Gambling Harm—Time for Action Contents

Chapter 4: Regulation

The Gambling Commission

194.We have explained in Chapter 2 how one of the major changes effected by the Gambling Act was the creation of the Gambling Commission. It replaced the Gaming Board for Great Britain, so that for the first time there was a body with overarching responsibility for regulating all forms of gambling.223 Its statutory duty is to pursue the licensing objectives,224 and the default position is that it should “permit gambling, in so far as the Commission thinks it reasonably consistent with pursuit of the licensing objectives.”225

Box 1: The Commission’s statutory functions under the Act

The Commission’s functions in relation to licensing and regulation under the Act can be categorised as licensing, compliance, regulatory enforcement, and criminal enforcement.

In particular, the Commission has the power to:

  • determine applications for operating and personal licences, specify the conditions to be attached to such licences (both general and individual), limit the duration of such licences, and determine applications to vary or renew operating and personal licences;
  • assess compliance with the Act, with any licence condition, code of practice, or other provision made by or by virtue of the Act;
  • assess whether an offence contrary to the Act has been committed (including the power to request information from operating and personal licence holders);
  • commence licence reviews and carry out inspections;
  • take regulatory action against an operating or personal licence holder following a review (including the power to issue a formal warning, to attach, remove, or amend a licence condition, to suspend or revoke a licence, and to impose a financial penalty for breach of a licence condition), and to void a bet and require repayment of any money paid in relation to it;
  • investigate and prosecute offences committed under the Act. 226

Source: Gambling Act 2005

195.Although the jurisdiction of the Commission extends, like the Act, only to Great Britain and not to Northern Ireland,227 its powers in relation to remote gambling cover those providing gambling services from remote gambling equipment situated in Great Britain to those outside Great Britain, as well as remote operators contracting with consumers in Great Britain.

196.The provisions of the Act do not govern the National Lottery, but the Gambling Commission is nevertheless its regulator. Prior to 2013 the National Lottery was regulated by the National Lottery Commission. The Public Bodies Act 2011 envisaged the merger of the Gambling Commission and the National Lottery Commission,228 and on 1 October 2013 the Gambling Commission took over the functions of the National Lottery Commission, which was abolished.229

Funding

197.Apart from the regulation of the National Lottery, the Gambling Commission is entirely funded by licence fees paid by businesses and individuals in the gambling industry which, in 2018–19, amounted to £18.99 million—down from £19.93 million the previous year. These fees are set by the Secretary of State. The last review was in 2016, and the current fees have been in force since 6 April 2017.230 The Gambling Commission told us:

“We are constrained by the existing regulatory framework on fee setting … The procedure for changing fees is lengthy and so is not undertaken frequently. Typically, our fees have been reviewed every four or five years, although there is no set period for these reviews. As a result, our fees can soon become out of step with the challenges we face in regulating a fast moving, innovative and growing industry … While we believe the regulatory framework is largely capable of flexing to meet new risks, the way our licence fees are set presents a challenge … We are increasingly finding that regulation requires us to expend resources in a way that is not directly proportionate to Gross Gambling Yield (GGY). So, while our income has increased as the regulated industry has grown, the costs being incurred in regulating the online sector, in particular, exceed the income rise.”231

198.In February 2020 the NAO published a report entitled “Gambling Regulation: problem gambling and protecting vulnerable people”.232 In that report the NAO identified and summarised some of the problems caused by the current funding structure, but offered no solutions. It seems clear to us that a review of funding every four years will not provide the Commission with the flexibility needed. The changes in gambling habits caused by the coronavirus pandemic, with no on-course gambling and virtually no gambling on sports, but a probable increase in online gambling (which even before then was the fastest growing part of the market), are likely to cause corresponding changes in the funds brought in by the fees, though we do not have any estimate of the size or direction of those changes.

199.The Gambling Commission wrote:

“Our immediate focus must be on securing the resources we need to continue to regulate effectively and we are developing proposals for revised fees for discussion with DCMS. In addition, we think there is merit in exploring alternative ways of settings fees and recovering costs which would better align with the nature of the work involved in regulating this industry. Alternative approaches already exist and are operated by other regulators.”233

200.Such changes would certainly require amendment of the Act, but it seems to us that funding which is entirely dependent on fees and may change in totally unpredictable ways—like the 5% reduction from 2017–18 to 2018–19, with possibly an even larger reduction in the current financial year—cannot be satisfactory. We hope that DCMS will prove receptive to any proposals from the Gambling Commission.

201.The Government should work with the Gambling Commission to devise a new funding structure in order to provide it with more flexibility and allow it to react and adapt to fast changing regulatory requirements.

Strategy

202.We have already mentioned section 22 of the Act, which is headed “Duty to promote the licensing objectives”. It provides:

“In exercising its functions under this Act the Commission shall aim—

(a) to pursue, and wherever appropriate to have regard to, the licensing objectives, and

(b) to permit gambling, in so far as the Commission thinks it reasonably consistent with pursuit of the licensing objectives.”

