Friday 23 June saw the announcement by the Competition and Markets Authority (CMA) that it has launched enforcement action against several online gambling firms. Whilst the list of operators affected has not been made public, it appears that a total of five operators received letters from the CMA on Friday.
The main issues which have led to enforcement action against these operators relate to:
– play-through conditions attached to sign up bonuses, where terms require customers to complete extensive wagering requirements before being allowed to withdraw money, which has raised a concern that customers are being denied “the opportunity to quit while they are ahead and walk away”;
– inadequate or unclear information about the restrictions and conditions that apply to promotions before sign-up, making it difficult for customers to evaluate whether they should take up the offer; and
– potentially unfair rules that restrict certain play strategies, which operators rely on to deny customers a pay-out.
The CMA’s remit is to prevent anti-competitive behaviour, but it also extends to investigating breaches of consumer protection law, having taken over the functions of the Office of Fair Trading in 2014. In relation to this enforcement action, it stated that it has “a range of powers at its disposal to bring any illegal activities to an end”. To put this into context, the CMA’s consumer protection powers are:
– Civil powers under Part 8 of the EA02 to stop infringements under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and Consumer Rights Act 2015 (CRA), by seeking an enforcement order from the courts.
– Criminal powers to prosecute businesses that engage in the most unfair commercial practice under the CPRs.
– The power under Schedule 3 CRA to seek an injunction to stop businesses using unfair terms.
The CMA indicates in its Consumer protection: enforcement guidance document that before taking court action it will normally attempt to stop and prevent repetition of what it considers to be an infringement by consulting with the business. We therefore anticipate that the cases against the five operators will be resolved by them giving undertakings not to continue or repeat the concerning type of promotions, rather than by any formal court action. By way of comparison, recent consumer enforcement work by the CMA looked at retailers publishing fake positive reviews and suppressing negative customer reviews. One retailer, which had instructed staff members to only approve reviews of four stars and above, agreed to give undertakings, including that it would publish all genuine reviews, and the case was closed. Another retailer, which had arranged for third parties to write positive reviews, again reached agreement with the CMA to give undertakings not to continue this practice.
In a similar way to the Gambling Commission, the CMA is committed to proportionate regulation. In determining what action to take against these operators, it should therefore take into account issues such as the likely effect of the action, whether there are equally effective alternatives and the risks of not taking action. Only twelve consumer enforcement cases over the past decade have led to court orders and these cases have related to issues such as illegal pyramid schemes and fraudulent sales practices, or involved businesses refusing to make the changes requested by the CMA. Of these cases, the majority involved civil orders or injunctions rather than criminal action. It seems unlikely that court action would be deemed proportionate in relation to the gambling operators under investigation unless they refuse to co-operate and criminal action is even less likely.
The CMA aims to be transparent in its consumer enforcement work and it will publish information about its enforcement activities to the extent that it considers it lawful and in the public interest to disclose. It seems likely that details of the five cases will be published once they have been resolved.
Regulatory action by the Gambling Commission could follow enforcement action by the CMA, which would take the form of a regulatory review, on the basis that the CMA action indicates that the operator may not be suitable to carry out licensed activities.
The CMA has also opened a further line of enquiry into obstacles that customers face when trying to withdraw their funds. This includes minimum withdrawal amounts or daily/weekly/monthly withdrawal limits, and arbitrary deadlines on providing identity verification information. Sarah Harrison, CEO of the Gambling Commission, has stated that identity “checks cannot be used as an excuse to unduly restrict legitimate customers from withdrawing their funds. If the CMA finds specific consumer protection failings in this area, it will add further cause for the Commission to review how fairly operators are treating consumers”. Now would be a good time for operators to review their procedures in relation to withdrawals and ensure they are fair to customers. There may be serious consequences for those found wanting in this regard following the effective warning flowing from this first series of actions.