11Aug

White Paper Series: Give your two pounds’ worth on DCMS’ consultation for online slots stake limits

11th August 2023 Chris Biggs 142

The consultation season well and truly began on 26 July 2023, with the Department for Culture, Media and Sport (“DCMS”) publishing the first two of its promised consultations from the White Paper. In this latest edition of our White Paper Series, we discuss DCMS’ proposals and reasoning for a maximum stake limit for online slots games in Great Britain (the “Slots Consultation”) and strongly encourage the industry to respond.

1. Background

As discussed in our previous White Paper Series blog on stake limits, DCMS foreshadowed its reasons for the Slots Consultation in the White Paper.

It noted that 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, due to the velocity at which people can stake, with no statutory limit on the amount they can stake. On the other hand, it was acknowledged that online operators are uniquely able to regularly monitor and scrutinise their customers’ spending on slots and intervene where necessary.

In the end, having considered the evidence available to it, DCMS concluded that reform was necessary. Although evidence of a clear causative relationship was limited, there was sufficient evidence of an association between higher stakes on online slots and identified risks of harm. DCMS determined it was time for change: there would be a consultation in summer 2023 on a stake limit for online slots of between £2 and £15. In addition, DCMS would also consult on a preferred £2 limit for those aged 18 to 24.

2. The proposals – General population

The Slots Consultation has now been published and DCMS has proposed four options for the maximum stake limit which should apply for online slots, seeking opinions on which option “strikes an appropriate balance between preventing harm and preserving consumer freedoms”.

We discuss the options and DCMS’ headline reasoning for each stake limit below:

Option 1 – A maximum online slots stake limit of £2 per spin

The industry knew £2 stake limits were going to be the starting point for the Slots Consultation and unsurprisingly, this option would have the greatest impact on consumers and businesses alike. DCMS recognises that 97% of all individual online slot stakes are below £2. However, up to 35% of players stake over £2 on a single spin at least once a year. Of course, £2 is a relatively low bar especially given that stakes over this threshold contribute to an estimated 18% of annual slots gross gambling yield (“GGY”). Option 1 would therefore have a significant impact on online casino operators and the industry’s GGY broadly.

Option 2 – A maximum online slots stake limit of £5 per spin

A £5 maximum stake per spin, as DCMS notes, is equal to the highest limit currently permitted on any land-based gaming machine.

There may be a superficial attraction to aligning online slots with the limits imposed on their land-based counterparts, but it would not come without a significant impact to the online industry which already has a wider system of safer gambling protections in place. Indeed, DCMS acknowledges this in the White Paper:

“The stake limits already applied to electronic gaming machines in the land-based sector could be a sensible starting point. However, taking an equitable approach to product regulation should take account of the wider system of protections in place online. For instance, the opportunity for data-driven monitoring of online play may justify a higher limit for online products than in relatively anonymous land-based settings.”

DCMS estimates stakes over £5 represent only 0.5% of online slots staking events but represent approximately 7.4% of slots GGY.

Option 3 – A maximum online slots stake limit of £10 per spin

Although a £10 maximum stake per spin is higher than any stakes permitted on a land-based gaming machine, DCMS is considering whether these higher limits are appropriate in the online world given that there are additional protections for online players, who are required to create an account to play and can therefore be more adequately monitored by licensed operators for signs of gambling-related harm (as suggested in the above quote).

This is particularly relevant given that DCMS does not anticipate severe disruptions to the majority of slots players if Option 3 is implemented, noting that 37% of all stakes placed above £10 were made by high and medium risk players.

As we hinted in our previous blog, it is possible DCMS will be drawn to setting £5 (Option 2) as the maximum stake limit for online slots, noting this figure appeared in an earlier leaked version of the White Paper. However, given its acknowledgement in the above quote, we believe DCMS is open to considering evidence-based responses which favour a higher limit. This is of course dependent on the industry submitting compelling evidence-based responses to the Slots Consultation.

Option 4 – A maximum online slots stake limit of £15 per spin

As with Option 1, the industry was aware a £15 stake limit would represent the maximum stake per spin in the Slots Consultation. Broadly, DCMS considers this stake limit would impact only a small minority of “habitually or occasionally high-staking players”, where stakes over £15 represent 0.05% of all stakes on online slots and 2% of GGY. We consider it unlikely that Option 4 is the option that will finally be adopted.

3. The proposals – 18 to 24 year olds

As we previously discussed, the White Paper committed to consulting on additional protections for young adults aged between 18 to 24 years on the basis that this age group may be a “particularly vulnerable cohort”.

The Slots Consultation cites the Gambling Commission’s Advice to Government for the Review of the Gambling Act 2005 in identifying a number of potential factors influencing gambling behaviours in young adulthood, including continuing cognitive development, changing support networks and inexperience with money management. DCMS separately noted that problem gambling rates are highest in the 16 to 24 years age group, according to the Public Health England and Gambling-related harms evidence review of 2019.

Accordingly, the Slots Consultation seeks views on the following three options:

Option A – A maximum online slots stake limit of £2 per spin for 18 to 24 year olds
Option B – A maximum online slots stake limit of £4 per spin for 18 to 24 year olds
Option C – Applying the same maximum stake limit to all adults, but building wider requirements for operators to consider age as a risk factor for gambling-related harm.

In setting out its evidence, DCMS acknowledges that typical online slots stakes for those aged 18 to 24 are lower than for other adult age groups. Data captured between July 2018 to June 2019 indicates the mean stake in this cohort was £1.05 compared to £1.30 across all adults aged 25 and over, and DCMS cites data indicating the age group’s average stake is 20% lower than the average for all adults (according to Patterns of Play).