203.Since one of the licensing objectives is “protecting children and other vulnerable persons from being harmed or exploited by gambling”,234 it is clear that this is an objective the Gambling Commission has to pursue. But the default position is that the Commission has to permit gambling unless to do so is inconsistent with that objective. This is the philosophy of the Budd report, and may have been appropriate when the Act was passed; but now that it is clear how much harm can result from this, it sends the wrong message. The default position should be that the Commission should not permit gambling unless it believes that to do so will be consistent with the licensing objectives.

204.Furthermore, it is right that the Commission should make the identification and prevention of such harm one of its main tasks; and so it already does. But when the opportunity to amend the Act comes, we believe this should be recognised by making this one of the Commission’s central statutory aims.

205.Section 22 of the Gambling Act should be amended as follows:

paragraph (b) should be amended to provide that the Commission should not permit gambling unless it believes that to do so will be consistent with the licensing objectives;

a new paragraph should be added making the identification and prevention of potential and actual harm a third aim of the Commission.

206.In 2018 the Gambling Commission published its Strategy for 2018–21.235 It states that the Commission’s five strategic priorities are to:

207.The latest annual report of the Commission is the report for the year 2018–19, published in July 2019, only one year into this three-year strategy. In his introduction Dr William Moyes, the Chairman, wrote:

“During 2018–19 the Commission has made considerable progress towards the achievement of its key objectives and laid the foundations to accelerate delivery in 2019–20—the second year of our corporate plan. Important advances were made in all five of the priority areas set out in the corporate plan … we are starting to see signs that the gambling industry is willing to recognise the need for more effective controls in relation to the protection of consumers, particularly those who may be vulnerable, such as children and young people—for example the recently announced voluntary bans on advertising during televised sports matches. Although there is much more the industry could and should do, the Commission welcomes signs of an openness to change …”236

208.We agree that there are “signs that the gambling industry is willing to recognise the need for more effective controls in relation to the protection of consumers”, but we are far from convinced that this is due to a disinterested openness to change. The increase in the voluntary levy gives every appearance of being an attempt, so far successful, to delay the imposition of a mandatory levy.237 The whistle-to-whistle advertising ban is ineffective.238 More significant changes like the ban on the use of credit cards have had to be imposed on the industry. We believe that, particularly in the case of online gambling, such voluntary changes as there have been are the reaction to the industry’s recent realisation that the tide of opinion is turning against it. If change is to be reliably sustained, this will come only by Government action and by continuing pressure from the public, the press, and of course the Gambling Commission.

Strategy to reduce gambling harms

209.For many years the Commission has funded and staffed an advisory body which has prepared a strategy for safer gambling. The National Responsible Gambling Strategy, launched in April 2016 by the Responsible Gambling Strategy Board, was a three-year strategy which accordingly expired in March 2019, when a Final Progress Report was published.239

210.Before the new strategy, covering April 2019 to March 2022, was published, a number of changes were made. The title of the advisory body was altered to Advisory Board for Safer Gambling (ABSG). The body’s new chair, Dr Anna van der Gaag, explained: “Our new name reflects the need for greater clarity about everyone’s roles in the delivery of the new strategy. Gambling harms are rightly recognised as a public health issue …”.240 The task of the ABSG is to “provide independent advice to the Commission as it works to implement the new strategy over the next three years and ensure progress is made on reducing gambling harms.”241

211.Another change was that the new strategy which was published in April 2019 was not just the strategy of the advisory body, but was adopted by the Commission as its own National Strategy to Reduce Gambling Harms 2019–2022.242 The Chairman of the Commission explained in the Strategy’s Foreword that “we are putting the full weight of regulation behind this strategy by taking on ownership of it from our advisers”.

212.We analyse in the following chapter the contribution this Strategy is making to the reduction of gambling harms, and how this can be improved.

Licence Conditions and Codes of Practice (LCCP)

213.Section 23 of the Act requires the Commission to prepare a statement of the principles it will follow for licensing and regulation, and section 24 has a similar requirement in respect of codes of practice. Pursuant to this the Commission has from time to time issued Licence Conditions and Codes of Practice (LCCP). The current version of the LCCP came into force on 1 January 2020, with amendments made in April 2020 implementing the ban on the use of credit cards which came into effect on 14 April 2020.243 It includes the general conditions relating to operating licences, the principal code of practice, and the general conditions attached to personal licences. There are also sector-specific sections of the LCCP. Additionally, the Commission can attach specific conditions to individual licences.

214.Licence conditions are mandatory. Providing facilities for gambling is an offence unless this falls within a number of exceptions, of which by far the most significant is that the person “holds an operating licence authorising the activity, and the activity is carried on in accordance with the terms and conditions of the licence”.244 It follows that many of the recommendations we make can be given effect by attaching more stringent conditions to operating licences, since failure to comply with those conditions will be an offence and may lead the Commission to review the operator’s licence with a view to suspension, revocation or the imposition of a financial penalty, and would also expose the operator to the risk of prosecution.

