July 21, 2020

In recent weeks we have seen three Parliamentary reports published which will all play a critical role in shaping the future of gambling regulation in Great Britain (and possibly beyond). Each report’s vision for the future of the gambling industry varies in its tone and coherence, but they present clear themes which we expect will dominate much of the policy debates that will take place when the formal government review of the Gambling Act eventually commences. These include familiar areas such as advertising, ‘affordability’ checks, online limits and responsible product design, as well as recommendations to impose a new ‘duty of care’ on operators and to categorise loot boxes as gambling once and for all.

Below is the first of a series of blog posts that will examine these key trends from the co-head of our team, Jason Chess, who assesses the House of Lords report and its observations about the role of the regulator, the Gambling Commission.

The House of Lords’ report ‘Gambling Harm – Time for Action’ (‘the Report’) commences its substantive discussion of the Gambling Commission at Section 194, page 54.[1]

The Report starts by taking issue with the core purpose of the Gambling Act 2005, namely that gambling should be permitted to the extent that it complies with the ‘licensing objectives’.[2] The Report calls for this binary construct to be reversed. It recommends that the relevant provision should be amended to say that gambling will not be permitted until the Commission is satisfied that it complies with the licensing objectives. The Report seems to acknowledge that this rearrangement of the syntax of the 2005 Act is largely visual in effect, offering as justification its view that the current enabling wording apparently ‘sends the wrong message’. The Report does not acknowledge that the relevant Section of the 2005 Act – Section 22 – already reflects this priority in its existing structure. It puts the pursuance of the licensing objectives in paragraph (a) and the entirely conditional permission of gambling in paragraph (b). It is quite clear from the existing Section 22, as currently drafted, that gambling may exist only to the extent that the Commission considers it to be ‘reasonably consistent’ with the licensing objectives and that visually and in substance the gambling is wholly conditional upon the preceding requirement of compliance. Looked at from a lawyer’s viewpoint (or indeed a practical viewpoint) one struggles to see reason why such a meaningless rearrangement of word seems so important to the Report. That however is to ignore the political sense that the word ‘message’ carries in the Report.[3] It is this cosmetic tweak to the wording that will of course enable a future press-release with the ‘We have banned gambling’ headline to be gifted to a future minister, just as the grant of several hundred gambling licences from 2014 onwards was ludicrously trumpeted by the minister at the time as a ‘crackdown’. A less cynical commentator might be tempted to take at face value the Report’s own justification for the change in ‘message’, namely that since the enactment of the 2005 Act the degree of harm caused by gambling has become clear. But this is factually untrue. The Report itself cites the Government’s own evidence at paragraph 264 where it says that ‘Rates of problem gambling have been relatively stable at under 1% for many years’.[4] At worst the rates have stayed stable, at best there has been a decline. The current level of problem gambling is a valid and necessary discussion but the suggestion that these levels have only recently become clear and represent some sort of sudden crisis is quite untrue.

The quibble over Section 22 leads on to another odd discussion, this time on the importance of the identification and prevention of potential and actual harm.[5] The implication that this is not already the overriding priority of pretty much everyone in the remote gambling industry will come as quite a shock to anyone with even the most tangential connection with the industry. As with the Section 22 discussion, the Report is honest enough to acknowledge that the Commission does indeed already see this as one of its ‘main tasks’ but says that it should be ‘recognised’ by making it a ‘central statutory aim’. Once again, the 2005 Act already accomplishes this. Section 24 provides for the Commission to draw up a ‘Code of Practice’ which sets out how the ‘vulnerable’ are to be protected: a direct quotation from Section 1 of the 2005 Act, the licensing objectives. This is the next-but-one section to Section 22 (referred to above) and is clearly the commentary upon, or the fleshing-out of the Commission’s core obligation in Section 22 to procure the licensing objectives. It is a paramount part of the 2005 Act already. It is impossible to read the 2005 Act in any way which fails to see the protection of the vulnerable as ‘core’ already – and what do the Report’s words ‘identification and prevention’ in any case add to the overarching statutory duty of ‘protection’? The Report seems to miss the significance of Section 24 and the significance of the codes of practice it refers to. In the substantive discussion of Section 24 ‘one or more codes of practice’ are referred to and ‘one of these’ must deal with the licensing objectives.[6] The Report seems to envisage this as some sort of small-print or ‘click-wrap’ document sitting on the shelf alongside many others. It shows no awareness that Part II of the LCCP is actually the whole ‘bible’ by which consumer care is accomplished and which represents the practical implementational response to the licensing objectives as they relate to customer care.