In respect of the specific limits proposed in Options A and B, DCMS does not cite data that specifically indicates either maximum stake limit would be best suited to this age group. The reasoning simply appears to be that as a potentially vulnerable cohort, there should be extra protections in place, i.e. lower maximum stake limits than those for the general population.

Option C would of course be the least intrusive option for operators and their customers, and any action required of operators would likely align with the Gambling Commission’s consultation on, and likely increase to, the requirements for operators to check customers’ individual financial circumstances in respect of indicators that their losses are harmful. Watch out for more on this in a forthcoming White Paper Series blog.

4. DCMS data and considerations

The status quo

In the Slots Consultation, DCMS cites Gambling Commission data in summarising the best available statistics about current slots play, set out below:

Furthermore, DCMS sets out staking behaviour for the 2022/23 financial year (representing more than 76 billion spins) which it uses to underpin its consideration of the likely impact of each maximum stake limit:

(The estimated % of slots GGY in Figure 2 assumes that all slots games have a 95% return to player and the distribution of spend within each bucket is modelled as non-linear.)

Aside from the sheer scale of online slots activity in the last financial year, the data presented in the Slots Consultation (including that shown in the above two figures) breathes life into DCMS’ proposals which, if we return to first principles, have been drafted in order to address the fact that there is evidence of a relationship between higher staking on slots and gambling-related harm.

By removing the ability for an arguably very small proportion of slots players to stake high(er) amounts on slots, will this aim be achieved? From the above data, we can see that most online slots spins from the last financial year would not be impacted by any of the proposed stake limits. However, the changes would result in a significant reduction in the industry’s GGY (we discuss this in further detail below).

Potential impact

So, has an appropriate balance been struck? Whilst we do not think there is a straightforward answer to this question (hence DCMS releasing the Slots Consultation), the potential impact of each of the options considered are set out in DCMS’ Online Slots Stake Limit Impact Assessment (the “Impact Assessment”), published alongside the Slots Consultation.

Interestingly, the Impact Assessment models the estimated reduction in annual GGY in the industry for each option considered in Slots Consultation, as follows:

To summarise this data, the Impact Assessment suggests that there will be an estimated reduction in the current annual online slots GGY of between 0.5% to 13.8%, ranging in real terms, from a £16.1m to £413.5m reduction in revenue annually.

Aside from the costs to business, the Impact Assessment also sets out the potential benefits of the maximum stake limits and shares the associated assumptions that DCMS made in coming to these conclusions. It is particularly worth noting that DCMS acknowledges it is difficult to accurately estimate gambling harm reduction from stake limits, stating:

“Gambling harm is complex and often the result of numerous factors both within and external to the actual gambling environment. It would be difficult to isolate the causal mechanism between staking at various levels (that will no longer be available) and the reduction in gambling harm.”

However, it goes on to note that there are clear, qualitative benefits to the stake limits for both the customer and the public sector. To pick a crucial example, the Impact Assessment identifies that each stake limit will have an impact on a customer’s risk of incurring runaway losses, and suffering gambling harm as a result of these losses.

Additionally, public sector benefits would include potential reductions in costs incurred by the public sector in respect of harmful gambling costs which include:
a) Primary care mental health services, secondary mental health services, and hospital inpatient services;
b) Job seekers allowance claimant costs and lost labour tax receipts;
c) Statutory homelessness applications; and
d) Incarceration costs.

We encourage all licensees and stakeholders to review the Impact Assessment, in addition to the Slots Consultation, for a closer look at the estimated costs and benefits of the proposed stake limits and to better inform views on where the balance between protection from harm and consumer freedom lies.

5. Responding to the Slots Consultation

The Slots Consultation will be open for responses for eight weeks only, until 11:55pm on 20 September 2023. Responses can be submitted through DCMS’ online survey, or as a Word or PDF document to [email protected]. DCMS is encouraging evidence from all parties who have an interest in the way gambling is regulated in Great Britain, including any international evidence.

Following the consultation period, DCMS will publish a formal response setting out its decisions in relation to the maximum stake limit proposals and its reasoning, as well as a final impact assessment, before implementing the changes. Changes will likely be made by way of the introduction of secondary legislation, e.g. the creation of a new licence condition for Gambling Commission licensees.

In the short time before the Slots Consultation closes, we strongly encourage all licensees and other stakeholders to consider the impact the proposals would have on their businesses and respond with evidence-based submissions. Now is the opportunity to influence positive change for consumer protection whilst tempering a potentially damaging blow to the commercial viability of the online slots industry in Great Britain.

Please get in touch with us if you would like assistance with preparing a response to this or any other DCMS and Gambling Commission consultations.
With thanks to Gemma Boore for her invaluable co-authorship.

03Aug

White Paper Series: Direct marketing and cross-selling in the crossfire

3rd August 2023 Gemma Boore 145

Welcome back to Harris Hagan’s White Paper Series of articles.

We have previously discussed the UK Government’s proposals relating to gambling sponsorship (see our previous White Paper Series article on sponsorship).

In this article, we outline changes proposed in the Gambling Commission’s Summer 2023 consultation regarding direct marketing and cross-selling (the “DM Consultation”), which was published on 26 July 2023 and will remain open for 12 weeks, closing 18 October 2023. We then contrast these proposals with the UK Government’s recommendations in the White Paper: High stakes: gambling reform for the digital age regarding direct marketing and cross-selling. Finally, we explain how, if implemented, the Gambling Commission’s proposals would change current privacy and direct marketing laws, and how they apply to the gambling industry as a whole.

