David Clifton: Licensing Expert – Death knell sounded for FOBTs?

On 31 October, Gambling Minister Tracey Crouch announced the launch of a 12-week consultation on proposals for changes to gaming machines and social responsibility measures that will run until 23 January 2018.

The consultation covers Government proposals relating to:

• maximum stakes and prizes for all categories of gaming machines permitted under the Gambling Act 2005 (including a reduction in the maximum stakes on FOBTs),
• allocations of gaming machines permitted in all licensed premises under the Gambling Act 2005, and
• social responsibility measures for the industry as a whole to minimise the risk of gambling-related harm.

This long-awaited announcement follows a year-long review of gaming machines and social responsibility measures that commenced in October 2016. The stated objective of that review was to ensure the right balance between a sector that can grow and contribute to the economy, and one that is socially responsible and doing all it should to protect consumers and communities.

The announcement brought little cheer to the gambling industry as a whole and, arguably, even less to the betting sector, even though the immediate post-announcement upward movement share price of both William Hill and Ladbrokes Coral betrayed a sense of relief that the news on FOBTs was not even worse.

What is clear from the Minister’s foreword to the consultation is that the Government believes there to be a clear need to “ensure that appropriate measures are in place to protect the vulnerable people that are exposed by the current weaknesses in protections” with the consequence that, insofar as industry requests for more liberalised machine restrictions and entitlements are concerned, it is “not minded to bring forward significant changes at this time”.

What is also clear is that the Government will not introduce any changes in gambling policy that benefit the industry unless they are evidence-based. The Minister emphasised this when she said: “while the Government welcomes ideas for socially responsible growth, any proposals must be backed up with clear evidence of adequate player protections and effective risk management strategies”.

Therein lies the challenge for the retail betting sector, bearing in mind that the consultation invites views on a range of options on reducing the maximum stake on FOBTs from £100 to somewhere between £2 and £50.

The challenge presented by the consultation document is that on the one hand, the Government “cannot ignore the evidence put forward as part of the call for evidence to support action, or the persistent concerns from many stakeholders and local communities about these types of gaming machines [i.e. FOBTs] and their potential impact on players and wider communities” and, on the other hand:

• it is perceived by the Government that the retail betting sector has provided little evidence that self-regulatory measures introduced since 2013 have made any significant impact on the rates of problem gambling, or on the degree of harm experienced by individuals, and
• it is unclear whether the 2015 £50 staking regulations, requiring greater interaction between betting office staff and customers, have had a measurable impact on harm.

As a result, the Government is concerned that the measures taken to date by the sector do nothing to counter the wider social impact and the potential amplification of harm for those living in the most deprived communities. It now wants operators to encourage customers to set voluntary time and spend limits, with hard stops when limits are met, and to utilise algorithms to “identify problematic play”.

It has also asked the Gambling Commission for more information about how better tracking and monitoring of play on FOBTs can help with interventions to protect players and if spin speed on games such as roulette should be looked at with a view to reducing “the potential for large losses on the machines and the risk of harm to both the player and wider communities in which these machines are located, such as the increased health costs associated with problem gambling”.

It also wants to see the gambling industry establish a process with the Responsible Gambling Strategy Board, GambleAware and the Gambling Commission in which data on how gaming machines are played is routinely shared, for the purposes of monitoring, evaluation and research, with a view to both improving methods of identifying harmful play on all gaming machines that enable high losses and developing interventions to help players who might be suffering harm.

The retail betting sector, therefore, has limited time in which to effect improvements in each of the above respects and to collate evidence of the type that is presently missing, at least in the Government’s eyes.

Whilst some commentators believe that the likely outcome is a reduction in the maximum stake on FOBTs to £30 or £50, I am not so sure. The consultation document presents a number of minimum stake options and, based on industry data, an indication in the case of each option of the percentages of players identified as (a) problem gamblers, (b) at risk of harm and (c) neither problem nor moderate/low-risk gamblers. That appears to present compelling evidence to a Government set on greater player protections that a reduction of the maximum stake to £2 on all B2 content would be the most appropriate option to pursue.

My money is on a £10 or less maximum stake, which would be in line with the range identified in September by Breon Corcoran, Chief Executive of Paddy Power Betfair, which must surely have been regarded by Government as an admission by industry that social responsibility concerns outweigh the economic concerns around betting shop closures, job losses and a reduction in Treasury receipts from machine games duty.

The online sector faces challenging times too, having attracted a good deal of regulatory concerns over the last year, including alleged unfair terms and misleading practices around sign-up and free bet promotions that are currently being investigated by the Competition and Markets Authority, and culminating in the recent eye-watering penalty packages for social responsibility and other shortcomings suffered by 888 and Gala Interactive, and to a lesser extent by Stan James Online.

As a consequence, it is no surprise that the following measures are now being proposed:

• • changes next year to the Gambling Commission’s LCCP designed to create more robust customer protections,

• a major two-year responsible gambling advertising campaign, funded by gambling operators,
• • new advertising guidelines, to be drawn up by the Committees of Advertising Practice to help protect those at risk of problem gambling and under 18 year olds,
  • restrictions to ensure that gambling content and channels cannot be accessed by under-18s via social media, and

• increased funding by gambling operators for research, education and treatment of gambling-related harm, in the absence of which the Government will consider introducing a mandatory levy on gambling operators.

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David Clifton – Director – ‎Clifton Davies Consultancy Limited