01Jun

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

1st June 2023 Bahar Alaeddini 296

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

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

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

What is an ombudsman?

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

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

The Gambling Ombudsman

The Government wants the Gambling Ombudsman to be:

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

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

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

Potential scale of unresolved complaints

2021/2022 statistics:

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

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

Potential issues

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

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

Frontrunner

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

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

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

Next steps

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

31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan 315

As the dust settles (at least temporarily) following the publication of the White Paper, we have “take time to think” so that we may share our insights in a series of blogs and vlogs on the many and varied aspects of the proposed gambling reforms. With the Gambling Commission already seeking to manage expectations by saying that the implementation of the White Paper “will likely take a number of years to fully complete” and urging “more haste, less speed”, this may be a long running series… We will focus on what we consider is important or interesting, ideally both, and our content will be concise and hopefully thought provoking.

Speaking about the White Paper recently in the House of Lords, Lord Grade referred to a saying in the film industry – “hurry up and wait” (also a song by Stereophonics and a military motto) – describing where you get to the location after being forced to spend a lot of time waiting, everybody is standing around, ready, but nothing happens. Having waited nearly 30 months for the publication of the White Paper, coupled with the latest (estimated) indication from the Gambling Commission that the first wave of consultations will not be seen until mid-July, this saying seems apt.

1. Spirit and intention of the White Paper

Throughout our White Paper Series, we will have as our touchstone the aim of the Gambling Review when it was published on 8 December 2020:

“The Government wants all those who choose to gamble in Great Britain to be able to do so in a safe way. The sector should have up to date legislation and protections, with a strong regulator with the powers and resources needed to oversee a responsible industry that offers customer choice, protects players, provides employment, and contributes to the economy.”

The White Paper is true to that laudable aim. As the Secretary of State says in her Ministerial Foreword, at the heart of the Government’s Review is making sure it has the balance right between consumer freedoms and choice on the one hand, and protection from harm on the other. The Government seeks to achieve this balance through an extensive package of measures across all facets of gambling regulation. If it is to be successful, the Government – and Gambling Commission – will need to retain an unerring focus on this balance, essentially the spirit and intention of the White Paper, as it is inevitably buffeted by vested interests through consultation, regulation, and legislation.

2. All things to all people

The first thing to say about the White Paper is that it has been broadly well received; when it was delivered in Parliament, within all sectors of industry, by the NHS, in the third sector and at the Gambling Commission. This was equally broadly unexpected, given the acrimony and divergence of views between stakeholders during the “hurry up” phase, so why has the White Paper been such a resounding success? At the risk of oversimplifying, but not wishing to overlook the obvious (including the lack of detail and long grass kicking), it is precisely because the Government has achieved a healthy balance in its proposed reforms, for which it deserves enormous credit, and it is because there is something valuable in the White Paper for everyone.

Responding to its publication, and demonstrating some of the “wins” for the respective stakeholders, comments on the White Paper included:

“Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry.” Gambling Commission CEO, Andrew Rhodes.
“BGC members will now work with Government and the Gambling Commission to deliver targeted and genuinely ‘frictionless’ enhanced spending checks to further protect the vulnerable, a new Ombudsman to improve consumer redress, and overdue plans to modernise the regulation of UK casinos.” Betting & Gaming Council CEO, Michael Dugher.
“..it should not be left to the health service to pick up the pieces left behind by a billion-pound industry profiting on vulnerable people, so I fully endorse the statutory levy set out in today’s White Paper and look forward to reading the proposals in detail.” NHS Mental Health Director, Claire Murdoch.
“At GamCare, our priority is making sure that people who need help receive it as quickly as possible. We therefore welcome the clarity the Government has provided on how research, education and treatment will be funded.” Gamcare CEO, Anna Hemmings.
“As chair of the all-party parliamentary group on gambling related harm, I welcome this long overdue White Paper. In the APPG’s 2019 interim report, we asked for affordability checks, parity between land-based and online stakes, an independent ombudsman, a curb on advertising and, most importantly, a statutory levy. Job done.” Carolyn Harris MP.

The introduction of a statutory levy paid by licensees and collected and distributed by the Gambling Commission under the direction and approval of the Treasury and DCMS ministers, is a flagship reform. The long debate as to whether there should be a statutory levy is at an end, there will be a DCMS consultation on the details of its design and, critically, the total amount to be raised. The statutory levy will fund research, education and treatment of gambling harms and is a load-bearing pillar of the reforms for those advocating the “polluter pays” principle.

