Gambling

Written evidence submitted by the Remote Gambling Association (GA 28)

1. I am writing on behalf of the Remote Gambling Association following the Committee’s call for evidence in relation to the above inquiry.

Executive Summary

2. The following is a summary of the main points that we would like to make to the Committee:

· The regulatory integrity of the British gambling industry has at least been maintained by the Gambling Act. Levels of problem gambling remain relatively low and the public can pursue this recreational activity in a fair and crime free environment.

· Unfortunately, the Act has not led to any significant commercial benefits for the UK gambling industry.

· The Act dramatically increased regulatory costs following the establishment of the Gambling Commission. It remains unclear whether that change represents good value for money.

· Online gambling still represents a small part of the overall UK gambling market. It is true that the companies servicing that market are predominantly based in Gibraltar, Alderney and the Isle of Man, but that has not been to the detriment of UK consumers or other parts of the UK gambling industry.

Request to give oral evidence

3. It is to be expected that a high proportion of respondents will ask for the chance to provide oral evidence and the RGA is no different in that regard.

4. We are fully aware that there will be a strict limitation on the number of organisations and individuals who may be called, but as online gambling appears to be prominent in the Committee’s thinking we would suggest that the trade association representing that sector should have the opportunity to discuss the issues with Committee members in person.

Introduction

5. The RGA is the largest trade association for the global online gambling industry. It represents over 30 of the most of the world's largest licensed and stock market-listed remote gambling companies. Our current membership and further information about the RGA can be found at www.rga.eu.com.

6. RGA membership is restricted to operators and software suppliers. The operators must be licensed for gambling purposes within the European Economic Area (EEA), the Isle of Man, or the Channel Islands and must adhere to our code of practice on social responsibility.

7. The members of the RGA have substantial experience in engaging with regulators and other stakeholders to ensure remote gambling is conducted in a fair, safe, and crime-free environment. This experience is based on operating in fully regulated jurisdictions where it is possible for private sector operators to obtain licences on a non-discriminatory basis.

Responses to specific issues raised by the Committee

How effective the Act has been in its core objectives to:

- ensure that gambling is maintained crime-free and conducted in an open and fair manner,
- protect children and vulnerable people from the adverse effects of gambling,
- update the legislative framework with regards to online gambling

· The British gambling industry has an excellent track record in combating crime and protecting the vulnerable. It compares well with any regulated jurisdiction in the world. The Act has perhaps brought a greater level of consistency to how these threats are addressed, but for the most part the situation is little changed from that which existed pre-2005.

· The legislative framework with regard to online gambling was an improvement because prior to the Act it was only online betting that was permitted under a bookmaker’s licence and there was no provision for other forms of online gambling, such as casinos, poker, and bingo.

· However, because of the uncompetitive fiscal regime in the UK most companies have chosen to be licensed in other jurisdictions (see below).

The financial impact of the Act on the UK gambling industry

· The costs of licensing and compliance have increased significantly. This includes both direct licence fees to the Gambling Commission (£13.3m in 2009/10) and the internal compliance costs for each company.

· While these costs have gone up, HMRC returns show that revenues have remained almost static. There are other factors that may have affected this, but overall the Act has had little positive financial impact.

· This is disappointing as there had been a reasonable expectation that increased levels of regulation and the establishment of a sizeable new regulator would provide sufficient assurance that new commercial opportunities might be offered, but they have not.

The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money

· The regulation of gambling raises a number of complex challenges and we welcome the Commission’s efforts to engage with the industry to address those through its risk-based approach.

· Nevertheless it is difficult to take an objective view of its effectiveness because its performance criteria are vague. It took over what was already a generally well regulated and responsible industry and, consequently, it is difficult to argue that it has led to a widespread improvement in standards or even that there was much room to make such an improvement.

· Against that background, and taking into account the much lower regulatory costs pre-2005, there must be a serious doubt about whether it does represent good value for money.

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

· If anything because of the fierce competition in the online market, there are probably fewer companies now with a significant share of the British online gambling market than there were in 2005, so it may be misleading to refer to a ‘proliferation’ of operators licensed in other jurisdictions.

· It is, however, true to say that, with very few notable exceptions, the British online betting and gaming market is dominated by companies licensed and operating out of Gibraltar, Alderney & the Isle of Man.

· Without exception, they are operating out of those jurisdictions for fiscal reasons rather than to avoid regulation. In fact, as recognized by the British Government under its ‘white list’ criteria, Alderney and the Isle of Man already have comparable regulatory regimes. Provision was specifically made in the Gambling Act 2005 for Gibraltar so that its licensees could to advertise to, and therefore transact with, British customers. It is reasonable to assume at the time that Parliament must have been satisfied that its regulatory standards were equally acceptable.

