Written evidence submitted by Sportech (GA 62)

A.  Summary

A.1 Sportech plc welcomes the emergence of the Gambling Commission, a single regulator who ensures a consistent approach to licensing and regulation.

A.2 Sportech believes that gambling is typically crime-free within the UK. It further believes that this is particularly true of pools betting. The low-stake, high-prize format makes it less attractive to abuse or criminal activity.

A.3 Sportech believes that operators have made great attempts to tackle problem gambling – including before the introduction of the Gambling Act. Sportech’s own activity in this regard is significant in terms of both financial contributions and operational practices, despite the fact pools betting is considered ‘low risk’.

A.4 Although Sportech believes that the Gambling Commission has been successful in many regards, it considers the costs which the Commission incurs as somewhat excessive for the services provided.

A.5 Sportech further believes that the Gambling Commission’s regulatory actions are occasionally heavy-handed and that it sometimes fails to provide a genuine risk-based approach in its regulatory duties.

A.6 Sportech remains based in the UK for the vast majority of its domestic activities but understands the financial pressures that have forced many operators offshore. Sportech wishes to remain based in the UK but feels this would be much easier if there was to be fiscal consistency across the EU and the white-listed jurisdictions.

B. Sportech – an introduction

B.1 Sportech plc is one of the world’s largest suppliers and operators of pool/tote betting products, with a presence in more than 30 countries. It processes over £8 billion of bets each year and has revenues of more than £120 million.

B.2 The company’s origins are in North West England in 1923. It remains headquartered in the UK and is listed on the London Stock Exchange.

B.3 The business is comprised of:

· the former Littlewoods, Vernons and Zetters football pool brands, now trading as The Football Pools

· horseracing totes in many countries and in numerous US states

· lotteries

· online casino, poker and bingo

· instant win games

· fantasy sports gaming

B.4 Sportech holds Gambling Commission licences for two non-remote and five remote UK-focused activities. Due to the international scope of its business, Sportech is also licensed in Alderney, Holland and many US states.

B.5 Over and above its renowned commercial activities, Sportech’s contribution to the lives of communities and individuals across the UK is without parallel in the sector. It has donated £1.1bn to football, other sports, the arts and charities over recent decades.

Q1. How effective has the Act 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

1.1 Elements of our business have historically been licensed and regulated by the Gaming Board for Great Britain, but following the introduction of the Gambling Act, in Autumn 2007, the majority of our remote and non-remote activities were licensed by the newly formed Gambling Commission (GC).

1.2 By corralling all gambling activities within a single body of law and under a single regulator, the Act has introduced the consistency of a robust licensing and regulatory process across the entire sector. Sportech welcomes this development.

1.3 Gambling in the UK has generally been crime-free and conducted in an open and fair manner over the last half century. The infrequency of headlines on the subject, in a media environment with a distinct appetite for gambling-related items, confirms this view.

1.4 Our first-hand experience of criminal activity is very limited. The football pools model that we operate, very similar to the model of other pari-mutuel betting products, is well-understood by the interested public, and its low-stake/high-prize multi-event format makes it less attractive to those seeking to launder money and less easy to manipulate for those intent on influencing outcomes.

1.5 Where there are examples of fraudulent betting, such as that undertaken by the Pakistan cricket team in 2010, this tends to involve fixed-odds betting rather than pool betting, and is instigated by illegal syndicates. There is little or no evidence of activity of this sort within the UK.

1.6 Should this change, with British-based or directed gambling becoming a regular target for criminal abuse, it is Sportech’s opinion that the Act gives the GC the freedom and right to address such abuse either in Britain or beyond, as appropriate.

1.7 The wider gambling sector was tackling the issues presented by problem gambling before the emergence of the Act, both in terms of operational practices and in terms of providing financial support for the agencies addressing it.

1.8 Sportech’s reputation in this regard is strong. Sportech’s businesses have thrived on their reputation for fair and caring treatment of customers from their inception. The company was a member of the original group which began to raise funds to address problem gambling early in the last decade, despite the fact that our principal products are deemed to be low risk. The Act has consolidated and, again, provided consistency across the sector for these efforts, and created an infrastructure for channelling payments to those who need them.