215.Under section 24 of the Act the Commission is required to issue one or more codes of practice. One of these describes the arrangements the operator must make (a) for ensuring that gambling is conducted in a fair and open way, (b) for protecting children and other vulnerable persons, and (c) for making assistance available to persons who are or may be affected by problems related to gambling. Section 82 of the Act describes such provisions as social responsibility code provisions. Compliance with them is automatically a condition of an operating licence, therefore any breach of them by an operator will be subject to the same sanctions as breach of a licence condition.

216.The Commission also issues ordinary code provisions which are not social responsibility provisions; these do not have the status of operator licence conditions but set out good practice. Operators may adopt alternative approaches to those set out in ordinary code provisions if they have actively taken account of the ordinary code provision and can demonstrate that an alternative approach is reasonable in the operator’s particular circumstances; or that to take an alternative approach would be acting in a similarly effective manner.245

Enforcement

217.None of the LCCP would be of any effect if the Commission did not enforce both the licence conditions and the social responsibility provisions of codes of practice. Mr McArthur, the CEO, told us:

“It is not our job to be the industry’s friend. We are the regulator of the industry. If there is any doubt about it, there should not be. We are on the side of consumers; we want to make gambling fair and safe for consumers. Therefore, we will regulate firmly. If there are compliance failings, we will take enforcement action that is firm but fair to drive up standards. That does not mean you need to be in a completely adversarial relationship with the industry. I would like to think that our relationship is an appropriate one, whereby they know that, if there are failings, we will be firm and fair about that and then, if lessons are not learned and standards do not rise, our approach will get tougher.”246

218.It is beyond doubt that until relatively recently the use made by the Commission of its power to fine operators in breach of the LCCP was totally inadequate. The total of the penalties imposed in 2016–17 was a derisory £1.7 million. However, in June 2017 the Commission issued a new Licensing, compliance and enforcement under the Gambling Act 2005: policy statement,247 since when it has made a rather more proactive use of its powers. It has also started to issue annual reports on its use of the enforcement powers, with the dual purpose of encouraging operators to comply with the rules and explaining what happens when they fail to do so. The first of these reports covers the year 2017–18,248 when the total of the penalties imposed was £18.4 million.

219.The report for 2018–19 explains that in that year the Commission carried out more than 160 regulatory and criminal investigations, an increase on previous years. The Commission also dealt with 2,000 intelligence reports and carried out hundreds of risk-based compliance assessments. Enforcement action resulted in £19.6 million in penalty packages, the surrender of three Personal Management Licences (PMLs), warnings for four PML holders and two advice as to conduct notices for PML holders.249 A further £6,541,188 was divested back to impacted parties and good causes.250

220.When Mr McArthur gave oral evidence to us together with Dr Moyes, we asked them about the case of Paddy Power Betfair, which in October 2018 was ordered to pay a regulatory settlement of £2.2 million after the Commission found that it breached the social responsibility code when five customers were able to gamble extensively despite indicators of gamblingrelated harm, and also failed to act in accordance with the Commission’s guidance on antimoney laundering. We put to them that, to a firm the size of Paddy Power, a fine of £2.2 million would be laughable. Mr McArthur strongly disagreed:I can tell you it definitely did not laugh at that … having been on the receiving end of it, that firm absolutely knows that if this happens again all options will be considered, including bigger fines and reviewing the personal licences of those people involved.”251

221.After this evidence session the Commission sent us supplementary written evidence with further details of their enforcement strategy:

“We adopted a strategy of escalating enforcement alongside the publication of our Corporate Strategy in 2017. This has made clear to operators that repeated failures will not be tolerated and will lead to escalating penalties. That message, backed up by more than £30 million in penalty packages since 1 April 2018, and our published Enforcement Reports has helped to start to change the culture at the top of Operators.”252

222.For an operator, even a very large fine does not have the same effect as the revocation of its licence. The Commission added:

“Regarding the number of operating and personal licences revoked, since November 2014 we have revoked: 9 operating licences; 9 personal management licences; 59 personal functional licences (these are for operator staff such as croupiers or cashiers). There have also been a number of occasions when operators or personal management licence holders have surrendered their licences rather than face the prospect of regulatory action by the Commission.”253

223.Until March of this year the record fine was £7.8 million in August 2017, imposed on the online company 888 for failures in their self-exclusion systems. However on 12 March 2020 the Commission announced that it had agreed that Betway should pay £11.6 million in respect of failures to comply with the Money Laundering Regulations, failures to conduct affordability checks and failures to give effect to self-exclusion agreements.254 We describe some of these failures in Chapter 5. This £11.6 million is described as a settlement consisting of a payment of £5.8 million in lieu of a financial penalty, which would be directed towards delivering the National Strategy to Reduce Gambling Harms, and a further £5.8 million “the majority of which to go to victims where it has been found, or could reasonably [be] suspected to be, proceeds of crime”.

224.Three weeks later this record was broken when on 2 April 2020 the Gambling Commission announced that Caesars Entertainment UK Ltd was to pay £13 million “following a catalogue of social responsibility, money laundering and customer interaction failures including those involving ‘VIPs’”.255 All of this £13 million was in lieu of a financial penalty and was directed towards delivering the National Strategy to Reduce Gambling Harms.

