Joint Committee on the Draft Gambling Bill

Joint Committee on the Draft Gambling Bill First Report

7 Advertising, Inducements and Credit

296. Historically the ability to advertise gambling products has been restricted because of the underlying policy that demand for gambling should not be stimulated. In recent years the laws on advertising have been relaxed in a piecemeal way with the result that some gambling advertisements, especially for "softer" products, are now permitted. The Government's broad policy on advertising under the draft Bill is clear:

"to replace the piecemeal provisions[…]with new provisions which reflect the changed status of gambling as an acceptable leisure activity[…] the Government believes that legitimate gambling businesses should be allowed to advertise in the same way as other businesses".[440]

297. It is undeniable that as a result of the draft Bill, gambling advertisements would become more visible and accessible than they are at present and, if successful, will stimulate consumer demand for gambling.

298. While we agree with this general policy, many of its details remain unclear. Some offences, relating to advertising and the protection of children,[441] are included in the draft Bill. However, we have still not seen drafts of other key provisions such as the offence of advertising unlawful gambling products.[442] As discussed below, other key information, such as codes of practice, will be left to the Gambling Commission to determine. While the guidance the Government has produced has been helpful,[443] the lack of specific detail has made it difficult for us and stakeholders to make a detailed assessment of the proposed future regime.

299. We recommend that further detail on the proposed regulation of gambling advertisements, including additional clauses of the draft Bill, should be published as soon as possible for consultation with stakeholders.

Unlawful advertising

300. Although the relevant draft Clauses have not yet been published, the Government proposes to include an offence of advertising illegal gambling. It notes that this could not apply to advertisements for gambling products from overseas, which would not be illegal within Great Britain.[444] The Government has, however, explained that the ability to prevent advertisements originating within the European Economic Area, presumably where these relate to gambling products from the UK, may be restricted by European law.[445] It has commented that Parliamentary Counsel will draft the relevant provisions of the Bill to permit derogation from such EU laws as appropriate.[446]

301. The Advertising Association has sought clarification on these provisions. In particular, it has commented that "reference is made in the EU Proposal for a Directive on Services (published in January 2004) to the fact that the [European] Commission is scheduled to bring forward proposals for additional harmonisation on gambling in 2005."[447] We recommend that the Clauses on the advertising of illegal gambling should be drafted so as to provide a flexible legislative framework that could take account of future European developments.

Other restrictions on advertising

302. The Government has accepted that some special considerations should apply to gambling advertisements: "the bar needs to be set higher still: gambling [advertisements] must be responsible".[448] We have heard a number of suggestions as to specific restrictions that should be applied. These have fallen into two main groups: first, the way in which advertisements are disseminated and to whom; and secondly, their content.

Restricted audience

303. One recommendation made by Budd was that advertisements should not be directed at children.[449] This has been accepted by the Government and an offence of inviting children to gamble has been included in the draft Bill.[450] The evidence we have heard suggests that this policy has wide-ranging support, although some have questioned its viability.

304. GamCare has commented that, despite the offence, young people will be subject to many more direct messages offering gambling products.[451] Many in the industry have also recognised that "despite making best efforts to prevent minors from trying to access their sites […] many advertising media cannot distinguish between adults and minors".[452] Mr Brown of the Advertising Association has also told us that it is not possible to "cocoon children from commercial messages",[453] and has recommended that the prohibition should focus on advertisements that are intentionally directed at children or are careless as to their audience.[454]

305. We agree that gambling advertisements should not be directed at children and that operators should take care to identify and control their actual audience. However we recommend that Clause 36 of the draft Bill, and any guidance or codes made under Clause 16, should not penalise operators that have taken all reasonable steps to prevent children receiving gambling advertisements.

Content

306. We have heard varying views on the question of whether information should be included in gambling advertisements about the risks of problem gambling.[455] In the context of internet gambling, the Evangelical Alliance commented that health/wealth warnings should be considered, drawing comparisons with the warnings on tobacco products.[456] Rachel Lampard of the Methodist Church, for example, suggested a simple statement like "stay in control of your gambling".[457] On the other hand, the Advertising Association has commented that the value of "health/wealth warnings" could be overestimated and that, in fact, they "are unlikely to be of much benefit".[458] The Advertising Standards Authority (the ASA) also informed us of research indicating that the public usually see warnings in advertisements as a way of protecting the advertiser. Mr Graham of the ASA commented that "one cannot assume that people will read those and think 'Gosh, thank you so much, I had not thought of that'".[459]

307. A number of witnesses have told us that it would, however, be useful if advertisements were to contain information about sources of help available for those who are concerned about their gambling. Peter Cox of GamCare told us that:

"if the industry starts to advertise in a major way, it would be helpful if our information is on their advertisements as well, as long as it does not become so small you need a pair of binoculars to read it."[460]

308. As gambling does not cause problems for the majority of people who gamble we are not convinced that health warnings, like those used for tobacco products, would be appropriate. We also have doubts as to the effectiveness of some cautionary statements included in advertisements such as those for financial products. Nevertheless, we recommend that gambling advertisements should include information about sources of help for problem gamblers and that the future regulator should consult relevant stakeholders before agreeing any detailed rules on advertising content, for example those to be specified in codes to be issued under Clause 16 of the draft Bill.

