Select Committee on Culture, Media and Sport Memoranda


Memorandum submitted by International Game Technology-UK (IGT-UK)


  IGT-UK Limited welcomes the opportunity to make their submission to the Culture, Media and Sport Committee of the House of Commons in respect of the Government proposals for gambling detailed in the Government's response to the Gambling Review Report "A Safe Bet For Success—Modernising Britain's gambling laws". Our submission follows the Committee's terms of reference where possible.

  IGT-UK is a wholly owned subsidiary of International Game Technology (IGT), the largest designer and manufacturer of gaming machines in the world. IGT is the world-wide market leader in the supply of machines and systems to casinos with an annual turnover of approaching $2 billion. It is listed on NASDAQ and has a market capitalisation of over $5 billion.

  IGT-UK, through its divisions Barcrest UK, Barcrest Games, Vivid Gaming, Red Gaming, Barcrest Spain and Barcrest Netherlands, has been active in the European gaming machine market for over 30 years. We sell between approximately 35,000 jackpot, all-cash and gaming machines per annum to UK and European customers, making us by far the largest UK-based designer and manufacturer of these machines. We also export casino games via our parent company to the US market, making us the only UK designer and manufacturer with a substantial position in the North American casino market.


  The principal UK gambling legislation was framed in the 1960s, and despite being over thirty years old, the structure established under this legislation has, by and large, served the UK well. One of its main objectives was to make the UK gambling industry crime-free and the Royal Commission of 1978 declared that this had been achieved. More recently, a report by the National Centre for Social Research , shows the UK to have one of the lowest rates of problem-gambling in the world. The UK Gaming Board is internationally recognised as one of the best industry regulators in the world; and the UK gambling industry has proven itself globally to be capable of delivering quality products and services delivered with integrity.

  However, the business environment is changing. New technology is creating new opportunities to gamble, making the distinctions drawn by the present legislation difficult to sustain. Video terminals promise to replace traditional reel-based fruit machines, fundamentally changing the position and income stream of the fruit machine designer/manufacturer. Most significantly, the Internet threatens to undermine existing legislation completely by allowing any UK citizen of any age with basic computing skills access to unregulated gambling sites world-wide.

  It is therefore necessary to review and update the current gambling legislation while being mindful that we are starting from a strong position and we should introduce change with caution.


  As a long-term participant in the UK gaming industry, IGT-UK welcomed the Gambling Review as an important step in laying down a flexible legislative framework to serve the UK Government and gambling community during the 21st Century, and made our submission to the Gambling Review Body accordingly. We believe that much of the resultant report was credible, and subsequently submitted a number of suggestions to the Department of Culture, Media and Sport which we considered would improve the overall package of recommendations.

  IGT-UK is pleased to note that the Government's response is a well-balanced distillation of the original Gambling Review Body's recommendations. The Department of Culture, Media and Sport is to be congratulated for their carefully reasoned review of the Gambling Review Body's recommendations, and it is most encouraging to observe that the consultation process has worked admirably on this occasion. It is particularly pleasing to note that the Government's proposals appear to be consistent with many of the suggestions made in our own response, and that the majority of our concerns or reservations with the Gambling Review Body's recommendations have thus been addressed.

  The Government's proposals set out consistent and workable means of allowing adults access to gambling opportunities whilst ensuring that proper controls are in place governing all those involved in the gambling business, that children are protected and that social responsibility is recognised and dealt with. The UK gambling industry has proven itself to be highly professional and reputable, and is considered to be a world leader in terms of integrity, so it is important that any changes do not compromise this enviable reputation.

  Throughout the consultation process, IGT-UK have maintained a number of principles that should underpin UK gambling regulation, and are encouraged that the Government's proposals support the vast majority of these. Pivotal in these principles is that that proper safeguards against criminality; under-age gambling; and problem gambling should be in place, so that adults should be free to choose from the full range of legitimate gambling products available.

  IGT-UK wholeheartedly agrees with the proposal that the UK gambling industry should be governed by a single integrated regulatory body (the Gambling Commission).

  The Gambling Commission should cover all forms of gambling, preferably including the National Lottery and spread betting. It should be adequately resourced and empowered to effectively control all companies and principal individuals involved in the provision of gambling opportunities.


  1.  The impact of the proposals on the suppliers, lessors and the users of gaming machines.

  In general, IGT-UK welcome the Government's proposals in respect of machines, and whilst they appear to be reasonably neutral in the overall impact upon the gaming machine business, this is difficult to quantify because there is much detail yet to be finalised, and the impact upon player behaviour cannot be determined.

