Written evidence submitted by Digital Entertainment Plc (GA 69)


1. This paper constitutes the submission of digital entertainment plc (‘’) in response to the call for evidence by the Culture, Media and Sport Select Committee regarding its new inquiry into gambling. We have sought to address certain issues regarding the scope of the inquiry as well as provide some context regarding the wider EU regulatory environment (appendix 1). As one of Europe’s largest online gaming companies with operations in the UK, and elsewhere across Europe, would welcome an opportunity to give oral evidence to the committee during the inquiry if the Committee would find this useful.

2. was formed from the merger of bwin Interactive Entertainment AG and PartyGaming Plc in April 2011 to create the world’s largest listed online gaming company presently valued at £1.2 billion. We are a British business generating approximately 10% of our business in the UK and employing over 250 employees here. We are listed on the London Stock Exchange and are subject to the same oversight as all other UK listed companies. Our main shareholders are Janus, Fidelity, M&G and Legal & General.

3. As an organisation we are committed to being a responsible gambling operator - having previously been awarded "Operator of the Year" and "Socially Responsible Operator of the Year" in the E-Gaming Awards; we are also certificated by Gamcare for our responsible approach to gambling practice and are a member of the FTSE4Good Index series of companies as well as making a meaningful contribution to the GREaT Foundation.

What does to: "ensure that gambling is maintained crime-free and conducted in an open and fair manner"

4. As a publicly listed company, complies with a wide range of laws, rules, standards and regulations throughout various jurisdictions. These include, but are not limited to:

National gaming license requirements in Gibraltar, Italy, France, Alderney, Mexico and Argentina

Self-Regulatory Frameworks, such as the CEN Workshop Agreement ("CWA") 16259:2011 Responsible Remote Gambling Measures of the European Committee for Standardization, the standards of the European Gaming and Betting Association or the eCOGRA GAPs;

EU Data Protection and Privacy regulations;

EU Anti-Money-Laundering provisions;

Corporate Laws and

IT Best Practices, such as COBIT.

5. To ensure compliance with the applicable requirements, we have established a set of internal controls for all relevant processes. When implementing controls, operational units are supported by our Compliance department and the Risk & Internal Control department to ensure that controls meet all applicable regulatory requirements, are effective and meet best practice. We are also subject to external reviews by independent organisations to ensure that we are meeting our requirements for industry best practice and stakeholder management.

6. The strength of our working practices is reviewed on a regular basis through a process of both internal and external audits. The Internal Audit department performs regular reviews of individual areas to test our regulatory compliance as well as the effectiveness of our policies in achieving their goals. In addition, we are also subject to numerous external audits throughout the year. In the past, such audits have been performed by renowned providers such as KPMG, eCOGRA,

GoodCorporation and GLI, which provides comfort as to the quality and independence of the reviews. Results from these reviews are communicated to the relevant operational teams, senior management and the Group’s Audit and Ethics Committees that then take further action as appropriate. This combination of both internal and external reviews helps to ensure that any risk of non-compliance or failure can be addressed promptly and appropriately.

What does to "protect children and vulnerable people"?

7. is committed to understanding our customers, meeting their needs and ensuring that they can enjoy our games in a safe and secure environment. We aim to develop effective responsible gaming measures based on empirical evidence.

8. While regulation of online gaming at a national level is able to provide a degree of protection for consumers in that territory, the diversity of approach and the fact that in most countries no such regulations exist means that the levels of protection available to consumers can vary considerably depending upon which territory the player is based and subject to the quality of available tools, such as access to public databases.

9. For an international gaming operator like, restricting ourselves solely to compliance with national regulations would therefore necessarily lead to an inconsistent approach. As a result, in addition to complying with our license obligations wherever they apply, we also employ a self-imposed layer of protection for consumers based on best practice self-regulation to complement national regulations. This is the reason why we have established a series of strong and long-standing relationships with a number of leading organisations whose aim is to ensure a high level of player protection for consumers.

10. The Children's Charities' Coalition on Internet Safety (CHIS) commented in their report "Briefing on the internet, e-commerce, children and young people" in November 2010 [1] , "Consideration should be given to establishing a licensing system similar to that which exists within the gambling industry" and "The fact that the gambling industry has been able to introduce successfully a system which keeps children off their sites proves that, at least so far as the sale of products and services rated 18 and above are concerned, scalable working solutions are available now."