Regulator

309. The regulation of the gambling advertisements that are currently permitted is undertaken by the Advertising Standards Authority (the ASA) and the Office of Communications (Ofcom). In the case of non-broadcast media, advertisements are self-regulated through codes drawn up by the Committee on Advertising Practice (the CAP Codes), a section of which deals specifically with betting and gaming. On the basis of the CAP Codes, the ASA currently receives, investigates and adjudicates complaints about gambling advertisements.[461] Ofcom, which is responsible for the regulation of broadcast advertising, is currently considering contracting out this responsibility to the ASA under a co-regulatory mechanism.[462]

310. The Government does not propose to amend the current system for the regulation of broadcast advertising which it states "can effectively be regulated by Ofcom under the Communications Act 2003". It does, however, state that "Ofcom would be expected to consult the Gambling Commission in preparing or amending its codes insofar as they relate to gambling".[463]

311. However, in the case of non-broadcast advertising, DCMS has suggested a departure from the existing self-regulatory system. It proposes that the Commission will instead be given the power to set and enforce requirements as to the manner and content of advertising through operating licence conditions and codes of practice.[464] The Government has also recognised that the Commission will not be able to control advertisements by those it does not regulate, such as family entertainment centres, advertising agencies and newspapers. The Secretary of State will be given the power to address this through secondary legislation.[465]

312. The Advertising Standards Authority (the ASA) and the Advertising Association have told us that the proposal to move responsibility for the regulation of non-broadcast gambling advertisements to the Commission is ill-conceived.[466] The ASA have stressed the need to "avoid regulatory overlap, duplication of complaint handling mechanisms and double jeopardy in the future regulation of gambling advertising."[467] The main arguments they have used in support of retaining the existing system of self-regulation include that the Government's proposals:

a) could create double jeopardy for the industry, which will be required to follow the Commission's codes as well as the ASA's more general rules, such as the requirement that advertisements are not misleading;[468]

b) would cause confusion for consumers, who would not know whether to complain to the Commission or to the ASA about gambling advertisements;[469]

c) would waste the existing expertise of the ASA and the assumption of this role by the Gambling Commission would be "disproportionately expensive";[470] and

d) follow the model used by the Financial Services Authority with respect to the advertising of financial products, a model "that is criticised by consumers and advertisers alike as slow, burdensome and lacking in transparency and user-friendliness".[471]

313. These comments have been supported by Sportingbet:

"We believe that this approach may cause confusion for the industry and customers and would deny both of the experience and expertise of the ASA and OFCOM. We believe a more appropriate role for the Gambling Commission would be as an expert adviser to the regulatory bodies."[472]

314. The Government has argued that the Commission should develop its own codes, especially regarding technical matters in which "other regulators could not be expected to have an expertise".[473] The Advertising Association has questioned this, noting that as respects the example given by DCMS (statements in advertisements about relative odds), the "ASA already has experience and a proven track record of dealing with precisely such technical content".[474] It has told us that if there are areas in which expertise is needed, the ASA would, as Sportingbet suggested, be able to draw on outside help and could seek such assistance from the Commission itself.

315. We recommend that the draft Bill should not prejudice the continuation of the existing and seemingly effective self-regulatory model for gambling advertisements. This would have a number of benefits, including relieving the Gambling Commission of one of the many burdens that would be placed on it under the draft Bill. We do, however, recommend that the draft Bill should contain a reserve power that would enable the Commission to assume regulatory responsibility if it is determined that self-regulation is not a success in any particular area.

316. At present, the ASA's regulation of non-broadcast gambling advertisements is underpinned by a power of referral to the Office of Fair Trading (the OFT). The ASA has recommended to us that a similar backstop model be adopted under the draft Bill as "[s]uch a model would retain last-resort sanctions […] for the Gambling Commission".[475] This could be achieved under the draft Bill in a number of ways. As the Government has acknowledged, it might "not be necessary for the Commission to impose licence conditions beyond one requiring operators to observe [codes developed by the existing regulators]".[476] If this approach were taken and the relevant CAP Codes were breached by an operator, the Commission would ultimately be able to revoke the operator's licence:

"As the body responsible for issuing, amending and revoking licences, the Commission will be the ultimate legal backstop for dealing with those who breach the code(s) of practice'.[477]

317. We recommend that the Gambling Commission should be a backstop regulator for gambling advertisements. We consider that one simple way of helping to achieve this might be for compliance with advertising codes to be attached as a condition of operating licences pursuant to Clause 62 of the draft Bill.