225.The fact that a payment agreed by the Commission can be described, not as a financial penalty, but as a payment in lieu of a financial penalty was explained in Licensing, compliance and enforcement under the Gambling Act 2005: policy statement,256 of June 2017:

“Regulatory settlements in the Commission context are not the same as “out of court” settlements in the commercial context. A regulatory settlement is a regulatory decision, taken by the Commission, the terms of which are accepted by the licensee concerned … It may be particularly important in this respect to provide redress to consumers who may have been disadvantaged by a licensee’s misconduct, or to relieve licensees of the profits or gross gambling yield resulting from their failures.”

226.While we welcome the fact that the Gambling Commission seems now to be prepared to make more effective use of its powers, the facts of these cases were truly shocking, and we question whether even a settlement of this size is sufficient to bring home to operators the magnitude of their failures. Certainly the sums involved are small compared to those imposed under deferred prosecution agreements (DPAs). A DPA, introduced into English law in 2014 by the Crime and Courts Act 2013, is a way of penalising a company which has committed an economic crime without the expense of a trial and without a criminal conviction as a result. DPAs have to be approved by the Crown Court, and the sums involved are of a different order of magnitude, ranging up to £500 million in the case of Rolls Royce, even after a 50% discount for cooperation with the Serious Fraud Office. Rolls Royce is a company employing some 50,000 people. The gambling industry employs more than 98,000 people;257 GVC alone has 15,000 employees258 and William Hill 16,000.259 We mention the figures involved in DPAs, not to suggest that the Gambling Commission should necessarily impose fines of a similar magnitude, but to show that in another field it is thought entirely appropriate to impose penalties which will make a meaningful impact on the company involved.

227.Fines currently imposed and penalties agreed by the Gambling Commission do not make a sufficient impact on large corporations. They should reflect not just the seriousness of the offence but the size of the offender. In the case of repeat offences or other extreme circumstances the Commission should demonstrate much greater willingness to exercise its power to withdraw an operator’s licence.

How the Gambling Commission is performing: the views of witnesses

228.Very few of our witnesses were prepared to say that the Gambling Commission does a good job, with a fair balance between permitting gambling and protecting the licensing objectives; but the criticisms were predictably different, depending on the witnesses. For example, the criticisms from BACTA260 included: “fails to understand business … pedantic, disproportionate and dismissive … tendency towards regulatory creep … bureaucratic, unreasonable (particularly on time scales) and lacking in industry knowledge …” A particular complaint was that

“the Commission now interprets the third licensing objective to protect children and vulnerable far more widely than intended. On a natural reading of the principle it would indicate that there is a particular onus on considering for the purposes of the legislation, those who are identifiably and specifically vulnerable. That would include for example not only children but vulnerable adults such as those with learning difficulties, mental illness or affected by substance misuse. The Commission currently reflects a view that everyone is vulnerable to gambling-related harm and therefore the entire population is covered by this principle. As a result policy proposals from the Commission that have, as their intent, the putative protection of the vulnerable, are applicable to the population as a whole—most of whom gamble perfectly safely … ”

229.Individual gamblers criticise the Commission from a very different perspective. Since we started our inquiry a number of people have written to individual members of the Committee, and to our staff, about their gambling problems. A common theme is that they have problems getting any, or any satisfactory, response from the operator, so they write to the Gambling Commission to ask it to intervene on their behalf, and the reply they receive (if indeed they do receive one which, we are told, is not always the case) is at best unhelpful, explaining that the Gambling Commission is unable to act on their behalf.

230.Mr Parente told us: “I have spoken to the Gambling Commission on numerous occasions, not for myself but for victims, and there is no support, no feedback and no help. If operators fail and get fined, they will fail again and get fined again. There has to be an element of accountability for their actions.”261 Alex Macey, one of our witnesses with lived experience, felt that the Gambling Commission “is not interested in assisting.” “If you complain to the Gambling Commission, you think there will be some accountability—but there is not, so you complain to an operator and there is rarely accountability from them. So where do you turn if you have no money and you cannot afford a solicitor to go to court? You have nowhere to turn.”262 This is one of the commonest complaints we have heard; we attempt to deal with it in the following chapter.

231.A further criticism, from Gambling with Lives, was that the Gambling Commission did not see it as part of its job to warn the public about the dangers of gambling. “The Gambling Commission did [accept that gambling is dangerous], but it did not see it as part of its job to warn people; that was the job of the charities263 … The Gambling Commission said that its job is to identify a particular risk from a particular product or a particular level or style of gambling, but then it thinks that all it needs to do is talk to the operators.”264

232.This is an area where the functions of the Commission are limited by statute. As it accepts, its duties include the protection of the interests of consumers and preventing harm to consumers and the public; but this refers to the body of consumers. It can take notice of the complaints of individual consumers only to the extent that they are evidence of a failure by an operator, or a failure of the system, towards the body of consumers. It has no power to intervene in disputes between operators and their customers except in that context. As the Commission told us, “If we receive complaints about a regulatory issue … we can investigate to see if it warrants enforcement action, but we cannot typically recover money for individual consumers.”265 That is a failure, not of the Commission, but of the system.