Financial risk checks, maximum stakes for online slots and the creation of an independent gambling ombudsman have also been very warmly received by key stakeholders and will all be consulted upon by DCMS. The new non-statutory ombudsman will be the subject of our next blog in this White Paper Series.

The Gambling Commission most certainly did not get everything its own way, with Government not religiously following the advice from the regulator, but the Gambling Commission will be the recipient of powers and resources intended to make sure that all gambling is overseen by a “beefed up, better funded and more proactive” regulator. Licence fees will be reviewed (upwards of course) to ensure it has the resources to deliver the commitments across the White Paper. When Parliamentary time allows, it will even get greater power to set its own fees. Detailed analysis of the Gambling Commission’s additional enforcement powers will be the subject of one of our early blogs in this White Paper Series, including some which may have passed below the radar in all the excitement.

The industry positives from the White Paper are more nuanced. The land-based industry can certainly look forward to the long overdue modernisation of casinos and bingo clubs – including greater machine entitlements, credit in casinos for non-UK resident customers, sports betting in all casinos, and additional opportunities for customers to win on the main stage bingo game – and cashless payments across all land-based gambling sectors (following consultation by the Gambling Commission on the player protections which would be required).

From an online industry perspective, the White Paper is arguably as good as could reasonably have been expected in the present political, media and regulatory environment. The Government has resisted calls for bans on advertising, rejected demands for blanket and intrusive low-level affordability checks, and will consult on maximum stakes for online slots at higher levels than leaked previously. However, in outlining the Government’s vision for the future of gambling in moderately business-friendly terms, the White Paper does provide policy direction to which to hold the Gambling Commission accountable, the beginnings of some certainty and a glimpse of what political and regulatory stability might look like, not to mention the hope that the next gambling review might be a generation away.

3. The upcoming consultations

Yes of course everyone wishes the White Paper had gone further (in their direction, naturally). Yes of course there is a lot of work to be done to implement the reforms, once we are no longer “waiting”. Yes of course the devil will be in the detail. But as even the Gambling Commission and the Betting and Gaming Council (the “BGC”) agree in their welcoming press releases, the White Paper is a “once in a generation” opportunity for change. All the key stakeholders will now be seeking to secure their respective prize and imploring Government to prioritise their interests and deliver on its promises at the earliest opportunity, not least through Government and Gambling Commission consultations.

If the risk of the reform process descending into warring factions and reaching a standstill is to be mitigated, and this would not be in anybody’s interests, it is imperative that the process itself remains balanced and that all the key stakeholders see comparable progress in relation to their interests. From an industry perspective, this means engaging positively, constructively, and wholeheartedly with the upcoming consultations, proposing pragmatic and sensible solutions to the difficult challenges the Government and the Gambling Commission face, not least in relation to cashless solutions and frictionless checks, substantiated by evidence wherever possible. It also means holding the Gambling Commission to account on what is expected of it by the Government in the White Paper, with fair prioritisation of its (no doubt stretched) resources and no reforms being left far behind, even when the Gambling Commission is not in favour of them. It means focusing on its prize and not seeking to “re-litigate” settled issues or actively seeking to frustrate other stakeholders, or indeed otherwise antagonising Government which has delivered upon a balanced vision.

The proposed reforms are going to take longer than any of the stakeholders want as they seek to claim their prizes, but they are worth waiting for, the consultation phase will be critical, with both Government and the Gambling Commission under immense pressure to listen, and we will of course be happy to assist clients with their responses where that would be helpful, as we did in the last once in a generation opportunity in 2005!

10Jan

Department for Digital, Culture, Media & Sport Committee Call for Evidence on Gambling Regulation

10th January 2023 Ting Fung 296

The Department for Digital, Culture, Media & Sport Committee (“DCMS”) Committee is examining the Government’s approach to gambling regulation, including investigating the progress made by the Government in addressing the issues raised by Parliament, how to ensure that regulation keeps pace with innovations in online gambling and the links between gambling and broadcasting and sport.

As part of its inquiry, the DCMS Committee is inviting written evidence on the following questions by 5pm on Friday 10 February:

What is the scale of gambling-related harm in the UK?
What should the key priorities be in the gambling White Paper?
How broadly should the term, ‘gambling’, be drawn?
Is it possible for a regulator to stay abreast of innovation in the online sphere?
What additional problems arise when online gambling companies are based outside of UK jurisdiction?

