports be included, for example?  Instead, the White Paper simply states that:

“Sports bodies need to ensure a responsible approach is taken to gambling sponsorship through the adoption of a Code of Conduct which will be common to all sports. For individual sports we believe that sports governing bodies are best placed to drive up standards in gambling sponsorship, recognising their specific context and responsibility to their fans. We welcome the work that is underway through sports governing bodies to develop a gambling sponsorship Code of Conduct, and will continue to support its development and implementation across the whole sporting sector…

…The measures included in a sponsorship Code need to be robust enough to provide meaningful improvements in the social responsibility of gambling sponsorships, while giving flexibility to accommodate the material differences between sports.”

The Government goes on to set out some possible principles to be included in the Sponsorship Code of Conduct:

Until we see the draft Sponsorship Code of Conduct, we will not know what impact, if any, it will have on current sponsorship arrangements. Certainly, a couple of the principles suggested in the White Paper appear to go no further than current requirements. By way of example:

(a) it is an offence under the 2005 Act to advertise unlawful gambling, including by means of sponsorship arrangements, and this offence carries a maximum sentence of imprisonment for a term not exceeding 51 weeks and a maximum fine of £5,000 (at the time of writing). If the possibility of committing a criminal offence is not a deterrent against accepting sponsorship from a gambling operator that is not appropriately authorised by a Gambling Commission licence, a commitment to a sports governing body under a voluntary Code of Conduct is unlikely to carry much additional weight; and

(b) operators are already required to follow relevant industry codes on advertising, notably the Industry Code for Socially Responsible Advertising, which provides that:

“advertising of adult-only gambling product suppliers should never be targeted at children….and this Industry Code continues to require that gambling operators do not allow their logos or other promotional material to appear on any commercial merchandising which is designed for use by children. A clear example of this would be the use of logos on children’s sports’ shirts.”

Lastly, it is currently unclear when the Sponsorship Code of Conduct will (1) be published; and (2) come into force. In terms of a timeline, the White Paper simply states that the Government will:

“work with sports bodies to refine the code over the coming months.”

Given the Government’s repeated promises that the White Paper (which took nearly 30 months to be published following the call for evidence) would be published in “the coming weeks”, many will be wary regarding this statement and likely, rightly so.  Not only has the Government committed itself to maintain involvement in the process of agreeing the Sponsorship Code of Conduct (which may slow it down) but the new code must also be reviewed, approved and adopted by governing bodies across “all sports”. We for one, do not envy the person responsible for overseeing such a mammoth task.

4. Our final thoughts…for now

Ultimately, we have again been delivered the message to “hurry up and wait” by the White Paper.  Until the Voluntary Ban comes into force and the Sponsorship of Code of Conduct is adopted across all sports (whenever that might be), it is likely that gambling sponsorship will continue to be the subject of keen debate in the press, politics and beyond. Indeed, in recent weeks, several Premier League Clubs have been caught in the crossfire and criticised for continuing to accept front of shirt sponsorship from gambling operators, even though the Voluntary Ban does not come into force until 2025/26. 

When it does come in, there are also concerns that the Voluntary Ban may not significantly reduce the visibility of gambling brands in major sports – but is this really the issue that the press and politicians are making of it? Some may argue that gambling sponsorship is simply the weapon du jour in the ongoing political warfare surrounding gambling. The White Paper, which sought to be evidence-based, concluded that the limited evidence on gambling sponsorship considered by the Government revealed that sponsorship has a limited effect on gambling behaviour. So, does it really need to be curbed and if it does, what will be the real financial impact of this on sports clubs, some of which currently derive a significant proportion of revenue from gambling sponsorship?

In our view, the key question will be whether the Sponsorship Code of Conduct can find the balance that the White Paper, and most of the industry, seeks. If it is well-considered and efficiently implemented, the Sponsorship Code of Conduct may yet prove itself to be an example of effective self-regulation. But to achieve this, sports governing bodies must strike a balance between (a) reducing the commercial practices that unduly increase the risk of exposure of gambling to children on the one hand, and (b) on the other, permitting gambling sponsorship – along with the financial injection that it brings – safely for the benefit of all levels of sport.