1. Background

In Chapter 2 of the White Paper, which deals with marketing and advertising, tougher restrictions on bonuses and direct marketing are one of the key reforms proposed by the Government. In the introduction to the chapter, the Government confirms that it recognises that online bonus offers can present risk, particularly for those experiencing gambling harm. In order to mitigate this risk, one of the key recommendations in Chapter 2 is that the Gambling Commission consult on strengthening consent for direct marketing, with the aim to give customers more choice in terms of the marketing they receive and how.

According to the White Paper, the proposal to strengthen consent for direct marketing is in addition to what the White Paper refers to as (emphasis added):

“the forthcoming introduction of requirements to not target any direct marketing at those showing strong indicators of risk, as outlined in the Gambling Commission’s requirement 10.”

For those in the know, this rather cryptic/confusing reference is to Requirement 10 of social responsibility code provision (“SRCP”) 3.4.3 of the Licence Conditions and Codes of Practice (“LCCP”), which reads as follows (emphasis added again):

“Licensees must prevent marketing and the take up of new bonus offers where strong indicators of harm, as defined within the licensee’s processes, have been identified.”

Requirement 10, which is now in force, was originally due to come into effect on 12 September 2022 alongside the Gambling Commission’s revised Remote Customer Interaction Guidance (“RCI Guidance”). However, to widespread surprise, the Gambling Commission delayed the implementation of Requirement 10 to 12 February 2023 and decided at the last minute to consult on the RCI Guidance before it came into effect.

The subsequent Consultation on Remote Customer Interaction (the “RCI Consultation”) was launched on 22 November 2022 and open for only six weeks (subsequently extended to nine) instead of the traditional 12. Eight months later, the RCI Guidance is still not in effect and the Gambling Commission has yet to publish a response to the RCI Consultation.

It is therefore confusing that the White Paper (published on 27 April 2023):

links to the not-yet introduced RCI Guidance when it refers to Requirement 10;
refers to the Requirement 10 as “forthcoming”; and
suggests that Requirement 10 applies where there are “strong indicators of risk” (not “strong indicators of harm”, the latter being the language of both SRCP 3.4.3 and the RCI Guidance).

It is also perplexing that the Gambling Commission has chosen to publish the DM Consultation before the RCI Consultation, despite promising the contrary at IAGA’s 40^th Annual Gaming Summit in Belfast.

For further analysis on the RCI Consultation (which we now have no idea when the response to which will be received), please see our five-part series of articles with Regulus Partners. available here: Part 1; Part 2; Part 3; Part 4 and Part 5.

Back to the topic at hand: Direct marketing. In the White Paper, the Government sets out a number of proposed principles for the Gambling Commission to explore through the DM Consultation, set out below:

At first blush, these appear on balance to be sensible suggestions that broadly build upon principles in existing privacy and direct marketing laws; we discuss this in further detail below.

More recently, in a pre-briefing to selected industry stakeholders on 5 July 2023, the Gambling Commission used its own terminology/short hand to describe the areas upon which the DM Consultation would focus:

Finally, on 26 July 2023, the Gambling Commission published its first summer consultation, a copy of which is available here:

Download the DM Consultation

Below, we:

explain the current legal position in relation to each of the principles identified by the Government in the White Paper as requiring reform;
(attempt to) link the White Paper principles to the Gambling Commission’s proposal, as set out in the DM Consultation, to add a new SRCP to the LCCP regarding direct marketing preferences (“SRCP 5.1.12”); and
finally, share our views on possible implementation issues, timelines, practicalities and direct costs that may impact the industry should SRCP 5.1.12 come into force in its current form – with the aim to help respondents shape their own responses to the DM Consultation.

For ease of reference, the proposed wording for SRCP 5.1.12 is set out below:

“Applies to: All licences
SR Code – 5.1.12 – Direct marketing preferences
Licensees must provide customers with options to opt-in to direct marketing on a per product and per channel basis. The options must cover all products and channels provided by the licensee and be set to opt-out by default. These options must be offered as part of the registration process and be updateable should customers’ change their preference. This requirement applies to all new and existing customers.
Channel options must include email, SMS, notification, social media (direct messages), post, phone call and a category for any other direct communication method, as applicable.
Product options must include betting, casino, bingo, and lottery, as applicable. Operators must make clear to customers which products they offer are covered under relevant categories.
Where an operator seeks an additional step for consumers to confirm their chosen marketing preferences, the structure and wording of that step must be presented in a manner which only asks for confirmation to progress those choices with one click to proceed. There must be no encouragement or option to change selection; only the option to accept or decline their selection.
Customers must not receive direct marketing that contravenes their channel or product preferences.”

If you would like our assistance responding to the DM Consultation, please contact Gemma Boore or your usual contact in the Harris Hagan team.

2. Analysis

Principle A in the White Paper: Opt-in to marketing and offers should be clear and separate options at sign‑up, not bundled with other consent such as broader terms and conditions and privacy policy.

What is the current legal position?

As rightly noted in the White Paper, there are already clear requirements that operators must seek informed and specific consent to send direct marketing to consumers. These are outlined in the Privacy and Electronic Communications (EC Directive) Regulations 2003 (“PECR”) and UK General Data Protection Regulation, as implemented by the Data Protection Act 2018 (“UK GDPR”) – both enforced by the Information Commissioner’s Office (“ICO”).