233.Professor Orford was one of very few witnesses prepared to say that the Gambling Commission was doing a good job, but even he had to qualify this:

“The other thing is that we have a very inadequate and unsatisfactory regulation system here. I hesitate to say that because I think the Gambling Commission does very good work. But the system we have of the Gambling Commission, GambleAware, and what is now called the Advisory Body for Safer Gambling, working together, and government really taking a backseat and saying, “We want you to get on with it”, is a thoroughly unsatisfactory system.”266

The view of this Committee

234.The work of the Gambling Commission is central to the wide liberalisation of the gambling regime created by the Act. If the industry’s freedom under the Act is not to be abused, if vulnerable people are to be protected, the regulator has to be alert, dynamic and proactive. Despite the statutory constraints under which it operates, the Commission has very wide powers. It can if necessary impose stricter regulation by adding more stringent licence conditions either on all operators, or on all in a particular category, or on individual operators, so long as these are objectively justified and do not discriminate between different operators.

235.The Commission has this year made three significant changes to the LCCP: it has limited the number of organisations to which operators can pay their voluntary levy;267 it has banned the use of credit cards for gambling; and it has made membership of GAMSTOP compulsory.268 All of these are highly desirable changes which we fully endorse. But it is hard to escape the impression that these changes have been made as a reaction to external pressure. This is particularly true of the ban on the use of credit cards, which many have been calling for for a long time. A number of the changes we are recommending can be made simply by amendments to the LCCP. We expect the Gambling Commission to make these changes very soon after we report, but they are changes which a more proactive Commission might have considered making without our intervention.

236.Enforcement is another area where, as we have explained, there has been a very significant and welcome change in the attitude adopted by the Commission. Again, its increasing willingness to make better use of its very wide powers has perhaps been a reaction to anticipated criticism rather than a recognition of the need to keep gambling operators compliant with their obligations.

237.The relationship between a non-departmental public body and its sponsoring department is not always easy. In exercising its statutory functions, especially of licensing and enforcement, the Commission must be, and be seen to be, entirely independent. Yet DCMS, as the department with primary responsibility for gambling, also plays a major role. As we have explained, the funding of the Commission is dependent on DCMS. On matters like the lowering of the maximum stake for FOBTs, the Commission can advise but only Ministers can act. We explain in Chapter 8 how the views of the Commission on the introduction of a mandatory levy have been disregarded by DCMS Ministers.

238.The Commission prepares an annual report which it submits to Parliament. This could be debated in either House, but usually is not. It could be considered by the Commons DCMS Committee,269 which could take evidence from the Commission and others, and report on its performance over the previous year; but it has not done so, certainly in the recent past. The report of the NAO published in February this year270 was a one-off. The promised Government review of gambling, if and when it takes place, is not intended to concentrate on the Commission. We believe there is a need for a mechanism for a regular assessment of the past performance of the Commission from which lessons can be learned which will improve its work in the future.

239.The Government should conduct a triennial review of the work of the Gambling Commission, taking evidence from a wide range of interested persons and bodies, and prepare a report to Parliament on the past performance of the Commission, on lessons to be learned for the future, and on any changes which may be needed to its constitution or to the law governing it.

Licensing of affiliates

240.The Advertising Standards Authority (ASA) defines affiliate marketing as follows: “Affiliate marketing is a type of performance-based marketing where an affiliate is rewarded by a business for each new customer attracted by their marketing efforts, usually with a pre-agreed percentage of each sale. Affiliates typically place ads and links online that direct consumers to the website of a company.” In the context of gambling, the reward of an affiliate is often proportionate to the losses incurred by the customers it attracts to the operator with which the affiliate has a contract.

241.Alex Macey, a police officer who had suffered an addiction to gambling since the age of 11, and in particular since he joined the police in 2003, said in written evidence: “I had received a bombardment of emails and texts from companies I had never even signed-up with. Whilst it was apparent that the minority of this marketing were directly from the licence holders the majority clearly seemed to be from affiliates of the licence holders.”271 He expanded on this in oral evidence:

“I could show you my phone today, and there would be between five and 10 emails from affiliates that have no permission to contact me. I do not even know who they are. It is quite hard to track down who they are, and they are linked to the main companies again. Funnily enough, I wrote to a company and told them: “You have sent me marketing material after I self-excluded”. They agreed that it was wrong and gave me a refund. I had to sign a bit of paper saying that I would not tell anyone about it; fine. A month later, an affiliate sent me another text from this company—so, the same company, after I had signed this non-disclosure, sent me another text message. They have no control of their affiliates’ behaviour.”272

242.When we took evidence from the main gambling operators,273 we asked them how they could justify using third parties to drive customers to their companies. Dan Taylor, the Chief Executive Officer of Paddy Power Betfair, explained that they had a small number of affiliate partners; they had reduced that number by 50% over the previous 12 months because they did not approve of the way the affiliates operated. He added that he would welcome a licensing regime for affiliates to ensure that they were held to the highest possible standards. He “would expect it to come through the Gambling Commission and to be regulated as any other part of the industry would be.”274