  It is expected that the number of machines sold per annum will reduce because a number of All-Cash (Category C) machines will be replaced by jackpot (Category B) machines, which have a longer life before renewal. It is not believed that this impact will be dramatic.

  The introduction of unlimited stake and prize casino slot machines will increase the number of machines sold per annum.

  We often hear it said that UK manufacturers have little experience with casino machine designs, so that the majority of the initial casino machine sales will be from overseas manufacturers. This is not true. Firstly, it should be recognised that all the major gaming machine manufacturers in UK market are already to some extent foreign-owned (by companies from the USA, Germany, Japan and Australia). Secondly, we must understand the likely position of IGT-UK in a liberalised UK casino market.

  IGT-UK has extensive experience in designing casino games for the highly competitive North American market and presently supplies some of the top-performing casino machines in that market. Indeed, IGT's decision to purchase IGT-UK from Bass in 1998 was heavily influenced by the strong casino-game design skills in the business. IGT-UK has a dedicated gaming machine manufacturing plant in Ashton-under-Lyne, Lancashire employing over 400 staff that already assembles product for IGT's European casino machine business and supplies key machine components into the North American casino machine market. IGT's share of compliant European casino machine markets is approximately 30 per cent and its share of compliant North American casino machine markets is approximately 70 per cent.

  It is therefore likely that there will be a direct and positive benefit to UK business and employment resulting from the liberalisation of the UK casino market

  We set out below a number of detailed points which we believe should be considered:

  1.1  Methods of Payment

  We welcome the Government's intention to adopt the deregulation proposals detailed in "Gaming Machines: Methods of Payment" to allow banknotes to be used and to allow winnings to be replayed, and urge that this be effected at the earliest possible time.

  1.2  The impact of annual reviews of the number of machines permitted by Local Authorities to be given careful consideration.

  Businesses need to be able to invest in their future with some degree of confidence, and frequent reviews of fundamental aspects of their operation would create uncertainty. Once a Local Authority has established the number of machines permitted for a premise, unless some fundamental aspect of the business has changed, it is highly unlikely that a review of this number would be necessary.

  In addition, we must be mindful of the limited resources available to the Local Authorities, and if there is no need for an annual review, then it makes good sense to minimise the number of applications submitted.

  We therefore suggest that the number of machines permitted by the Local Authority should remain extant until a substantive change in the premises or operation takes place; and that grandfather rights should apply to the number of machines already established for premises so as to allow these businesses to protect their past investments.

  1.3  A number of Category C to be machines permitted in a pub as an adjunct to the liquor licence together with additional machines at the discretion of the Local Authority is a welcome principal, but the details should be reviewed.

  It is envisaged that the proposed number of two machines adjunct to the liquor licence would generate a large number of applications to the Local Authorities for additional machines, significantly adding to the burden on these offices.

  In order to both protect the Local Authorities from such an increase in burden, and to allow existing businesses to sustain their business plans, we suggest that the number of Category C machines permitted as an adjunct to the liquor licence to be revised upwards to three.

  1.4  The proposals regarding fixed-odds betting terminals in Licensed Betting Offices require clarification.

  We note the proposal to limit the maximum prize available on a fixed-odds betting terminal sited in a Licensed Betting Offices to £500.

  Whilst the Government argues that such machines involve gaming, these terminals are not fundamentally gaming machines and should not contribute to the maximum of four x Category B or C machines to be permitted in Licensed Betting Offices.

  1.5  IGT-UK welcomes the proposal for a Category D non-gaming machine with trivial stake and prize.

  It is desirable to retain children's games with prizes. The size of the stake and prize must be trivial, and a maximum stake of 10p and a maximum prize of £5 cash (or tokens/prizes to the value of £5) would appear reasonable.

  However, the proposal to fix the stake and prize levels without mechanism for review requires reconsideration. It is not reasonable to assume that such values would be appropriate for ever, and at the very least would require review if and when the UK adopts the Euro. It makes sense to incorporate a review mechanism even if it has no effect for some years.

  1.6  IGT-UK welcomes the proposal that all licensed participants in the gambling industry should be free to negotiate commercial terms subject to the usual constraints of Competition Law

  The present rules prohibiting developers of game software, manufacturers and operators from sharing in the gaming machine revenue prevent the industry adapting to changing technology.

  Gaming machine manufacturers currently generate their income by selling machines to operators, who rent them to site owners. However, future gaming machines are likely to become video-based with an open platform, sold once by the manufacturer and then updated using games supplied from a host of design companies, probably downloaded to the video machine via the Internet.

