22Mar

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

22nd March 2023 Gemma Boore 239

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

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

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

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

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

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

The strong appeal test – how does it work?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For example:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Exception for narrowly targeted advertising

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

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

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

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

Recent ASA rulings – what do they tell us?

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

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

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

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

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

Peter Crouch and Micah Richards – not of strong appeal

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

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

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

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

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

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

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

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

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

Top Tips

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

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

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

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

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

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

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

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

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

Summary

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

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

21Mar

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

21st March 2023 Adam Russell 238

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

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

Proposed changes to the LCCP

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

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

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

2. Reporting deaths by suicide to the Gambling Commission

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

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

3. Payment services – technical update

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

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

Responding to the Consultation

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

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

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

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

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

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

19Jan

The time for reflection?

19th January 2023 David Whyte 226

Harris Hagan and Regulus Partners have set out over the course of four articles our concerns about the Gambling Commission’s (the “Commission”) consultation (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). Of these many concerns, the principal one is that the Guidance is so obviously bad regulation. It may have been inspired by noble intentions, but a combination of loose drafting, weak evidence, legislative incompatibility and a failure to fully and adequately consider the consequences threatens to result in a costly, ineffective and incoherent regime. All of these issues can relatively easily be avoided if the Commission revisits the Guidance in the light of responses to the Consultation.

Drafting

Putting aside the fact that it is inappropriate, and arguably ultra vires, for the Commission to introduce formal requirements through guidance, the drafting of the Guidance is hopelessly ambiguous; key terms are either undefined or so highly generalised as to be meaningless. This creates scope for subjectivity, wildly divergent interpretation, market distortion and confusion about what constitutes compliance. Licensees are required, for example, to consider both “young adults” and “older adults” as vulnerable, but without any explanation as to when one stops being ‘young’, or starts being ‘older’. A customer using “multiple products” is said to be displaying an “indicator of harm or potential harm”, but the Guidance is silent on what a ‘product’ is, or what timeframe should be considered; is someone whose only gambling consists of annual punts on the Grand National and the FA Cup Final really exhibiting potentially harmful behaviour?

There is a lack of clarity as to what the Commission considers to be a “strong indicator of harm” in the Guidance. In the Consultation the Commission acknowledges previous concerns raised about this, and states that it “does not consider it appropriate at this time to set requirements which would remove the discretion or ability on the part of operators to tailor processes to their businesses and customers”. There is no easy way of prescribing precisely what may be a “strong indicator of harm”, however, if the Commission wishes to permit discretion, it could assist licensees by explaining to them how it will determine, during compliance assessments or enforcement action, what amounts to a “strong indicator of harm” so that they are appropriately informed when applying that discretion.

The Guidance appears to conflate “indicators of harm” with actual harm – requiring licensees to take action to correct customer behaviours regardless of whether they are in fact harmful. There is a clear distinction between “identifying harm or potential harm” and identifying customers “that may be at risk of harm”. In consequence, licensees are required to demonstrate impacts on behaviour, even where the customer is gambling without issues. This risks unjustifiably trampling on consumer autonomy, a dangerous precedent in regulation. It also makes it almost impossible for licensees to justify not conducting a safer gambling interaction based on either “indicators of harm”, “vulnerability” or both: a combination of the “indicators” applying to anyone who gambles.

Process

The second big problem is one of process. Whereas the Gambling Act 2005 recognises vulnerability as an exceptional state applicable to people unable to make properly informed or adult decisions, the Guidance conceives vulnerability to harm as being universal, with consumers divided between the victims and the vulnerable. The Commission’s revisionism has enormous implications for the functioning of the market and the interests of consumers as well as parliamentary sovereignty. It is not the Commission’s role to twist the law in order to accommodate moral inclination and the Consultation itself raises questions of process with certain aspects of the Guidance seemingly inviolate.

Neither the Consultation, nor the Guidance takes account of the practicability of the measures required, the cost implications, or the potential for negative unintended consequences.

The Guidance offers few clues as to what specific actions licensees should take in response to “indicators” and proposes a distinction between what operators ‘should’ do and what they ‘must’ do: a distinction that is likely to elude most compliance officers, as well as the Commission’s own enforcement officials.

Evidence

Very little evidence is presented by the Commission to explain the basis for selection of the “indicators”, and much of what is provided is highly selective and in some cases misleading: the classification of in-play betting as an “indicator” is an obvious example of this. The effect is that the regime appears arbitrary and deprives licensees who attempt to understand it of important context: understanding the specific basis for classifying something as an “indicator” would mean licensees are better placed to respond appropriately and to the benefit of consumers.

The Commission appears to have undertaken no research into consumer support for the measures that are being mandated or how they might react to them. One of the more alarming aspects is the characterisation of vulnerability in the Guidance based on broad generalisations about age (‘young’ as well as ‘older’ adults), disability (‘poor physical or mental health’) or educational attainment (‘poor literacy or numeracy skills’ and ‘knowledge’). This, along with the suggestion in the Guidance that licensees should harvest medical information about their customers, could be interpreted as unfairly discriminatory and introduces issues of privacy and data protection, with licensees encouraged to harvest and store highly sensitive information about a customer’s health or personal life. There is no demonstration within the Consultation that the Commission has considered the ethical or legal dimensions of this requirement, the extent to which licensees possess the requisite expertise to interpret such information, or whether this is even possible.

Timing

The Social Responsibility Code (which obliges licensees to take into account the Guidance) will be implemented in full from 12 February 2023, less than three weeks after the Consultation closes. This is an indecently short period for the Commission to weigh opinion and evidence and leaves licensees with little time to align safer gambling systems to the new rules. To date, it appears that very little, if any, effort has been made to understand the views of gambling consumers, or to consider the negative unintended consequences that seem almost certain to arise for them.

As the Commission has itself recently noted, many operators are “moving in the right direction and are looking to move their customers away from behaviours that present a higher risk to licensing objectives.” Whilst the Commission is admirably seeking to ensure that customers are not harmed from gambling, it is vitally important that its expectations are clear and evidence based if that positive progress is to continue. In its current form, the Guidance does not deliver in those areas: this is not only unfair on licensees, it is dangerous from a consumer protection perspective. In recent times the Commission’s actions have indicated a willingness to improve its engagement with licensees. This is a very positive change. Rather than rush to implement the Guidance, the Commission would be best served to consider all consultation responses, and revisit the Guidance, even if this means a delay.

Conclusion

There is common sense at the heart of the Guidance; but common sense tends to be context dependent and often resists codification. The Commission’s approach reflects a philosophy of market regulation by rules alone; something that is guaranteed to result in bad regulation and negative outcomes for consumers. Now is the time for reflection.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

17Jan

Is in-play betting really an ‘indicator of harm’?

17th January 2023 David Whyte 218

The Gambling Commission (the “Commission”) is currently consulting (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While this exercise has not yet attracted the same attention as its 2020 predecessor consultation and call for evidence on remote customer interaction requirements and affordability checks (on remote customer interaction and affordability checks) it is potentially every bit as significant for licensees and consumers. In this, the fourth in a series of articles, Regulus Partners and Harris Hagan examine one specific detail of the Guidance – its classification of in-play betting as an “indicator of harm” – and consider what insights it holds for the Commission’s approach to evidence-based policy-making.

The decision to single out in-play betting participation, from all the other forms of online gambling, as a behaviour that might be an “indicator of harm” should strike even the most casual reader of the Guidance as odd. The seemingly arbitrary nature of the classification is reinforced by an absence of supporting evidence. Instead, we are offered a rather banal explanation that: “people who bet in-play may place a higher number of bets in a shorter time period than people who bet in other ways, as in-play betting offers more opportunities to bet”. It adds that: “some studies have shown that placing a high number of in-play bets can be an indication that a customer is at an increased risk of harm from gambling”; but the studies themselves are not cited.

In search of enlightenment, Regulus Partners submitted a request under the Freedom of Information Act in order to obtain the missing evidence. This turned out to constitute one blog article, one journal paper and a selection of results from the Commission’s 2016 Telephone Survey. An examination of these sources raises various questions about the Commission’s capacity for critical analysis. Most importantly, however, the evidence cited does not support the classification of in-play betting as an “indicator of harm”.

In-play betting

Before we delve into the detail, it is worth explaining what an in-play bet is, because the image of turning sports into a slot machine is somewhat misleading. To bet in-play is to place a wager on an event which has already started, but before the result is known; that sounds simple but here are some practical examples. Placing a bet on the final score of a football match during half-time counts as in-play, but during the 100 minutes or so that a typical football match lasts, there are typically ten domestic horse races, even more international and dogs races, and as many virtual betting opportunities that a customer can hope to find. Equally, a tennis match typically lasts 90 minutes and can go on for hours; in Australia in-play betting is not permitted on the internet, so in tennis it is the game rather than the match which is considered to be the unit of play; therefore most ‘in play’ bets on a standard definition become ‘pre-match’ in Australia by applying a common sense workaround. Basketball can be similarly divided up: a two and a half hour match comprises four twelve-minute periods and a lot of stoppage time. Perhaps the most obvious ‘in play’ definition trap is a three-day test match in cricket, substantially all of the betting is necessarily ’in play’ but hardly ever fast-paced. The frequency at which a gambler bets is clearly an important potential marker for harm, but whether or not a bet is in-play is typically a definitional red-herring based upon the length and game-structure of the sport rather than the customers’ betting frequency on a given sport.

The blog

In April 2013, Professor Mark Griffiths of Nottingham Trent University published a blog The ‘In’ Crowd: Is there a relationship between ‘in-play’ betting and problem gambling?’. The article contained no analysis of betting data or harm. It was instead a conjectural piece that considered whether an ability to place football bets more frequently (through in-play) heightened risk of disordered gambling. It argued that the ability to place successive wagers on successive matches, combined with an expansion in television coverage of live football, might increase risk of harm for some people compared with the days when most games kicked off at 3pm on a Saturday afternoon and were not televised live. If anything, the blog appears to suggest that the dispersal of matches across the week (and at different times of the day), which reduced the intervals between football betting days, was the bigger issue.