With credit and sincere thanks to Gemma Boore for her invaluable co-authorship.

A recent study by Djohari et al. (2021) on the visibility of gambling sponsorship in football related products marketed directly to children revealed that gambling logos were visible, largely on the front of the shirts, in 42% of the stickers 2020 Panini Premier League sticker album.

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04Jul

White Paper Series: The Gambling Commission’s powers – more to come?

4th July 2023 David Whyte Harris Hagan, White Paper 214

As all stakeholders seek to get to grips with the White Paper and their focus is drawn to its high-profile proposals such as financial risk checks and stake limits, they might be forgiven for overlooking the potential aftereffects apparent from some of the more inconspicuous proposals, particularly when those proposals are considered in the context of the Gambling Commission’s Advice to Government – Review of the Gambling Act 2005 (the “Advice to Government”).

When referring to the Gambling Commission’s powers and resources in the White Paper, the Government states in its summary (our emphasis added):

“The Commission has a broad range of powers that enable it to regulate the industry effectively but there are some small changes that could be made around its ability to investigate operators, including improving the Commission’s responsiveness to changes of corporate control.”

There is limited information contained in the White Paper about what those “small changes” might be. Points of note are:

  1. “The government and the Commission are clear that an enhanced approach to compliance enforcement is required to effectively monitor the industry and ensure that operators are abiding by the rules.”
  2. The Gambling Commission has advised that “some of its powers concerning investigations could be enhanced to better protect consumers and hold operators to account”. In particular, “it is concerned that licence holders are able to take action that can hinder or frustrate an investigation, including surrendering their licence during the course of the investigation.”

The Government concludes:

“When Parliamentary time allows, we will legislate to give the Commission additional powers to assess and regulate new business owners, reflecting the increased complexity of the entities that it regulates. We will also look at the case for providing further powers to ensure that licensees are not able to interfere with the Commission’s ability to conclude its investigations or move their finances to reduce the size of their fine.”

To understand fully the extent of the “small changes” or “further powers” that the Government may decide are appropriate, it is necessary to consider the Advice to Government, within which the Gambling Commission proposes amendments to the Gambling Act 2005 (the “2005 Act”) “to allow for streamlined regulatory action in a number of areas”. This article focusses on three of those areas: (a) the process for change of corporate control (“CoCC”) applications; (b) options for investigations and licence surrender; and (c) flexibility for penalties that can be imposed on licensees.

Change of corporate control

Under section 102 of the 2005 Act, a change of corporate control (“CoCC”) takes place when a new person or other legal entity becomes a new “controller” of a licensee (more information on a CoCC can be found in our previous blog). When a CoCC occurs, licensees must notify the Gambling Commission, via eServices by means of a key event, as soon as reasonably practicable and in any event within five working days of them becoming aware. Licensees must then submit a CoCC application within five weeks of the event occurring or the Gambling Commission is obliged to revoke the licence, although it may, at its discretion, extend the five-week period. Presently, in determining a CoCC application, the Gambling Commission has a binary choice, it may, in law, only grant the application or refuse it. If the latter, the licence is revoked.

The complexity of corporate structures and financing have increased the burden on both the Gambling Commission and licensees to investigate and/or evidence proof of ownership and source of funds related to CoCC applications and this, along with suitability considerations, means increasingly prolonged investigations. The Gambling Commission recommends: (a) the removal of the binary nature of the CoCC decision, to allow for the possibility of it granting the application subject to its imposition of conditions on the licence; (b) an amendment to allow for the appeal by a licensee against the Gambling Commission’s decision not to grant an extension of the five-week period for the submission of a CoCC application, which at present can only be appealed by means of judicial review; and (c) that it be given the ability to apply a financial penalty for the submission of CoCC applications outside the five-week reporting window.

