Gambling (Licensing and Advertising) Bill

Written evidence submitted by the Remote Gambling Association (GB 04)

Executive Summary

1. The following is a summary of the main points that the Remote Gambling Association ("the RGA") would like to make to the Committee:

· Protection of consumers is the Government’s primary justification for the Bill. However, in evidence to the CMS Select Committee, and more recently during the 2nd Reading debate when the Minister stated that:

‘The Bill is largely a prudential measure to prevent what is currently a risk from becoming a major issue in future’

It has become clear that this is a really a piece of pre-emptive legislation designed to deal with a potential rather than an actual problem.

· It can be argued that the Bill is a disproportionate response to problems which are largely theoretical, but all of our members will take out the necessary licences when required to do so and we are committed to working with the Government, the Gambling Commission, and other stakeholders to ensure that the new regime works as well as possible.

· The most critical point we would like to make is that the success or otherwise of the new regime is dependent on British consumers choosing to gamble with British licensees. That will only happen if (i) the offering of those licensees remains internationally competitive; and (ii) there is effective enforcement to deter non-licensed companies from accessing the market.

· To achieve the first of these on a long term basis, the government should be urged to listen to the repeated advice of the CMS Select Committee to establish a tax rate and regime that enables licensees to remain competitive.

· Encouraging British customers to bet with British licensees that are able to provide the value and range of products that they expect will do much more to ring-fence the market than dubious enforcement measures.

· In addition, we have set out below information on specific issues that could be associated with the Bill, including:

o Current Licensing regimes

o Tax and enforcement

o Participation in online gambling

o Research, Education & Treatment (RET)

o Protection of the young

o Advertising

o Sporting integrity

o Horserace betting levy

Introduction

2. The RGA is the largest trade association for the global online gambling industry. It represents 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. It includes all of the major players in the British remote gambling market.

3. 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.

4. 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.

Current licensing regimes

5. Despite the impression given in the Bill’s supporting papers, companies servicing the UK remote gambling market are predominantly based in Gibraltar, Alderney and the Isle of Man. All of them have regulatory standards which are comparable to those in the UK. The companies licensed in those three jurisdictions when added to those currently licensed by the Gambling Commission would constitute close to 100% of the British online gambling market.

6. Online gambling is an international industry and it is very common for our members to hold licences in multiple jurisdictions. It is in everyone’s interests that regulators work together and identify licensing synergies.

7. Consequently, when considering applications the Gambling Commission should fully take into account the standards that licensed EEA and White List operators already adhere to and not repeat all of the checks that they have already been subject to.

Tax and enforcement

8. Although tax provisions do not form part of this Bill, the new licensing and tax regimes cannot be considered in isolation.

9. If the British tax regime was internationally competitive, then the companies that dominate the British online gambling market would already hold Gambling Commission licences. The fact that so many of them, including the largest companies in the wider British gambling industry, operate from offshore proves that it is not.

10. In short, this licensing Bill would not be necessary if HM Treasury had introduced an appropriate regime in 2007. If they do not change the tax regime then there is every possibility that over time British licensees will lose market share to companies outside of the licensing regime.

11. Enforcement to prevent non-licensed operators from accessing the market is clearly very important. Unfortunately, the available measures have not been sufficiently successful in most other jurisdictions where they have been tried.

12. Instead of focussing on the behaviour of operators, the Government should focus on the demands of consumers. If they can be met by British licensed operators then there will be no need for them to seek out alternatives. Removing demand is the best enforcement measure.

Participation in online gambling

13. The Gambling Commission has developed a set of questions for a survey conducted by ICM research that ask British adults about their participation in gambling over the last four weeks. The independent survey, which is conducted quarterly, allows trends in the population to be followed.

14. The most recent survey was published last week and found that:

· An average of 55% of respondents had participated in at least one form of gambling in the previous four weeks. This compares to 57% in 2012.

· An average of 15% of respondents had participated in at least one form of online gambling in the previous four weeks. This compares to 14% in 2012.

· If those respondents only playing the National Lottery online are excluded, the proportion of respondents who had participated in online gambling falls to 8%. This compares to 8% in 2012.

15. It is often wrongly claimed that online gambling is a major cause of problem gambling, but this is not supported by the evidence. For example, the Australian Productivity Commission found in 2009, when reviewing Australia’s gambling laws for the Government, that, "there are no empirical studies that establish a causal relationship between gambling online and problem gambling".

16. The rates of problem gambling in Europe are generally very low and have remained stable as online gambling has grown more popular. For instance, the 2011 British Gambling Prevalence Study found that the rate of problem gambling in Britain was between 0.5% and 0.7%. It was found that Britain has a problem gambling rate similar to Norway (0.8%), Germany (0.6%) and Switzerland (0.8%), and lower than the USA (3.5%), Australia (between 1.4% - 2.1%) and South Africa (1.4%).

17. Therefore there is no evidence that British participation in online gambling is growing rapidly and there is no evidence that online gambling is more addictive than comparable forms of gambling.

Research Education and Treatment

18. It is wrong to suggest that offshore operators do not pay their way on research, education and treatment. Four of the top ten donors to the Responsible Gambling Trust are pure online gambling companies, and in the current financial year /14 online gambling companies contributed in the region of 30% of the more than £5million raised. Donations are made by offshore companies to provide education, research and treatment for UK residents on a voluntary basis, in exactly the same way as UK licensees.

19. The DCMS statement says that ‘these operators will also be required…to contribute to research, education and treatment’. In the first instance, while it is a voluntary system it cannot be the case that anyone is ‘required’ to do it, but more importantly they proportionately already do more than companies licensed by the Gambling Commission.