The blog concluded that: “in-play betting is something that many of us in the problem gambling field are keeping an eye on because it’s taken something that has traditionally been a non-problem form of gambling to something that is more akin to betting on horse racing.” This is significant for two reasons. First, the speculative nature of the commentary is emphasised by Professor Griffiths’ intention to “keep an eye on” in-play betting. His concerns stemmed not from any actual data or observations of in-play betting, but from what some people might theoretically do given the chance to place bets throughout the duration of a football match. Moreover, Professor Griffiths noted the relationship between bet frequency and event frequency needs further empirical investigation and conceded that “ntil more research is forthcoming a definitive answer is currently not available.” Second, he compared in-play betting on football with horserace betting – an activity with consistently low rates of “problem gambling” reported via official prevalence surveys. In short, Professor Griffiths did not suggest that in-play betting was especially risky.

The journal

The second piece of Commission evidence is a study published in the Journal of Gambling Studies in 2015, Demographic, Behavioural and Normative Risk Factors for Gambling Problems Amongst Sports Bettors (Hing et al.). The study features results from an online survey of sports bettors in Australia in 2012. It concluded that: “risk of problem gambling was also found to increase with greater frequency and expenditure on sports betting, greater diversity of gambling involvement, and with more impulsive responses to betting opportunities, including in-play live action betting.”

It would be wrong, however, to read this conclusion as vindication of the Commission’s targeting of in-play betting. First, the study was based on data from Australia, where in-play betting is only permitted by telephone or in person and where on-line in-play bets may therefore only be placed with unlicensed operators. Second, it is based on a relatively small sample of sports bettors (n=639) and the use of an online survey vehicle that “deliberately oversampled to optimise recruitment of adequate numbers of problem and at-risk gamblers”. Third, the data was gathered via a self-report survey rather than actual observation of betting behaviour. It relied on respondent recollections, from the previous 12 months, of the proportion of bets that they placed by different channels, at different times (i.e. the day before the event, the day of the event, during the event) and on different outcome classifications (i.e. final outcome of event, key events such as ‘first goal’ and micro-bets such as ‘next point’ in tennis). The classification by respondents of betting activity in this way for an entire 12-month period would have involved fairly heroic feats of recall.

Most importantly however, the journal paper’s findings do not support the Commission’s categorisation of in-play betting as an “indicator of harm“. The researchers did find an association between the percentage of an individual’s bets placed “during the match” and their Problem Gambling Severity Index (“PGSI”) score – but they also identified a similar association for traditional bets placed within the hour prior to kick-off. Perhaps more significantly, they found that betting in-play on the final outcome of the match was associated with lower PGSI scores than final outcome bets placed before kick-off. Associations between the percentage of bets on “key events” and PGSI score was similar whether the bets were placed before or during the match. It did indicate that regular betting on “micro events” (which can only be made in-play) are associated with higher PGSI scores: but to suggest that this proves the inherent riskiness (or harmfulness) of all forms of in-play betting is at best a profound misreading of the research.

The survey

The final item of evidence is a set of results from the Commission’s Quarterly Telephone Survey in 2016 (the “2016 Survey”). The Commission reported that “27.4% of online gamblers who bet in-play were classified as problem gamblers, compared to 10.9% of all online gamblers and 5.4% of online gamblers who do not bet in-play. 44.1% of online gamblers who bet in-play were classified as at risk of problem gambling compared to 40.4% of all online gamblers and 26.4% of online gamblers who do not bet in-play.”

On the face of it, these findings appear to support the classification of in-play betting as an “indicator of harm”. This however overlooks important considerations of survey methodology and interpretation.

The 2016 Survey typically samples around 4,000 people a year. While this is a reasonable sample size for estimating overall participation in gambling, findings are likely to be less robust when considering specific activities. For example, we calculate that the number of online football bettors in the sample in 2016 was around 160; the number of tennis bettors just 14. The ‘problem gambling’ rates for online gambling cited by the Commission (using the short-form PGSI rather than the full nine-item instrument) were three times higher than those found in the ‘gold-standard’ NHS Health Survey for the same year, something that raises obvious questions about sample bias. Upon original publication of the results in 2016, the Commission noted with suitable circumspection that “due to small base sizes the data presented here should be considered as indicative, and be treated with caution.“

Issues of survey reliability aside, there are a number of issues of interpretation. The Commission appears not to have considered that people who typically bet in-play may, for other reasons, be considered higher risk. For example, young men (a higher risk demographic group) are likely to be over-represented amongst in-play bettors. It seems plausible that a majority of in-play bettors will also bet traditionally; in which case they may be assumed to have broader wagering repertoires than people who only place bets before the start of the event (because they do both). Finally, the analysis is limited to a comparison of “problem gambling” rates between two different types of online sports betting. It provides no comparison between in-play betting and other forms of gambling, which would be necessary to classify it as a uniquely risky product.

Conclusion

The Commission’s decision to classify in-play betting as an “indicator of harm” is, according to its Freedom of Information Act disclosure, based entirely on an assessment carried out in 2016, which stated: “on the balance of the evidence we have reviewed and considered, we have concluded that the current regulatory regime in place for in-play betting is sufficient and further controls are not needed at this time.” It is unclear therefore why a review of precisely the same evidence base in 2022 should arrive at such a different view.

The Commission is correct to point out that short gaps between bets or high-staking after a big win may be risk indicators for some people, but if so, this is true of many other activities and not just in-play betting. Indeed, in-play betting does not appear to be particularly high-risk viewed solely through a lens of bet frequency or rapidity.

Official prevalence surveys have consistently shown that participation in online sports betting is associated with low rates of PGSI and DSM-IV “problem gambling”. As we pointed out in our third article, this is particularly the case where bettors have not participated in other forms of online gambling. We know from Commission data that around one-quarter of online gamblers, and therefore a much higher proportion of online sports bettors, participate in in-play betting. It is not a difficult jump to realise that it is implausible that problem gambling rates could be so low for remote sports betting in total if in-play betting on its own was a significant “indicator of harm”.

There is no inherent logic to consider in-play betting as especially risky. After all, ‘in-play’ simply denotes the fact that the wager is placed after the event has commenced. A final outcome result bet placed five minutes into a match is really no different to the same bet placed five minutes before kick-off. If anything, the bettor has more information on which to make his or her decision. Some bet types, in particular ‘micro-bets’, may indicate elevated risk; but specific bet-choices may be indicative of risk in all forms of gambling: this is not unique to in-play.

Our analysis indicates that the Gambling Commission’s decision to categorise in-play betting as an “indicator of harm” is based on a mis-reading of a very thin and selectively assessed evidence base. Indeed, we would go further, the Commission’s claims are in fact contradicted by the only peer-reviewed study presented as evidence. The Griffiths blog is a cogent article, however it proves nothing and in any case does not support the Commission’s classification, whilst results from the 2016 Survey appear to be at odds with the ‘gold-standard’ Health Survey for that year (and all other years) and are presented without context and in a way that does not allow further checking or analysis. In this article, we have examined, and found wanting, the evidence presented by the Commission in support of just one of the vast number of “indicators of harm” or “vulnerability” that feature in the Guidance. This may in itself be an indicator of a particular vulnerability within the Commission: a susceptibility to believe the worst about the market it is required by law to oversee. It is certainly an indicator that evaluation is difficult and may be subjective, something that would benefit from introspection in any final version of the Guidance.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

09Jan

Proposed Customer Interaction Guidance: The problems with common sense by decree

9th January 2023 David Whyte 219

The Gambling Commission (the “Commission”) is currently consulting (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While this exercise has not yet attracted the same attention as its 2020 predecessor (on remote customer interaction and affordability checks) it is potentially every bit as significant for licensees and consumers. Once implemented, it is likely that its strictures will in time bind non-remote gambling licensees and consumers too. Regulus Partners and Harris Hagan have written a series of co-authored articles to assist stakeholders responding to the Consultation. In the second of these articles, we described how the Guidance threatens to alter the meaning in law of “vulnerability” through its definition of “vulnerable persons”, by rendering universal what had formerly been considered exceptional. In this, our third article, we examine why this matters, in terms of both near-term regulatory compliance and longer term attempts to stigmatise participation in gambling.

The most striking feature of the Guidance is the extent to which it attempts to mandate common sense through a series of ill-defined rules – proposing a vast bureaucracy to facilitate and evaluate customer interactions. Having established a wide range of criteria for classifying customers as either “vulnerable” to, or “at risk” of, gambling harm; two concepts that appear to be definitionally similar but which the Commission, at different times, treats as both distinct and the same, the Guidance then requires licensees to configure a range of actions in response. The Guidance is, however, silent on what specific actions should be aligned to particular criteria (or clusters of criteria).

A little less conversation, a lot more interaction

Such is the breadth of the Commission’s conceptualisation of “vulnerability to harm” (there are literally millions of possible combinations of the “factors of vulnerability” and “indicators of harm” contained within the Guidance), it is inevitable that different licensees will take different actions in response to the same risk factors. More significantly and putting aside the inconsistent use of the differing terms “may be experiencing harm” and “may be at risk of harm” in the Guidance, licensees’ interpretation of what actions should be applied to any particular constellation of “indicators” is likely to differ from the Commission’s (and indeed, within the Commission, between one official and another).

In the absence of clearer direction, licensees will be left to learn from painful experience what “vulnerability” looks like through the eyes of Commission officials as well as what action or response should be considered appropriate (knowing that the Commission’s view on any given day is no guide to future interpretation). More cautious licensees may find themselves conducting customer interactions as a response to the vaguest suggestions of vulnerability; for example, being above or below certain, as yet unspecified, age thresholds. In this way, a degree of standardisation may eventually be achieved; albeit with thresholds set at successively lower levels.

Licensees who adhere to the Guidance, are exposed through a requirement that their staff “need to be trained on the skills and techniques they need to help them carry out customer interactions, including what to do if a customer becomes distressed or there is a risk of suicide.” There is no question of anyone in the gambling industry not wishing to prevent suicide. However, this wording implies that it is the responsibility of licensees or their employees to identify risk of suicide, and act upon it. Suicide risk is always the result of a complex array of factors, that may or may not, include an individual’s gambling. It is the responsibility of qualified professionals to identify that risk, not licensees, and it is dangerous on multiple levels, including in relation to the wellbeing of licensees’ employees, to suggest otherwise in formal Guidance.