In the main, these proposals are proportionate and reasonable. The removal of the binary nature of the CoCC decision will benefit both licensees and the Gambling Commission, as will the introduction of the proposed appeal process. The Gambling Commission has become increasingly strict in relation to the late submission of CoCC applications, so licensees will be unsurprised that it is now proposing the imposition of a financial penalty in those circumstances. Whilst a financial penalty is certainly better than the alternative of revocation, licensees may wish to seek clarification in relation to how the quantum of the proposed financial penalty will be calculated. A fixed fee would most certainly be preferable to the application of the Statement of principles for determining financial penalties (the “FP Statement”), which incudes no formula for calculating quantum, allows for uncapped financial penalties, and contains various criteria that may be not be appropriate to the late submission of a CoCC application.  

Refusal of licence surrender

The Gambling Commission recommends that the Government considers amending the 2005 Act to permit it to refuse a licence surrender under certain circumstances when an investigation is taking place, so that it retains “regulatory authority” over licensees, post surrender, primarily with a view to it imposing a financial penalty. The implication from the Gambling Commission’s proposal, which is supported by little more than reference to “vidence from casework” is that, in its view, licensees may be utilising surrender as a means of avoiding a financial penalty, and that they may “move finances during, or in anticipation of, an investigation” to avoid the same.

Potential options proposed by the Gambling Commission are: (a) requiring its consent before the surrender of a licence in circumstances where enforcement action has been commenced; (b) extending the application of the relevant sections of the 2005 Act that provide the power for the Gambling Commission to impose a financial penalty, such that for a specified period they apply to a licence that has lapsed or been surrendered; and (c) amending the 2005 Act to prevent licensees from triggering a mandatory licence revocation by failing to pay their annual licence fee.

We have several concerns about this proposal and the Gambling Commission’s justification for it:

  1. Licences are valuable assets that are difficult to obtain. Reputable licensees subject to enforcement action will: (a) wish to continue to operate in the British market, clear their name and protect their asset; and/or (b) be very concerned at having to disclose their surrender to regulators in other jurisdictions without having defended the alleged licence condition breach to a conclusion; and/or (c) be aware their previous standing will be taken into account in the context of any new licence application, as will that of the PML holders and controllers involved. Surrender is much more likely to be due to a desire to exit the market in Great Britain, likely influenced by ever-increasing regulatory requirements, the inordinate length of time taken by the Gambling Commission to carry out a licence review, or by other commercial or economic factors. Some licensees who do surrender might not even have considered doing so, but for the reminder included by the Gambling Commission in much of its enforcement related correspondence that a licence can be surrendered at any time. The implication of widespread manipulative intent in the Advice to Government is therefore wrong and perhaps provides valuable insight into how the Gambling Commission perceives the integrity of its licensees.
  2. Very exceptionally, an unscrupulous licensee may surrender their licence deliberately to avoid a financial penalty. In those very rare instances, those who do so might better be dealt with by means of criminal prosecution and the consequence and protection that brings, rather than be subject to sanction by what will, at that stage, be an exacerbated Gambling Commission.
  3. One of the reasons given by the Gambling Commission for its recommendation is that “a surrendered license leaves unable to protect consumers or take regulatory action to hold the licensee accountable for their actions.” We struggle to understand how imposing a financial penalty on a licensee that has surrendered their licence will further protect consumers. The surrender itself, prompted by the Gambling Commission’s action, must surely both protect consumers and hold licensees accountable.
  4. Punitive sanctions form an important part of the Gambling Commission’s regulatory toolkit but when a licence surrender has already removed all risk, are not critical to its upholding of the licensing objectives set out at section 1 of the 2005 Act. We question whether it is appropriate for the Gambling Commission, or any other regulatory body, to retain regulatory authority over a former licensee in those circumstances, when the sole objective is to facilitate the imposition of a punitive financial sanction. If, as the Gambling Commission suggests, licensees have moved finances deliberately to avoid a financial penalty, the refusal of surrender is not going to guarantee a different outcome.
  5. A financial penalty can only be imposed if there has been a breach of a licence condition, which, by virtue of section 33 of the 2005 Act, is a criminal offence. The Gambling Commission is therefore able to prosecute should it wish to seek to impose a punitive sanction. However, the Gambling Commission may be less inclined to take this approach because: (a) it would be obliged to prove the offence beyond reasonable doubt, rather than to the lower burden of proof of balance of probabilities applicable to its imposition of a financial penalty; (b) it would likely be held to higher investigative standards and more restrictive time limits by the criminal courts; and (c) unlike a financial penalty which is unlimited and paid into the Consolidated Fund, the quantum of court fines is restricted by statute and fines are paid to the courts.