The current legal position can be broken down as follows:

PECR requires that, subject to limited exceptions, specific prior consent must be obtained to send direct marketing to individuals by electronic communication (e.g. emails, calls and texts – NB. this does not include non-electronic methods of communication, this will be important later on).
According to ICO guidance, the best way to obtain valid consent is to ask customers to tick opt-in boxes confirming they are happy to receive marketing calls, texts or emails from you.
Consent is defined in the EU General Data Protection Regulation (“EU GDPR”) (which was transposed into national law by UK GDPR following Brexit) as “any freely given, specific, informed and unambiguous indication of the data subject’s wishes by which he or she, by a statement or by a clear affirmative action, signifies agreement to the processing of personal data relating to him or her” .
To put things simply, the implementation of EU GDPR significantly strengthened the concept of consent for the purposes of PECR and meant that many companies needed to refresh consents previously obtained for direct marketing as they did not meet EU GDPR’s new higher threshold of consent. This was typically because existing consents had not been freely given (e.g. they were obtained in order to gain an incentive, such as an entry into a competition); were not specific enough (e.g. they did not specify who would send the marketing, or what type of marketing would be sent); or had been obtained by means of a pre-ticked box during sign up (which does not involve an affirmative action by the customer – rather, it requires inaction).
There is however, one key exception in PECR to the requirement to obtain consent to direct electronic marketing and this is known as the “soft opt-in”.
Broadly, the soft opt-in means that you do not need to obtain consent when you’re sending marketing emails or texts to offer similar goods or services to your customers or prospective customers. The example given in the ICO guidance is that “if a customer buys a car from you and gives you their contact details, you’d only be able to market to them things that relate to the car eg offering services or MOTs”.
To rely on the soft opt-in, you must give the customer a simple opportunity to refuse or opt out of the marketing, both when first collecting the details and in every message after that.

As can be seen from the above, there is an argument that the second limb of Principle A (i.e. consent should not be bundled with other consent such as broader terms and conditions and privacy policies) does not alter the current legal position. The higher threshold of consent to direct electronic marketing is already required and has been since 25 May 2018 (when EU GDPR came into force). It would be very difficult to argue that marketing consents bundled with consent to, for example, terms & conditions or privacy notices are “freely given, specific, informed or unambiguous” – and any gambling operators engaging in this practice are already at risk of enforcement action from the ICO. So, what did the Government want the Gambling Commission to change?

What is proposed in the DM Consultation?

SRCP 5.1.12 proposes new specific requirements for licensees to offer all customers (not just new) more granular consent options (per channel and per product) – with consent options set to opt-out by default (i.e. not pre-ticked). There is no exception to this rule, i.e. gambling companies will no longer be able to rely upon the soft opt-in. Arguably, this does not change the high bar of consent that is already required under UK GDPR and PECR (as intimated by the Gambling Commission’s pre-briefing); rather, it removes an exception to the high bar of consent which otherwise applies to all other commercial businesses in the UK.

Turning to the first limb of Principle A (i.e. opt-in to marketing and offers being clear and separate options at sign-up), this indicated that the Government wanted to give consumers more choice in terms of whether they receive (i) marketing and/or (ii) offers.

The Government’s commentary regarding submissions in the call for evidence from people suffering from gambling harms sheds some light on what was intended here:

“Submissions from people with personal experience of gambling harms elaborated on the negative effects which can come from… …direct marketing and inducements. These ranged from feeling ‘spammed’ by the volume of marketing, including in forms such as push notifications that they had not intentionally agreed to; to continuing to receive marketing even after an operator had removed them from offers due to the risk of harm and receiving promotions via email during periods of abstinence which triggered a relapse.”

It appears the Government is distinguishing between marketing of a service, on one hand (for example, provision on odds for sporting events or new casino games by email, text or push notification); from the provision of incentives such as free bets or bonus offers, on the other.

Surprisingly, there is no equivalent reference to this distinction in the DM Consultation.

What could possibly go wrong?

If operators can no longer rely upon the soft opt-in exception, this would:

significantly alter current practices whereby operators and affiliates have to date, in line with current rules, sent (e.g.) marketing emails and texts to customers offering similar services;
result in operators and affiliates needing to seek fresh consent from millions of individuals that have not actively opted-out to marketing – potentially losing huge tranches of customer databases in the process; and
mean gambling would stand alone – in terms of being the only commercial industry in which express consent is always required in order to send electronic marketing.

These changes are likely to have a huge impact on big and small operators alike, as well as the affiliates that send direct marketing on their behalf – each of which are likely to have spent significant time and money curating their customer databases lawfully since EU GDPR, often by relying on the soft opt-in.

And when would this momentous change take place? The Gambling Commission notes that preferences to receive offers would need to “be reconfirmed in a new format”, implying that fresh consent must be obtained in order to be able to continue marketing to customer databases after a certain date. Will this be the case from a hard-stop date, or will an operator be permitted to send marketing until its customer is next presented with the option to reconfirm preferences (e.g. the next time they sign in) – meaning that some customers will forever lie in limbo, receiving marketing but never confirming that they no longer wish to receive it?

The Gambling Commission’s commentary in the DM Consultation regarding the process for existing customers suggests that the latter option may indeed be the case:

“We are proposing that, if introduced, licensees must direct customers to the webpage or area of the site/app where they can decide whether to opt in to offers or not at the first opportunity after implementation date, for example upon next login.”

Either way, refreshing consent for all soft opted-in customers (or, in the worst-case scenario, all customers), will undeniably result in a huge number of customers that are currently receiving marketing with no objections, suddenly being suppressed from marketing lists – and consequential loss of revenue for operators and affiliates.

How many of those customers will expressly opt back in with each operator, for each product and for each channel – surely only a proportion…. was this what is intended? A clean start for the population as a whole – so those who wish to receive gambling marketing can, once again, choose to receive the (metaphorical) filth and the remaining population (who must have either gambled or opted into marketing at some point if they are currently receiving marketing – after all, EU GDPR did happen) can be spared? Was this really what the Government intended in the White Paper or the Gambling Commission’s way of quashing gambling advertising to the greatest extent possible, despite the Government’s conclusion that it could not find a causal link between advertising and gambling harms or the development of a gambling disorder?