The consequences of all this may be guessed at: enforcement action ramped up as the Commission weaves an ever more intricate web of compliance tripwires; licensees absorbing (or passing onto customers) substantial increases in the cost of doing business; and customers facing greater levels of intrusion and inconvenience based upon lifestyle preferences but also a range of factors beyond their control, such as age or disability.

Under the Guidance, licensees will be expected to conduct customer interactions according to a quota system based on DSM-IV and PGSI “problem gambling” prevalence rates from the Health Survey for England 2018 (the “Health Survey”). Online sportsbooks must therefore interact with at least 3.7% of their customers each year; while the minimum quota for online slots, casino and bingo operators is set at 8.5%. Licensees will be required to carry out monthly checks to ensure that they are on course to hit these targets.

The use of quotas raises a number of questions not addressed within the Consultation, which does not even canvass views on the wisdom of such a scheme. First, it reveals a discontinuity in the Commission’s logic – with “problem gambling” belatedly introduced as a proxy for “vulnerability to harm”. It should not, however, be assumed that someone with a DSM-IV or PGSI classification of “problem gambling” will meet the definitional criteria set out by the Commission for “vulnerability” or “harm”. This invites the question of just what problem is to be addressed and who, in particular, licensees are expected to protect: those whose gambling might be considered problematic according to recognised psychiatric criteria, or those who may meet the regulator’s often more nebulous definition of “harm”. The requirement that licensees use “specifically the problem gambling rates for the individual activities” exposes a basic misunderstanding of prevalence surveys. The Health Survey does not in fact provide “problem gambling” rates by discrete activity. Instead, it shows prevalence rates for people who participate in certain activities in combination with others, which is a rather different thing.

The Guidance becomes even more muddled in proposing interaction quotas for licensees with online sportsbooks and casinos – suggesting the use of a combination of problem gambling rates weighted for the percentage of revenue derived from each activity. It overlooks a simpler, more targeted and more logical method – using ‘problem gambling’ prevalence rates for customers who only use sportsbooks when gambling online, those who only play online slots, casino or bingo and those who do both. We have provided the figures below from the Combined Health Surveys for 2016: it would be a relatively straight-forward matter for the Commission to update these for 2018.

Activity	DSM-IV/PGSI ‘problem gambling’ rate (% of customers participating)
Online betting	0.4%
Online slots, casino & bingo	7.3%
Online betting and online slots, casino & bingo	8.7%

The Guidance states that these quotas may be recalibrated in the future – with particular reference to how “problem gambling” or “gambling-related harm” are measured. Here it should be recalled that the Commission is part-way through a process to wrest control of the measurement of gambling and “problem gambling” prevalence from the NHS – through the replacement of the Health Surveys with its own vehicle. The Commission’s Update: Pilot of survey questions to understand gambling-related harm published in May 2022 (the “Pilot Survey”) produced a combined PGSI problem gambling’ rate of 1.3% – more than three times higher than the result from the Health Survey. Analysis by Regulus Partners has highlighted previously a number of serious errors with the Pilot Survey (including a failure to carry out cross-checks with regulatory returns data; and overlooking the impact of Covid-19). The Commission has neglected to address these flaws and states, as an article of faith and without supporting evidence, that Health Surveys under-report “problem gambling”.

The Pilot Survey also contained questions about gambling-related harms, although the Commission has been rather selective in releasing these results. Some of these “harms”, as we explained in our previous article, include reduced attendance at the cinema, spending less time with loved ones or “feeling like a failure”. Rather unsurprisingly, they are experienced by a much larger group of gambling consumers than those likely to be classified as “problem gamblers”. Licensees may find therefore that interaction quotas are ramped up significantly in the future as a consequence of surveys controlled entirely by a regulator apparently intent on demonstrating that “problem gambling” or “gambling harms” are widespread in the population.

One obvious difficulty with issuing quota requirements is that they lead inevitably to a tick-box approach to compliance based on quota fulfilment. The Guidance sets out a very catholic definition of what might be considered an “interaction” – from generic safer gambling messages or pop-ups right through to treatment referrals and exclusion. Thus, in order to satisfy the quota, licensees may simply have to make sure that around one-in-five or one-in-ten customers receive a generic safer gambling message at least once a year – a figure that is likely to be well below current levels where responsible operators are concerned. In time therefore, the Commission may either drop the quota system or increase its complexity, with quotas for specific types of interaction (e.g. quotas for self-exclusion).

When combined, all of the above issues will make it incredibly difficult for licensees to act where there are “strong indicators of harm” as there is a lack of clarity in the Guidance as to what the Commission considers to be a “strong indicator of harm”. In the Consultation the Commission acknowledges previous concerns raised about this, and states that it “does not consider it appropriate at this time to set requirements which would remove the discretion or ability on the part of operators to tailor processes to their businesses and customers”. One might take the view that this is precisely what the Guidance does, particularly when it contains formal requirements.

Evaluation and Impact

The greatest area of complexity is likely to reside within the requirement that licensees conduct assessments in order to “understand the impact of individual interactions and actions on a customer’s behaviour”. The Commission is correct to highlight the importance of evaluation, even if it might strike some as hypocritical, given its own aversion to scrutiny, as safer gambling initiatives are often implemented or mandated on the basis of face validity rather than scientific observation. Evaluation is critical therefore if we are to improve and move beyond what should work in theory and understand what works in practice.

However, the implication here is that if the customer’s gambling activity does not change for the better (i.e. stop or reduce), they are suffering, or continue to be at risk of suffering harm. This cannot be correct: a customer may continue to gamble at previous levels or even increase their spend following an interaction for various reasons. There are several problems with the demand that licensees demonstrate the effect of changes to customer behaviour of every single customer interaction. First, it will be vastly bureaucratic and costly to implement, given the number of interactions that licensees will be encouraged to undertake. This might be acceptable if the benefits of such a system outweighed the costs, but this is unlikely to be the case. Gambling behaviour, and particularly disordered behaviour, is complex. To suggest that each individual licensee’s action might be separately assessed for discrete impact goes against the balance of research opinion as well as the Public Health whole systems approach. Neither the Guidance nor the Consultation give any consideration to proportionality, in direct contravention of the Responsible Gambling Strategy Board’s evaluation protocol.

This section of the Guidance gives rise to possible negative (and so presumably unintended) consequences. It fails to consider the substantial costs that such a system would impose on licensees or what this might mean in terms of customer experience where such costs are passed on through pricing. Most importantly, however is that it may impede efforts to protect consumers. Licensees swamped by assessing the impact of potentially millions of individual interactions may suffer a loss of perspective, impairing their ability to identify and understand what is happening to those at genuine risk of harm. People who fall under the Guidance’s discriminatory gaze (by virtue of being too old, too young, not physically fit enough or too trusting) may find themselves subject to repeated harassment by multiple licensees. Finally, there is the risk that a requirement to carry out evaluation on such a microscopic basis will in fact deter licensees from undertaking interactions over and above the level demanded by the quota system.

The Guidance of course, is not satisfied by requiring evaluations of every single customer interaction: licensees must also demonstrate impact. This stipulation reveals a fundamental flaw in the Commission’s thinking. As we explored in our second article, the basis for interaction in the Guidance is a range of “indicators” denoting “vulnerability” or “harm”; but indicators are not the same as actual vulnerability or harm. In demanding that all interactions must demonstrate impact, the Commission appears to conflate probability with certainty; and in doing so ignores the presence of false positives that are a feature of any diagnostic system. Under the Guidance, licensees will be required to demonstrate that interactions alter customer behaviour, regardless of whether reform is necessary, or to document, frequently, their decisions as to why such alteration was considered unnecessary despite the indicators identified. Worse, licensees will feel obliged to take progressively more heavy-handed approaches with such customers until a change is observed, the regulatory equivalent of factitious disorder imposed on another.

This impact becomes even more absurd when one considers the nature of some of the indicators in the Guidance that may trigger an interaction. To illustrate, we use the same hypothetical customer from our second article – a 24-year-old with dyslexia who bets in-play on football and cricket and typically spends slightly above the average for his age group. Now imagine this benighted individual suffers a bereavement. Displaying seven indicators of vulnerability or harm, some licensees may consider him an appropriate target for interaction – but what precisely should be the outcome? The licensee cannot alter his age, address his dyslexia or alleviate the distress of personal loss; and so must presumably either deter him from betting in-play (an activity branded an “indicator of harm” on the most spurious grounds, as we show in our next article) or encourage him to spend less. Even if a reduction in spending is achieved (via coercion of an individual displaying no actual symptoms of harm) the customer will still be considered vulnerable on four counts and at risk of harm on two – and therefore subject to further interactions in the future (until he ceases to be ‘younger’ or ‘bereaved’ perhaps). The consequences of such a regime are unlikely to be in the best interests of that customer; and while ‘black market’ risk can be overplayed, it seems legitimate to cite it where such blatantly anti-consumer logic is concerned.

These are the near-term implications of what the Commission proposes in its Guidance. It is possible too that the Guidance hints at longer term aims or outcomes: the addition of further regulatory restrictions which stigmatise betting and gaming as pastimes. The codification in the Guidance (which introduces “formal” requirements) of “younger adults” as intrinsically vulnerable, may in time be used to lobby for the legal age for gambling to be raised (with perhaps a new maximum age being introduced to address risk among “older adults”); while certain modes of gambling (most obviously in-play betting) may be curtailed or banned on the same basis.