The political thread of the Report rears its head at another juncture, in paragraph 208. In discussing various changes volunteered by the remote gambling industry the Report notes that the industry has not offered any such changes voluntarily but has had to be pressurised by the ‘tide of opinion’. The Report is confident that future change will, similarly, only come from ‘continuing pressure from the public, the press, and of course the Gambling Commission’.[7] At this point the ‘modus operandi’ of the Report appears in plain view. The mechanism for change and regulation is to be public opinion. But there is no recognition at all that public opinion is fickle and can be shaped and directed by inaccuracies, anecdotes, single-issue campaigners and individual tragedies. It is a thousand miles away from the sort of evidence-based approach that any industry, let alone one where less than 1% of customers suffer serious harm, is entitled to demand. Unfortunately, and perhaps just as dangerously, the Commission itself seems to have been judged by the Report in the same way. After some carping that even the largest regulatory settlements were insufficient and that individual players receive no redress directly from the Commission, the Report concedes that the action on GAMSTOP, the credit card ban and the limiting of recipients for the levy were positive steps. But even these, according to the Report, were ‘made as a reaction to external pressure…which many have been calling for for a long time’.[8] The sin of the Commission seems to have been its refusal to follow public opinion. These paragraphs show no cognisance whatever of, for example, the evidence of Dan Taylor, Paddy Power CEO, who in paragraph 242 reveals that Paddy Power voluntarily axed non-compliant affiliates, or Conor Grant, COO of Sky Betting and Gaming, who closed SkyBet’s entire affiliate program in 2017 over compliance concerns – steps which were taken due to genuine compliance concerns on the part of highly ethical businesses seeking to take the initiative on customer care and which were nothing to do with public pressure.

So it seems that the court of public opinion – no doubt as articulated by highly motivated anti-gambling groups and a highly partisan media – is to be the directing mind of the Commission as well as the industry. Indeed, paragraphs 202-239 of the Report betray the influence of the same interest groups. As we have seen above, para. 203 misrepresents gambling harm as some sort of emergent crisis when in fact it has been stable if not declining for years. Paras. 203 and 215 misunderstand and accordingly misrepresent the legislation currently in place in an attempt to discredit it as unfit for purpose. Paras. 208 and 235 assume that gambling operators will not change their behaviour unless forced to do so by ‘public opinion’. Paras. 235 and 236 similarly accuse the Commission, effectively, of doing nothing unless frightened into doing so by public opinion. Para. 220 states that gambling operators are unaffected by the financial penalties imposed upon them and that the £2.2m imposed upon Paddy Power was ‘laughable’. Paras. 229 to 232 rehearse the usual complaint that aggrieved individuals cannot use the Commission as an arbitration body in disputes with operators. The Report notes fairly enough that this is a failure of the ‘system’ but at no point is mention made that all consumers have available to them a no-cost independent third-party arbitration provider – mandated by the Commission as part of the ‘codes of practice’ that the Report passes over (IBAS is in fact itself charged, judged and condemned in paras. 390-396 on the basis of the evidence of a single aggrieved witness).