1.9 It is our view that there is nothing in the Act which has increased the propensity for addiction or reduced the protections for those affected.

1.10 The legislative framework for online gambling in the UK is generally similar to that found in other jurisdictions. It covers those aspects that any licensee would expect it to cover, and as such it is effective. That effectiveness would be tested more thoroughly were there more licensees, but the lack of licensees is a function of UK tax rates, not the quality of the Act.

Q2. The financial impact of the Act on the UK gambling industry

2.1 The compliance requirements which have been developed in response to the Act have imposed additional costs. We welcome the introduction of comprehensive and modern regulation, and accept that some costs are bound to come with that – such as licence fees and the costs associated with vetting players – but costs sometimes appear excessive.

2.2 For example, there are relatively few operators in the remote sector who are licensed by the GC. As a result the large fixed overheads considered essential to regulate the sector are borne by a small number of licensees, rendering each share excessive. The financial impact on each of these operators is considerable.

Q3. The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money

3.1 In our view, the GC has generally been effective since its inception and, on an individual basis, staff there have been very supportive and helpful. Regulating activities which historically haven’t been regulated isn’t easy, particularly when those activities are sensitive both socially and politically. The Act was new, the regulator was new, and many of the regulated were new to that experience. As already mentioned, there is a general absence of news stories, and that is a testament to the GC as well as its licensees.

3.2 It is clear from the experiences of the wider industry that the risk-based approach to regulation that the GC intended to adopt has not really materialised. We accept the GC might have very good reasons for this approach but, nevertheless, find this particularly ‘hands-on’ role disappointing. A recent example is provided by Sportech’s attempt, with partners, to sell pools entries via terminals in public houses. The Act, at 93.3, permits the holder of a football pools licence to authorise others, by letter, to make facilities available for the sale of entries on its behalf. Following the receipt of legal opinion from a highly-reputable source, which was shared and discussed in advance with the GC, a trial proceeded. The GC has now decided that the activity is illegal and the trial has been terminated. Under a confident, risk-based attitude on the part of the regulator, we are sure that the trial would have continued.

3.3 The question of whether it represents good value for money is not clear-cut. As pointed to in our response to the last question, we believe that the costs incurred, and charged, by the GC are not always justifiable. The excessive licence fees for remote operators are described above and change reporting costs are also high. For example, recording the fact that a City financial institutional shareholder, which increased its shareholding in Sportech to over 10%, incurred a cost to Sportech of over £4,000.

Q4. 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

4.1 The tax rates enjoyed by those operators who are licensed off-shore place the on-shore operators at an enormous commercial disadvantage. The Act has not influenced this; many of the off-shore operators serving the UK market are companies which, for all sorts of operational and logistical reasons, would prefer to stay on-shore. The Act and its regulation are not the issue.

4.2 As indicated above, many of Sportech’s activities are licensed in and operated from the UK. We have located them here because it is where we have historically been based and where many of our customers and employees live.

4.3 The pressures that have led many in a similar position to move off-shore affect us as well and unless an incentive to stay on-shore, or a disincentive to go off-shore, is introduced, we will ultimately have no option but to follow them.

4.4 Ideally, there would be fiscal consistency across Europe and the white-listed jurisdictions, and we would welcome any attempts by the Government to bring this about.

Q7. What impact the Act has had on levels of problem gambling

7.1 The three Prevalence Surveys conducted since 1999 show the level of problem gambling to have broadly flat-lined over the past twelve years. It is difficult to argue, therefore, that the Act has had any impact on the levels of problem gambling one way or another.

7.2 The Act has certainly formalised and given consistency to the approach to be adopted by GC licensees, in terms of the channelling of funding, the requirement for players to be able to self-exclude and the reporting of numbers who have. Sportech welcomes this consistency of approach and the wider efforts of the gambling industry to combat problem gambling.

June 2011

Prepared 1st August 2011