DCMS Committee member, Julie Elliott MP, has stated:

“Gambling acts as an enjoyable pastime for large numbers of players, but regulation is struggling to keep pace with the rapidly changing way in which it happens today. This puts people at risk of the devastating harm it can sometimes cause to lives. The DCMS Committee’s inquiry will look at the scale of gambling-related harm in the UK, what the Government should do about it and how a regulatory regime can best adapt to new forms of online gambling, based both in and outside the UK.”

Figures from the Ernst & Young report (the “EY Report”) commissioned by the Betting and Gaming Council (“BGC”) and published last November, in The economic contribution of the betting and gaming sector: 2021-2022, also reflect gambling as a popular pastime through which the gambling sector contributed £7.1bn to the UK economy between 2021 and 2022. The EY report’s statistics also serve to highlight the wider context of gambling regulation reform, on which BGC CEO, Michael Dugher, commented last month:

“Our members pump billions into the economy, support the treasury with more billions and support over a hundred thousand jobs. But this contribution is never guaranteed. This industry needs to thrive if it is to maintain its status as a global leader.

“We urge the government to find an evidence-led, balanced white paper that protects the vulnerable, allows the vast majority who bet safely to continue to do so and, crucially, allows businesses to thrive.”

Certainly, the Government’s approach to regulation needs to be balanced and proportionate, however, as delays to the publication of the White Paper continue, a factor that remains to be addressed, is the timeliness of action. Question 2 of the Call for Evidence suggests the possibility of further delay of the White Paper, which was promised “in the coming weeks” for much of last year. The latest word on the street is that the White Paper will be published in February. However, we have learned to be somewhat sceptical about any gossip on this topic; certainly, the questions being asked by the DCMS Committee, and especially question 2, might suggest a longer timeline.

07Jul

The Affordability Debate (4): The Commission Unmasked

7th July 2022 Julian Harris 314

Readers may recall the three articles we have previously written analysing the Gambling Commission’s (the “Commission”) covert operation to introduce a requirement on operators to conduct evidenced affordability checks. Whilst we cannot claim that it is as a result of those publications, it is encouraging that the Commission has finally and “officially” been taken to task on this controversial issue by no less a body than the Digital, Culture, Media and Sport (the “DCMS”) Committee of the House of Commons (the “Committee”). On the penultimate day of the Committee’s Inquiry on What next for the National Lottery? (30 June 2022), the Committee heard evidence from Commission CEO, Andrew Rhodes and its Executive Director, John Tanner. Whilst much of the questioning by the Committee related to the subject matter suggested by the title of the Inquiry, the Committee then turned to the subject of affordability checks and then customer interaction.

We can all sympathise with being taken off guard by unanticipated questioning, but less so with Mr Rhodes’ apparent denial of responsibility for, or even knowledge of, matters that occurred before his appointment, especially in relation to such a critical issue for consumers and the industry.

Even less worthy of sympathy was his apparent inability to explain the relationship between the newly published Customer interaction guidance – for remote gambling licensees, the November 2020 Consultation and call for evidence – Remote customer interaction (the “Consultation”) on which the Committee interrogated Mr Rhodes, and the issue of affordability which was the basis for the questioning. This is particularly the case given that the core and most contentious of the Commission’s ever evolving proposals in relation to affordability, the introduction of mandatory financial thresholds for affordability checks, was introduced in the Consultation.

Secrecy v transparency

To quote Jeremy Bentham, “secrecy, being an instrument of conspiracy, ought never to be the system of a regular government.” summarises neatly the Committee’s displeasure – to put it mildly – at the Commission’s failure to publish the results of its Consultation. As the Chair, Julian Knight MP, put it:

“This is important work. Affordability and affordability checks are of great public interest. It seems to be very strange that this has not been made publicly available. I do not know what is so secret about it that it needs to be handed over covertly to DCMS and then inform the White Paper. We have a right to see it as well and so does the general public, because we pay for you.”

Mr Rhodes denied knowledge of the reasons, on the basis that it pre-dated his appointment. Now that he has been the CEO for a year, one would expect that he knew, or ought to have known, about the Commission’s handling of an important document relating to a key Commission policy that has been disclosed to DCMS, which has been the subject of numerous licence reviews conducted by the Commission, is of critical importance to those whom the Commission regulates and to consumers, and which has been the subject of very substantial commentary. As the Chair commented:

“It does seem to be very strange that you should announce a consultation in November 2020 on such an important area, which frankly does need scrutiny more widely than just DCMS and the Department, and that was not released publicly. I thought that would be of interest to parliamentarians, rather than for it just to be handed covertly to officials at DCMS. That seems a very strange approach and lacking in transparency, frankly.”

