The UK’s Department for Digital, Culture, Media and Sport (DCMS) this week officially launched its review of the Gambling Act 2005 (the Review) with the publication of two important documents: the Terms of Reference and Call for Evidence, and its Response to the House of Lords Select Committee Report. In this article we consider what the early signs are for the industry, as well as how the Review interacts with other regulatory consultations in the industry.
Regulatory Framework and Background
A formal review of the Gambling Act 2005 (the Act) was a widely supported pre-election manifesto promise from the current UK government, rooted in the belief that the Gambling Act 2005 is not fit for purpose in the digital age.
The Act forms the framework for the regulation of virtually all forms of gambling in Great Britain, with the exception of the National Lottery. The Act codifies the current Gambling Commission licensing structure for gambling operators and B2B suppliers, and established the Gambling Commission itself (the Commission) as the industry regulator. The Commission manages the licensing process, sets the Licence Conditions and Codes of Practice (LCCPs) that all licensees must abide by, and is responsible for enforcement of the Act and the LCCPs.
The power to amend the LCCPs in response to emerging issues has been used multiple times over the past 15 years, for example the recent ban of the use of credit cards and the rules around age and identity verification were implemented by way of updates to the LCCPs, without the need to update the Act.
We previously wrote about the reasons for launching such a review, and the extent to which changes to increase player safety that appear to be driving the Review could be implemented separately. Since the summer, calls for evidence and consultations have duly been launched by DCMS into the use of loot boxes and by the Gambling Commission into remote customer interaction and affordability checks, with another consultation on game design for online slots also recently concluded. The Commission is also in the process of implementing changes to VIP schemes, which came into effect in October, and guidance relating to preventing reverse withdrawals. The Review acknowledges that these consultations will continue in parallel, though it is unclear how it will be ensured that they produce outcomes that align with the findings of the Review.
What will the Review be looking at?
The Review will cover six main areas.
1. Online Protections – players and products
The Review will consider whether the current system of player protection, which requires gambling operators to track customers’ behaviour and intervene if there are indications of gambling harm being suffered (often through the use of an algorithm), is sufficient. It will specifically consider whether any system which is designed to tailor protections to each player should be replaced by blanket statutory controls, such as the spend limits to be considered in the affordability consultation.
It will also gather evidence on ‘white label’ agreements and the extent to which these are used by brands who would otherwise not be able to meet the GB regulatory standards themselves.
This will be of particular importance to the online industry, and we expect significant engagement from operators on these issues.
2. Advertising, sponsorship and branding
The Review will consider whether safer gambling messages in advertising are effective, whether the current regulation of gambling advertising (which is delivered by a combination of the UK Advertising Code, the Gambling Industry Code of Socially Responsible Advertising and the LCCPs) is sufficient and whether there is a net positive or net negative from allowing gambling sponsorships across sports and esports. Promotional offers, such as bonuses and free spins, and the operation of VIP schemes will also be considered.
This section is not just relevant to the gambling industry – it will be of importance to sports bodies (in particular, football clubs and esports orgs) as well as commercial broadcasters.
3. The Gambling Commission’s powers and resources
The Review will consider whether the current flow of fees from licensees to the Commission is adequate to sustain the Commission and support the full gamut of its regulatory activities. The introduction of an additional levy of operators will be considered if it is felt that the Commission requires further resource.
The review will also consider whether the Commission’s current investigations, enforcement and sanctioning powers are sufficient to effect change in the behaviour of operators and raise standards.
Evidence will also be gathered on the extent of black-market activities in Great Britain and the powers that the Commission may require to challenge these. The regulated industry may well have important input it wishes to provide on this issue.
4. Consumer redress
The Review will consider whether changes such as the introduction of an ombudsman are necessary in order to provide more effective redress to individual consumers where an operator has breached its obligations under the LCCPs.
5. Age limits and verification
The Review will seek evidence on the extent of illegal underage gambling in the UK, and whether additional protections may be required for young adults (in the range of 18 – 25 years old). It will also consider raising the age for society lotteries and category D gaming machines to 18, in line with the recent announcement raising the age for National Lottery play to 18.
6. Land based gambling
The Review will consider whether the current regulation of land-based gambling is appropriate for the digital age and, in particular, whether it allows the land-based gambling industry to compete with online services. As part of this, the legislative landscape for casinos will be also be considered.
Finally, the Review will also look at the role of other licensing bodies, such as local authorities, and whether they are sufficiently empowered to effectively fulfil their role in relation to gambling and gambling premises.
Interaction of the Review with Gambling Commission consultations
The terms of reference and the scope of the Call for Evidence offer genuine hope that the Review will be based on an analysis of evidence provided by all sides of the gambling debate, including the industry itself, which we called for in our previous article. This should be warmly welcomed, as should the fact that any changes to (or replacement of) the Act can be properly scrutinised by Parliament.
However, it is important to note that the Commission is, separately, continuing with its consultation on affordability. That consultation raises the prospect of the Commission bringing in mandatory default limits on monthly gambling spend.
The concept of a regulator determining limits on what individuals should spend on a lawful leisure activity is of wider significance than many seem to appreciate. If blanket default spending limits can be imposed on the population in the name of public health, might we see similar default limits on our discretionary spend on alcohol, tobacco or high fat, salt and sugar foods, each of which constitute a far greater public health problem than gambling? At the very least, we would suggest that such a seismic change deserves the Parliamentary scrutiny afforded by a proper legislative process, and should be considered as part of the Review rather than potentially being implemented before it.
Call for Evidence: Next steps
All interested parties are encouraged to submit their responses to the Call for Evidence by email to firstname.lastname@example.org. The terms of reference, call for evidence and instructions on submitting can be found here.
The call for evidence closes at midnight on Wednesday 31st March 2021.
DCMS Response to the House of Lords Select Committee Report
More so than the Call for Evidence, the DCMS Response to the House of Lords Select Committee Report gives an indication of the Government’s thinking on specific policy issues, beyond a desire to gather evidence before making judgments.
It is true that many of the responses to the House of Lords Report refer simply to the fact that evidence will be gathered and considered as part of the Review, and we have not repeated those here.
However, there are a few points of particular interest, which include DCMS:
- expressing very lukewarm views on the idea of a licensing scheme for affiliates, which appear to suggest that policing affiliates is likely to remain the responsibility of licensed gambling operators;
- showing strong support for the concept of enhanced affordability checks, and for the Gambling Commission to continue with its consultation, but without much more insight into what affordability really means. At least there is an acknowledgement of the need for a proper solution to be industry-wide rather than operator-specific, and that there is a “need to strike an appropriate balance between player protection and the freedom of individuals to choose how they spend their money”;
- rightly (in our view) appearing to reject the Select Committee’s recommendation that sports bodies should not be able to sell their media rights to betting operators, which will be a relief to sports rights holders as well as the betting market;
- suggesting that lottery duty will remain as a turnover tax not a gross profits tax, and that the advertising spend of society lotteries might be capped; and
- making the important statement that “The government agrees that it is important to build the evidence base on gambling harms with high quality, independent research and is committed to working to this goal. We will be considering how to ensure the availability of high quality evidence to support policymaking as part of the Gambling Act Review”.
On that final point, it is to be hoped that DCMS recognises that evidence provided by anti-gambling groups is no more independent that that provided by the industry, and that both deserve proper consideration, as well as proper interrogation.