243.Conor Grant, Chief Operating Officer of Sky Betting and Gaming, replied: “At Sky Betting & Gaming, we closed our affiliate scheme in 2017 because we were equally concerned. Since then, we have signed 12 larger media partners, as we call them.” When pressed, he accepted that the “media partners” were doing the same work as affiliates, but added that his company had changed the way it worked: “Historically, if you joined the site and lost £100, the affiliate would have had a cutback of that. Today, the media partner gets a fixed fee and no further revenue as a result.”275 The CEOs of Bet365, William Hill and GVC all admitted that their companies still used affiliates, some at least of which were paid on the basis that they benefited when the player lost a bet.276

244.We heard this evidence on 4 February 2020. On 21 February we received a submission from a body called the Responsible Affiliates in Gambling (RAiG).277 They explained that they wrote “having taken note of comments already made by the Committee’s participants.” Although this submission arrived over six months after the deadline, we accepted it as written evidence.

245.RAiG was set up in May 2019 by three of the largest affiliates “to foster wider initiatives in the UK affiliate market to promote social responsibility and help create a safer gambling environment for consumers.” A condition of joining the association is that each member will be subject to an annual social responsibility audit. Although the RAiG evidence does not mention who conducts this audit, their website tells us that it will be conducted by Gambling Integrity, a body whose clients include William Hill, Sky Betting and Gaming, and GVC.

246.RAiG estimate that there are “tens of thousands of affiliates operating in the UK market. The vast majority of these will be very small indeed, often individuals who promote gambling on social media. At the other end of the spectrum are listed and multi-million pound companies such as those who established RAiG.” They state: “It is widely accepted that affiliates deliver between 30%–50% of acquisition to operators in the UK and collectively, members of RAiG reach millions of unique customers each month via their websites and products.”278

247.Affiliates are not individually licensed. They are regulated by the ASA, but not by the Gambling Commission, whose involvement is only indirect. Mr McArthur told us: “We have made it extremely clear to our operators that they are personally accountable for the actions of affiliates, so they cannot say, as some tried a little while ago, ‘We could not possibly control this, because it is all being done by affiliates. Although it is done in our name, it is done without our knowledge’ … We are holding the operators to account, and we have fined operators for not controlling their affiliates.”279

248.The submission of the RAiG of course argues that they are sufficiently regulated. Among many arguments, they point out that “the [Gambling] Commission’s compliance policy has led to thousands of affiliate relationships being terminated because the operators could no longer be satisfied that some of the affiliates they were working with were sufficiently compliant. RAiG believes that these actions have already had a major impact and it again begs the question of how much additional impact licensing would have when taken together with the existing regulations.” They suggest that “improvements could be made by better enforcement of the current regulations and rules rather than introducing a licensing regime.” They note that the Gambling Commission has no plans to introduce a licensing regime for marketing affiliates and they add the disinterested observation that to do so would “create a huge burden on the regulator”.280

249.It is clear from the evidence of Mr Macey and our other witnesses with lived experience that many of the contacts with gamblers who have self-excluded come from affiliates of the operators. We agree with Kenny Alexander, the CEO of GVC, who when asked whether affiliates should be licensed by the Gambling Commission, replied: “Absolutely—they should be under the same sort of controls and regulations as operators”.281 If, as we believe, the licensing of affiliates is necessary, the fact that this would undoubtedly be an additional burden on the Gambling Commission, involving perhaps the creation of a new category of licence, is no reason for not doing so.

250.We recommend that affiliates should be licensed by the Gambling Commission before they can enter into contracts with gambling operators, and that operators should not be permitted to enter into contracts with unlicensed affiliates.

The house edge

251.The Gambling Commission currently requires online operators to include “information that may reasonably be expected to enable the customer to make an informed decision about his or her chances of winning” for virtual gambling games such as online roulette.282 This information is almost always displayed as what is known as the “return-to-player” percentage, e.g., “This game has an average percentage payout of 90%”, meaning that for every £100 bet, on average £90 will be paid back out as prizes. However, the Gambling Commission regulations also allow this information to be displayed as the “house-edge” percentage, e.g., “This game keeps 10% of all money bet on average”, meaning that gamblers will on average lose £10 for every £100 bet.

252.A return-to-player of 90% and a house-edge of 10% are therefore factually equivalent, but psychologically they are quite different. Dr Ludwig, Dr Newall, and Dr Walasek told us that research they had conducted showed that gamblers think they will have a better chance of winning when given return-to-player information than when given equivalent house-edge information. They surveyed 363 online roulette games across 26 major operators and found 357 games with return-to-player statements and none with house-edge statements. Return-to-player statements were further hidden in dense blocks of text on obscure help screens, with 95.5% of statements using the smallest text size on the screen, and 99.7% using the lowest level of text boldness.283

253.This plainly does not conform with the licensing objective of “ensuring that gambling is conducted in a fair and open way”; nor does it comply with the Gambling Commission regulations which require “information that may reasonably be expected to enable the customer to make an informed decision about his or her chances of winning”.284 The flexibility on how to display this information has been exploited by an industry-wide strategy of only displaying hidden and confusing return-to-player statements.

