Evidence submitted by the Casino Operators Association (GA 19)


1. The Casino Operators’ Association (UK).

2. Effectiveness of the core objectives of the Gambling Act 2005.

3. Evaluating the impact of off-shore online gambling operators on the UK gambling sector and what effect the Act has had on this;

4. Why the Act has not resulted in any new licences for casinos or "super" casinos;

5. The effectiveness of the classification and regulation of gaming machines under the Act;

6. What impact the Act has had on levels of problem gambling.

1. The Casino Operators’ Association of the United Kingdom (COA).

1.1 Ten years ago, when the casino industry was represented by one association (The British Casino Association), it became clear to the independent casino owner/operators that the plc members were pushing for a very different agenda regarding legislative change to the casino industry. The short-term fast-buck policies of cross-sector organisations that operated not only UK casinos, but betting offices, online gaming sites, bingo clubs, arcades and most detrimentally overseas gambling establishments meant that the plc operators had a different agenda to that of the independent UK casino operators and the smaller casinos were increasingly outvoted or ignored when it came to policy and lobbying strategies within the BCA.  Hence, in 2001, the Casino Operators’ Association of the UK was formed.

1.2 Since then, the COA has maintained a distance from the BCA and its successor the NCiF because we were formed (as our website declares) "to offer a different forum from that dominated by the short-term, share price driven concerns of plcs. (We) promote a gaming regime that is focussed, realistic and responsible, both socially and financially. While welcoming modernisation, the COA (UK) believes that the unique qualities of British casino gaming requires the long experience of independent owners who still make a powerful contribution to the industry in the 21st Century."

2. Effectiveness of the Core Objectives of the Gambling Act 2005.

2.1 Many of the weaknesses of the Gambling Act 2005 were brought about by the intense and extravagant lobbying of a naïve Government by national and international conglomerate operators. "Free market" advocates saw the casino sector as a pie of which the whole of the leisure industry should have a slice, and the ‘Big 4’ of the betting industry and large overseas operators took full advantage.

2.2 This Association argued strongly at the time of the initial Gambling Review that all that was required was some minor amendments to the gambling legislation and that sweeping change would be wholly detrimental to the existing casino estate. Ten years later, our fears have been fully realised.

2.3 The Gaming Act 1968 effectively halted the uncontrolled proliferation of casinos in the UK largely though its ‘demand test’ and ‘permitted areas’ regulations. Prior to the ’68 Act there were approximately 1200 casinos which, in very short order, were reduced to 120 with the implementation of the 1968 Act. The demand criterion was strictly monitored by the Gaming Board (who firmly guided the local magistrates) under the aegis of the Home Office and accordingly the casino estate stayed within about 10% of that 120 figure for over 30 years.

2.4 Sir Alan Budd, in his Gambling Review Report (presented to Parliament in July 2001) had advocated a free-market approach. In the Executive Summary of the report he claimed:

"We believe that competition between suppliers of gambling activities offers the most effective way of providing a fair deal for the punter. Our proposals for the abolition of the demand test and the permitted areas rule will help to increase competition." (Para 1.17)

He did not mention that removal of the JPs from the equation and the enhanced role of unqualified LAs would hamper the control overview.

2.5 Prior to the Review, gambling was transferred away from the Home Office to DCMS and this free-market ideology took over Government/ DCMS policies after they heard fantastic promises from American, Australian and South African lobbyists of streets paved with gold as a result of their inward investment. The quid pro quo for the overseas involvement was the almost total de-structuring of the existing, successful, British casino model in favour of the American ‘Vegas’ model which is devoid of the ethos of British social constraint. Membership would have to go; advertising and marketing could no longer be restricted; employee ‘fit and proper’ checks would be downgraded; social responsibility would replace personal responsibility and, most important of all, the demand criterion must be abolished.

2.6 This last change came quickly. Only one year after the Government’s response to Budd’s report ("A Safe Bet for Success" in 2002), the Gaming Board for Great Britain noted in their annual report that they (and consequently the local Licensing Magistrates) had been advised by Government that they were only to invoke the demand criterion "if a situation arose where there were reasons to believe that problems of control would result".

2.7 The ‘un-stimulated’ element was thus in effect removed. By the time the Gambling Act 2005 received Royal Assent (and it became clear to the world that only a maximum of 17 casinos would initially be allowed under that Act), there had been a scramble to apply for licences under the still extant 1968 Act. By March 2005, the 120 or so licences had already risen to 138; but worse was to follow.