  So, the current commercial model is likely to change. Machine sales will most likely fall and the operators' main expenditure will be on the combination of software and graphics forming a game. Such intellectual property is most naturally dealt with by charging on a per-usage royalty or revenue-share basis throughout the supply chain, prohibited by present legislation.

  1.7  The proposal for the Gambling Commission to be empowered to approve, or otherwise, any new machine type developed is welcome.

  The Government's support of technological innovations is welcome. However, in order that the inventor of a new type of machine may have certainty in planning the exploitation of such an invention, the Gambling Commission should provide a written certificate to the gambling industry as to the regulatory status of any such new machine type that would be binding on the Gambling Commission for a long period (eg 20 years).

  Clearly, the Gambling Commission could revoke such a certificate at any time if it were subsequently discovered that the true nature of the new machine type was not fully disclosed, or if associated conditions specified by the Gambling Commission (as to, for example, the closeness of future machines to the original approved machine) are not met.

  1.8  The regulations governing gaming machine development must be flexible in order to allow innovation and evolution of the structure of the industry to accommodate technological change

  The flexibility of the present UK regulations (based upon the integrity of participants and the working relationship between the industry with the Gaming Board) is envied by many in Europe. A machine testing regime developed by BACTA and the Gaming Board has been successfully adopted by all major machine manufacturers to submit data to the Gaming Board for each machine produced. This has enabled the UK gaming machine industry to be fast-moving and innovative.

  This contrasts with certain European markets (eg Germany, Norway etc.) that insist on detailed approval by a public body or third party for non-casino machines, where these processes have a strong tendency to be highly bureaucratic and have a number of effects, such as:

    —  Slowing the rate of machine development (UK machines are presently developed in 6-8 weeks whereas formal type approval often takes 6 months or more)—increased time to market raise barriers to new entrants

    —  Tendency to favour indigenous suppliers who "know the system" restricting foreign competition

    —  Unresponsiveness to new technology and innovation, thereby stifling the industry

  Whilst formal and detailed machine approval is totally appropriate for unlimited stake and jackpot slot-machines found in casinos, such approval processes for non-casino machines should not be introduced, instead retaining the machine testing regime successfully operated by BACTA and the Gaming Board.

  2.  The potential contribution of casino-development to the economy.

  There is little doubt that the proposals in respect of casinos will have an overall positive effect upon the economy, with the attendant regeneration of local economies. As with any change, there will be winners and loser, but international experience suggests a substantial net increase in activity and prosperity.

  Casinos are heavily regulated, adult-only environments and there is no evidence that problem-gambling is related to the prevalence of casinos.

  3.  The prevention of criminal infiltration of gambling.

  3.1  IGT-UK welcomes the proposal that the Gambling Commission be given significant licensing and enforcement powers.

  The Royal Commission of 1978 confirmed that, as a result of the 1968 Gaming Act, organised crime was no longer a problem, and this remains true today.The proposed strict licensing regime with powers of enforcement can only enhance the integrity of the gambling industry further, subject to the Gambling Commission being adequately resourced to carry out its functions effectively.

  3.2  All participants in the gambling industry should be certified to ensure that they behave (and are seen to behave) with a level of integrity that is beyond question.

  IGT-UK is pleased to note that in addition to licensing gaming machine operators and site owners, the Government is considering licensing of game designers and manufacturers. This is a vital component of the Gambling Commission's regulatory powers and the Government should include such a requirement in the final legislation.

  Without wishing to add to the burden of the Gambling Commission, IGT-UK further believes that manufacturers and assemblers of gaming machines and equipment have different legal responsibilities from games design companies and should be licensed separately. Products that are manufactured or assembled must be as the games designer or software writer intended, and the games design software fitted must be in its originally intended legal form. This may seem a small point but it is vitally important that gaming machine/manufacturers/assemblers are aware of their responsibility to ship product to market without deviation from the high standard adopted by the game designers in accordance with the gambling legislation.

  This will safeguard the probity of the gambling industry and a comprehensive licence structure would ensure the integrity of all participants, allowing the Gambling Commission to impose penalties in the event of breach of the regulations. The Gambling Commission should issue licences according to clearly defined and rigorously enforced criteria.

  4.  The social impact of the changes proposed and the safeguarding of the young and otherwise vulnerable.

  4.1  IGT-UK welcomes the principle that gambling should be a strictly adult activity.

  Gambling is an activity that we know is susceptible to addictive behaviour. In principle, it should therefore be restricted to adults who are capable of making an informed choice as to their involvement.