254.Licence conditions should require the proportion of the stake retained by the house to be displayed prominently and clearly, in simple terms, on each gaming machine in all gambling premises, and in remote gambling.

Regulation by local authorities

255.In England and Wales, for 500 years the licensing of premises for the sale of alcohol was a function of justices of the peace.285 The Licensing Act 2003 transferred this function to new licensing committees of local authorities. The policy for this was contained in a White Paper published in 2000,286 and it is no surprise that the Budd review which reported in July 2001, considered “that the same arguments apply to gambling premises”, and recommended that the same transfer should apply to the licensing of premises for gambling.”287 It is therefore the licensing committees of local authorities which license premises for gambling.

256.We have explained in the previous chapter how the liberalisation of gambling has led to the proliferation of betting shops on high streets, and we referred to the evidence of the Estates Gazette that this has in turn led to “bunching”, with almost 700 units on the same high streets as other bookmakers.288 The Local Government Association have also drawn attention to this issue, which they refer to as the “clustering” of betting shops, and have pointed out to us that licensing authorities have a contradictory mix of powers under the Gambling Act, with the ability to bar the opening of local casinos, but no real power to prevent the opening of other premises. “Due to the statutory ‘aim to permit’,289 licensing authorities are unable to prevent the opening of certain gambling premises in their areas even if they feel that they are already saturated with them. There should be more local flexibility within the Act for democratically elected councillors to make such decisions if they can be shown to be in the interests of the local economy and community.”290

257.Leeds City Council were keen to have more local autonomy:

“The Council would welcome more control, such as the ability to control numbers in a given area, for example in the same way as cumulative impact areas work for the Licensing Act 2003. This would prevent the proliferation of any single type of gambling premises in an area—such as betting shops, AGCs or bingo halls, which not only have an impact on the local high street but also seem to accumulate in deprived areas. The Council would also welcome the ability to incorporate local conditions and requirements into the Statement of Licensing Policy to control matters such as single staffing, window displays, visibility of gaming and gambling machines, etc. to promote the protection of children and vulnerable people.”291

258.Gerald Gouriet QC expressed similar views:

“It is something of a myth that giving the licensing function to local authorities has resulted in ‘local licensing control’. The control that most licensing authorities would like to exercise is the refusal of a licence for a betting shop or adult gaming centre on the simple ground: “the local community doesn’t want it”. Licensing authorities do not have that power—although licensing justices under the repealed legislation did. Even if (as is frequently the case) substantial numbers of local people strongly object to the grant of a new licence for gambling premises on the perfectly rational ground that the high street already has enough of them and the local community doesn’t want any more, that is not a lawful ground for rejecting an application made in accordance with the 2005 Act.”292

259.We agree. We accept that to give local authorities such a power in respect of the licensing of premises for gambling would be a reversal, not only of the general “aim to permit” philosophy which underpins the Act, but also of the prohibition on licensing committees having regard to “the expected demand for the facilities which it is proposed to provide.”293 It would not however be inconsistent with the Budd report which, having recommended the abolition of the demand test, went on to say: “We recommend that in determining whether the location for gambling premises is appropriate the local authority should have regard to the general character of the locality and the use to which buildings nearby are put.”294

260.We believe such a change would be justified. The interests of the operators should not be the only significant factor in a decision on where a betting shop is located. Local authorities should be able to decide not just on the basis of “what is good for the punter”,295 but what is good for the community as a whole. In this respect licensing committees should have the same powers as they do when licensing premises for the sale of alcohol.

261.The Act should be amended to give licensing committees deciding on the licensing of premises for gambling the same powers as they already have when deciding on the licensing of premises for the sale of alcohol.


223 Responsibility for the National Lottery came later: see paragraph 196.

224 Gambling Act 2005, section 1: (a) preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime, (b) ensuring that gambling is conducted in a fair and open way, and (c) protecting children and other vulnerable persons from being harmed or exploited by gambling.

225 Gambling Act 2005, section 22

226 The Commission has no power to prosecute offences in Scotland. That power rests solely with the Crown Office and Procurator Fiscal Service, to whom the Commission can refer the results of an investigation.

227 Under the Gambling (Licensing and Advertising) Act 2014, section 5, the Commission has power in respect of the offence of advertising unlicensed remote gambling in Northern Ireland.

228 Public Bodies Act 2011, section 2 and schedule 2

229 The Public Bodies (Merger of the Gambling Commission and the National Lottery Commission) Order 2013 (SI 2013/2329)

230 The Gambling (Operating Licence and Single-Machine Permit Fees) Regulations 2017 (SI 2017/303). These Regulations set fees for 39 specific types of licence, and vary with the GGY of the operator.

