Supplementary Written evidence submitted by the Department for Culture,

Media and Sport (GA 105)

At the recent Select Committee I promised to write to you about whether the "Full Tilt situation" could happen in Britain, specifically Full Tilt's failure (to date) to pay back players' deposits.

At the time of the implementation of the Gambling Act in 2007, the Gambling Commission considered it was disproportionate to introduce requirements for the British-based betting or remote gaming industry to hold a financial reserve. Gambling contracts made since 1 September 2007, however, are legally enforceable under the Gambling Act 2005.

The Commission did consider whether it would be proportionate to introduce requirements for the betting or remote gaming industry along the lines of the casino reserve (an amount set aside or guaranteed or covered by insurance to cover the maximum liability the operator was likely to have to players) to ensure players could withdraw their deposits and winnings. There was, however, very little evidence that, without such prescription, the betting industry or the remote gaming industry had failed to honour liabilities to players. Indeed, in a number of insolvencies the purchaser of the brand had honoured the liabilities to players.

The Commission concluded that, on balance, there was not a cost/benefit case for requiring the then newly regulated sectors (betting and remote gaming) to offer total protection for player funds, not least because it would push up costs and leave less regulated or illegal sites with a competitive advantage which would make it potentially easier for them to tempt players. Instead, the Commission required operators to explain to players to what extent and how their funds were protected. The intention was that consumer pressure, and operators competing to show their corporate social responsibility credentials, would help improve the overall level of protection offered. It is also worth noting that, while the casino reserve was initially maintained, there were concerns from the sector that the reserve was an increasing burden. The Commission looked carefully into the risk of a casino not honouring its liabilities to players and concluded it was extremely small and subsequently removed the requirement for a reserve on the grounds it was a disproportionate burden on the industry.

The Commission had become aware, even before Full Tilt hit the headlines, that remote players thought they had more protection than they did in reality and tended not to consider the risks to their funds when choosing an operator. The Commission has therefore been considering how to make consumers more aware of the risk they run in leaving funds on deposit with an operator, whilst being more prescriptive with operators about the way they look after player funds and what information they give players. The Commission is expected to reach a conclusion later this year, taking into account the report by Peter Dean for the Alderney regulator into lessons learned from the Full Tilt issue.

I hope that clarifies the situation we discussed at the Select Committee hearing. I share your concerns about the present position, but pending the results of the Commission's review, we run the risk of introducing measures which might not be necessary, feasible and proportionate. I'm sure we are all awaiting the Commission's conclusions with great interest and concern!

John Penrose MP

Minister for Tourism and Heritage

7 March 2012

Prepared 22nd March 2012