Finally – although those in the pro-gambling camp may not wish to highlight this in their response – no commentary on the DM Consultation would be complete without acknowledging the lack of mention of the Government’s recommendation that opt-ins to marketing and offers should be clear and separate options at sign‑up. Although this may be a relief for the industry (who might want to distinguish consent for incentives vs generic marketing), what does it say about the Gambling Commission’s ability to transpose the UK Government’s recommendations into enforceable, realistic and practical requirements? Playing devil’s advocate, it is of course, possible that the Gambling Commission plans to save this final treat for its forthcoming consultation on free bets and bonus offers, which is due later this year.

We can but “watch this space”.

Principle B in the White Paper: Customers should be able to change preferences at any time through their account settings.

What is the current legal position?

The right to withdraw consent is entrenched under EU GDPR. Article 7(3) provides that the “data subject shall have the right to withdraw his or her consent at any time” and “It shall be as easy to withdraw as to give consent”.

Similarly, and as noted above, those seeking to send direct electronic marketing without obtaining consent under the soft opt-in must be given a simple opportunity to refuse or opt out of the marketing, both when first collecting the details and in every message after that.

The question is therefore how the DM Consultation was intended to build on current legal requirements.

Some light is shed on the issue by the following commentary in the White Paper:

“…a recent behavioural audit of popular online gambling operators found there was usually extra friction associated with unsubscribing from communications, including ‘scarcity messages’ to discourage consumers from doing so.”

This audit, which was conducted by the Behaviour Insights Team (“BIT”), cited various examples of ‘dark patterns’ used by gambling operators. Dark patterns are techniques used to encourage or compel users into taking certain actions, potentially against their wishes.

From a marketing perspective, the dark patterns identified in BIT’s audit included emotional messaging (e.g. making the customer feel guilty about wanting to unsubscribe) and false hierarchies (e.g. making buttons that the operator wants the customer to press brighter, more colourful, or easier to find, than for example, an unsubscribe button).

What is proposed in the DM Consultation?

SRCP 5.1.12 requires that options to opt-in for direct marketing must be offered to customers as part of the registration process and be “updateable” if customers want to change their preferences.

In addition, the Gambling Commission acknowledges the results of the BIT audit in the preamble to the DM Consultation and cites an example of one operator seeking confirmation when a customer opted-out of marketing in a way which appeared designed to introduce a fear of missing out on offers. In its commentary, the Gambling Commission notes that:

“While seeking a confirmation could be useful to ensure preferences haven’t been accidentally altered, any accompanying message shouldn’t be aimed at discouraging the player’s choice.”

This led to the following (slightly long-winded and very specific) requirement in SRCP 5.1.12:

“Where an operator seeks an additional step for consumers to confirm their chosen marketing preferences, the structure and wording of that step must be presented in a manner which only asks for confirmation to progress those choices with one click to proceed. There must be no encouragement or option to change selection; only the option to accept or decline their selection.”

What could possibly go wrong?

The first requirement for preferences to be “updateable” is of course, an extension of the White Paper’s explicit suggestion that customers should be able to change marketing preferences at any time via account settings. This practice of course, already being common within the industry (not least because the right to withdraw consent is a fundamental concept of EU and UK GDPR) – but not a specific requirement under the LCCP. By incorporating such a requirement into the LCCP as a SRCP, compliance will be a condition of licences and in the event of breach, the Gambling Commission will have the right to take enforcement action, as well as the ICO.

The second requirement, introduced to prevent operators from encouraging customers not to unsubscribe from marketing, in our view, feels a little short-sighted. Rather than limiting such a restriction to additional steps in the unsubscription process, the Gambling Commission could have sought to prohibit the use of dark patterns in direct marketing completely, potentially by publishing new guidance.

By side stepping the issue, SRCP 5.1.12 addresses only one of the problems identified by BIT in its audit. This means that the use of other dark patterns may continue to permeate gambling marketing following the implementation of the White Paper and beyond. For example, in terms of emotional messaging or false hierarchies in other parts of the customer consent journey or within direct marketing messages themselves (rather than just on one page that confirms a customer’s request to unsubscribe).

Principle C in the White Paper. Operators must offer the opportunity to opt-in and out of different forms of communication (e.g. text vs email vs push notifications).

What is the current legal position?

The position under PECR is best summarised in the ICO’s Direct Marketing Guidance, which states (emphasis added) that:

“When using opt-in boxes, organisations should remember that to comply with PECR they should provide opt-in boxes to obtain specific consent for each type of electronic marketing they want to undertake (eg automated calls, faxes, texts or emails). Best practice would be to also provide similar opt-in boxes for marketing calls and mail.”

The ICO goes on to give the following example of good practice:

Push notifications and direct messages on social media are not mentioned in the ICO’s Direct Marketing Guidance, but it follows that specific consent should also be obtained to these channels as they are examples of electronic marketing.

According to the White Paper, the Government is not convinced that the granular level of channel consent required by PECR is being obtained across the industry as a whole:

“When signing up, many major operators offer only an ‘all or nothing’ approach where a user is either unsubscribed from all marketing or provides consent to all communications.”

It follows that the DM Consultation would explore the need to reiterate current PECR requirements, by mandating that specific consent is obtained to each channel that will be used for direct electronic marketing.

What is proposed in the DM Consultation?

As drafted, SRCP 5.1.12 requires that licensees must provide customers with options to opt-in to direct marketing on a per-channel basis. Specifically:

“Channel options must include email, SMS, notification, social media (direct messages), post, phone call and a category for any other direct communication method, as applicable.”

What could possibly go wrong?