The Guidance contains some useful insights but ultimately falls down in its attempt to inculcate common sense by diktat. In doing so, it fails to recognise the essence of common sense as something that cannot be circumscribed by rules. Whilst some of the factors set out in the Guidance are sensible and may have an effect on a customer’s powers of self-regulation, it is impractical to seek to enforce this in “formal” Guidance, particularly when that guidance is unclear. Further, there is no suggestion anywhere in either the Guidance or the Consultation that the Commission has taken the time to understand the basis of current licensee practices (a review of enforcement cases is, by definition, no way to assess the market as a whole); or to consider how desired behaviours might be encouraged rather than coerced. In our last two articles in this series, we will examine the evidence presented by the Commission for classifying in-play betting as an ‘indicator of harm’ in its own right; before closing with a summation of the reasons why all gambling licensees and consumers, alongside those concerned about personal freedom in other domains, should take the time to respond to this most worrying of consultations.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

23Dec

Where is the harm? Implications of regulatory revisionism for customer interactions

23rd December 2022 David Whyte 217

In this – the second in a series of articles on the Gambling Commission’s (the “Commission”) consultation (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”) – Harris Hagan and Regulus Partners consider the concept of ‘vulnerability to harm’ that underpins the Guidance. The Commission proposes that licensees be required to identify “harm”, “potential harm” and “vulnerable states” by monitoring customer behaviour, scrutinising private information and making assessments based on a range of demographic characteristics. While licensees should always be sensitive to customer wellbeing, the Commission’s attempt to translate common sense into a bureaucratic checklist appears to be at odds with the intent of the Gambling Act 2005 (the “2005 Act”), regulatory coherence and the best interests of consumers.

Vulnerability and harm

The Guidance requires licensees to identify customers exhibiting “indicators of harm” as well as those who – for a wide variety of reasons – may be “vulnerable” to gambling harms. For these terms to be meaningful, it is important first to understand what the regulator wishes to convey by the term “harm”. While the Guidance itself is silent on this matter, the Commission has defined gambling harms in its Update: Pilot of survey questions to understand gambling-related harm as “the adverse impacts from gambling on the health and wellbeing of individuals, families, communities and society.” Emphasising the breadth of the concept, it adds that “these harms are diverse, affecting resources, relationships and health, and may reflect an interplay between individual, family and community processes. The harmful effects from gambling may be short-lived but can persist, having longer-term and enduring consequences that can exacerbate existing inequalities.”

To hammer home the scale of the problem, the Commission enumerates 27 “harms” experienced by gambling consumers and a further 13 “harms” to “affected others”. Some of these adverse impacts are incontrovertible – financial consequences such as problematic debt being the least ambiguous – but others are less clear-cut. The Commission, for example, defines having less money to go to the cinema or “other forms of entertainment” as a harm from gambling. Spending money on one pastime in preference to another – as the Australian academic, Professor Paul Delfabbro has pointed out – is “more akin to opportunity costs than true harm”. Its inclusion in the ‘Index’ suggests a moral judgement on those people who prefer to spend their own money on betting in preference to the movies or a meal out. Among the Commission’s other “harms”, we also encounter “feeling like a failure” which in its weakest form is a potential corollary of all unsuccessful wagers and “spending less time with people you care about”, a test that many activities, including going to work or attending a school or college, would fall foul of.

Are these the “harms” or “potential harms” that the Commission expects its licensees to identify? If so, how does it expect them to do so? Will licensees, for example, be required to scrutinise bank statements in order to understand whether or not customers are movie-goers? With what degree of regularity must customers be going to the flicks in order to satisfy the regulator? This may be a case of reductio ad absurdum – but it illustrates the fact that the Commission has in fact set some fairly absurd tests for what should be considered harmful. In the absence of clearer direction, operators are expected to make their own judgements about which of the “harms” listed by the Commission they should be attempting to identify.

A list of 21 prescribed “indicators of harm” are provided in the Guidance as a minimum – but not exhaustive – set of standards. The basis for the selection of these indicators is not made clear, supporting evidence is often not cited, and generally they lack all but the most conceptual definitions. For licensees, this presents a significant challenge in terms of operationalising the indicators. How, for example, should a licensee create a rule for “amount of money spent on gambling compared with other customers”? Is this intended to suggest that anyone spending above the mean (or median) is displaying an indicator of harm? As written, it could be used to describe anyone wagering more than the lowest-spending decile, which would be more than “other customers”. Another example is the “use of multiple products”, without any definition of what constitutes a “product”. Are football betting and tennis betting different “products” or a single product (i.e. sports betting)? Is a ‘Rainbow Riches’ slot game a different product to ‘Cleopatra’, as manufacturers would certainly contend? Where certain activities are concerned, any participation at all is considered potentially problematic. In-play betting is classified as an automatic indicator of harm. Although, as we will explain in a further blog, this appears to be based on the Commission’s misreading of its own evidence.

So much for harm; but what about “vulnerability”? Here, the Guidance does at least provide some kind of definition of what a “vulnerable person” is: “somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

Harris Hagan has raised previously its concerns about the transformation of what the Commission considers to be “vulnerability” and its inclusion of a definition of the term in guidance. It is for Parliament, not the Commission to define a statutory term that is included in the 2005 Act and which Parliament did not find it necessary to define, having clearly considered the interpretation of vulnerability a straightforward matter. Reference in the third licensing objective firstly to children, and then to other vulnerable persons adequately sets out Parliament’s intention that the licensing objectives apply to those people not able to make properly informed or ‘adult’ decisions.

The operative phrase in the definition in the Guidance – “especially susceptible to harm” – implies that vulnerability is a rare or exceptional condition rather than a state shared by the majority. This conceptualisation is however, undermined by the Commission’s use of illustrative examples. “Young adults” are categorised as vulnerable (around 12% of the population are between the ages of 18 and 24 years); but so are “older adults” (23% of the population are 65 or older). Poor physical health denotes vulnerability (43% of adults have a long-standing medical condition); as does poor mental health; (17% have a common mental health disorder; 16% have an eating disorder). One is vulnerable if one is bereaved (15% of us each year), has caring responsibilities (13%) or has dyslexia (10%). Most perplexing of all, a “higher than standard level of trust or appetite for risk” – a quality that might be said to be a defining characteristic of any gambler – is also sufficient to qualify an individual as vulnerable.

The Guidance refers to the Financial Conduct Authority’s (“FCA”) observation that 46% of adults “display one or more characteristics of vulnerability” and indeed, the Commission’s definition of vulnerability is identical to that used by the FCA in its Guidance for firms on the fair treatment of vulnerable customers – February 2021 (the “FCA Guidance”). The FCA Guidance is, however, prepared to serve an entirely different purpose. It is issued under s139A of the Financial Services and Markets Act 2000 (legislation which, unlike the 2005 Act, makes no reference to vulnerability) and provides guidance on the FCA’s Principles for Business, which state that, “a firm must pay regards to the interests of its customers and treat them fairly”. Principle-based regulation of this nature almost certainly requires guidance and the FCA is justified in defining vulnerability in that context; that the Commission seeks to take an identical approach to the FCA, in an entirely different context, is not.

There is a difference between the FCA’s intention that regulated firms identify “characteristics of vulnerability” to ensure they treat their customers fairly and in accordance with their needs, and the Commission’s duty under the 2005 Act to permit gambling in so far as it thinks it reasonably consistent with, the licensing objective of “protecting children and other vulnerable persons from being harmed or exploited by gambling”. The Commission’s reinterpretation of “vulnerability” as a universal rather than exceptional state risks distorting and undermining the legislation that it is required to enforce – replacing parliamentary sovereignty with regulatory fiat. Furthermore, the Commission prescribes a requirement in SRCP 3.4.3. It therefore had the opportunity, following consultation, to set out precisely its definition of vulnerability when introducing that requirement. That it now seeks to widen the parameters of that requirement in the Guidance, is plainly wrong.

The concept of vulnerability

The suggestion that we are all vulnerable may be true at a certain banal level – but it is inconsistent with the intent of the legislation and also the Commission’s own conception of ‘especial susceptibility to harm’. A system of customer monitoring predicated on the idea of universal vulnerability risks failing those in genuine need of protection. There are a number of other practical considerations which the Guidance fails to address. For instance, it suggests, by way of reference to past enforcement cases, that operators must routinely scrutinise customer bank statements in order to harvest medical information, or risk facing sanctions for failing to do so. This raises complex ethical issues of discrimination and data protection. Should operators, for example, treat customers differently on the basis of a perceived medical condition (which they are expected to glean from banking data)? How might customers feel about betting companies holding information (however obtained and however accurate) about their health?

To illustrate the scale of the challenge presented by the Guidance, consider the following fictitious scenario. A 24-year-old with dyslexia who bets in-play on football and cricket and spends slightly above the average for his age group could plausibly be said to raise three ‘vulnerability’ flags and three ‘indicators of harm’. As we observe in the next in this series of articles, a licensee would be required to determine for itself whether or not the presence of six ‘indicators’ would necessitate an interaction, and if so of what variety. It is inevitable that operators will adopt widely divergent interpretations in such instances, with implications for market distortion. Perhaps more significantly, the Guidance creates ample scope for disagreement between licensees and the Commission about whether a customer is vulnerable or displaying genuine indicators of harm.

That “vulnerability” is to be determined by whether a “firm”, which we understand to mean a licensed operator (again the use of “firm” a reflection of the Commission’s use of the FCA’s definition), is “acting with appropriate levels of care”. The decision as to whether a licensee has acted with appropriate levels of care must ultimately rest with the Commission and therefore it seems that vulnerability will be determined subjectively by the Commission, almost certainly in hindsight. Further, by suggesting, incorrectly, that licensees have a duty of care at law to prevent customers from gambling if they are or might meet the Commission’s definition of vulnerability, the Commission risks improperly introducing such a duty in law, or at least exposing licensees to such a challenge. This is dangerous territory for any regulator, and for licensees.

Autonomy – a wider debate

Finally, there are some genuine ‘slippery slope’ consequences for the wider economy, privacy and personal freedom. One of the Commission’s key items of evidence for the proposed interactions regime is a survey carried out in 2020 by the Money and Mental Health Policy Institute (‘MMHPI’) included in the report A Safer Bet. The Commission states that 24% of people with mental health problems experienced financial problems in consequence of online gambling and 32% said that they had bet more than they could afford to lose. This representation of the findings is misleading (the survey was of people with mental health problems who had gambled online and not all people with mental health problems – an important distinction); as is the Commission’s repeated misuse of the Problem Gambling Severity Index item “bet more than afford to lose”, which is a risky behaviour rather than a harm.