  We need strict measures to ensure that gambling is an adult activity, comprising clear rules with rigorous enforcement, in order to prevent under-age gambling. BACTA has developed a code of practice which has been successfully introduced by many companies to protect children from gaming machines, and this set of rules could be adopted as the basis of a legally binding code by the Gambling Commission.

  In order to ensure that gambling is an adult-only activity, we welcome the Government's proposals which draw a sharp distinction between two types of locations:

  4.1.1  Adult locations: locations primarily for adults (eg casinos, adult-only arcades, bingo halls, licensed betting offices, pubs, members' clubs). These locations are to be licensed, conditional upon there being clear and demonstrable controls in place to ensure that only adults can gamble in these locations. Any breach of the adult-only rule to result in fines, with an ultimate sanction of the complete withdrawal of the licence.

  4.1.2  Public locations: locations freely accessible to children (eg seaside arcades, cafes, fish and chip shops). No adult gambling machines should be allowed, only trivial games with prizes as permitted by the Local Authority.

  The National Lottery is recognised as a gambling activity, and social responsibility considerations must require that the age limit for participation be raised to 18, in line with all other forms of gambling.

  4.2  Children may have opportunities to play games for prizes but, in order to distinguish such activity from gambling, these prizes should be trivial.

  There is a strong tradition in the UK of children's games with prizes. This tradition has its origins in the funfairs and seaside arcades that have provided family entertainment for many years. There is little or no evidence that such activity is harmful, and without children's games for prizes, many of these traditional businesses would cease to be viable.

  4.3  Problem-gambling creates social difficulties and so active steps should be taken to minimise problem-gambling.

  While the UK is starting from a position as one of the countries with the lowest levels of problem gambling in the world, this should not make us complacent. The UK industry must continue to behave in a socially responsible fashion and work with the appropriate organisations such as Gamcare to seek to minimise problem-gambling.

  The recently established Gambling Charitable Trust, funded by the industry, will support both the necessary research and those companies actively involved in providing help and advice to problem gamblers. All companies involved in gambling, including the National Lottery and those companies specialising in spread-betting, should accept responsibility for social problems that gambling may cause, and as such should contribute to this fund.

  5.  The potential impact on the National Lottery of increased competition following the deregulation of casinos, bingo, pool competitions and society lotteries.

  The Government has expressed the view that the National Lottery should not necessarily be required to compete with other forms of gambling on an equal basis, and we accept that the support of good causes requires the National Lottery to be protected.

  The competitive advantages that the National Lottery enjoy, such as advertising and accessibility, will no doubt be eroded by the Government's proposals, but it will continue to be a privileged gambling opportunity, and we do not believe that the proposals will impact markedly on its position.


  Whilst we recognise that internet gambling does not form part of the Committee's initial inquiry, we strongly believe that this issue requires urgent consideration if the principles of UK gambling are not to be threatened by unregulated offshore developments.

  Internet technology promises a revolution in the gambling industry as it does throughout our society. Unregulated offshore internet gambling threatens to: undermine the UK's successful gambling legislation; increase problem and under-age gambling; reduce UK tax revenues; and promote organised crime.

  The BISL study reflects public concern that Internet gambling should be properly regulated , a view that is shared by much of the gambling industry. Whilst we are pleased to note the proposal for the Gambling Commission to approve UK internet gambling sites and games, and that such approved sites are to be kite-marked, there are other important issues which require consideration:

    —  The laws of other countries could be compromised by allowing their citizens to gamble on UK Government approved sites when internet gambling may be illegal in their own country (such as the United States). We suggest a condition of receiving a Gambling Commission kitemark be that Internet gambling sites respect the laws of other countries and verify the nationality of the gambler, presumably by sight of the player's passport.

    —  Internet gambling to be restricted to adults who have been through a rigorous registration and identification process.

    —  Socially responsible policies based upon advice provided by agencies such as Gamcare on problem gambling to be enforced.

    —  Payment to be by debit card/account only, and not by credit card.

  Much of this will require international co-operation to enforce and the UK should seek to take a leading role in such a development.


  The Government's proposals fit well with the principles we have identified as fundamental to a successful gaming legislation, and we are continuing to work with the Department for Culture, Media and Sport to make improvements to a number of their proposals.

  We are pleased to note the Government's intention to create an embryonic Gambling Commission in advance of the enabling legislation, to work in parallel with the Gaming Board etc. We note that a great deal of detailed work is yet to be done before the proposals can be laid before Parliament, and we have offered to provide the Department for Culture, Media and Sport any assistance in completing these proposals and in formulating the associated gambling legislation.

  If the Culture, Media and Sport Committee would like clarification of any of the above matters we will be happy to make IGT-UK representatives available.

3 May 2002

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