Protection of young and vulnerable people

20. The consensus view amongst those dealing with child welfare is that the age verification procedures of online operators are an example for other sectors to follow.

21. It is something that we would never be complacent about, but the online gambling industry’s efforts in this area have repeatedly been lauded in Parliament. In addition, the European Commission sought views on the issue as part of its consultation on a Green Paper on Online Gambling in the Internal Market. Some of the questions asked how on-line age controls are imposed. The response submitted by the Children’s Charities’ Coalition on Internet Safety, which includes Action for Children, Barnardo’s, BAAF, The Children’s Society, NCB and NSPCC stated:

"Since the online age verification laws came into force in the UK in September 2007, the children’s organizations have not been made aware of a single instance where a child has beaten the system and got online to gamble. There have been instances where a child has "borrowed" a parent’s credit or debit card and has been able to pass themselves off as the parent, but that raises different issues. There is nothing that laws can do about that, neither is there an easily foreseeable technology fix that can solve it. However, we are not aware of any instances where a child was able to lie about their age and get away with it in an online environment, as they used to do quite easily before the law was changed."

Advertising

22. The Bill will restrict legal advertising to operators licensed by the Gambling Commission. It will not affect the current advertising regulations in any other way.

23. Concern was expressed at 2nd Reading about the prevalence of gambling advertising and, in particular, in relation to betting advertising during televised sporting events.

24. The advertising regulator, the ASA, already applies a robust regime to prevent, for example, advertisements being targeted at minors. It has publicly stated that it does not see gambling advertising as a particular concern and that compliance with its rules is high.

25. Above and beyond the ASA, the industry code for socially responsible advertising has imposed a number of additional measures. It is in this code that the industry voluntarily agreed to impose a 9.00pm watershed for all forms of gambling advertising except (i) betting advertisements associated with the related live events on which bets were being offered; and (ii) bingo, because that gambling product alone had already been allowed to advertise on television prior to the Gambling Act 2005.

26. There is no evidence whatsoever that television advertising in Britain has led to any increase in problem gambling or underage gambling (which according to the latest research from the National Lottery Commission has actually decreased since 2007).

27. Despite this the industry appreciates the views expressed in some quarters and would be happy to take part in any objective review of the current procedures.

Sporting integrity

28. The main risk to sporting integrity is unregulated betting outside of the UK controlled by organised crime groups where they bet on UK sport but may never take bets from UK based customers. Organisations such as the IOC and FIFA have therefore increasingly focussed on unlicensed operators and organized crime, primarily in the Far East and Eastern Europe. The licensing reform will not change that.

29. While it is understandable that the Gambling Commission would like to see more companies hold UK licences to increase the pool of operators they can receive information from, it has been widely recognised by the International Olympic Committee and others that match fixing is something that national regulators should address on a bilateral and multi-lateral basis. This approach mirrors what national regulators already do with other multi-jurisdictional crimes such as money laundering and fraud.

30. Licensing a greater number of online gambling companies in the UK is only one way of helping to improve sporting integrity. It is equally crucial that national regulators establish effective information- sharing agreements between themselves as it would be to see more companies licensed by the Gambling Commission. There are established procedures for information sharing on this basis. They contain appropriate checks and balances and it is wrong and unnecessary to attempt to short circuit those provisions by seeking to license companies already regulated in jurisdictions which already have such provisions in place.

31. The online betting industry established the European Sports Security Association (ESSA) to protect and promote integrity in sport. ESSA acts as an early warning system to alert sports bodies, regulators and its members to any dubious betting activity. The UK Regulator has signed an MOU to facilitate the exchange of information on suspicious betting patterns.

32. Some parts of the sporting industry, for understandable commercial reasons, would like to see the introduction of a sports’ betting right which would give them control over what bets could be offered and require betting operators to pay them for the right to offer bets on hose markets.

33. We would suggest that this is a commercial matter and not an integrity issue at all. The European Commission is considering the issue as part of a wider review of sports governance and it should not form part of a licensing bill which is designed and has been portrayed to the European Commission as being designed solely to enhance consumer protection.

Horserace betting levy

34. We share the Government’s view that extending the levy to companies based outside of the UK would be a breach of EU law.

35. There have been suggestions that a recent European Commission decision about the French Horserace levy has changed the legal position. However, the full decision has not yet been published and (i) we do not expect it to address this specific issue; and (ii) it is likely that it will have restated restrictions on the purposes for which such a levy can be used.

Identifying British customers

36. The Gambling (Licensing and Advertising) Bill amends the 2005 Act so that all remote gambling operators would be required to obtain a licence from the Gambling Commission to enable them to transact with British customers and advertise in Britain

37. The Bill seeks to protect British based customers. How those people are identified is complex, uncertain, and could be administratively expensive, especially if it requires customers to be geo-located on a permanent basis using IP addresses.

38. Our strong view is that IP addresses are not and cannot be 100% reliable in determining a person’s physical location, especially if techniques such as proxy servers and virtual private networks are used. A Google search on "hide my IP" produced 29.3m results and one site alone claims millions of unique users each month and is reported to be in the top 500 most visited of all UK websites of any type. Not only are we convinced that IP checking is not reliable enough now but the growing trend towards internet privacy and anonymity will make it less reliable in the future.

39. There is a simple alternative of ensuring that that the Bill covers every account registered at a Great British address. This method has been adopted by HM Treasury and HMRC for the proposed place of consumption tax and we recommend that this is used to identify GB customers for the purposes of this Bill.

40. We are in discussion with the Gambling Commission and hope they will adopt a more flexible approach before licences are issued.

November 2012