2.8 DCMS had intended to set a cut-off date of March 2006 for any further applications for 1968 Act casino licences in order that the transition period between the Acts would be free of any licence hearings or appeals. However the incumbent Minister neglected to implement the requisite legislation to halt 1968 Act applications until April 2007. By this time another 90+ casino licences had been applied for and the appeal hearing for the last of these licences (in Leeds) was not heard until October 2009. This was completely outside the intent of Parliament which had, from the outset 6 years previously, been steadfastly against such proliferation.

2.9 Now there are 147 casinos operating in the UK within 53 permitted areas. Additionally there are 42 casino premises licences which have been granted but are not operating (i.e. there are 42 ‘dormant’ licences).

2.10 The 2005 Act has allowed for an additional 8 ‘small’ and 8 ‘large’ casinos, albeit 11 of these are to be allowed in existing permitted areas (due to the distorted Government brief for the Casino Advisory Panel). The full compliment of UK casinos could therefore reach as high as 205 (in 58 permitted areas), although the market can barely support the 140 casinos already operating.

2.11 It has become clear that the problem with the free-market approach is that it could only possibly work in an environment where all market members are relatively equal in size. If not the free market is easily dominated and manipulated by the largest operators - as has happened so dramatically in the groceries/retail sector with the extreme dominance of a few supermarket chains, and the pub/club sector. The casino industry has also found that the large operators soon begin to squash competition by opening next door to their smaller rivals in the hope of putting them out of business, or they buy out their rivals and either rebrand them in their own image or just close them down. This is closely comparable to the betting industry’s recent strategies (whose demand criterion was also removed by the 2005 Act), whereby many rural independent shops have been taken over by the large operators and relocated side-by-side onto the High Street of nearly every major town in the UK.

2.12 The ‘free-market’ idea of positioning establishments adjacent to existing successful businesses has already proved to be highly damaging to previously viable casinos as is clearly shown by the 16 recent casino closures. To allow operators to open in adjacent Local Authority areas would have the same effect if no geographical buffer (i.e. a demand test) is included in the legislative change.

2.13 With regards to the third Licensing Objective of ensuring that children and vulnerable people are protected, at the same time as introducing a slew of supposedly protective measures (which are mainly just time consuming for the operator and serve to absolve gamblers of any personal responsibility), instead of maintaining the casino opening hours of 12pm until 6am as a mandatory licence condition (which would have ensured a national closed/ "cooling-off" period for all customers), the Act left opening hours as a default condition at the discretion of the local authorities. The result has been that, without a nationally applicable closing period, gamblers are gambling until they can do so no more and their money is all spent. Not all of them will be problem gamblers but it has been noticeable that customers are simply wiped out by prolonged gambling in a way that did not happen when there was a short break in their activities.

2.14 The UK now has 24 hour gambling in most areas as local authorities are unwilling and ill-equipped to oppose 24 hour licence applications by powerful operators and, due to market demand, even smaller operators opposed to 24 hour gambling have been forced to follow suit.

Recommendation 1: We fully endorse a review of the permitted areas to promote new areas (as suggested over a decade ago by the BCA), but stand firmly against the abolition or removal of this important regulation.

Recommendation 2: The ‘Demand Test’ should be reintroduced in order to stop the clustering of gambling premises on the High Streets.

Recommendation 3: Bearing in mind the core objectives of ensuring that gambling is maintained crime-free, that it is conducted in a fair and open manner and that children and vulnerable people are protected from being harmed or exploited by gambling, this Association firmly believes that the opening hours default condition of 12pm to 6am should be made a mandatory condition and, further, that the entire gambling portfolio should be returned from DCMS to the Home Office.

3. Evaluating the impact of off-shore online gambling operators on the UK gambling sector and what effect the Act has had on this;

3.1 Throughout the implementation process of the Gambling Act 2005, from the publication of the Budd Report through to enactment and all the way to present day, this Association has consistently highlighted the fact that the previous Government’s Gambling Review and resulting Gambling Act fell far short of one of its main and important objectives: to regulate and control remote gambling.

3.2 In 2009, the Government finally admitted that there was a clear need to revisit the system of regulating remote gambling and so DCMS published a consultation on ‘The Regulatory Future of Remote Gambling in Great Britain’.

3.3 The consultation document cited numerous reasons for the need for change including:

· overseas jurisdictions having different regulatory standards leading to customers experiencing varying levels of protection;

· overseas jurisdictions not being compelled to report certain information e.g. suspicious betting activity;

· overseas jurisdictions not being obligated to contribute towards research, education and treatment of problem gambling;

· Whilst British consumers make up a significant proportion of the European remote gambling market, the Gambling Commission found that it is regulating increasingly fewer gambling operators.

3.4 The increasing number of remote betting operators previously licensed by the Commission, who had moved overseas to compete with foreign operators who were accessing the British market, had put further pressure on other operators licensed by the Commission to follow suit and this has had a significant effect on the size of the Commission-regulated remote gambling sector.