11. Having been one of the first online operators to be certificated by GamCare, the UK’s leading provider of information, advice, support and free counselling for the prevention and treatment of problem gambling, continues to apply the high standards of self-regulation set by GamCare.

12. As a member of the European Gaming and Betting Association (‘EGBA’), we also comply with more than 160 standards covering aspects of responsible gaming and good business practice, and the Generally Accepted Practices which are both audited annually by the e-Commerce and Online Gaming Regulation and Assurance (‘eCOGRA’), a player protection and standards organisation that provides an international framework for best operational practice requirements, with particular emphasis on fair and responsible gambling. A study carried out by eCOGRA reveals that 67% of the consumer facing responsible gaming Standards implemented by the EGBA match or even exceed those applied by 10 of Europe’s largest gambling monopolies.

13. We have also taken an active involvement in the recently published CEN Workshop Agreement on ‘Responsible Remote Gambling Measures’ (‘CWA’), the first Pan-European agreement which provides a high level of consumer protection for online players across the European Union. As a result of close cooperation between regulatory bodies, research institutes, healthcare providers and the industry, the European Committee for Standardisation initiated in 2010 an international stakeholder dialogue to develop standards for player protection on the internet. This workshop process over the course of several months resulted in the development of the "CWA 16259:2011

Responsible Remote Gambling Measures" standard, which comprises 134 normative rules in nine categories:

1. The protection of vulnerable customers

2. The prevention of underage gambling

3. Combating fraudulent and criminal behaviour

4. Protection of customer privacy and safeguarding of information

5. Prompt and accurate customer payments

6. Fair gaming

7. Responsible marketing

8. Commitment to customer satisfaction and support

9. Secure, safe and reliable operating environment

We plan to become certified according to CWA 16259 during summer 2011.

14. These standards have been praised by a number of commentators including UK MEP Malcolm Harbour, Chairman of the European Parliament's consumer protection committee. On publication of the CWA, he commented: "These new European voluntary standards will provide greater protection for online gamblers, and help control underage participation. With a Commission green paper and a European Parliament report forthcoming in this area, it is an encouraging sign that the European industry has shown a willingness to self-regulate in order to create a safer environment for gaming across the Single Market."

15. As a pioneer of addiction-related research, the Division on Addictions (‘DOA’), Cambridge Health Alliance, a Harvard Medical School teaching affiliate, entered into cooperation with bwin during 2005. This cooperation, in part, focuses on examining actual gaming behaviour in sports betting, casino, poker and other online games. The scientific analysis and results of the studies have brought about a paradigm shift in addiction research. The unique character of these studies is described by Howard J. Shaffer, Ph.D., Associate Professor, Harvard Medical School, Director, Division on Addictions, The Cambridge Health Alliance, a teaching affiliate of Harvard Medical School, as follows, "For the first time ever the studies conducted in cooperation with bwin use the accurate records from computer-based internet gaming to study actual gaming rather than what people remembered or were willing to say." is continuing this successful collaboration. An ongoing goal is to create a scientific evidence base for the development of a safe and entertaining gaming environment.

16. The collaborative research carried out by the DOA has provided seminal scientific results, which have been published in peer-reviewed international scientific journals:

· Online gaming is used by the majority of players in moderation and in a responsible manner. The risk potential is therefore similar to offline gaming. There is no evidence, to date, to support the contention that online gaming is an especially powerful enticer, in line with the findings of the UK prevalence studies.

· The first markers for the early recognition of problem gambling are available. Although a high intensity of gaming by itself is no indicator for an increased risk, a combination of high intensity and high variability of gaming is a predictor for future gambling-related problems.

· A number of Responsible Gaming measures are proven to be effective, and are therefore a significant factor in the prevention of gaming addiction.

17. The continuing results of this research collaboration provide the international scientific community with an empirical evidence base that has long been lacking. All data is open to further research via the Transparency Project [2] : We also benefit from the cooperation with the DOA. It ensures that we can fulfil our vision of a "safe and entertaining gaming environment" on the basis of scientifically developed Responsible Gaming measures.