Licensees would be wise to monitor the Gambling Commission’s next steps in this area so that they may challenge the logic of this recommendation when it is revisited by either the Gambling Commission or the Government in consultation.

Flexibility for penalties that can be imposed on licensees

Statutory time limits

In the Advice to Government, the Gambling Commission refers to the 12-month time limit for laying criminal charges and the 24-month time limit for imposing a financial penalty prescribed by the 2005 Act. It suggests that these time limits have restricted its ability to prosecute or impose a financial penalty in cases where “establishing a breach” is “very complicated” and proposes amendments to the 2005 Act to: (a) introduce greater flexibility in the time limits for bringing prosecutions; and (b) explore extending the cut-off period for the imposition of a financial penalty.  

Although the Gambling Commission states that it has “sound evidence from regulatory experiential knowledge and casework” that underpins its recommendations, the examples used by the Gambling Commission as justification are very broad and insufficiently detailed. As most licensees who have been involved in Gambling Commission enforcement action have experienced, the primary reason for the delay is not that “the increasing complexities of gambling businesses make establishing a breach in some cases very complicated” but rather the Gambling Commission’s inefficiency.

Licensees subject to the Gambling Commission’s enforcement process are often required to adhere to relatively short deadlines, whereas the Gambling Commission operates to much longer deadlines. Some licensees have had to wait six months or more to receive a response or update from the Gambling Commission, often only to receive a preliminary findings or findings letter that largely repeats the content of its previous correspondence. It is this inefficiency that leads to the expiration of statutory time limits. A significant factor that has led to the increasing complexity of the Gambling Commission’s investigations will likely be its inconsistent application of its regulatory requirements or a lack of clarity about the same, particularly given its increasing introduction of formal requirements through guidance, and the lack of clarity as to its expectations in relation to affordability.

Furthermore, it is not, as the Gambling Commission states in the Advice to Government, its charge to “establish a breach”: this is again an indication of its mindset. As a regulator it is obliged to investigate suspected breaches on a fair, reasonable and proportionate basis, and to reach a conclusion on the facts. A cynic might suggest that it is this determination to “establish a breach” that is prolonging its investigations. This is particularly so when Licensees’ have raised their standards significantly in recent years and therefore, despite published enforcement action, breaches may be harder to come by.

Long, process driven, delays do not only impact statutory time limits. They have a commercial impact on licensees, detract valuable resource from day-to-day compliance activities, and when related to individuals, impact their wellbeing. It is in all parties’ best interests that matters are dealt with expeditiously. Before amending primary legislation, the Government might wish to consider a careful and fact-based examination of the Gambling Commission’s productivity, including in relation to past enforcement cases. Efficient, proportionate, reasonable, and timely investigations are the very reason for the statutory time limits being imposed in the first place.

Extending the scope of financial penalties

The Gambling Commission sets out in the Advice to Government that extending the scope of financial penalties (which currently only apply to breaches of licence conditions) to encompass suitability concerns, would give it more opportunity to take action. It goes on to state that every case of a financial penalty “has also included suitability concerns which we have been unable to take into account when imposing the penalty” in inference being that if suitability concerns were to have been in scope, the financial penalties it has issued would have been greater.