318. The Government's proposals for restricting advertisements from overseas operators are discussed in the context of remote gambling below.

Inducements

319. A number of gambling operators currently offer inducements to consumers in order to encourage them to use their services. Betting operators often offer free bets when customers open an account and, as we saw during our visit to Great Yarmouth, bingo halls offer more simple inducements like subsidised meals and free travel. We are also aware that a number of online gaming and betting operators offer free stakes or bets to encourage consumers to use their websites initially or to spend more than they would otherwise have spent. Other more sophisticated loyalty card systems are operated by casinos in the United States and Australia. These operate like supermarket loyalty cards, which award points for money spent and maintain information on the playing patterns of card holders.

320. We have heard some specific concerns about the possible impact of inducements on businesses in the locality of gambling premises. If large casino operators were, for example, able to provide free food and drink, we have been told that this could divert trade from nearby businesses which would be unable to compete with the inducements offered.[478] Lord McIntosh of Haringey, Parliamentary Under-Secretary of State, DCMS, indicated to the Committee that free food and drink should continue to be allowed as it is currently permitted by the Gaming Board.[479] The possibility of gambling operators being able to provide free alcohol has, in particular, been criticised by witnesses:

"I understand that in other countries free alcohol is provided in casinos. I would interpret that, and I am sure some other people would interpret that, as getting people intoxicated in order to more easily take money off them."[480]

321. DCMS does not propose a general prohibition on inducements as it is "not convinced that all inducements […] represent a risk that would justify a measure so broad in its effect."[481] Instead, it proposes to give the Gambling Commission the flexibility to place controls on inducements through the imposition of licence conditions and the use of codes of practice. An additional clause published on 12 March 2004 provides that a condition may restrict or make provision about the "making of offers designed to induce persons to participate, or to increase their participation in […] licensed activities" as well as the "participation in arrangements for inducing[…] persons to gamble".[482] In addition, the Government will "retain the option of imposing a general condition on operating licences that would have the effect of prohibiting all inducements to gamble".[483]

322. We recognise that determining which inducements to gamble should be allowed and which should be prohibited is difficult. Accordingly, we agree with the Government's proposal not to impose a blanket ban on all inducements. We also agree with the current proposal to give the Gambling Commission the power to control the offer of inducements by operators, whether by way of stringent codes of practice issued under Clause 16 and/or licence conditions under the new Clause published on 12 March. We believe that the licensing objective to protect the vulnerable under Clause 1 would make it incumbent upon the Commission to use these powers to prevent inducements which amount to predatory marketing and which threaten the ability of consumers to control their gambling behaviour.

Loyalty cards

323. When asked about the more complex inducements that can be offered through loyalty cards, Lord McIntosh of Haringey, Parliamentary Under-Secretary of State, DCMS, told us that:

"I think that loyalty cards have very significant advantages[…]it enables us to identify people who are gambling; it enables us to get information about where they come from and who they are[…]; and, of course, the casinos keep records of the amounts they gamble. This could be helpful in the control of problem gambling; it could be helpful in identifying the effects of gambling on individuals and communities."[484]

324. The casino industry has reiterated these potential advantages and has also commented on the benefits of loyalty schemes as a marketing tool.[485] In particular, they have told us how such schemes help the operator to understand their customers and the response of customers to the products they offer.[486]

325. Other witnesses have disputed the claim that loyalty cards are an effective way of tackling problem gambling: "the suggestion by the Minister that loyalty cards are a way of controlling pathological gambling indicates that he is remarkably ill informed".[487] The Royal College of Psychiatrists has described loyalty cards as "a device to stimulate gambling",[488] and the Australian Centre for Gambling Research has warned that in their experience "Aggressive marketing and promotions (eg loyalty programs, note acceptors and smart card technology that encourage increased gambling), […] have undermined the regulatory standards established when operators were first licensed" (emphasis added).[489]

326. We recommend that the Gambling Commission consider the risk associated with loyalty cards alongside other forms of inducement. If the Gambling Commission concludes that loyalty cards do not pose disproportionate risks, we recommend that the ability of such cards to collect information on those who gamble should be harnessed to help address problem gambling. Conditions might then be attached to licences under the Clause published on 12 March to this effect. Obtaining information about people with a gambling problem could also be an additional benefit of casinos retaining membership schemes, as we discuss below.