Quite aside from matters of precision, there is an important omission of context. In the same year, the MMHPI also published the results of a survey on online shopping by people with mental health problems – with very similar, and in some cases more alarming, results. The MMHPI report, Convenience at a cost found that 29% of respondents had spent more than they could afford when shopping online while 63% “had cut back on essentials” and 56% “had fallen seriously behind on payments for bills or debt repayments as a result of not being able to control their spending.” In short, the basis for regulatory intervention on remote gambling could just as easily be applied to shopping with Amazon or Tesco. Context is important because it helps us understand whether state action in one domain is consistent with broader societal ‘rules’ – and so deters unfair discrimination against particular groups (in this case, people who enjoy gambling). The Commission’s deliberate exclusion of this information, which was brought to its attention as part of the original consultation, is unhelpful and reinforces the idea that the regulator is not in earnest in its use of public consultations.

The Commission’s obsession with vulnerability suggests a rather hopeless outlook on life. To the extent that we are all, to some extent vulnerable, we are all resilient too and possessed of broad powers of self-regulation. An exclusive focus on what makes us weak with no recognition of what makes us strong is distortive and may lead to negative consequences – most obviously through undermining individual agency, which is an essential ingredient for wellbeing.

The identification of harm and vulnerability set out in the Guidance is the basis for ramping up operator interactions with customers, which may in some cases be warranted. The practical implications of the requirements to interact, and to evaluate the effect of those interactions, is the subject of our next article.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

22Dec

Putting the Customer First: Why all licensees should the take the Consultation on Customer Interaction Guidance seriously

22nd December 2022 David Whyte 221

A little over two years on from the launch of its consultation and call for evidence on remote customer interaction requirements and affordability checks, the Gambling Commission (the “Commission”) has initiated a new public consultation (the “Consultation”) – this time on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While the Consultation has so far not attracted the same attention as the 2020 exercise, the implications are potentially just as profound. In a series of co-authored articles, Harris Hagan and Regulus Partners will explore the key proposals in the Guidance, examining the evidence that underpins them and asking whether they are in fact proportionate, legal and in the best interests of consumers.

We appreciate that some of the more cynical readers of this article may think there is little point in responding to the Consultation as the Commission will take little or no notice of any feedback it receives from licensees. However, we consider it critically important that all licensees, including non-remote licensees, do respond to the Consultation. It is more difficult for the Commission to ignore numerous representations on common concerns, and experience suggests that similar guidance may be produced for non-remote licensees in the future. Recognising that the timeframe for the Consultation will include the holiday period, the Commission has extended the originally proposed six weeks to approximately nine weeks, and it will now close on Monday 23 January 2023.

There are a number of areas of the Guidance which licensees should be concerned about – Harris Hagan included some of these in previous articles in July and September 2022. In this article, the first of the series, we set out a summary of those issues, and analyse the “Introduction” and “General requirements” sections of the Guidance. In subsequent articles we will also consider the central theme of assessing ‘vulnerability to harm’; and how licensees will be expected to take action to address it.

Key areas of concern

Our key areas of concern about the Guidance, many of which we will explore in more detail in this series of articles, are:

It has been poorly drafted. Many key terms are either undefined or defined in a fashion so highly generalised as to be almost meaningless. An absence of precision in the way that regulatory requirements are described inevitably invites a high level of subjectivity in terms of how they will be interpreted by both licensees and the Commission.
The evidence that underpins key measures contained in the Guidance is either absent or highly selective – and, in some cases, it is misleading.
It appears to conflate “indicators of harm” with actual harm – requiring licensees to take action to correct customer behaviours regardless of whether they are in fact harmful.
The definition of key terms is so broad as to make it almost impossible for licensees to justify not conducting a safer gambling interaction based on either “indicators of harm”, “vulnerability” or both.
It takes no account of the practicability of the measures required, the cost implications, or the potential for negative unintended consequences.
The Commission appears to have undertaken no research into consumer support for the measures that are being mandated or how they might react to them.
One of its more alarming aspects is the suggestion that licensees should harvest medical information about their customers. There is no demonstration within the Consultation that the Commission has considered the ethical or legal dimensions of this requirement, the extent to which licensees possess the requisite expertise to interpret such information, or whether this is even possible.

Issues not addressed in the Consultation

The Commission makes it clear that the Consultation relates solely to the Guidance which is issued on Social Responsibility Code Provision (“SRCP”) 3.4.3. The requirements of SRCP 3.4.3 itself are not within scope, nor are “matters associated with unaffordable gambling and specific thresholds which should apply”, the “separate consultation on the three key financial risks” the Commission committed to in May 2021 (yet to materialise), or matters associated with “single customer view”.

General requirements

“How to use this guidance”

There are inconsistencies in the Guidance between “aims” and “formal guidance”, and it is difficult to ascertain whether the Commission expects licensees to “take into account” or “address” its aim in setting each requirement.

The impact of this inconsistency can be seen throughout the Guidance. For example, requirement 1 states that “icensees must implement effective customer interaction systems and processes in a way which minimises the risk of customers experiencing harms associated with gambling.” However, aim 1 states that “Licensees must have effective controls to minimise the risk of customers experiencing harms associated with gambling”. There is a clear difference between implementing effective systems and having effective controls, the latter being more easily determined subjectively by the Commission and with hindsight: the assumption likely being that if any customer has suffered or experienced harm (a highly malleable term as we will explain further in our next article), the controls were ineffective.

It is critically important that the Commission ensures uniformity in the Guidance. If ‘aims’ are within scope, then the language used for requirements and aims should be consistent: if ‘aim’ is not within scope, then the “How to use this guidance” section of the Guidance should be amended and reference to licensees being obliged to “address that aim” removed, to ensure that this is abundantly clear.

Formal requirements as guidance?

Harris Hagan has previously set out its view that it is inappropriate, and arguably ultra vires, for the Commission to introduce formal requirements through guidance. The Commission seeks to address such concerns in the Consultation where it states:

“On occasion, the proposed guidance document uses the language of ‘must’ or ‘the Commission expects’. This language is used in contexts where the guidance is intended to reflect the requirements or SR Code Provision 3.4.3. The proposed guidance document also uses the word ‘should’, which denotes an approach or action that is not required by SR Code Provision 3.4.3, but which operators are required to consider. We are interested in stakeholders’ views on the language used in the proposed guidance document in this respect.”

Despite this statement, there are several areas of the Guidance where the language used does not reflect the requirements set out in SRCP 3.4.3, goes beyond those requirements, or is inconsistent with those requirements. This is inappropriate, will cause confusion, and exposes licensees to the risk of broad or inconsistent interpretation by Commission officials during compliance or enforcement action.

By means of an example:

Requirement 4 states: “Licensees must have in place effective systems and processes to monitor customer activity to identify harm or potential harm associated with gambling…”;
Aim 4 is stated as being to ensure “that customers who may be at risk of harm are identified”; and
Formal Guidance 4 states that “icensees must identify customers that may be at risk of harm.”

There is a clear distinction between “identifying harm or potential harm” and identifying customers “that may be at risk of harm”: the latter arguably being impossible as it applies to anyone who gambles. We will discuss this in more detail in a subsequent article. The importance of the Guidance being easily distinguished from the prescriptive requirements set out in SRCP 3.4.3, and of ensuring consistency between requirements and aims and formal guidance, must not be overlooked.

“How the Commission will use this guidance”

The Commission refers under this section of the Guidance to its expectation that “licensees demonstrate how their policies, procedures and practices meet the required outcomes”. However, at no point has the Commission set out what those required outcomes are. SRCP 3.4.3 is not outcome-led; it is, at least in part, prescriptive – as is the Guidance. We would therefore suggest that “requirements” rather than “required outcomes” is the more accurate language to be used here.

“Amending this guidance over time”

Under this heading, the Commission sets out that “for the purposes of raising standards, protecting customer interests, and preventing harm to customers, will update and re-issue guidance”. Harris Hagan has previously raised concerns about this approach. We remain of the view that the Commission should consult on any changes to the Guidance, particularly if those changes introduce formal requirements, or if they explain how the Commission may interpret those formal requirements. The Commission is comfortable with short consultation periods; it originally proposed that the Consultation be open for six weeks. To conduct further short consultations before amending the Guidance is hardly an arduous task, particularly given the benefit of doing so, not only to licensees and stakeholders, but to the Commission itself.

In our second article, we will discuss the concepts of “harm” and “vulnerability” that underpin the Guidance.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

14Nov

Licensing, compliance and enforcement policy statement: Gambling Commission consultation response – the “under the radar” compliance and enforcement changes you may not (yet) have noticed – Part 2

14th November 2022 Gemma Boore 230

On 23 June 2022, the Gambling Commission published the response to its November 2021 consultation (the “Consultation”) on its Licensing, Compliance and Enforcement Policy Statement (the “Policy”) and this is our second blog on the response. The first blog can be accessed here.

Compliance Changes

Proposal 9. Remote compliance assessments

Proposal: Policy to explain that compliance assessments may be carried out remotely and clarify what this involves.

Respondents’ views: Although the majority of respondents agreed with the proposal, some noted that:

1. the digital privacy of licensees and their customers must be considered;
2. face to face meetings are more productive;
3. assessments conducted in a remote environment allow for items to be lost in translation, talk to be taken out of context and prevent the relevant parties from engaging in open conversation and dialogue.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission addressed comments that remote assessments may jeopardise privacy byconfirming it had “considered the proportionality and legality of using this method of assessment and satisfied that appropriate controls in place to ensure that laws relating to data protection are complied with”. The regulator acknowledged concerns regarding perceived disadvantages of remote assessments and confirmed that it would take a flexible approach, conducting assessments both face-to-face and via remote means.

Our view: This is another example of the Policy being updated to reflect current practice. Remote assessments were of course, a necessity during the Covid pandemic and in the same way as remote working has become commonplace across the globe, they are here to stay. As remote assessments carry just as much weight as in-person assessments, they must be given the same level of care and attention by the business. Licensees must ensure that training records, revenue reports, customer accounts and AML/safer gambling procedures/records and other key policies and procedures are on hand and ready to be discussed and/or disclosed if necessary. The key people that have been asked to attend and any other personal management licence holders, should be present, ready to answer the Gambling Commission’s questions and critically, show the Gambling Commission how they carry out their roles. Please get in touch if you have any questions regarding compliance assessments.