It appears that the testimony of persons with ‘lived experience’ carries all before it – facts, contrary evidence, objectiveness, the nature and effect of existing law. Paragraphs 230 to 233 are a case in point. In para 230 a Mr Parente offered evidence that the Commission provided ‘no support, no feedback and no help’. In para. 231 ‘Gambling with Lives’ offered evidence that the Commission ‘thinks that all it needs to do is to talk to the operators’. In para. 232 the Report acknowledges that ‘the functions of the Commission are limited by statute’ but then immediately proceeds to condemn the Commission anyway. The very next paragraph, 233, opens with the words ‘Professor Orford was one of the very few witnesses prepared to say that the Gambling Commission was doing a good job, but even he had to qualify this…’. In case anyone might have missed the insinuation of incompetence here, paragraph 234 makes clear that in the eyes of the Report the Commission has failed to be ‘alert, dynamic and proactive’. IBAS receives the same treatment in paragraph 411, needing to be replaced on the basis that it ‘is already seen by some as having close links to the industry’. Seen by whom?…and on what basis?…and with what merit? The Report consistently declines to assess the agenda of hostility. Some of it may indeed be justified, very much of it probably not. But the Report does not even address the need for such objectivity, let alone attempt it.

As far as concrete changes to what the Commission is and what it does, the Report says nothing of particular substance. The recommendations boil down either to things that are obvious anyway or else platitudes. Paragraph 201 suggests a new funding structure. Paragraph 22 proposes a purely cosmetic re-jig of the already perfectly adequate Section 22 in relation to the Commission’s core statutory function. Paragraph 227 recommends that fines should ‘reflect the…size of the offender’ which is a factor the Report seems not to know is already included in the Commission’s assessments as to quantum (though it is admittedly not referred to in the 2005 Act). Paragraph 239 recommends a triennial review of the Commission, taking evidence from ‘a wide range of interested persons and bodies’, presumably because no-one at the DCMS can be bothered to support or peer-review the work of the Commission.

Apart from the flaws, non-sequiturs and plain self-contradictions caused by its purely political approach, the wider failings of this part of the Report are twofold.

In the first place it has no historical sense. There is no awareness that the remote gambling industry has only recently ceased to be an explosively expansionist digital start-up. Since the issuance of British ‘point-of-consumption’ licences in 2014/2015 the industry has made quantum strides in terms of overall customer care and now possesses a thoroughly mature understanding of its obligations to society. Much of the customer harm that exists today is historical. It is the legacy of a time when both industry and regulator were working away from the Budd report’s libertarian premise that gambling was a leisure choice for consumers to manage just like any other digital offering. The industry is by no means perfect even today and work remains to be done but it is now not just open but warmly receptive to sensible objective regulation, including self-regulation, as never before.

In the second place the Report has no geographical sense. The British remote gambling industry is without any question at all one of the most intensively regulated and policed in the world if not the most. The Report showed no awareness that the sanctions imposed pursuant to British licences have over the last few years been far, far heavier than under any comparable gambling regulation. Nothing remotely approaching the range and severity of British sanctions have been imposed in any other jurisdiction and only today are other European jurisdictions such as the Swedes beginning to follow the British example. The Report bays for blood and demands to know why licences are not revoked. Part of the answer is that operators who cannot resource the standards of British compliance either resign their licences or do not attempt to enter the market. The regulator is not perfect and work needs to be done, particularly around matters of impartiality, transparency, objectivity of process and its concerning recent tendency to privilege ‘lived experience’ testimony from individuals. But it is unfair to suggest that all of this work has been motivated by no more than a terror of headlines. In fact, the Commission is at its worst when reacting to the morning’s headlines and at its best when it is doing what Neil McArthur promises in paragraph 217 of the Report: conducting with the industry an ‘appropriate relationship, firm but fair’.

[1] https://publications.parliament.uk/pa/ld5801/ldselect/ldgamb/79/79.pdf (accessed 15th July 2020).

[2] Paras. 202-203, 205.

[3] As used in para. 203.

[4] Paragraphs 262 – 264 discuss the various statistics. The Commission’s own 2019 data suggests a 0.5% rate of ‘problem gamblers’ down from the Government’s 2016 figure of 0.7%.

[5] Para. 204.

[6] Para. 215.

[7] Para. 208.

[8] Para. 235.