Credit

327. The existing Gaming Act prohibits operators licensed under that Act (i.e. casinos and bingo-halls) from offering credit for the purposes of gaming or discharging a gambling debt. Neither may credit cards be used in gaming machines. Such prohibitions do not however cover betting or lotteries, or gaming on the internet. The Government has also noted that customers may use credit cards "to withdraw cash from automatic tellers situated in casinos and other licensed premises".[490]

328. The current proposals with respect to credit have been described as follows:

"The draft Bill will make provision to continue the prohibition on the offering of credit at casinos and bingo premises […]. The draft Bill will also maintain the prohibition on the use of credit cards in gaming machines and also in lottery vending machines. Outside these categories, the draft Bill gives the Gambling Commission the power to judge whether, and to what extent, gambling operators should be permitted to provide credit to customers."[491]

The proposals are, therefore, to retain limitations on the availability of credit for gambling. Any restrictions that the Commission wishes to impose on the offering of credit will be applied through conditions attached to operating licences. On 12 March 2004 DCMS issued draft Clauses relating to the offer of credit. These expressly provide that licence conditions could restrict the "giving of credit in connection with licensed activities" and that mandatory conditions would be imposed on non-remote casino and bingo operating licences prohibiting operators from giving or facilitating the giving of credit.[492] An additional Clause was also published on 12 March prohibiting gaming machines designed or adapted to permit money to be paid by means of a credit card.[493]

329. We received a significant amount of evidence regarding this policy. A number of commentators have noted that a symptom of problem gambling is spending more than one can afford to lose and that, if it became easier to get into debt in order to gamble, this could increase problem gambling.[494] The Mothers' Union has commented that "[d]ebt incurred through excessive gambling clearly undermines family stability; leading as it does to family breakdown, ill health and job losses."[495] The Salvation Army told us:

"we are all very concerned about the proliferation of gambling on credit. There just seems to be something innately worrying about that and again our poll showed that 94 per cent of the population feel that allowing people to gamble with credit cards would put people at a greater risk of incurring gambling debts. It sounds obvious."[496]

330. Professor Orford told the Committee, "I think credit cards are dangerous. We live in a society now where credit card debt is a major national problem, so I would have thought allowing people to bet with credit cards was a bad thing".[497] The Royal College of Psychiatrists has commented on the anomaly that, although the use of credit will be controlled elsewhere, "the use of credit cards will be allowed for remote gambling".[498]

331. During our visit to GamCare we saw at first hand the very high levels of debt that are common for problem gamblers and heard about the immense difficulties that this can cause. We were told at the same time about the irresponsible attitudes of some credit providers, including repeated offers of credit to problem gamblers who had requested that they should not be given credit. We consider this to be incompatible with responsible lending practices.

332. When asked about the proposals on credit the casino industry noted that, given the proposal to permit a wide range of gambling products to be offered within a casino:

"We see that there is a rather strange anomaly in that the betting component will be allowed to issue credit but the casino component will not, so that if you were in one part of the facility you could get credit but in the rest of the place you could not."[499]

333. We have been told that, while casinos would like to be able to offer credit, "we are not talking about the issuance of wholesale credit as you see with high street credit cards and store cards" and "[i]t is pre-authorised and it is for high net worth clients only".[500]

334. We do not believe that the use of credit should be prohibited on the face of the Bill. We do, however, recommend that the Gambling Commission should be required to issue codes of practice under Clause 16 and to attach licence conditions under the Clause published on 12 March, regulating the offer and acceptance of credit by operators. We note that, in line with the licensing objective under Clause 1 "to protect the vulnerable", such codes of practice should restrict the use of credit where necessary to protect problem gamblers.

440 Draft Gambling Bill: Supplementary Policy Memoranda, DCMS, February 2004, Policy Note 6, para 6 Back

441 See, for example, Clauses 36, 37, 46 and 47 Back

442 Clause 30 of the draft Bill is left blank Back

443 Draft Gambling Bill, Supplementary Policy Memoranda, February 2004, Policy Note 6 Back

444 Draft Gambling Bill: Supplementary Policy Memoranda, February 2004, Policy Note 6, para 8 Back

445 Draft Gambling Bill: Supplementary Policy Memoranda, February 2004, Policy Note 6, para 11 Back

446 Draft Gambling Bill: Supplementary Policy Memoranda, February 2004, Policy Note 6, para 11 Back

447 Advertising Association, Submission to DCMS dated 12 March, 2004 Back

448 DCMS, Draft Gambling Bill: Policy document, Cm. 6014 - IV, November 2003, para 6.8 Back

449 DCMS, Gambling Review Body Report, Cm. 5206, July 2001, para 22.24 Back

450 Clause 36 Back

451 GamCare, Ev 476, para 9 Back