Strange indeed. A lack of transparency on the part of the Commission has unfortunately permeated this issue; coupled with the Commission’s sleight of hand in introducing affordability requirements outside due process, this has left operators confused by the relationship between their regulatory obligations in law and the Commission’s expectations, as explained in more depth in our second article (The Affordability Debate (2): Ambiguous Regulatory requirements). Mr Rhodes again pleaded ignorance:

“I was not at the Commission at the time, so I am very happy to look at what the reasoning was for it not being published. My understanding since I have joined the Commission is that we have fed into the White Paper that affordability checks will be considered as part of the White Paper’s recommendations, rather than have essentially two bites at that.”

More disappointing is that he did not explain what the Commission is doing now in relation to affordability. Given that the Committee referred to this as being “such an important issue”, we consider this to be somewhat disingenuous: it does not reflect the degree of transparency which the Committee felt entitled to expect, nor to the level which the Commission expects of its licensees.

Realpolitik

As operators are painfully aware, the Commission has for some three years done rather more than, in the word of Mr Rhodes, “…fed into the White Paper…”. The Consultation was followed just three days later by the Compliance and Enforcement Report 2019 to 2020 (6 November 2020) (the “2020 Enforcement Report”). In fact, even earlier – in its Compliance and Enforcement Report 2018 to 2019 (27 June 2019) (the “2019 Enforcement Report”) – the Commission outlined various open-source data that may help licensees to “assess affordability for its GB customer base and improve its risk assessment and customer interventions.” In referring to the recommendations it made in the 2019 Enforcement Report, and considering customers who have “demonstrated gambling related harm indicators and been able to continue to gamble without effective engagement”, the Commission opined that: “Furthermore, these individuals have funded their gambling without satisfactory affordability checks and appropriate evidence being obtained.” . The 2020 Enforcement Report proceeded to outline various open-source data that can help licensees to “assess affordability for GB customers and improve risk assessment and customer inventions”. Similar to the 2019 Enforcement Report, this data primarily focuses on average annual salary as outlined in the ONS survey of Hours and Earnings.

The core, critical “requirement” is that:

“Operators must interact with customers early on to set adequate, informed affordability triggers to protect customers from gambling related harm. Failure to do so could render the operator non-compliant.”

“Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.”

The Commission takes the view that its Enforcement Reports serve as indicators to licensees of its expectations, for which licensees can be held to account; these reports therefore arguably contain policy positions that, if enforced, are more akin to licence conditions or code provisions. We have discussed previously our concerns that the Commission may be making indirect changes to licence conditions and/or code provisions through its introduction of requirements to adhere to guidance and this is perhaps another, somewhat broader, example of that. Aside from the fact that the Commission is not adopting a risk based and proportionate approach, the evidential basis for the Consultation included research in which customers admit to having sometimes lost more than they can afford, rather than their gambling being unaffordable. The Commission cite the Enforcement Reports as evidence in support of their proposed measures, when in fact the Enforcement Reports deal with “clearly unaffordable” gambling, whilst the proposed affordability constraints go far beyond customers losing tens of thousands, extending to affordability checks after lifetime losses of as little as hundreds of pounds; a point not missed by the Committee, when the Chair referred to “consumers potentially having to submit bank statements or tax returns to bet as little as £100 a month.”

We do not agree that the Enforcement Reports carry the weight of formal guidance. It is clear from the content of the Licence Conditions and Codes of Practice (the “LCCP”) that in cases where the Commission expects licensees to adhere to formal guidance, it says so. Social Responsibility Code Provisions 2.1 (anti-money laundering – casino) and 3.4 (customer interaction) are examples of the Commission explicitly requiring licensees to adhere to, or take account of, specific formal guidance. Nowhere in the LCCP is there any reference to the Enforcement Reports carrying such weight, as we have previously explained (The Affordability Debate (2): Ambiguous Regulatory requirements).

So, in the case of affordability, the Commission expects licensees to abide by a series of “requirements” none of which are clearly set out in licence conditions, codes of practice, or formal guidance issued by the Commission under its statutory remit, but in their Enforcement Reports and the existing Customer Interaction Guidance and more broadly the Consultation. Breach of a Code under section 24 of the Gambling Act, 2005 may properly be taken into account by the Commission in the exercise of its statutory function but acting contrary to whatever opinions it expresses in its Enforcement Reports, or in speeches, may not. There can therefore be no basis for the Commission, when raising safer gambling concerns, to refer to those Enforcement Reports in its compliance assessment findings, licence review threats or regulatory actions, as it is increasingly doing.