We agree with the Gambling Commission’s statement: most of its cases of a financial penalty do include reference to it having suitability concerns. However, those suitability concerns are almost always directly linked to a breach of a licence condition. We therefore question whether extending the scope in the manner proposed is necessary, as a financial penalty can be imposed in those cases anyway.

If the Gambling Commission wishes to increase the quantum of the financial penalties it imposes, it has the ability to amend its FP Statement. At present, the FP Statement does not include a formula for calculating the quantum of financial penalties, much to the frustration of licensees and advisors alike. The FP Statement does, however, set out the criteria that is considered by the Gambling Commission when imposing a financial penalty. Much of those criteria could just as easily be relevant to any consideration of a licensee’s suitability: it could therefore be argued that the Gambling Commission is already taking suitability into account. Furthermore, should the Gambling Commission have serious concerns about a licensee’s suitability, it has the ability to suspend or revoke their licence. Licensees may again wish to challenge the necessity of this proposal, if it is introduced in future consultations.

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

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03Jul

White Paper Series: Low(er) stakes gambling in the high stakes White Paper

3rd July 2023 Francesca Burnett-Hall Responsible Gambling, White Paper 208

An objective of the review of the Gambling Act 2005 was to protect players from the risk of harm, and to address this, the Department for Digital, Culture, Media & Sport (“DCMS”) proposes in its white paper, High Stakes: Gambling Reform for the Digital Age, the implementation of a package of protective measures, including applying a stake limit to online slots.

Consideration was given to applying a stake limit to all online products, including all casino games and betting. However, evidence suggests that slots, which are defined in the Gambling Commission’s Remote Technical Standards as “casino games of a reel-based type (includes games that have non-traditional reels)” carry the greatest risk of harm. Slots have the highest average losses per active customer of any online gambling product, the highest number of players, the longest play sessions and the greatest potential for financial harm, as the nature of slots allows for frequent staking (the average spin speed for online slots is 7 seconds, although a game cycle can be as little as 2.5 seconds) with no statutory limit on the amount people can stake – at least not yet.   

The Gambling Commission’s Advice to Government encouraged a stake limit for online slots and suggested several options, including:

  • a universal stake limit applied to all players on a precautionary basis;
  • tailored stake limits applied only to at-risk demographic groups or customers identified as being at risk of harm; or
  • a risk-based “smart stake” which allows a stake limit to be tailored to the player.

DCMS agrees that stake limits are needed, but while we know that stake limits will be coming, we do not know definitively where they will land, as DCMS will be consulting this summer on applying a stake limit to online slots which will be fixed somewhere between £2 and £15 for the general population, with a lower stake limit for 18-24 year olds which could be either £2, £4 or using a risk-based smart stake approach.  

In the land-based sector, a reduced stake limit was applied to fixed odds betting terminals (“FOBTs”) in April 2019, lowering the maximum stake from £100 to £2 in an effort to reduce the risk of gambling related harm. This had a very significant effect on betting shops, which suffered a £763 million or 42% drop in machine sector gross gambling yield (“GGY”) between 2018/19 and 2021/22.

We think it is unlikely that the online slots stake limit will have parity with the £2 FOBT limit, and for good reason. Online operators benefit from the fact that their customers must hold accounts with them, giving them access to data which allows them to monitor their customers, track their play, and intervene where necessary. This is less easily achieved by land-based operators, whose customers can be unknown and where it can be difficult to track play as they move across machines. Additionally, the stake limit is just one of a number of protective measures that is proposed in relation to online gambling, meaning that there will be layers of protection for the customer.

That said, it is also unlikely that the stake limit will be set at £15. The nature of slots products is that they can be played very quickly and repetitively, with a new game round potentially every 2.5 seconds – even at a £15 maximum stake, this could quickly add up to significant losses.