While we knew it was very likely (if not a certainty) that the DM Consultation would consult on requiring the industry to obtain specific, granular consent for electronic marketing channels such as email, SMS and by extension, push notifications and direct messages on social media; we are surprised that the Gambling Commission is also considering requiring prior consent to marketing by telephone or post. It is surprising because neither of these channels are currently subject to consent requirements in PECR – rather, the ICO refers to options to opt out of these channels as being “best practice”.

As is the case with the removal of the soft opt-in, this change will mean the gambling industry stands alone in the UK as the only commercial industry in which consent is required to send marketing by post or live phone call. Is this not perhaps, a step beyond what was intended by the Government in the White Paper? If we turn back to Principle C in the White Paper, it is notable that this mentions text, email and push notifications only. Did the Government really think new restrictions should also apply to live phone calls and post – or is this another example of the Gambling Commission exceeding its remit and seeking to further suppress gambling advertising even when the Government has concluded there is a lack of conclusive evidence of a relationship between gambling advertising and harm?

Finally, respondents will note that there is a question in the DM Consultation regarding whether the category “any other direct communication method” future proofs SRCP 5.1.12. In our view, this does indeed have the effect of future proofing the provision but, in the same way as the references to “post” and “phone call” in SRCP 5.1.12 extend consent requirements beyond PECR, the catch-all category will also extend it to all other present and future non-electronic methods of communication. For example, a face-to-face conversation with a gambler in a casino, bingo hall, betting shop, racecourse – or even on the street.

Once again, is this really what is intended and if it is, how does one obtain consent to having a conversation with someone without any communication in the first place? In our view, in order to be practical, prevent inadvertent breach by licensees and reduce the current (perhaps unintended?) regulatory creep, SRCP 5.1.12 should be restricted to the types of electronic communication for which prior consent to direct marketing is already required under PECR (e.g. texts, fax, emails, automated phone calls etc).

Principle D in the White Paper. Customers should be given the option to opt-in to bonuses and promotional offers separately from other marketing, and to set controls regarding which products they receive offers on. Specifically, there should be no ‘cross-selling’ without user opt-in.

What is the current legal position?

Please see our analysis of Principle A above, for a discussion regarding the distinction between incentives and generic marketing – and conclusion that Government’s recommendation to these two forms of marketing be distinguished for consumers has not come to fruition in the DM Consultation.

With regard to cross-selling (which is the practice of marketing a product (e.g. casino) to a customer that is actively participating in another product (e.g. bingo)), it is important to remember that consent under UK GDPR must be freely given, specific, informed, and unambiguous.

The “specific” and “informed” aspects of this definition suggest that the practice of cross-selling different products and services could prove difficult when express consent is relied upon. If an individual has agreed to receive marketing regarding online bingo, they would not expect to receive marketing regarding sports betting opportunities, for example.

The soft opt-in exception to PECR however, is more permissive. In this case, marketing emails or texts regarding similar goods or services can be sent to customers without express consent being obtained in advance. According to the ICO’s Direct Marketing Guidance, the key question when determining whether products are similar is whether the customer would reasonably expect messages about the product or service in question.

In the White Paper, the Government revealed that it was particularly concerned regarding cross-selling practices in the industry. It noted that although causality between problem gambling and gambling on multiple products was not clear, various pieces of evidence presented to it revealed troubling findings:

“the number of different gambling activities individuals participate in is a risk factor for harmful gambling in young people, and that participating in seven or more gambling activities was associated with harmful gambling in adults.”

“engagement with multiple activities is associated with harm, raising important questions about the appropriateness of operators actively encouraging customers to expand their repertoire, particularly to those products associated with a higher problem gambling rate such as online slots.”

The White Paper goes on to recommend that there should be an increased level of customer choice around whether customers receive promotional offers and if so, what kind of offers and for which products.

The key question for the Gambling Commission to consider was therefore, how granular should any such requirement be? Marketing of (i) online slots to horse racing bettors; or (ii) online bingo to sports bettors (being the two examples given in the White Paper) are obvious examples that are likely to require separate consent going forward. But what about marketing online slots to land-based slots customers or marketing online poker to customers that play other card games online?

What is proposed in the DM Consultation?

The Gambling Commission appears to have gone for the easy option here. It has proposed, in new SRCP 5.1.12, that licensees provide customers with options to opt-in to direct marketing on a per product basis. Specifically:

“Product options must include betting, casino, bingo, and lottery, as applicable. Operators must make clear to customers which products they offer are covered under relevant categories.”

For clarity, examples of products that fall into these broad categories are set out in the preamble to the proposal:

“…the betting option includes virtual betting, gambling on betting exchanges, betting on lottery products as well as all real event betting. Casino includes slots, live casino, poker and all casino games. Bingo includes only games offered in reliance on a bingo licence e.g., not casino products. Lottery covers any lottery product offered in reliance on a lottery licence.”

What could possibly go wrong?

The Gambling Commission’s decision to broadly categorise all gambling products into four pots: (i) betting, (ii) casino, (iii) bingo and (iv) lottery, will be welcome news for marketing teams. By grouping the wide array of potential gambling products so broadly, there will still be many opportunities for cross-selling within each stand-alone category.

To provide some colour – although it will no longer be possible to market slot games to sports bettors – operators with diverse product offerings will still be able to cross-sell a wide range of products. For example:

someone receiving marketing about sports betting could be sent opportunities to bet fixed odds on the weather, politics, lotteries or virtual events – or even match bet other users on a betting exchange;
someone receiving marketing about slot games could be shown games such as keno, poker, roulette, baccarat or any of the other wide array of games in the casino family;
someone receiving marketing about lotteries could be offered scratch cards to raise money for the same, or a similar, good cause.

