Reflecting on the Gambling Commission's activities in the last year and what the future might hold for gambling regulation in Great Britain
This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
This summer the gambling industry has had some insight into what the Gambling Commission's current and future priorities are when it comes to regulation. This came in the form of the Gambling Commission's Annual Report for 2015/16 and Philip Graf's departing speech as Chairman of the Gambling Commission at the RSA in July. Both of these provide some insight into what we can expect to see in the coming year and it is apparent that issues around protecting consumers are likely to remain at the forefront of the Gambling Commission's mind. As (in the words of Graf) gambling becomes a "normalised" activity it is interesting to look at how the Gambling Commission hopes to engage and work with operators to protect consumers in an ever more digitalised world. The threat of tougher enforcement action against operators and personal licence holders also looms on the horizon.
Changing industry
Graf's speech and the Gambling Commission's Annual Report both emphasised the rapid changes within the gambling industry over the past few years. According to Graf, online gambling now has the largest share of the British gambling market accounting for 28% of gross gambling yield and 70% of online gambling activity is now conducted from a mobile device. The growth of digital has also been accompanied by a growth in advertising. Graf reported that between 2013 and 2016 television advertising expenditure on gambling products increased from 80 to almost 120 million pounds. Alongside more conventional forms of advertising, there has been an increase in online advertising and programme sponsorship. As we looked at recently Graf also addressed the world of esports, stating that last year the esports gambling market was worth £56 million. The Gambling Commission has committed to understand developments in these areas – and also fintech - in its Annual Report, recognising that in order to understand any associated risks (particularly to younger demographics) there is a need to understand the underlying technology.
Graf warns that these "transformative" changes in the gambling industry have led to a "normalisation" of gambling in British society. It is this increased normalisation of gambling which the Gambling Commission seems to focus its energy on. In its eyes the risk of harm to consumers is increased where gambling is engaging and in the line of sight of increasing numbers of consumers.
Protecting the consumer
The Gambling Commission remains committed to tackling gambling related harm. In light of the fact that problem gambling can have such widespread impact on society as a whole Graf sees it as a key public health issue. Meanwhile in its Annual Report 2015/16 the Gambling Commission's Chief Executive, Sarah Harrison, said that the aim of the Gambling Commission was to put "consumers at the heart of regulation". An increased and "sharper focus" on consumer protection is notable since Sarah Harrison took over as CEO and shows no signs of abating.
A new Social Responsibility code was introduced into the Licencing Conditions and Codes of Practice (LCCPs) in May 2015, allowing the regulator to take more direct action on misleading advertising. The Gambling Commission has worked closely in the last year with the likes of the Committee of Advertising Practice and the Advertising Standards Authority to scrutinise the way in which gambling products are being marketed on social media, particularly for free bets and bonuses.
Other multi-agency cooperation includes 'Operation Linden' an initiative lead by the Information Commissioner's Office to tackle spam marketing.
Looking forward, the Gambling Commission warns the industry in the Annual Report that it has identified practices that may potentially breach consumer law, including problems with online marketing and terms and conditions. With the focus continuing to be on protecting consumers, there is no doubt that operators should continue to work carefully to ensure they do not mislead consumers, review their customer-facing terms and conditions against the requirements of consumer law, including the Consumer Rights Act 2015, and pay close attention to developments in this area.
In light of these commitments, we would expect to see the Gambling Commission working more closely with the Competition and Markets Authority as we have begun to see already in the last year. The industry should be prepared for a tougher approach from the Gambling Commission where they find that operators are not being fair and open with consumers.
Cooperation but tougher on rule breakers
The Gambling Commission has underlined that where possible it has sought to cooperate with operators to ensure compliance. However the Gambling Commission notes that engagement from operators tends to be at compliance manager level and it has a keen desire to shift engagement – and accountability - to the board level.
Annual assurance statements have been introduced this year in a pilot scheme, a move designed to hold boards directly to account. This requires operators with a gross gambling yield over £25m to provide senior level self-assessment regarding the degree of compliance with licensing objectives including the way improvements can continue to be made in the future.
The Gambling Commission has obtained a number of voluntary settlements from large operators over recent months. Graf and the Annual Report warned that the Commission is reviewing this approach to non-compliance. Graf said that operators do not appear to be learning lessons from these settlements and that, if this remains the case and standards are not raised, there will be tougher and more impactful enforcement going forward. Graf also suggested that going forward the Commission will increasingly look to hold personal management licence holders to account.
Boards and PML holders should therefore look to actively engage internally to promote compliance from the top down, but also with the Gambling Commission on all necessary fronts and maintain active dialogues with the Gambling Commission.
Combatting crime
Unsurprisingly, a key component of the Gambling Commission's strategy is to ensure that operators confront the risks of money laundering. The Commission has held anti money laundering forums and workshops as well as introducing a requirement for operators to conduct a risk assessment, which aims to identify money laundering vulnerabilities. The Commission launched a consultation in late 2015 to amend the LCCPs in order to strengthen the provisions relating to crime prevention. The consolidated LCCPs, which will come into effect on 31 October 2016, will seek to enhance regulatory tools to combat crime as well as encourage operators to take a more proactive approach to meet their licensing objectives. You can read more about recent and future developments in anti-money laundering here.
Conclusion
Both the Annual Report and Graf's speech make it clear that the Gambling Commission thinks there is still much to be done to protect consumers, combat crime and increase the engagement and accountability of senior management in these issues, despite some gains in the past year. Given the strong indications that enforcement action will get even more tough in the coming months, operators would be well advised to look closely – and critically – at their current level of compliance and act accordingly.