18. Although we provide gamers with broad variety of scientifically evaluated tools to help them maintain a controlled and responsible attitude towards gaming, in some cases gambling-related problems can occur. In these cases provides players with the facility to self-exclude in order to prevent harm to the player. Such self-exclusion can be for a relatively short period or for six months.

19. However, the complexities of pathological gambling behaviour means that some players need specialist assistance that we cannot provide. Therefore we maintain an international network of collaborations with renowned national and international healthcare providers. Contact addresses to counseling services in the player’s own mother tongue are available on the Responsible Gaming website or by direct contact to Customer Services.

20. Not all operators employ all of these protections. Risks to consumer protection are perhaps most acute in unregulated or ‘black markets’ that tend to be populated by many private entities with opaque ownership structures. Regulated markets that fail to present an attractive proposition to the consumer can be expected to result in consumers being driven to underground sites that are able to offer more attractive terms but which fail to offer the same levels of protection offered by regulated operators.

21. It is virtually impossible to restrict consumer access to the internet and if people want to gamble online then they will always be able to find a site based somewhere in the world that will take their money. By prohibiting gambling or by creating an overly burdensome regulated framework, you exclude the licensed and well-regulated sites from accepting customers and effectively drive the activity underground.

22. The black market exists. In Italy, regulators noted that when online poker was regulated in 2009, the market was instantly worth over €2 billion. This is because the market was already there. When the US outlawed online gaming in October 2006, we led the legitimate sector by exiting that market immediately. However, others did not switch off and they filled the void we left. Consequently, in the subsequent years, the market grew but with illicit operators filling the vacuum left by the regulated operators. The market is now worth $16 billion.

23. Similarly, a recent study of the French Market found that an estimated 57% of the total online gaming activity was taking place with illegal black market operators. [3]

Does the UK legislative framework need to be updated due to online gambling?

24. We firmly believe that the model adopted by the UK Government is delivering an excellent framework for consumers: they have access to a wide choice of operators at competitive prices and the levels of problem gambling as evidenced by the most recent prevalence study remain low. As a result, we believe that there is no need to amend the legislative framework. The UK already has a mature, well-established and well-regulated gambling market, one that represents an attractive model for other European countries as and when they open up their markets.

25. is licensed and fully regulated in three Member States – Gibraltar (part of the United Kingdom), Italy and France. As a dependency of the UK, Gibraltar and the UK already enjoy a long, established relationship taking advantage of the working relationship between the regulators.

26. There is no doubt that overly burdensome regulation can damage the business of the regulated industry. Red tape increases costs for both our consumers and operators and impedes the ability of regulated operators to compete with those that choose not to comply with such obligations. Based on the experience gained from markets like France, it is clear that the pricing advantage gained by unregulated operators outweighs the perceived risk that may be associated with playing on an unregulated site.

27. As a business with strong ties to the UK, we want to be able to attract and retain high performing talent from around the world and seek to promote and develop a high performance culture where our employees are both engaged and well-rewarded. We can only do this with the help from our Government in the UK and the right business and regulatory environment in the UK and across Europe.

What impact the Act has had on levels of problem gambling

28. The British Gambling Prevalence Study 2010 (‘BGPS’) was published in February 2011. The study demonstrated that for the vast majority of consumers, gambling continues to be a popular and safe leisure activity. With regard to problem gambling, the study used two different methods to assess the rate among adults. The first suggested it is 0.7% and the second 0.9%. In 2007, both methods indicated a rate of around 0.6%.

29. The study showed that online gambling –    in contrast to land based forms – has clearly become safer between the 2007 and the 2010 prevalence survey. In the 2007 survey they reported percentages of >7% of all online gamers encountering problems, in 2007 this value went down to 3%.

30. The study also showed that 73% of adults gambled in the previous year (compared with 68% in 2007). Online gambling increased slightly from 6% to 7% of adults over the same period.

31. The Gambling Commission described the increases respectively as, "not statistically relevant" and "at the margins of statistical relevance". The Commission has also stated that it is impossible to say whether these apparent increases are "an upward trend or a temporary fluctuation".

32. It is worth noting that even at the marginally higher levels indicated, the rate in Britain is still lower than many other jurisdictions around the world.