In each case, these communications could be sent without prior specific consent – provided the customer consented to receive direct marketing regarding the wider category of products. Arguably, such consent may have been given in the first place, with the expectation that direct marketing would be sent regarding products that the customer was already actively using only (e.g. sports betting offers for sports bettors; free stakes for slot game players etc.) – this will no longer be the case.

We query whether in fact, this change chips away at – rather than extends – the high bar of consent currently required by PECR.

3. Conclusion

In this article, we have delved into the proposals in the DM Consultation regarding direct marketing and given you, the reader, our high-level observations on some of the issues that may arise if SRCP 5.1.12 is introduced in its current form, without amendment. This is, however, just the consultation phase and the Gambling Commission has released the proposed wording for SRCP 5.1.12 with the stated intention (whether or not honourable) of collating feedback from interested stakeholders before making a final decision on how to proceed.

In the short time before the consultation closes on 18 October 2023, we urge you to consider (and if possible, investigate) the impact that SRCP 5.1.12 would, as drafted, have on your business. If the industry is to positively influence the consultation process, it is imperative that it engages by submitting evidence-based and fully considered responses. The more voices that are heard, the more likely the Gambling Commission is to take into account feedback on its proposals and, if appropriate, adjust them to better reflect the recommendations made by the Government in the White Paper and hopefully, reduce the likelihood of unintended consequences.

The time has officially come to speak now – or forever hold your peace. Please get in touch with us if you would like assistance responding to any of the Gambling Commission or DCMS consultations.

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 147

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.

04Jul

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

4th July 2023 David Whyte 142

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:

“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.”
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 penaltie s (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:

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.
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.
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.
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.
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.

26Jun

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

26th June 2023 Harris Hagan 137

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

13Jun

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

13th June 2023 Harris Hagan 133

We are very pleased to announce that Ben Dean, Director of Sport and Gambling, from the Department for Culture, Media and Sport (“DCMS”) will be participating in the International Association of Gaming Advisors (“IAGA”) 40^th annual International Gaming Summit at the Culloden Estate and Spa in Belfast, Northern Ireland from 20 to 22 June 2023.

This will be the first time DCMS has spoken publicly since the publication of the long-awaited gambling white paper (the “White Paper”) on 27 April 2023.

Ben will be discussing the White Paper and next steps in his keynote at 1.30pm on Wednesday 21 June 2023 and he will join industry experts in the following panel at 1.45pm:

The Long-Awaited White Paper on Gambling Reform in Britain

After nearly 30 months, six Gambling Ministers, three Prime Ministers, two Monarchs, 16,000 responses, several leaks, a World Cup and a global pandemic, this panel considers what the publication of the White Paper tells us about the future of the regulated market for betting and gaming in Britain.

Moderated by Dan Waugh from Regulus Partners, the panellists include:

Ben Dean, Director – Sport and Gambling, DCMS
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, Gambling Commission

The keynote and panel are essential for anyone licensed in Great Britain or thinking about market entry, including through an investment or M&A activity.

Spaces are limited so please book your ticket to avoid disappointment!

As mentioned in our earlier blog in May, 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. Partners, John and Bahar, will moderate panels on What’s Happening in the Republic of Ireland and The Current State of Industry M&A. It is without hesitation that this Summit is commended to readers not least for the excellent quality of the content and networking events.

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!

01Jun

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

1st June 2023 Bahar Alaeddini 176

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

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

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

What is an ombudsman?

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

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

The Gambling Ombudsman

The Government wants the Gambling Ombudsman to be:

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

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

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

Potential scale of unresolved complaints

2021/2022 statistics:

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

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

Potential issues

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

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

Frontrunner

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

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

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

Next steps

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

31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan 184

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!

17May

White Paper Series: The End of the Beginning VIXIO Webinar

17th May 2023 Harris Hagan 183

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:

27Apr

Long-Awaited Gambling White Paper Published

27th April 2023 Harris Hagan 172

The long-awaited High Stakes: Gambling Reform for the Digital Age (the “White Paper”) has been published today, nearly 30 months after the review of the Gambling Act 2005 terms of reference and call for evidence (the “Gambling Review”) was published on 8 December 2020.

The Gambling Review had the following objectives:

Examine whether changes are needed to the system of gambling regulation in Great Britain to reflect changes to the gambling landscape since 2005, particularly due to technological advances;
Ensure there is an appropriate balance between consumer freedoms and choice on the one hand, and prevention of harm to vulnerable groups and wider communities on the other; and
Make sure customers are suitably protected whenever and wherever they are gambling, and that there is an equitable approach to the regulation of the online and the land-based industries.

Six Gambling Ministers, three Prime Ministers, two Monarchs, 16,000 responses, several leaks, a World Cup and a global pandemic later, we welcome the publication of the White Paper which brings at least the beginnings of some certainty and direction to the industry about Government plans to ensure our gambling laws are “fit for the digital age” and on important issues such as affordability, where speculation (often of the worst-case variety) and uncertainty has been casting a long shadow over the future of the industry. It also brings substantial and meaningful reforms intended to make gambling safer, “to protect vulnerable users in smartphone era”. These include the proposed introduction of a mandatory levy on gambling companies (for spending on research, education and treatment of problem gambling), but will undoubtedly not go far enough to meet the expectations of gambling reform campaigners.

In today’s announcement, Culture Secretary Lucy Frazer outlined a comprehensive package of new measures to achieve the Government’s objectives following the Gambling Review, and captured the balance between consumer freedoms and protection of harm in her Ministerial Foreword to the White Paper as follows:

“Millions of us enjoy gambling every year and most suffer no ill effects, so state intervention must be targeted to prevent addictive and harmful gambling. Adults who choose to spend their money on gambling are free to do so, and we should not inhibit the development of a sustainable and properly regulated industry which pays taxes and provides employment to service that demand. What we will not permit is for operators to place commercial objectives ahead of customer wellbeing so that vulnerable people are exploited.”