A Bridge Too Far

As licensees know from sometimes bitter experience, and as we explained in our second article on this subject, whilst the Commission has not formally imposed the proposals in the Consultation, it has sought to require operators to abide by them, or variants of them, referred to in its Enforcement Reports, by exerting pressure and threatening regulatory action for failing to implement affordability checks. This is clearly inconsistent, unfair and possibly exceeds its powers. Operators subjected to regulatory action have been pressured by the Commission to adopt affordability checks as if they were a legal requirement. The consequence, aside from placing them at a disadvantage to competitors, has been to create a climate of fear.

This has been exacerbated by confusion as to what the Commission actually requires. Moreover, despite the fact that the Consultation contains proposals for such checks to be applied solely to the online industry, the Commission is requiring such checks also from the land-based industry. The Commission has not merely pre-empted the Government’s decision, it has taken upon itself the role of Government and Parliament, i.e. that of lawmaker.

The whole truth

Mr Rhodes was unambiguous in saying that the issues relating to affordability checks “are something for the White Paper.”

Against the background explained above, it is reasonable to ask how he found himself able to make this statement. He was certainly correct in his pithy summary of how the Commission should have addressed affordability. However, he failed to explain that the Commission has been acting on many of the proposals on which it purported to consult for some three years, without reference to any higher authority. We find this strange indeed, not least given the Committee’s obvious interest and concern about the subject and the Chair’s statement that “affordability and affordability checks are of great public interest.” Given this “public interest” in the issue and the Committee’s concern as to lack of transparency on the part of the Commission, the Committee should have been informed of the Commission’s existing enforcement on the whole industry of affordability checks.

There is little point in speculating as to the reason for this absence, but it is reasonable to question whether (1) Mr Rhodes did not consider it relevant; (2) he was unaware of it and of the numerous licence reviews in which affordability has been an important feature; or (3) he chose not to mention it. If (1) obviously his view was misconceived; if (2) this would be a cause to question his grasp of the Commission’s work; and if (3) one wonders why not.

In the first article on affordability (The Affordability Debate: Protection, Responsibility and the Right to Choose), we commented that in disregarding the Consultation and pre-empting the results, the Commission had become the emperor that had no clothes. He has now been defrocked.

A question of trust

In conclusion, the Committee Chair asked Mr Rhodes if the Commission “have any measures or metrics in place to decide exactly how you are trusted by your licensees, for instance? Is there an overarching survey of that?” His answer was: “Not presently, no. There isn’t.” The answer from Mr Rhodes was correct: an answer that the Committee probably found disappointing.The fact of the question being asked hints at the possibility that the Committee considered there could be a negative response to such a survey.

There are stronger remarks that leave little doubt as to the Committee’s opinion; in questioning on metrics to determine whether the National Strategy to Reduce Gambling harms works, the Chair described the approach set out by Mr Rhodes as “very slipshod”. Having then heard Mr Rhodes admit there were no metrics to determine whether the £40 million spent does any good, the Chair concluded the hearing by saying:

“What do you do? There seems to be money going out the door and no accountability for that money, apart from when you make the award. This money just splashes out there and you have no idea in terms of what this impacts with the licensees. I am struggling to think precisely as an organisation how you are doing your job, because these seem to be key measures and indicators of whether you are successful.”

It is not for us to speculate on the views of licensees, who are quite able to make their views known themselves, but this withering criticism from the Committee reflects what was said by the All-Party Parliamentary Group on Betting and Gaming: there is reason to suppose it may well be shared by others.

As we know from experience, the degree of engagement between the Commission, those whom it regulates and even independent advisers, is negligible. The Commission seems interested in canvassing the views of those whom it knows to be anti-gambling or have reason to dislike the industry. This has been demonstrated by its formation of a group of people with “lived experience”, which meant only those who had suffered a problem with gambling. The Commission has never, to the best of our knowledge sought views from the vast majority who enjoy gambling as an adult leisure activity. For most licensees, the only real engagement with the regulator is through regulatory reviews or other confrontational issues.

In short, this issue demonstrates the need for the Commission to go on an “improvement journey”, be put into “special measures”, or even the equivalent of a “licence review” to establish whether it is fit, able and prepared to carry out the function with which it is charged under the Gambling Act, 2005 and not to make law according to its own whims.