Most likely, the limit will be set around the £5 mark. Indeed, this is the number that was leaked from an earlier version of the white paper in July 2022, and a cynic might say that reverse engineering is in play, and that by giving a range of £2 to £15, DCMS can say that they are being tough on industry by imposing a £5 limit at the lower end of the spectrum under consideration.  

For the year 2021-22, online slots GGY was £3 billion. DCMS has calculated the financial impact of the proposed stake limit based on a fixed maximum of £8.50, which is the midway point between the proposed range of £2 to £15. This estimates a drop in online slots GGY of £135 million to £185 million, or 4-6%. If the stake limit is set at £5, the impact on the industry will be even greater.

DCMS’ consultation will take place this summer, and we urge you to get involved. Do get in touch if you would like any advice, or need assistance preparing a response.

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03Jul

White Paper Series: Cashless payments – finally bringing the land-based sector into the digital age?

3rd July 2023 Bahar Alaeddini Anti-Money Laundering, Harris Hagan, Responsible Gambling, White Paper 251

In the year ending March 2021, nearly £910 million was generated from gaming machines in Great Britain (excluding those located in pubs).  In total, there were nearly 170,000 gaming machines located in bingo premises (41%), adult gaming centres (35%), betting premises (15%), family entertainment centres (8%) and casinos (4%).  In the period April 2020 to March 2021 (during the pandemic), the largest revenues, by a country mile, were generated by gaming machines located in bingo premises (41%) and adult gaming centres (35%), with revenues slowly declining in most sectors.  There is no reliable data on the number located in pubs, or associated revenues, but the figure is likely to be in the region of 70,000.

A lifeline in the White Paper is the proposed review of cashless payments on gaming machines with the plan to remove the current legislative prohibition, set out in the Gaming Machine (Circumstances of Use) Regulations 2007 (the “2007 Regulations”), banning cashless payments directly on gaming machines. 

The original purpose of the prohibition was to protect players from over-spending as it was assumed players would have more control over their play if they were playing with cash, providing natural interruptions in play by stopping their gambling to obtain more cash.  The lack of a break in play is viewed as a lost opportunity for the player to consider whether they wish to continue to play and spend more. 

The lifeline offered in the White Paper is hugely positive and could result in the long-overdue modernisation of the land-based sector, bringing it into the digital age.

Cash is dead

Since the 2007 Regulations, especially with the advent of contactless payments and global pandemic, non-cash payments have grown exponentially.  Use of cash has declined across society with the expectation that it will not be used by 2035.  In 2011, 72% payments in pubs were made by cash and, in 2020, this reduced to only 13%.  In 2021, almost a third of all payments in the UK were made using contactless.  This societal change has negatively impacted the land-based sector beyond belief, and it has been compounded by pubs no longer giving cashback and ATMs being removed.  We now live in a world where hardly anybody uses cash.  I – almost exclusively – use Apple Pay and regularly leave the house without cash or a bank card! 

The restriction on using debit cards directly on gaming machines (credit cards are banned) has meant the land-based sector has been left behind.  Whilst industry has been creative and found ways to make indirect debit card payments and protect players (in collaboration with DCMS and the Gambling Commission), take up has been slow and these are “not a fix-all solution”.

2018 Gambling Commission cashless advice

In March 2018, and in response to significant payment innovations in the retail economy, the Gambling Commission published advice on cashless payments in gambling premises (which remains in force), crystallising its position and key considerations for operators, as follows:

  • tracking play and collecting better data on player behaviour to make an informed assessment of those at risk of gambling-related harm;
  • providing tailored safer gambling information to players including transactional information on money spent/withdrawn;
  • player-led controls to enable better self-management such as a player’s own spend or withdrawal limits; and
  • the importance of gathering data both before and after the implementation of any measure to demonstrate the impact of control measures.

