David Clifton – Strengthening social responsibility (again)!

Clifton Davies co-founder David Clifton has a look at the increasing regulatory scrutiny on the gambling industry and warns there may be more to come. 

My “Licensing Expert” article last month posed the question whether a regulatory crackdown on gambling advertising was around the corner.

We now know at least part of the answer. The Department for Culture Media & Sport has published a call for evidence by 4 December 2016 in relation to its review of gaming machines and social responsibility measures that can be accessed via this link.

A large part of the industry media comment has been on those parts of the call for evidence that seek views on gaming machines, more specifically:

• maximum stakes and prizes for all categories of permitted gaming machines and
• allocations of gaming machines permitted in all premises licensed under the Gambling Act 2005,

with particular attention being focused on the extent to which betting operators’ measures on B2 machines (FOBTs) have improved player protections and mitigated harm to consumers and communities.

However, that is not the only area where DCMS is seeking evidence. It has also posed the question “is there any evidence on whether existing rules on gambling advertising are appropriate to protect children and vulnerable people from the possible harmful impact of gambling advertising?”

In relation to the “existing rules”, it has cited:

• removal by the 2005 Act of longstanding advertising restrictions, allowing for TV advertising of all gambling products,
• the subsequent strengthening of the Gambling Industry Code for Socially Responsible Advertising, that includes a 9pm TV watershed for all gambling advertising, (except for bingo, lotteries and the advertising of sports betting around televised sporting events) and, since earlier this year, the ending of sign-up offers on television before 9pm, and
• the four-strand review initiated by the government in 2014 that broadly found that the various codes of practice that regulate gambling advertising remained effective in protecting people from harm.

The DCMS call for evidence asks “is there anything further that should be considered to improve social responsibility measures across the industry?” There will certainly be those who consider the answer to that to be a very firm “yes!”. For example:

• on 24 October, the Culture Secretary Karen Bradley signalled her alarm both as secretary of state and as a parent that her “children can recite just about every gambling advert that there is”,
• recent Gambling Commission statistics refer to the proportion of 18 to 24 years olds with a serious gambling problem having increased over the last three years from 0.8% in the year to September 2013 to 1.4% in the year to September 2016, and
• a number of advertising agencies have reportedly spoken out against the ethics of gambling operators.

 There are certainly grounds for concern that a blanket ban on all gambling advertisements before the 9pm TV watershed may be on the cards. This would have a dramatic effect on operators, given the increase in gambling advertisements on television from 90,000 in 2005 to 1.4million in 2012

It is therefore clearly important from the industry’s perspective that it takes a carefully considered and responsible approach to its own response to the call for evidence. I believe the Commission will be looking for more than words. I think it is likely to want action along the lines demanded of the large operators who submitted their first Annual Assurance Statements earlier this year. In other words, operators should aim to satisfy the Commission that they are focusing on identifying problem and at-risk gambling, tackling it and tracking the effectiveness of their progress in tackling it.

If that wasn’t challenging enough news for the industry, also within the last month the Gambling Commission has announced that it is supporting a Competition and Markets Authority (“CMA”) investigation into whether gambling operators are treating customers fairly.

The CMA has already contacted a range of gambling operators to demand information about their use of potentially unfair terms and misleading practices. Its press release in relation to the investigation can be read here.

This ought not to create undue fear for the industry. LCCP licence condition 7.1.1 already requires licence-holders to “satisfy themselves that none of the terms on which gambling is offered are unfair terms within the meaning of the Consumer Rights Act 2015” and to comply with those terms. It also requires that “an accurate summary of the contractual terms on which gambling is offered must be made available to customers and set out in plain and intelligible language”.

However, it must be borne in mind that the CMA investigation has been commenced in response to concerns raised by consumers on issues such as cancelling bets, altering odds after bets have been accepted, and offering misleading sign-up promotions.

A number of potentially unfair terms and conditions were set out in the Commission’s February 2015 “Strengthening Social Responsibility” document including:

• misleading use of the term ‘free’ in relation to free bets and bonuses, if combined with other conditions such as minimum churn,
• terms that make customers fully responsible for any discrepancies on their betting receipts, even where there is undisputable evidence that their intentions have been misrepresented,
• the acceptance of late bets which are void, without sufficient information to consumers about late bet restrictions and how to reclaim monies staked for bets which are now void,
• bets accepted even though the payout would be more than allowed by the operator, and
• delays in meeting customer withdrawal requests, for example where the option to reverse withdrawal is made available.

In a press release confirming support for the CMA investigation, Sarah Harrison, the Gambling Commission chief executive, has said: “We expect the gambling industry to ensure terms and conditions are not unfair. However, operators are still not doing enough. I continue to have concerns that many of these appear to bamboozle rather than help the customer make informed choices. Gambling, by its very nature, is always going to involve risk but customers must have faith that if they win, they will not end up feeling that the deck is stacked against them because of an obscure condition that they did not properly understand. We approached the CMA to work with them to address issues in the gambling sector and we are delighted to have agreed a joint programme of work to ensure terms are fair and transparent.” 

Signalling that some consequential changes can be expected in this respect too, the Commission’s recently published Remote Gambling and Software Technical Standards consultation (that runs until 17 January 2017) – see here – states that “over time, the Commission may make amendments to the RTS to tackle any specific remote technical issues emerging from our work with the CMA about the use of potentially unfair terms and misleading practices”.

On 8 November, the Gambling Commission held a conference called “Raising standards”. Sarah Harrison’s hard-hitting conference speech entitled “Accelerating the pace of change” can be read in full here. But key themes included the need for a genuine and public commitment by operators to meet their social responsibilities and to treat customers fairly, described by her as “an increasingly important theme for the Commission”.

Her speech made it abundantly clear that:

• at the heart of the Commission’s vision for raising standards is its requirement that operators put consumers at the heart of everything they do, demonstrate that their interest in consumers’ needs is genuine and do so at a faster pace. With this in mind, she urged operators to think “what does the consumer need?” rather than merely “what does the Gambling Commission expect?”
• to ensure that the needs of consumers are met, it is proposed that not only will the Commission’s existing bias in favour of regulatory settlements rather than licence reviews be removed so that these options are placed instead on an equal footing, but also higher penalties will be likely in future, in particular where systemic and repeated failings by operators occur.

You have been warned!

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David Clifton – Director – Clifton Davies Consultancy Limited