· In that respect nothing has changed since 2005, although the Government has brought into question the future of the ‘white list’ system. From the relevant DCMS consultation paper this is apparently because of a desire to compel all operators, irrespective of their location, to hold British licences rather than any suggestion that the ‘white list’ jurisdictions do not continue to compare well to UK standards. If they had failed in that regard then no doubt the Government would have removed the relevant jurisdiction from the ‘white list’ and addressed the problem in that way.

· There is no hard evidence that the development of this sector outside of the UK has been to the detriment of the wider UK gambling sector. While there may be some overlap between online and land-based gamblers there is nothing to indicate a widespread cannibalization of the market that existed pre-2005. With regard to this, HMRC figures for receipts from betting, gaming and lottery duties, show that in 2006/7 they collected £1.39bn and in 2009/10 they collected £1.44bn.

· There is also no evidence of harm to UK consumers (this was acknowledged in the DCMS consultation paper in 2010 about the regulation of remote gambling, which referred instead to ‘potential’ risk). The so-called offshore sector, which is predominantly made up of companies that have a substantial UK base anyway, is still responsible for the creation of thousands of jobs, contributes to the economy through a whole range of commercial arrangements, for example advertising and sports’ sponsorships, and is a major contributor to the GREaT Foundation.

· The Act has not been a factor in the development of the British online gambling market, which as with all businesses, has been commercially driven.

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

· We would leave this for the casino sector to comment on.

The effectiveness of the classification and regulation of gaming machines under the Act

· We would leave this for those sectors with an interest in gaming machines to comment on.

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

· It is very difficult to know what contributes to the prevalence of problem gambling and how factors weigh against one another. It is therefore difficult to assess the impact of the Act on levels of problem gambling.

· What we do know is that levels of problem gambling in the UK remain low by international standards. The three national prevalence studies that have been conducted since 1999 show a very steady and relatively low level of problem gambling over a protracted period of time and one which does not appear to have been affected greatly by the increased availability of, for instance, gaming machines or online gambling.

· Although the most recent study has been depicted by some as showing a significant rise in problem gambling the truth is very different. It highlighted the serious discrepancies thrown up by the different problem gambling screens that were used, but crucially in the words of the authors, the Gambling Commission, and the Minister the differences between the two most recent studies were ‘in the margins of statistical significance’.

Issues not specifically raised by the Committee

8. There are clearly a number of additional issues that might be raised in relation to the inquiry, but we would like to focus on two that might well be raised by other interested parties.

9. The first of these is advertising. The Gambling Act 2005 brought in a number of new advertising freedoms, most notably in relation to broadcast advertising. Our view is that advertising in the UK is well regulated by the various provisions and codes that have been introduced by the Gambling Commission, the Advertising Standards Authority, and the gambling industry itself. These various measures are complementary and have achieved a high level of compliance across a whole range of marketing, advertising and sponsorship.

10. This is to the credit of all concerned and has been beneficial to the gambling industry, the advertising industry and to consumers. It has been one of the successes of the Gambling Act 2005 and properly reflects the position of gambling as a mainstream leisure activity albeit one that requires appropriate regulatory safeguards.

11. The second issue is sports’ betting and, in particular, concerns that have been raised about match fixing. This is clearly an issue of huge importance to both the betting and sporting sectors, even though direct links with the Gambling Act are not immediately apparent. The key point we would like to make is that the European regulated betting sector faces a potential threat from corruption in sport, and not just that related to betting, but it is in no way responsible for any corruption that may occur. The responsibility for that rests with participants in those sports, individuals who might be seeking to defraud licensed betting operators, or illegal betting operators who primarily are based in the Far East.

12. Notwithstanding that, the betting industry is anxious to work in partnership with sports to combat problems of this kind. Examples of this are the role played by the European Sports Security Association (ESSA) in the provision of an early warning system; and player education programmes such as the one provided by the UK Professional Players Federation (PPF). The PPF’s work in this area is funded jointly by the Remote Gambling Association and three of its members (Ladbrokes, bet365 and Betfair). In its first year this enabled 2400 professional sportsmen to be given the required training about betting and integrity. It is planned that this scheme will be developed further in coming years.

Conclusion

13. We are mindful that the Select Committee will receive a significant amount of written evidence and because of this we have sought to concentrate on a number of key issues and, of course, to comment on those areas that the Committee has already expressed an interest in. However, we would be happy to supply further details if that might be of help.

June 2011

Prepared 29th July 2011