David Clifton: Licensing Expert – Grave new world order for British gambling operators

David Clifton

At the end of May, Tim Miller, Executive Director at the UK’s Gambling Commission made a speech at the IAGA International Gaming Summit in New York. Just over a month later, the Commission unveiled its new enforcement strategy, intended “to ensure operators put customers first and raise standards” in the words of Sarah Harrison, the Commission’s Chief Executive.

These two events have served to disclose a clear dichotomy between:

  • on the one hand, the Commission’s very firmly held opinion that the gambling industry must take its social responsibilities seriously and focus more on what its customers, communities and society expects of it, and
  • on the other hand, the equally firmly held opinion by some industry respondents to the enforcement strategy consultation that the Commission’s consumer-focused rationale for the tougher enforcement regime amounts to, at best, “regulatory creep” or, at worst, the Commission exceeding its powers and remit by seeking to extend both its regulatory authority and the licensing objectives under the UK’s 2005 Gambling Act.

The Commission has responded to that industry opinion by saying that “there is nothing new about placing the consumer at the heart of the regulatory system” and that “a fast changing gambling industry requires all of us to stay alert to changing consumer experiences, including new risks to the detriment of consumers. Placing a greater emphasis on consumer interest ensures that both operators and regulator recognise and respond to these changing circumstances, whilst remaining consistent with the licensing objectives”.

Tim Miller’s speech adopted a similar tone. He suggested that the industry should be asking itself: “Society wants to change the terms of its contract with the gambling industry. The question is ‘Are you ready’?”. The general thrust of his thesis was that the 2005 Act constituted a social contract between the gambling industry and the British public.

He postulated that one side of the bargain behind the 2005 Act was the offer of “one of the most liberal gambling markets in the world, where the industry would have greater freedom to innovate in the products they can offer, to operate in a flexible business environment and to generate profit for their directors and shareholders”. No doubt those within the industry reading this will form their own view whether they have received this side of the bargain.

In Miller’s view, the other side of the bargain was that, in return, society expected gambling operators to take their social responsibilities seriously. He said that not only were the ‘clauses’ in this social contract based on strict legislative and regulatory requirements (including the licensing objectives), but that, in addition, “society included additional terms that cover corporate behaviour, social responsibility, consideration of the public interest” and “terms that are unwritten, implied and subjective”. 

Intellectually, that is an interesting argument, but I question whether it is sustainable as a matter of fact, given that the 2005 Act expressly gave the Gambling Commission a specific duty to promote the licensing objectives and imposed on it a requirement to publish a social responsibility code that exists within the Commission’s Licence Conditions and Codes of Practice, with which all licensed operators must comply and which are to be taken into account by the Commission in exercising any of its functions.

The Commission’s recent enforcement action against the likes of Lottoland, 888 and BGO, coupled with its support of the current Competition & Markets Authority investigation into unfair terms and conditions, provide good examples of how it effectively exercises its regulatory functions and how the regulatory regime works in practice.

What then are, and what is the sustainable evidence to substantiate Miller’s contention that operators should also comply with, additional “terms that are unwritten, implied and subjective”? He suggested that those terms stipulate “how businesses perform their role in society” and that whilst regulatory intervention has typically occurred when society starts to feel that business is not “playing by the rules”, in today’s world, “instead of regulation being the natural response of choice, we are witnessing more direct action by society itself”. He gave, as an example, consumer boycotts of companies that are thought not to be paying their fair share of tax.

In what I suspect was his most contentious comment in relation to the ‘social contract’ that he maintains exists between the industry and the public, he said that “the route for seeking redress if that social contract were to be breached would not be to a court of law but to the court of public opinion. Disputes would not be adjudicated on by a judge but would be determined by pressure groups, politicians and the media” and that “whilst gambling hasn’t yet been subject to the more extreme end of consumer action, there is growing evidence that public attitudes are starting to shift towards that direction”.

Foremost in the evidence on which he relied was the Commission’s annual report “Gambling participation in 2016: behaviour, awareness and attitudes” that indicated a marked increase in negative sentiment towards gambling, with only 34% of people in Great Britain thinking that gambling is fair and can be trusted, compared with almost 60% in 2008. He summed up the report’s findings by saying “there is still public support for the existence of gambling as a leisure activity but growing concern about the way it is being offered”. One cannot help but wonder whether that concern has been primarily induced by sensationalist headlines in certain best-selling parts of the UK’s press about FOBTs and Premier League football players’ gambling activities.

I am not for one moment suggesting that there is no room for the gambling industry to improve its social responsibility standards. The experience from the first year pilot Annual Assurance Statement scheme for larger gambling operators has, for example, very effectively focused minds on how to improve identification of, and how to minimise harm suffered by, at-risk as well as problem gamblers. In addition, GambleAware’s recently published Evaluation Protocol will assist operators’ responsible gambling initiatives by providing a framework for them to evaluate customer interventions and positive results are flowing from the growth of multi-operator self-exclusion schemes. One hopes too that positive results will flow from the Commission’s call earlier this year for operators to take customer complaints more seriously by operating complaints procedures that are “genuinely accessible and give consumers trust that their concerns have been listened to and acted upon in a timely way”.

However, is it really the case that things are now so bad that, as Miller maintains, “the contract between the gambling industry and society is under pressure and rapidly needs some attention”? Is it instead the case that the industry needs to get the message across to the public (as effectively as its sales marketing messages) that it has taken fully on board the Commission’s fundamental position that the consumer is at the heart of gambling regulation and that it is actively taking steps to raise social responsibility standards accordingly?

That’s not all because it must also be borne in mind that the Commission clearly wants:

  • not only “an industry culture where if something goes wrong, an operator recognises the consumer impact, quickly informs us, and swiftly implements an effective remedy, prioritising the interest of those affected”,
  • but also a move away from the idea that the social responsibility agenda is driven solely by what the Commission tells, or what the law requires, the gambling industry to do, and that operators should focus more on what their customers, their communities and ‘society’ expects of them.

A grave new world has most certainly dawned.

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David Clifton – Director – Clifton Davies Consultancy Limited

dc@cliftondavies.com