The guidance places responsibility squarely on operators to consider what measures are most effective and appropriate to their businesses.  Further, it acknowledges the lack of evidence to suggest the optimum duration of a break, but sets out the expectation that, wherever possible, players should at least cease gambling and physically leave the gaming machine. Where players can access new gambling funds with only a limited or no physical break from the gaming machine, operators must nevertheless ensure players are otherwise provided a break from, or an interruption in, gambling before those funds can be used.  The guidance also states the Gambling Commission “may consider taking regulatory action in individual cases if, for example, an operator was to increase the risk of harm to its customers without providing appropriate mitigations.”

DCMS will work with the Gambling Commission to develop “specific consultation options for cashless payments” (expected Summer 2023).  DCMS is clear that any new or additional player protection measures will need to be in place before the legislative prohibition is lifted.

The Gambling Commission’s view is that the onus is on industry to demonstrate cashless payments can be offered without increasing gambling harm or crime.  So, what does this mean for industry?

The White Paper has created a staggering volume of work for both DCMS and the Gambling Commission.  As such, all proposals will not be treated equally, and a sceptical view is that cashless will not be a priority.  As an important lifeline, it will require great effort by industry to keep it high on the agenda for DCMS and the Gambling Commission.  One way to achieve this would be through an industry code, backed by evidence wherever possible, and promoting the associated benefits of cashless payments given, for example, low test-purchasing scores for gaming machines in alcohol-licensed premises.  The greater the industry support, the more likely it is the proposed reform will be delivered in a timely, sensible and workable way.

Cashless industry code

Two of the challenges of developing an industry code are, firstly, gaming machines are in different types of gambling premises (each with their own unique “person, product, place” considerations), highlighting the difficulty of agreeing standards or codes of practice.  By way of example, pubs are not regulated premises by the Gambling Commission.  They are automatically entitled to offer gaming machines as part of their alcohol licence granted by the local licensing authority.  Pubs and gambling premises will very likely have different baselines and priorities, and industry must inevitably set higher standards.  The industry is better placed to do so and both DCMS and the Gambling Commission will expect them rise to the challenge.  It is unclear what this means for pubs, particularly given their unsupervised nature, but given the 84% test purchasing fail rate (in 2019), they would be best placed to embrace a cashless industry code through amendment of the Social Responsibility Charter for Gaming Machines in Pubs issued by the British Beer and Pub Association.

Secondly, there are several types of cashless payment technologies each with different functionality.  Unless banks facilitate player protection tools (for example, through online banking), physically or virtually presenting a debit card is very different from using a cashless gaming app or eWallet which connects to a gaming machine.

A practical solution would be to develop a cross-sector industry cashless code to reflect best practice and aim to install a minimum set of standards to address issues of risk.  The central commitment would be to allow cashless payments whilst minimising the risks of gambling-related harm and protecting players.  Standards may include the following:

  1. a meaningful forced delay before the funds can be used (for example, 2 minutes, although in a cross-sector industry code it might be sensible to steer away from prescribing a timeframe);
  2. personalised financial limits (deposit/spend) with clear messaging and calls to action;
  3. personalised time limits with clear messaging and calls to action;
  4. time and money spent totals with clear alerts;
  5. prescribed maximum deposit in a single transaction or day etc.;
  6. time-outs;
  7. transaction history (ideally, searchable by last 24 hours, last week, last month etc.);
  8. self-exclusion;
  9. safer gambling messaging;
  10. tracking player data to provide targeted messaging and/or interventions;
  11. automatic disconnection from the gaming machine after inactivity with credit returned;
  12. digital age verification to prevent underage gambling;
  13. withdrawals must only be made to registered / the same card; and
  14. restricted to one debit card.

Once agreed with DCMS and the Gambling Commission, compliance with the industry code could be incorporated as a licence condition in the Licence conditions and code of practice and/or gaming machine technical standards.

At the appropriate juncture, we will of course be happy to assist clients with their responses to the consultation where that would be helpful.

With credit and sincere thanks to Jessica Wilson for her invaluable co-authorship.