33. The authors of the Study have made clear that while the results show what gambling products problem gamblers use, they do not show that anyone product causes someone to become a problem gambler. Both the BGPS 2010 and other recent research show that the only reliable factor that can help to predict problem gambling is the intensity of an individual’s involvement in gambling and that problem gamblers typically use a wide range of gambling products both on-line and offline.

34. The welfare of customers is of fundamental importance for and the wider, regulated online gambling industry. We will continue our efforts in conjunction with the UK Government, regulators and experts in the field to determine how to minimise the number of people encountering difficulties. By working with the Government and key stakeholders such as the Gambling Commission, the GREaT Foundation, The Responsible Gambling Strategy Board, Gamcare and the National Problem Gambling Clinic, we will remain active in addressing these issues.


35. An increasing number of adults will and do gamble online. They enjoy it and are seeking to do more of it. The only way to protect consumers is to give them the opportunity to use the best and safest sites. All other things being equal, consumers will always choose regulated competitors over the black market because of our reputation for allowing consumers to gamble safely and fairly. Equally, by remaining outside the regulatory net, black market sites are able to offer significantly more attractive returns to players creating an unlevel playing field: money talks and consumers will inevitably be drawn towards those higher returns offered by illegitimate operators.

36. In the UK, we have a system that already works – one that is tried and tested. We need the UK Government’s support in London and Brussels to ensure that the British online gaming industry remains at the forefront of e-commerce as we work towards a responsible, secure and reliable

framework for online gaming throughout Europe, providing consumers with a range of entertaining games that they know they can bet on safely.

37. would like to urge the UK Government to continue to support the existing regime which has already proven itself to be a robust regulatory framework, ensuring that customers are able to continue to enjoy a safe and fair online gambling environment and not be pushed towards sites with no assured consumer protection measures or where consumers have no legal rights.

June 2011

Appendix 1: The EU regulatory environment

1. The EU online gambling regulatory environment is uneven and complex, creating a challenging environment for as well as consumers.

2. The exclusion of gambling from the Services Directive in 2006 gave Member States the freedom to set their own gambling regulation as long as the measures that they use are necessary, consistent, proportionate, and non-discriminatory – and not simply as a means of protecting government revenues, which as a motivation is expressly unlawful under EU law.

3. Some Member States use a monopoly system to provide gambling services to their citizens. We doubt that in barring well-regulated, licensed and socially responsible EU operators with the most advanced fraud-detection, anti-money laundering and player protection systems at their disposal from accessing some domestic markets – while simultaneously allowing their own national monopoly to market similar online gambling products – consumer protection is in fact the primary motive driving Government policy.

4. There is no evidence that state monopolies are better-placed to protect the consumer than a well-regulated EU-licensed operator – in a study carried out for the EGBA, it was shown that on average, 66% of the EGBA’s members’ responsible gaming practices were either on a par or more robust than those implemented by member state lotteries.

5. Consumer protection is the most commonly cited reason given for restricting access to markets. Therefore, it is vital that there is sufficient evidence to support this position – so far there is none.

6. A number of Members States are beginning to regulate – in 2010 France opened up its market to online gaming, albeit with tight restrictions and in Denmark the process is well under way with the gaming acts having been passed a year ago. In 2011 we are looking at the possibility that Spain, Greece, Germany and the Netherlands will move to become regulated markets. However, in the absence of any clear guidance from the EU it is likely that this will result in an even greater fragmentation of the EU internal market.

7. Policy makers must understand the reality of the market and focus their attention on ensuring a consistent approach, one that protects consumers. Governments should be making policy decisions based on evidence, not rhetoric and construct laws that achieve their objectives in a proportionate and consistent manner that is based upon market realities. We hope that the European Commission’s Green Paper on "On-line gambling in the Internal Market" and the European Parliament’s IMCO Own Initiative Report on online gambling in the EU will allow for a factual discussion at EU level and curb the costly fragmentation of the common market to ensure that consumers throughout the EU enjoy consistent and high standards of regulated, safe and high-quality products.