Proposal 10. Changes to assessment framework

Proposal: Policy to update assessment framework to reflect terms actually used by Gambling Commission officials to judge levels of compliance: namely, ‘Serious failings’, ‘Improvement required’ and ‘Compliant’.

Respondents’ views: Some respondents noted that:

1. the categories appear clearer but there should be subcategories in the improvements required section, to separate minor and/or major improvements;
2. the section entitled ‘Improvement Required’ should not stipulate that a licensee ‘just meets’ the Commissions requirements as this would mean they are technically compliant; and
3. sections of the framework could be more prescriptive.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission rejected arguments that additional subcategories and/or outcome descriptions would be useful. The regulator further clarified that ‘Improvement required’ is used “to reflect circumstances where a licensee may be in breach of a licence condition or social responsibility code, or any other requirement attached to a licence. However, we would not use this description where we judge that there is likely to be a significant impact on consumers, the licensing objectives, or the reputation of the industry. We would also expect clear assurances that a licensee will make immediate changes to ensure that there is no future risk.”

Our view: This is the only proposal that does not appear to have gained approval from at least 50% of respondents. A strange outcome, as this is another prime example of a policy amendment made to catch up with what is happening on the ground. In practice, we have seen this language used in the Gambling Commission’s communications with licensees regarding the outcome of compliance assessmentssince 2019. The only oddity is the delay in the Gambling Commission updating its own policies to reflect practice. It is also not particularly surprising, given how long these phrases have been used, that the Gambling Commission is rejecting suggestions for improvement to its own lingo.

Proposal 11. Introduction of Special Measures

Proposal: Policy to outline the circumstances in which an operator may be placed in special measures and the consequence of this.

Respondents’ views: Although the majority of respondents agreed with the proposal, some noted that:

1. the approach to divestment needs to be clearer and the Gambling Commission should consider whether funds can be divested back to consumers; and
2. licensees should be able to refuse to enter Special Measures and to defend its position if a review is then instigated.

Other respondents queried whether the Gambling Commission should publish when licensees enter Special Measures to ensure consumers could assess if their risk appetite is big enough to continue to use the services of such operator.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission rejected the assertion that it should publicise circumstances where a licensee enters Special Measures – an outcome that will bring relief for many. The regulator also took the position that comments regarding divestment fell outside the parameters of the consultation. It further noted that “While it is open to a licensee to refuse Special Measures, this would most likely mean that the licensee, based on the identified failings, would be considered for review of its licence. As part of that review process, we would want to understand why the operator was unwilling to work to achieve compliance at pace. The review process allows for the licensee to make representations about the Commission’s findings and proposed course of action.”

Our view: For better or worse, several licensees have now experienced the Gambling Commission’s Special Measures process and more will experience it yet. Although we remain of the view that much greater informal engagement by the Gambling Commission with individual licensees would be preferable and appropriate when compliance issues are identified (assuming, of course, the regulator is proportionate, consistent and appropriate in those dealings), it is encouraging to see the Gambling Commission introducing a less draconian form of engagement than commencing a licence review under section 116 of the 2005 Act. Please see our blog on 11 October 2022 on Special Measures for further commentary on the implications for licensees and whether a cautious welcome for the new process is justified.

Enforcement changes

Proposal 12. Right to issue further preliminary findings letter

Proposal: Policy to be updated to permit the Gambling Commission to issue a further consolidated preliminary findings letter in situations where the regulator is not in a position to proceed to determination after a licensee has made its representations on the Gambling Commission’s initial findings.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. there is potential for ambiguity of the interpretation of ‘flexible approach’ and the need to ensure procedural fairness;
2. a balance would need to be struck between sufficient investigation, obtaining and properly considering representations whilst also ensuring overall process is fair, transparent and managed within a reasonable timeframe; and
3. the revised approach should not unduly benefit the Gambling Commission at the expense of licensees.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission sought to alleviate respondents’ concerns by confirming that “it is not envisaged that this amendment would be utilised solely for the benefit of the Commission… …It is anticipated this would be used exceptionally, rather than routinely.”

Our view: This change in policy effectively allows the Gambling Commission two bites at the metaphorical cherry in terms of reaching preliminary findings. It has been by argued by some that this is unfair (including in our blog on 13 December 2021) and that the Gambling Commission should apply sufficient diligence in its initial investigation to prevent the need for a second consolidated set of preliminary findings except, possibly, in rare situations where significant new evidence has come to light. Now the amendment to the Policy has been made, we shall see whether this new tool will be used exceptionally (and fairly) – or become a more routine part of the Gambling Commission’s increasingly aggressive repertoire.

Proposal 13. Financial resource of group and UBOs considered for financial penalties

Proposal: Policy to be updated to permit the Gambling Commission to request information regarding the financial resources available to a licensee’s group companies and ultimate beneficial owners. The Policy further clarifies that in the absence of sufficient information, it will infer that the licensee has the resources to pay.

Respondents’ views: Some respondents noted that the amendments may stray beyond the legislative parameters under the 2005 Act. Others queried whether the calculation of fines should be standalone in reference to the breaches and evidence. There was a concern that the provision invites unfairness for larger gambling businesses who may suffer more than smaller companies.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission rejected arguments that the requirement expanded its regulatory remit claiming that “The Act stipulates that the Commission will have regard to the affordability of a proposed penalty. The Act is not prescriptive on the definition of financial resources but for a group structure where dividends and loans are available to move monies around the group it follows that a licensee has more financial resources available to it than a stand-alone company and should be assessed accordingly. In addition, consideration of the group finances removes the ability of the licensee to move monies available to fund a penalty out of reach during the investigation period.”

Our view: As discussed in our blog on 13 December 2021, we consider that the revised wording in the Policy goes significantly beyond section 121(7)(c) of the 2005 Act, which requires the Gambling Commission to take into account “the nature of the Licensee including in particular his financial resources” when calculating a financial penalty. The Gambling Commission has effectively interpreted the phrase “nature of” as including not only group companies but also piercing the corporate veil between the licensed companies and its shareholders. The explanation provided in the consultation response does not get close to providing a clear rationale for this seismic change from a group perspective and ignores it completely from a beneficial owner’s perspective. We expect future disputes (private and perhaps by more public means) if and when the Gambling Commission looks to rely on these provisions when determining financial penalties. Please get in touch if you would like any advice on dealing with the Gambling Commission.

Proposal 14. Regulatory Panel to consider challenges to licence suspensions

Proposal: Policy to be updated to clarify that challenges to interim suspensions of operating licences would be heard before the Regulatory Panel of Commissioners, who would list the matter for hearing as soon as reasonably practicable.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. the challenges of appealing a decision to officials when officials made the initial suspension decision;
2. the perceived lack of industry experience on the Commission’s Board;
3. the need to further clarify ‘as soon as reasonably practicable’, recognising time is of the essence; and
4. the Gambling Commission should be clear and provide information on what failings could lead to a suspension.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission attempted to address concerns regarding the independence and experience of the Regulatory Panel in its response by stating that “where such a decision is challenged it would be before different officials… …Commissioners are not employees of the Commission and afford a layer of separation from officials which will help act as a safeguard to test our decision making”. It did not address comments requesting further clarity on timing or the type of failings that could lead to suspension.

Our view: This change to the Policy enshrines the principle that a hearing relating to a licence suspension will be held as soon as reasonably practicable. This is, in principle, positive for licensees. Although it is not clear whether “reasonably practicable” means days, weeks, or months; uncertainty over licensed status is bad for business so getting before the Regulatory Panel quickly is a good thing. It is even more important when the Gambling Commission exercises its right, under section 145 of the 2005 Act, to disapply the rule that the licence suspension should be stayed while the licensee is given the opportunity to appeal the decision because it deems there is an important or emergency need to do so. In such cases, licences are suspended with immediate effect – causing catastrophic damage to player (and investor) confidence in the business.

Proposal 15. Regulatory settlements only considered at an early stage

Proposal: Policy to be updated to clarify that regulatory settlements would only be considered at an early stage in enforcement proceedings and that the Gambling Commission would not normally accept offers after the licensee had made representations on the Gambling Commission’s preliminary findings.

Respondents’ views: Although most respondents agreed with the proposal, some noted:

1. a need for greater transparency around calculation of penalties and/or settlement amounts, acceptance criteria and timescales for decisions;
2. the amendment being contrary to furtherance of gambling as a statutory objective;
3. it is not in the interests of fairness to preclude representations before a settlement offer;
4. settlements should be permitted at any time with mitigation being given to earlier settlements made and reflected in a discount; and
5. affording the licensee a chance to fully understand the Gambling Commission’s case and evidence before submitting a settlement offer, particularly if there has been a further preliminary findings letter issued.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission clarified that it “does not invite, nor negotiate settlements. If a licensee wishes to submit a settlement the Commission up until now has been duty bound to consider it, irrespective of the stage submitted however our view that settlement is a privilege and not a right remains”. The regulator goes on to clarify its new policy position only to consider settlements before representations are made. It further confirms that “if a further preliminary finding is issued by the Commission, the clock would be reset to the last preliminary findings”.

Our view: As noted in our blog on 13 December 2021, the representation stage in proceedings is without doubt, the most critical in putting forward a licensee’s case. By effectively bypassing this stage, the Gambling Commission is requiring a licensee to accept that it is right with all of its findings. This is particularly poignant given that the public statement that is released to announce the outcome of a settlement will invariably refer to “agreed failings” of the licensee. Going forward, a critical observer (and hopefully investor) will do well to query whether a public statement relating to a settlement with the Gambling Commission could have looked drastically different should representations by the licensee have been permitted. Please get in touch if you would like advice on making representations and/or reaching a settlement with the Gambling Commission.

The changes to the Licensing, Compliance and Enforcement Policy Statement took effect on 23 June 2022. Please get in touch with us if you would like assistance on any compliance or enforcement matters.

