Keeping Affiliates in Line: “No Fudging”
Ensuring that operators have adequate oversight of their marketing affiliates has been on the Gambling Commission’s agenda for some time, but now appears to be under the spotlight once again. Historically, the Advertising Standards Agency (the “ASA”) and the Gambling Commission have not been shy to take action against operators who they consider have had inadequate oversight of their affiliates, and the current global crisis has again brought the issue to the fore, with concerns that affiliates have sought to exploit the situation for marketing purposes. Whilst the Gambling Commission has no jurisdiction over affiliates, the ASA (which does) has repeatedly ruled that:
- both the operator and the affiliate are responsible and accountable for non-compliant advertising, even where the advertisement was the sole creation of the affiliate; and
- operators cannot absolve themselves of responsibility for marketing communications where they ultimately reap the benefits.
In a recent message to the gambling industry in the light of the COVID-19 crisis, Neil McArthur emphasised the need for licensees to ensure that their affiliates are “conducting themselves properly” – or the Gambling Commission will not hesitate to take action. A similar message was delivered by his predecessor, Sarah Harrison, at WrB in February 2017, in which she said:
“…my message to [affiliates] is that they need to get their house in order. But far more importantly, my message to operators is there is no ‘fudge’ around this, no equivocation – the affiliates who promote your brand and who drive business to your websites are your responsibility, and it is you who are accountable.”
If you get a mention by the CEO of the Gambling Commission in a keynote address to the gambling industry, it is rarely good; it sets alarm bells ringing. Unfortunately, whilst some operators have improved practices, it seems those bells were not heard by many in 2017.
Unlicensed Third Parties
Affiliates are not licensed by the Gambling Commission although, arguably, they could be licensed under the existing legislation. Our view remains that it has no appetite for licensing affiliates, and it is much easier to hold a relatively small number of operators responsible.
As they are not licensed, affiliates are not bound by the Licence Conditions and Codes of Practice (“LCCP”), though they must comply with both the Code of Non-broadcast Advertising and Direct & Promotional Marketing (known as the CAP Code) and the Code of Broadcast Advertising (known as the BCAP Code) (the “Advertising Codes”).
Despite not being bound by the LCCP, in accordance with social responsibility code provision 1.1.2, licensees must:
- ensure that the terms on which they contract with affiliates require affiliates to conduct themselves as though they were bound by the same licence conditions and codes of practice;
- oblige affiliates to provide them with the information they need to comply with any reporting requirements; and
- have the right to terminate in the event of breach or behaviour inconsistent with the licensing objectives.
There is no doubt that licensees are considered responsible for the actions of third parties with whom they contract, which includes affiliates. The buck very much stops with them. In response to the need for greater oversight and control over affiliates, practical challenges and regulatory risks, many affiliate marketing programmes have been drastically reduced and, in some cases, radically disbanded.
Industry Code for Affiliates
Following Neil McArthur’s CEO Breakfast Briefing on 2 October 2019, three Gambling Commission industry working groups were created, which included the Safer Advertising Online Working Group. We reported on recent updates on 2 April 2020, which included the adoption and implementation – by all affiliates – of a code of conduct. This will be updated and amended on a regular basis to ensure all measures undertaken by the industry will be implemented equally by affiliates. It is expected that this code of conduct will be in place by July 2020 and the Gambling Commission has made very clear that licensees will be “held to account for these commitments” from this date.
The industry code has not been published yet. Affiliates are strongly encouraged to engage with their licensed partners and the Responsible Affiliates in Gambling group, which is an independent body established in May 2019 and chaired by Clive Hawkswood (former CEO of the Remote Gambling Association), set up to help raise standards in the sector, particularly in respect of responsible gambling. Equally, licensees should engage with the Betting and Gaming Council and conduct a comprehensive review of its affiliate programme.
Considerations for Affiliates
- Act as if you are licensed yourselves, only without the licence fees. If you do not, you do not have a future in the gambling industry.
- Educate yourselves on the legal and regulatory requirements relating to gambling advertising.
- The requirements are all readily available online with operators, regulators and, of course, lawyers eager to provide guidance.
- Review your training requirements and deliver any additional training.
- Make sure your advertisements are legal and not misleading (particularly regarding free bets and bonuses, by stating significant terms and conditions) and socially responsible.
- Consider what safer gambling information you should provide.
- Ensure you comply with any advertising codes in other countries that you may be advertising in.
- Ask your licensed partners for assistance and how they are preparing to implement the new industry code. Some operators have existing marketing guides for their affiliates on the rules and regulations governing marketing in the jurisdictions in which they operate.
Considerations for Licensees
- Ensure marketing carried out by affiliates is socially responsible and in compliance with the Advertising Codes.
- Encourage affiliates to use the free and paid for copy advice service provided by CAP and the ASA.
- Educate affiliates by providing detailed guidelines, including worked examples of compliance and non-compliance.
- Review your marketing guidelines and rules, including your marketing approval process and the role of your marketing PML holder.
- Review your policy, procedures and controls relating to affiliates, ensuring you have a comprehensive and robust audit approach. This should be led by your marketing PML.
- Review your training requirements and deliver any additional training. This may include both employees and affiliates.
- Review your affiliate agreements to ensure compliance with social responsibility code provision 1.1.2 (as detailed above), the LCCP, the Advertising Codes and your marketing guidelines and rules, and strengthen where required. By way of example:
- if affiliates can only use material that you have produced in-house, include a term that such material may not be amended; and
- if affiliates can modify or develop content, specify that approval is required before material is published.
- Ensure you have adequate remedy in the event of breach such as inclusion of a term allowing you to withhold any revenue share.
- Ensure you have the right to terminate easily and promptly in the event of breach or behaviour inconsistent with the licensing objectives.
Affiliates play a critical role for operators, generating traffic and revenues. In addition to recognising the value of affiliates, operators must acknowledge (if they have not already) that those same affiliates now also represent a genuine risk to their business and reputation. Ultimately, licences are a privilege not a right so ensure you have adequate measures in place to protect your licence!
If you would like to discuss any of these issues, including provision of training, please do get in touch with us.