3.5 These overseas operators (in any EEA member state, Gibraltar or white listed jurisdictions) are free to target British customers by advertising and providing their services without needing a Commission licence or complying with Commission requirements (such as anti-money laundering and sports integrity reporting, probity of operators and testing of software).

3.6 In addition, the Commission is funded through licence fees, so any work undertaken by them in relation to overseas operators is met out of UK licence fee income or funded by DCMS, which is clearly an undesirable situation.

Recommendation 4: Option 4 of the ‘Regulatory Future of Remote Gambling in Great Britain’’ should be adopted and implemented i.e.: to introduce the need for EEA and Gibraltar based operators to obtain a licence from the Gambling Commission to enable them to transact with British consumers and advertise in the UK.

4. Why the Act has not resulted in any new licences for casinos or "super" casinos;

4.1 In his Gambling Review (para. 1.26), Sir Alan Budd postulated:

"To reduce the risk of a proliferation of small casinos we recommend a minimum size."

The Gambling Act took this recommendation to heart and created the bizarre situation that casinos are now probably the only businesses in the country that cannot expand their operations unless they take over an existing operation, or undertake to develop an extremely large operation in any one of 16 largely unviable locations in the UK.

4.2 Additionally, Sir Alan’s premise of thus "reducing the risk of a proliferation of small casinos" has been completely negated by the fact that 8,800 Licensed Betting Offices have been allowed to offer four hard-core casino gaming machines in each of their shops in the form of Category B2 gaming machines (formerly known as Fixed Odds Betting Terminals – FOBTs). These machines have changed the face of ‘bookies’ and now represent more than 50% of an LBO’s income – a worrying statistic not least because, under the "Primary Activity" guidelines laid down by the Gambling Commission, betting should be the primary activity of a betting licensed premises, not gaming machines! If the machines remain, casino-level control is required of LBOs who operate Category B2 machines.

Recommendation 5: The 16 ‘super casinos’ format should be scrapped in favour of the time-served and perfectly workable licensing regime of the ’68 Act.

5. The effectiveness of the classification and regulation of gaming machines under the Act;

5.1 As mentioned above (para. 4.2), FOBTs were reclassified as Category B2 gaming machines under the Act. This effectively quashed the long-running argument by the betting industry that FOBTs were a betting product, but ultimately failed in its objective to regulate the so-called "crack cocaine" of gambling (a term coined by GamCare, the leading problem gambling charity) by allowing them to continue to be offered outside of the necessarily highly regulated environment imposed on casinos – which is where they belong. LBOs are not required to licence their frontline staff nor are they bound by the Money Laundering Regulations (as casinos are) and so do not have the supervision and controls required in casinos.

Recommendation 6: Either Category B2 gaming machines should be prohibited from being offered anywhere other than casino premises, or LBOs should be required to licence any staff connected with gambling (as casinos are with Personal Functional Licences) and LBOs should be bound by the Money Laundering Regulations to casino levels.

6. What impact the Act has had on levels of problem gambling.

6.1 The 2007 Gambling Prevalence Survey (which illustrated the effectiveness of the 1968 Gaming Act) and the 2010 Survey (which was the first measure of the effectiveness of the 2005 Gambling Act) clearly showed firstly that gambling is a mainstream pastime enjoyed in one form or another by the majority of the adult population of the UK and, secondly, that a tiny minority of those people who do gamble suffer problems through their gambling.

6.2 Since the ’68 Act, the casino industry has always taken seriously its responsibility to care for its customers; the 2005 Act merely created tick-boxes and forms for operators to prove that this was so. As stated in para. 2.14, the removal of customers’ personal responsibility has led to a multitude of frivolous and vexatious litigation through misconceived self-exclusion, interaction and complaints regimes and has probably been welcomed by the legal profession as, unlike its predecessor the Gaming Board, the Gambling Commission will not get involved in any customer/ operator disputes.

6.3 Despite the low levels of customers with a gambling problem, the Act introduced an obligation upon the industry to fund the research into, the education about and the treatment of problem gambling (RET) which almost entirely absolved the previous Government from any financial involvement which would have been comparable to money they provided for other addictions such as alcoholism, drugs or obesity.

6.4 In typical "Big State" style, an overly-expensive, self-serving and unnecessary tripartite system of Quangos was set up (RGSB, RGFund and the GREaT Foundation) to administer the RET system and which are paid for out of the industry’s contributions.

Recommendation 7. The tripartite system of administration of RET be abolished and contributions, instead, be paid directly to the problem gambling professionals (e.g. GamCare and the Gordon Moody Association).

July 2011

Prepared 29th July 2011