14Nov

Licensing, compliance and enforcement policy statement: Gambling Commission consultation response – the “under the radar” licensing changes you may not (yet) have noticed – Part 1

14th November 2022 Gemma Boore 240

On 23 June 2022, the Gambling Commission published the response to its November 2021 consultation (the “Consultation”) on its Licensing, Compliance and Enforcement Policy Statement (the “Policy”). The Consultation had sought views on several amendments to the Policy, as discussed in our previous blogs on this subject on 1 December 2021 and 13 December 2021.

The changes, which were wide-ranging and significant, were broadly grouped into three categories: licensing, compliance and enforcement.

The Gambling Commission received 66 responses to the Consultation from licensees, trade associations, members of the public, the charity and not-for-profit sector and “others”. Key examples of support for and objections to each proposal are detailed in the 34-page response document.

Despite (at least some) respondents raising what we consider to be well-founded concerns regarding the changes – which we discuss below – the Gambling Commission implemented its proposals almost invariably without amendment. As noted in our blog on the Gambling Commission’s partial introduction of its new customer interaction requirements; this “consult > issue response > implement as originally planned” cycle is now commonplace as we increasingly see the Gambling Commission revise its policies in line with its initial proposals, irrespective of consultation responses received.

In addition to deciding to implement without affording much regard to industry comments, the Gambling Commission announced, at the bottom of the response document, that the changes would take effect on 23 June 2022: the same day that the Consultation was published on the Gambling Commission website. Oddly, there was no associated notification published on the news section on the regulator’s website. Instead, this key update was published only as a new response (amongst many) on the consultation page of the Gambling Commission website and the Policy replaced swiftly thereafter, with the updated version dated June 2022.

This ‘under the radar’ approach to updating the Policy, which – as noted in our previous blog, is an important document that underpins every aspect of the licensing lifecycle – means that many licensees may not yet have noticed the changes.

The purpose of this blog is to bring to our readers’ attention the key amendments and provide insight into the implications that those changes have for those that hold gambling licences in Great Britain.

The Consultation Questions

The Consultation contained 15 proposals for specific changes to the Policy.

For each proposal, respondents were invited to indicate whether they ‘strongly agree’, ‘agree’, ‘neither agree or disagree’, ‘disagree’ or ‘strongly disagree’ to the amendment, and give reasons for their answer. Interestingly, the Gambling Commission noted in its response that “the majority of respondents” (i.e., >50%) agreed with all but one of the proposals (Proposal 10: Assessment framework being the only exception to this rule). It would be interesting to know how this was further split between the available five options.

Proposal 1. No dual regulation of financial products

Proposal: Policy to clarify that the Gambling Commission will not normally grant operating licences in respect of products that blur the lines between gambling and financial products.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. products could fall through a regulatory gap, with little or no consumer protection in place;
2. the approach would stifle innovation and economic growth; and
3. the approach amounted to a blanket ban on products of a certain type.

Other respondents queried whether refusing to license a gambling product due to its presentation was aligned with the Gambling Commission’s duty to permit gambling in so far as it is reasonably consistent with the pursuit of the licensing objectives.

Gambling Commission’s position: The original proposals were implemented as drafted. While the Gambling Commission acknowledged – but did not agree with – views that the approach may stifle innovation / growth and/or be inconsistent with its duty to permit gambling, it failed to comment on whether its position could result in products falling through a regulatory gap with little or no consumer protection in place. It also failed to comment on whether the approach would amount, in practice, to a ‘blanket ban’.

Our view: The Gambling Commission noted in its initial call for evidence that issues relating to the dual regulation of products may be better resolved via legislative change but that “this is unlikely to happen before the current Gambling Act Review is concluded”. The change to its policy position therefore seems to be little more than a stopgap: an interim solution to prevent further embarrassment (similar to that experienced in the wake of the BetIndex t/a Football Index scandal; see our 1 December 2021 blog for further commentary). Whether the White Paper will adequately address issues relating to the dual regulation of products is another question. In our view, this is a complex area and proper consideration of the advantages and disadvantages of permitting properly run and regulated versions of these products will be key to the debate. Although a blanket ban may be the easiest option, is it the best step overall?

Proposal 2. Right to reject incomplete licence applications

Proposal: Policy to reflect the Gambling Commission’s existing position to reject incomplete application forms with no refund of the application fee.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. application forms on the website are difficult to navigate or enter appropriate information;
2. the Policy or website should more clearly state what constitutes a complete application;
3. applicants should be able to engage with the licensing department prior to and during the application process; and
4. it is unreasonable for the Gambling Commission to retain the whole fee for rejected applications when the licence application process needs (considerable, in our view) improvement.

Gambling Commission’s position: The original proposals were implemented as drafted. However, the Gambling Commission acknowledged that information on its website / application forms could be improved and committed to take this forward in the new financial year. The Gambling Commission also clarified that where an application is considered incomplete, it will write to the applicant informing them of the information that is missing and give them 10 working days to provide it. The application will be rejected only if the information is not provided within that period. With regard to the suggestion that applicants should be able to engage with the licensing department prior to and during the licence application process, the Gambling Commission commented as follows:

“Suggestions that applicants should be able to engage with the Licensing team are noted. Engagement currently takes place through the application process however pre-application support is necessarily limited to general advice. The Commission is responsible for assessing and making decisions about applications and there would be a clear conflict of interest if we assist applicants by providing more detailed support and advice beyond the general advice. The Commission’s current fee structure supports our licensing, compliance and enforcement work but does not extend to pre-application services.”

Our view: As noted in our blog on 1 December 2021, the Gambling Commission’s position on rejection emphasises the critical importance of submitting full applications, whether they relate to new licences, variations of existing licences or changes of corporate control. The Gambling Commission often requests complex information in support of such applications including information relating to third parties – such as current or former beneficial owners and those providing funding to the business – that can prove difficult to provide within a 10 working day period. Although it is positive that the Gambling Commission is looking to improve the information and guidance available on its website so that the average applicant has better insight in terms of what is required, its efforts are yet to be seen given, at the time of writing, the Gambling Commission’s information requirements on its website differs from the application portal!

The skills and expertise of specialist gambling lawyers are key to ensuring the best chance of success and securing a licence as quickly as possible. Please get in touch if you would like assistance with any licence applications.

Proposal 3. Persons relevant to a licence application

Proposal: Policy to include further examples of persons relevant to an operating licence application: namely, shadow directors, persons or other entities who are controllers of the applicant and/or those that are its ultimate beneficial owners.

Respondents’ views: Although most respondents agreed with the proposal, others asked for further examples and guidance on who could be considered relevant persons, noting that the current examples gave the Gambling Commission significant discretion.

Gambling Commission’s position: The proposal was implemented using slightly different wording – see below. In response to comments that the wording gave the Gambling Commission significant discretion, it commented as follows: “The Gambling Act 2005 (the “ Act”) necessarily gives the Commission discretion as to who are considered relevant persons. It is an applicant’s responsibility to identify who might be relevant, bearing the Policy in mind, but the Commission will, on a case-by-case basis, identify and ask for information about who it considers may be relevant persons not identified by an applicant”.

Amended paragraph 3.10 (changes to proposal highlighted):

3.10 In considering operating licence applications the Commission will include assessment of the suitability of those persons considered relevant to the application. The persons considered relevant may vary depending on the information provided in the operating licence application and on company structure, but are likely to exercise a function in connection with, or to have an interest in, the licensed activities. It may also include shadow directors, persons or other entities who, whether or not likely to exercise such a function or have such an interest, are shadow directors, who are controllers of the applicant and/or those who are its ultimate beneficial owners. General guidance on who may be considered relevant is available on the Commission’s website and in regulations.

Our view: As noted in our blog on 1 December 2021, the Gambling Commission’s position on relevant persons highlights the importance of applicants and licensees ensuring their stakeholders – especially the owners of the business and those funding it – understand the relevant gambling law, regulatory and licensing requirements of being licensed in Great Britain, the Gambling Commission’s assessment process, and its wide discretion to request any information it considers relevant.

Proposal 4. Timescale for using a new licence

Proposal: Policy to clarify that the Gambling Commission will consider whether an applicant will use its / their licence within a reasonable period.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

the term ‘reasonable’ is subjective and should be clearly defined, for example 3 months;
the Gambling Commission should consider how long it may take a business to get certain things into place, for example banking arrangements;
the Gambling Commission should clarify whether this only applies to personal licence applicants who work for a company rather than act on a consultancy basis; and
personal licence holders may be between jobs that require a personal licence.

Proposal 4. Timescale for using a new licence

Proposal: Policy to clarify that the Gambling Commission will consider whether an applicant will use its / their licence within a reasonable period.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

the term ‘reasonable’ is subjective and should be clearly defined, for example 3 months;
the Gambling Commission should consider how long it may take a business to get certain things into place, for example banking arrangements;
the Gambling Commission should clarify whether this only applies to personal licence applicants who work for a company rather than act on a consultancy basis; and
personal licence holders may be between jobs that require a personal licence.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission rejected comments that a reasonable period should be defined because this would be considered on a per case basis. In respect of personal licence holders, the regulator maintained its position that personal licence applicants would be required to be employed in a role that requires a personal licence within a reasonable time.

Our view: Whilst it is unhelpful that the Gambling Commission has not defined the meaning of reasonable, in our view, the general expectation is that an operating licence is used within 6 to 12 months to demonstrate a genuine need for it, although this is not set out in the Policy and as the Gambling Commission notes it depends on each licensees’ circumstances. The consultation response suggests that the Gambling Commission may be moving away from granting personal licences to those providing consultancy services to gambling businesses, which would be welcomed news.

Proposal 5. Clarification on suitability criteria

Proposal: Policy to include further information on how the Gambling Commission assesses the suitability of an applicant to hold an operating licence.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. further examples and guidance are needed on who could be considered relevant persons and definitions of ‘shareholder’, ‘beneficial owner’ etc., and how suitability is assessed;
2. public companies do not choose their shareholders or who owns stock, suitability should focus on board and management team; and
3. the Gambling Commission should take a balanced and risk-based approach as some connected individuals may already be approved or regulated by another regulator.