The White Paper is 268 pages long and has six chapters.

The key proposed reforms are:

A statutory gambling levy to fund treatment services and research, including through the NHS, the rate of which will be subject to further DCMS consultation. The DCMS consultation will consider the differing association of different sectors of the industry with harm and/or their differing fixed costs, and will commence with design and scope in Summer 2023.
New default stake limits for online slots games that will be between £2 and £15 per spin, with greater protections for 18-24 year olds (options of £2 or £4 or based on individual risk), all subject to DCMS consultation in Summer 2023.
The Gambling Commission will consult in Summer 2023 on two forms of financial risk checks. It is proposed that at a £125 net loss within a month or £500 within a year, there will be background checks for financial vulnerability, such as County Court Judgments. It is proposed that at higher levels of spend, engaging proposed thresholds of £1,000 net loss within 24 hours or £2,000 within 90 days, there will be more detailed consideration of a customer’s financial position. It is proposed these triggers will be halved for those aged 18 to 24. The Government estimates that “only about three percent of the highest spending accounts will have more detailed checks”. The intention is that these checks will be “frictionless” with further information only being required from customers as a last resort. Operators will be required to respond appropriately to any identified risks on a case-by-case basis, but “it is not the intent that government or the Gambling Commission should set a blanket rule on how much of their income adults should be able to spend on gambling”.
The Gambling Commission intends to consult on mandating participation in a cross-operator harm prevention system based on data sharing.

Extra powers for the Gambling Commission to enable it to tackle black market operators through court orders and work with internet service providers (ISPs) to take down and block illegal gambling sites. Proposed reform of the fee structure for the Gambling Commission “to give it greater flexibility to respond to any emerging risks and challenges posed by the industry”. The Culture Secretary envisages a “beefed up, better funded and more proactive Gambling Commission”.
Rules to prevent bonus offers from harming vulnerable people – for example, the Gambling Commission will be looking in 2023 at how free bets or spins are constructed and targeted to stop them from being harmful.
A review by the Gambling Commission in Spring/Summer 2023 of online game design rules to look at limiting speed of play and other characteristics which exacerbate risks.
A new industry ombudsman to deal with disputes and rule on redress where a customer suffers losses due to an operator failing in their player protection duties, to be accepting complaints within a year.
A review of the current horserace betting levy to make certain racing continues to thrive.
Casinos of all sizes will be permitted to offer sports betting in addition to other gambling activities.
Government will take steps to reallocate unused 2005 Act casino licences to other local authorities.
Where 1968 Act casinos meet the requirements of a 2005 Act Small casino, including for size and non-gambling space, they will be eligible for the same gaming machine allowance. A single gaming machine-to-table ratio of 5:1 will apply to Large and Small 2005 Act casinos and these larger 1968 Act casinos, and they will be entitled to the same maximum 80 machine allowance as Small casinos. Smaller casinos will benefit from more machines on a pro rata basis commensurate with their size and non-gambling space, subject to the same table-to-machine ratios and other conditions. DCMS to consult in Summer 2023.
Government will legislate, when Parliamentary time allows, so that the small number of high-end casinos operating in the internationally competitive market will be able to offer credit to international visitors who have undergone stringent checks set out by the Gambling Commission.
DCMS will work with the Gambling Commission to develop specific consultation options for cashless payments in the land-based sectors, including the player protections that would be required before the prohibition is removed. Consultation in Summer 2023.
Government will adjust the 80/20 ratio which restricts the balance of Category B and C/D machines in bingo and arcade venues to 50/50, to ensure that businesses can offer customer choice and flexibility while maintaining a balanced offer of gambling products. DCMS consultation in Summer 2023.
Government is supportive of trials of linked gaming machines, where prizes could accrue across a community of machines, in venues other than casinos (where they are already permitted). This is subject to further work to assess the conditions and how to limit gambling harm, and subject to Parliamentary time to legislate.

The White Paper is a Government policy document which sets out proposals for future gambling legislation and regulation. The White Paper does not include a draft Bill, because the proposed reforms (with just a few exceptions) do not require primary legislation. This is consistent with our long-held view that the Government and the Gambling Commission already have wide-ranging and extensive powers under the Gambling Act 2005, that most reforms can therefore be achieved through secondary legislation and regulation, and that the Government has far more important legislative priorities in the present socio-economic climate.

As the previous Gambling Minister, Paul Scully MP, said in his speech to the Betting and Gaming Council on 26 January 2023:

“The White Paper is not the final word on gambling reform. It will be followed by consultations led by both DCMS and the Gambling Commission. I want the industry to stay engaged as policies are refined, finalised, and implemented.”

We urge the industry to heed that imperative. Our initial review suggests that the White Paper is arguably as balanced as the industry could reasonably have expected, with important and overdue liberalisations for the land-based industry, and that it should engage with Government and the Gambling Commission to ensure that the proposed reforms are delivered in a timely, sensible and, critically, workable way. Vigorous engagement will certainly be required in relation to the “affordability” proposals given their importance and complexity. The Government has set out an ambitious timeline for itself and the Gambling Commission in the White Paper and gambling reform campaigners have already made clear their intention to “hold the Government’s feet to the fire to ensure these measures are implemented swiftly”. So perhaps at least one area of consensus will emerge as secondary legislation and regulation is refined, finalised, and implemented, but do not expect many more as the debate about gambling reform intensifies.

We will continue to review the White Paper in more detail and will be publishing our insights “imminently” and reporting on material developments over the coming weeks and months.

Meantime, watch today’s announcement in the House of Commons made by the Culture Secretary, the Rt Hon Lucy Frazer KC MP:

Download the White Paper