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26Jun

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

26th June 2023 Harris Hagan Harris Hagan, White Paper 215

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”) 40th 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.

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01Jun

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

1st June 2023 Bahar Alaeddini Harris Hagan, Responsible Gambling, White Paper 256

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:

  1. “fully operationally independent”, in line with Ombudsman Association standards and commitments to complainants and organisations complained about, namely: accessibility, communication, professionalism, fairness and transparency;
  2. “credible with customers”; and
  3. 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:

  1. 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. 
  2. “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.
  3. 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)? 
  4. 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?
  5. Time limit: Will there be a time limit to bringing a complaint? A reasonable cut off point (perhaps, 12 months) should be introduced.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.

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31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling, Training, White Paper 273

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!

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18May

International Association of Gaming Advisors’ 40th Annual Gaming Summit hosted in Belfast

18th May 2023 Harris Hagan White Paper 239

The International Association of Gaming Advisors (“IAGA”) is delighted to host the 40th annual International Gaming Summit at the Culloden Estate and Spa in Belfast, Northern Ireland from 20 to 22 June 2023. The Summit is understood to be the first such event held in Northern Ireland and has been warmly welcomed by Visit Belfast and Tourist Northern Ireland.

As a silver sponsor, Harris Hagan proudly continues its long association with IAGA, which includes Julian Harris and John Hagan serving as President in 2013 and 2019/2020, respectively, and Bahar Alaeddini serving as General Counsel and Co-Chair of the Conference Programme Committee. It is without hesitation, therefore, that this Summit is commended to readers not least for the excellent quality of the content and networking events.

Partners, John and Bahar will moderate the following panels:

What’s Happening in the Republic of Ireland

Moderator: John Hagan

Panellists: Sharon Byrne, Chairperson, Irish Bookmakers Association; Rob Corbet, Partner, Arthur Cox; Micaela Diver, Partner, A&L Goodbody; Mark O’Neill, CFO, BoyleSports.

The Current State of Industry M&A

Moderator: Bahar Alaeddini

Panellists: Leon Ferera, Partner, Jones Day; Paul Richardson, Partner, Partis Solutions; Sonia Vermeys, Shareholder, Brownstein Hyatt Farber Schreck; Daniel Vyravipillai, Managing Director, Morgan Stanley Investment Banking Division.

John will also host a fireside chat with Nigel Eccles, CEO of Co-Founder of Vault Labs.  Amongst other accomplishments, Nigel also co-founded FanDuel in 2009 and Flick in 2018.

The first day of the Summit will conclude with the following panel on the White Paper:

The Long-Awaited White Paper on Gambling Reform in Britain

Moderator: Dan Waugh, Partner, Regulus Partners

Panellists: Antony Gevisser, Senior Vice President – Legal & Operational Affairs, Super Group; Andrew Herd, Managing Director, Lancashire Court Capital Ltd; Wes Himes, Executive Director, Betting & Gaming Council; Helen Rhodes, Director of Major Projects, British Gambling Commission.

Each day of the conference will be followed by high-quality social events featuring regional cuisine and the warm hospitality for which Ireland is so well known. This year’s President’s reception and dinner is being hosted at Hillsborough Castle, the British Royal Family’s residence, on the 22 June 2023.  Optional social events have also been organised for 19 June 2023, including a golf tournament at Portstewart Golf Club, whiskey tasting at Bushmills Distillery and a tour of the Northern Ireland coast.

Please feel free to contact us if you would like to know more about IAGA’s work, membership and/or the Summit.  We very much hope that you can join us there!

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17May

White Paper Series: The End of the Beginning VIXIO Webinar

17th May 2023 Harris Hagan White Paper 251

On 16 May 2023, Bahar Alaeddini appeared as a panellist on a VIXIO GamblingCompliance webinar titled “The End of the Beginning” together with Dan Waugh from Regulus Partners, in which they discussed some of the key proposals of the White Paper, where we go from here and the impact:

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