Gambling Commission’s position: In the updated Policy, the Gambling Commission make what they refer to as a “minor amendment” – see below. With regard to requests that it take differing approaches with public (vs. private) companies and for any applicants / individuals that are regulated elsewhere, the Gambling Commission’s response was as follows: “It would not be appropriate to differentiate between public and private companies; the suitability criteria apply to all applicants although the Commission will take a risk-based and proportionate approach when applying the criteria. This includes whether individuals or entities are already approved by the Commission or another regulator.”

Amended paragraph 3.13 (changes to proposal highlighted):

3.13 When considering the suitability of an applicant the Commission will look beyond the applicant itself and may for example consider those connected with the applicant such as • persons relevant to an application by reason of their being likely to exercise a function in connection with; or likely to exercise such a function or have such an interest in the licensed activities;, • are shadow directors;, • persons or other entities who are controllers of the applicant;, and/or • ultimate beneficial owners. In respect of the applicant and others connected with the applicant the Commission has regard to the following elements and seeks evidence to support and enable an assessment to be made against each one:

- - Identity and ownership – This includes the applicant’s transparency in relation to the beneficial ownership of the applicant and those who finance and profit from its operation.
  - Finances – For operating licences this will include the resources likely to be available to carry out the licensed activities and the legitimacy of the source of the capital and revenue finance of the operation.
  - Integrity – Honesty and trustworthiness. Willingness to comply with regulatory responsibilities, uphold the licensing objectives and work cooperatively with the Commission.
  - Competence – Experience, expertise, qualifications, and history of the applicant and/or person(s) relevant to the application. Ability to comply with the regulatory responsibilities, uphold the licensing objectives and work cooperatively with the Commission
  - Criminality – criminal record of the applicant and/or person(s) relevant to the application.

Our view: The Gambling Commission’s unwillingness to tailor its information requirements when dealing with public (vs. private) companies will frustrate many, including us, as this is something we have lobbied on for many years. Publicly traded companies are subject to usual and regular trading on the public market and are generally regulated by both a securities regulator (such as the US Securities and Exchange Commission) and the national stock exchange (such as the New York Stock Exchange). By their very nature, their ownership is ever-changing and subject to market volatility meaning it can fluctuate daily or even hourly. In certain cases, applicants/licensees, or their ultimate parent companies, that are publicly traded, are simply unable to comply with the Gambling Commission’s information requirements, which are sometimes without gambling law, regulatory or licensing basis. We have significant experience dealing with such issues; please get in touch if you would like advice.

We also note that, while removing the bullet points in the first list in paragraph 3.13, the Gambling Commission has removed the reason why the applicant may be considered connected (i.e., by having an interest in the licensed activities). A typo or just lazy draftmanship? Unfortunately, this adds ambiguity to a section of the Policy which is already prone to wide interpretation.

Proposal 6. Requirement to provide evidence of source of funds

Proposal: Policy to confirm that the Gambling Commission will request evidence of the source of finance for a new gambling business at the application stage in order to satisfy itself the operation is not being financed by the proceeds of crime and that profits would not be used to fund criminal activity.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. it would be beneficial to include examples of documents that would satisfy evidence requirements;
2. use of word ‘tainted’ is pejorative;
3. there should be specific mention of terrorist financing and sanctions; and
4. the reference to the Gambling Commission being ‘fully satisfied’ may indicate that it is going beyond its scope in terms of acting reasonably and proportionately in line with legislation.

Gambling Commission’s position: In this instance, the Gambling Commission took comments regarding the phrase “tainted by illegality” into account and replaced it with wording more closely aligned with the first licensing objective – see below. The first paragraph of the proposal was implemented as originally drafted. The Gambling Commission was clear in its response that it does not intend to provide further examples of documents that satisfy its evidence requirements. It also reiterated its policy to take a “risk-based and proportionate approach, including in respect to the amount and detail of information an applicant is required to provide.”

Amended paragraph 3.28 (changes to proposal highlighted):

As stated above, the Commission will also wish to be satisfied as to the sources of the applicant’s finance to satisfy itself that such funds are not ~~tainted by illegality~~ associated with crime or disorder.

Our view: As noted in our blog on 1 December 2021, it has long been the Gambling Commission’s policy to request evidence from applicants to satisfy itself that the business will not be financed by the proceeds of crime or used to finance criminal activity. Such requests unfortunately, often meet resistance as stakeholders, particularly institutional ones, are reluctant to share information on funding structures and/or individual investors – so it has been unhelpful that until now, there has been little mention of the regulator’s requirements in its policy documents. We therefore welcome this change to the Policy as it at least now reflects the Gambling Commission’s practices and will therefore put potential licensees (and their stakeholders, to the extent they are adequately informed) on notice that the regulator will, in detail, query and request evidence relating to, the source of finance for the proposed business. Please get in touch if you have any questions regarding the financial evidence that needs to be provided to the Gambling Commission.

Proposal 7. Clarification that licensees have ongoing reporting obligations

Proposal: Policy to include examples of the types of matters that should be notified to the Gambling Commission from time to time including changes in ownership/control, regulatory returns and licence variations if a licensee is likely to exceed its fee category.

Respondents’ views: Although most respondents agreed with the proposal, some noted that:

1. further examples could be added, for example changes to corporate and/or governance structures, change of name and/or organisation, changes to ‘natural persons’ benefitting from the gambling operations, all key events etc.;
2. the Policy suggests the onus is on the applicant to self-police the correctness of the licence when the Commission is operating for this specific reason; and
3. content in new paragraph is already covered elsewhere, for example in the Licence Conditions and Codes of Practice (“LCCP”)so not needed here and there is no rationale to explain the inclusion.

There was also a suggestion that licences should have an expiry date and require review (at the applicant’s cost) on a periodic basis.

Gambling Commission’s position: The original proposals were implemented as drafted. The Gambling Commission rejected requests for further examples claiming that the inclusion of examples was not intended to provide an exhaustive list of all matters that the licensee should report. The regulator acknowledged however, that the examples cited were already set out in the LCCP and/or on its website but complained that “some licensees are not reporting these changes, submitting regulatory returns, or submitting variation and/or change of control applications in the required timescales. We remain of the view that the addition of some key examples highlights to licensees the importance of these matters and, by extension, the importance of reading and understanding their licence conditions thoroughly and putting in place mechanisms to comply”. The regulator further noted that licences do not have an expiry date and a change of this nature would require an amendment to the 2005 Act.

Our view: It is essential that licensees consult the LCCP to understand their reporting requirements, including what types of changes in ownership/control are reportable as key or other reportable events. We agree with the Gambling Commission that all too often, we hear stories of licensees notifying the regulator months or years after changes of corporate control have occurred and/or a licensed entity has exceeded its fee category. It is important that licensees have controls in place to monitor such activities and ensure compliance with requirements. This is critical if a change of corporate control may have occurred given the risk of revocation for non-compliance with section 102 of the 2005 Act. Please get in touch if you have any questions regarding reporting requirements to the Gambling Commission.

Proposal 8. Minor updates to reflect changes in internal policies

Proposal: Several minor updates to the Policy.

Respondents’ Views: Respondents made a number of comments in connection with these changes including the following requests:

1. that online guidance be made available as a complete document;
2. that the Gambling Commission further define company structure and give further details about whether this means within the licensed entity group or the full group structure; and
3. that the Gambling Commission’s expectations on revenue from other jurisdictions be made clearer.

Gambling Commission’s position: The Gambling Commission acknowledged comments that online guidance would be better placed in one downloadable document and confirmed that “this improvement will be explored in the new financial year, as part of continuous improvement, and taken forward as soon as practicably possible”. Requests for more clarification on company structure were however, refused on the basis that this is a policy document and company structures can vary enormously. There was no response to the request for revenue notification requirements to be made clearer.

Our view: We look forward to the day when online guidance can be downloaded into one downloadable document – but query how long this will take. As an aside, we also agree with the Gambling Commission’s observation that company structure can vary enormously. If you are in any doubt regarding disclosure requirements, please get in touch with us and at an early stage if you are submitting an operating licence application to the Gambling Commission.

The changes to the Licensing, Compliance and Enforcement Policy Statement took effect on 23 June 2022. Please get in touch with us if you would like assistance on any licensing matters.

26Sep

The Gambling Commission’s Checklist for Licensees on Good Practice Complaints Handling

26th September 2022 Adam Russell 235

Following a review of licensee complaints policies which contained “a number of areas for improvement”, the Gambling Commission published advice and good practice tips for operators on 21 July 2022. This blog serves to summarily remind licensees of existing rules and guidance enclosed in the Gambling Commission’s update.

Player complaints: relevant themes

Research from the Gambling Commission found that 8% of players have made a complaint in the past, with an additional 4% reporting their wish to complain but failure to do so. These statistics are supplemented by qualitative data which suggests that some players refrain from pursuing complaints procedures because it is often considered a “tedious process”, with some licensees appearing “purposefully difficult to reach”.

However, it is important that players can locate policies and “raise their complaints without any barriers” to “improve outcomes” for both them and operators.

Although mentioned in the detailed leaks in July 2022, it remains to be seen whether a gambling ombudsman scheme will be introduced, as part of the Gambling Act Review, to adjudicate gambling complaints.

Checklist for good practice complaints handling

In light of this, the Gambling Commission issued the following checklist for good practice complaints handling:

ensure your complaints process is clear and short;
include clickable and appropriately functioning links, including a link to the complaints procedure on your homepage;
avoid jargon/legalese and use plain English instead;
inform players what information is required to investigate their complaint;
include details of the 8-week time limit for either resolving the complaint or issuing a final response;
clearly indicate whether a final decision or ‘deadlock’ has been reached;
utilise technology (such as webforms and decision trees) to help guide consumers through the complaints process, but always provide alternative contact methods;
ensure that your complaints procedure is accessible for all, including vulnerable people, with adjustments readily made where required;
maintain a virtual paper trail;
utilise consumer support tools, such as Resolver; and
provide clear signposting to ADR providers.

The overarching theme is that licensees should design their complaints procedures in a transparent, clear and accessible manner.

Next steps

We strongly encourage licensees to review their complaints procedures against the Gambling Commission’s checklist on good practice for complaints handling, making them as simple as possible, and ensuring policies are implemented.

Please get in touch with us if you require assistance in developing appropriate internal policies and/or updating your complaints procedure in line with the Gambling Commission’s checklist.