8. With a European online gambling market estimated at €9.08 billion in 2011, clarity regarding the parameters for a workable framework for online gambling from the European Commission, as it has done for other inherently highly regulated sectors such as telecoms or pharmaceuticals, would help Member States to avoid costly mistakes and ensure that this vibrant segment of eCommerce is managed appropriately in a way that protects consumers whilst fostering economic growth.

9. A failure to do so will only increase market fragmentation and result in the duplication of national requirements. A study conducted in 2010 by Price Waterhouse Coopers showed that, for France alone, the administrative and technical costs for obtaining and maintaining the national license to operate on the French market are € 8.7 million for a single EU operator, already licensed in one or several other Member States. National licensing regimes imposing such burdens on the service providers only benefit non-EU licensed black market operators to the detriment of player protection.

10. is committed to promoting integrity in sport and in the run up to 2012 it is vital that, together with Government we allay any fears on issues surrounding sports integrity. Often there are inaccurate references to the involvement of regulated betting operators in betting scandals

when in fact this is not the case. The regulated operators have a vested interest in ensuring that integrity is maintained – fears over corruption in sport will only serve to reduce betting volume and the potential revenue opportunity for betting operators.

11. The nature of the Internet means that we are able to a high level of protection for consumers and for sport. This is demonstrated by the Hoyzer affair in 2005 (a German football scandal involving a referee called Robert Hoyzer) – no online firms suffered during the Hoyzer affair in Germany because their systems and technology platforms are able to provide a perfect audit trail – as such the online channel is an unattractive route for those seeking to benefit from corruption in sport. It also allows operators to identify and act quickly upon any suspicious betting activity. By contrast, the German state offline lottery lost upwards of €20 million on the Hoyzer scandal.

12. We cooperate closely with ESSA (the European Sports and Security Association) to identify suspicious betting patterns and report them within the framework of the early warning system to the responsible sports associations. We also report any Suspicious Activity Reports to the relevant authority, in compliance with the EU Anti-Money Laundering Directive. As IOC President Rogge said in March "We have no issue with legal betting. Betting on sports events is as old as sport itself. Reputable betting firms are our allies in this effort."

13. In France, since July 2010 and in contrast with other Member States, sports organisers have been extended a right over their sport events – or a sports rights’ levy. Already this has resulted in a smaller and less competitive betting market, with regulated operators being forced to offer less attractive odds as the implementation is rather complex and costly. Each licensed sports betting operator needs to negotiate the payable fee separately with each French sports event organiser while the regulator, Arjel’s approval must subsequently be obtained. In some cases, where no agreement has been reached, no or only few operators eventually offer bets on certain sports events. As a result, the offer becomes less competitive and attractive for consumers leading to them turning to the black market. This has the opposite intended consequence with the reduction in the income of sports event organisers, and jeopardizing fraud control since there are even less online sports betting operators to monitor the events particularly in less popular sports and sporting events.

14. Another unintended consequence is that many online gaming operators refrain from offering bets or reducing their offer on a number of sports focusing only on those sports events that generate most income, i.e. football and tennis. Operators focus on international events of certain sports such as NBA instead of the French Basketball League, reducing the visibility of and income of French events.

15. In addition, this right fails to address the illegal operators or syndicates that are often based in Asia, which have been linked with some of the well-publicised recent betting corruption scandals. This right encourages the consumer to seek out higher risk, unregulated sites with little or no consumer protection.

16. The introduction of this sports right also threatens the freedom of speech as it grants an exclusive right to specific sports stakeholders over information that is currently in the public domain; it is detrimental to less popular sports as they force betting operators to concentrate their investments and resources on the more popular sports with more business and pay-out potential such as premium tennis and football.

17. Finally, such a sports’ rights levy would arbitrarily and unfairly target the gambling industry. Despite rhetoric to the contrary, the online gaming industry does not threaten the funding of sport, it is in fact a major contributor to European sport – the licensed gambling industry contributes an estimated €3.4 billion per annum to sport alone with €2.1 billion [4] contributed by private gambling companies. Governments, including the UK, must leave this legally complex area alone to ensure that the current balance between public and private interests continues to exist for the good of sport.

July 2011



[3] MAG “ Jeux en ligne” in the French Market “ Key features, strengths and weaknesses of the French legal gaming offer”, 2011


Prepared 1st August 2011