231 Supplementary written evidence from the Gambling Commission (GAM0116)

233 Supplementary written evidence from the Gambling Commission (GAM0116)

234 Gambling Act 2005, section 1(c)

235 Gambling Commission, Strategy 2018–2021 (2018): https://www.gamblingcommission.gov.uk/PDF/Strategy-2018–2021.pdf [accessed 18 May 2020]

236 Gambling Commission, Annual Report and Accounts 2018–19 (July 2019): https://www.gamblingcommission.gov.uk/PDF/Annual-Report1819.pdf [accessed 18 May 2020]

237 See paragraphs 549–557.

238 See paragraphs 507–510.

239 Responsible Gambling Strategy Board, Final Progress Report: National Responsible Gambling Strategy 2016–19 (March 2019): https://live-rgsb-gamblecom.cloud.contensis.com/PDF/RGSB-Final-Progress-Report-2016–2019.pdf [accessed 18 May 2020]

240 Gambling Commission, ‘Gambling Commission’s independent advisory board renamed to reflect sharper focus on safer gambling’: https://www.gamblingcommission.gov.uk/news-action-and-statistics/News/gambling-commissions-independent-advisory-board-renamed-to-reflect-sharper-focus-on-safer-gambling [accessed 18 May 2020]

241 Ibid.

242 Gambling Commission, National Strategy to Reduce Gambling Harms (25 April 2019): https://www.reducinggamblingharms.org/asset-library/national-strategy-to-reduce-gambling-harms.pdf [accessed 28 April 2020]

243 Licence conditions and codes of practice, Part I: Licence condition 6.1.2

244 Gambling Act 2005, section 33

245 Licence conditions and codes of practice, Part II: Code of practice provisions

246 Q 145 (Neil McArthur)

247 Gambling Commission, Licensing, compliance and enforcement under the Gambling Act 2005: policy statement (June 2017): https://www.gamblingcommission.gov.uk/PDF/Licensing-compliance-and-enforcement-policy-statement.pdf [accessed 18 May 2020]

248 Gambling Commission, Raising Standards for Consumers: Enforcement Report 2017–18 (June 2018): http://www.gamblingcommission.gov.uk/pdf/raising-standards-for-consumers-enforcement-report.pdf [accessed 18 May 2020]

249 Gambling Commission, Raising Standards for Consumers: Enforcement Report 2018–19 (June 2019) p 3: https://www.gamblingcommission.gov.uk/PDF/2604-GC-Enforcement-Report-2018–19-1.pdf [accessed 18 May 2020]

250 Gambling Commission, Annual Report and Accounts 2018–19 (July 2019) p 19: https://www.gamblingcommission.gov.uk/PDF/Annual-Report1819.pdf [accessed 18 May 2020]

251 Q 148 (Neil McArthur)

252 Supplementary written evidence from the Gambling Commission (GAM0116)

253 Ibid.

254 Gambling Commission, ‘Betway to pay £11.6m for failings linked to ‘VIP’ customers’: https://www.gamblingcommission.gov.uk/news-action-and-statistics/news/betway-to-pay-116m-for-failings-linked-to-vip-customers [accessed 18 May 2020]

255 Gambling Commission, ‘Systemic failings at Caesars Entertainment leads to the departure of three senior managers and sanctions of 13m’: https://www.gamblingcommission.gov.uk/news-action-and-statistics/news/systemic-failings-at-caesars-entertainment-leads-to-the-departure-of-three-senior-managers-and-sanctions-of-13m [accessed 18 May 2020]

256 Gambling Commission, Licensing, compliance and enforcement under the Gambling Act 2005: policy statement (June 2017) para 5.22: https://www.gamblingcommission.gov.uk/PDF/Licensing-compliance-and-enforcement-policy-statement.pdf [accessed 18 May 2020]

257 Written evidence from the Betting and Gaming Council (GAM0068), dated 6 September 2019 gave the figure 106,000. The figure 98,000 comes from the Gambling Commission’s latest statistics published in May 2020: Gambling Industry Statistics: April 2015 to March 2019 updated to include October 2018 to September 2019, p 9

258 Written evidence from GVC Holdings Plc (GAM0042)

259 Written evidence from William Hill (GAM0084)

260 Written evidence from BACTA (GAM0050)

261 Q 70 (Tony Parente)

262 Q 70 (Alex Macey)

263 Q 171 (Charles Ritchie)

264 Q 171 (Liz Ritchie)

265 Supplementary written evidence from the Gambling Commission (GAM0116)

266 Q 23 (Professor Jim Orford)

267 See Chapter 8, paragraph 563.

268 See Chapter 5, paragraph 368.

269 Or, before the session 2017–18, its predecessor, the Select Committee on Culture, Media and Sport.

270 See paragraph 198.

271 Written evidence from Alex Macey (GAM0058)

272 Q 58 (Alex Macey)

273 Kenny Alexander, CEO of GVC; Ulrik Bengtsson, CEO of William Hill; John Coates, Joint Chief Executive of Bet365; Conor Grant, Chief Operating Officer of Sky Betting and Gaming; Dan Taylor, Chief Executive of Paddy Power Betfair; together with Brigid Simmonds, Chair of the Betting and Gaming Council. Paddy Power Betfair is a division of Flutter Entertainment plc. Sky Betting and Gaming is a wholly owned subsidiary of The Stars Group, which is listed on the Toronto stock exchange. On 5 May 2020 Flutter Entertainment plc merged with The Stars Group. Paddy Power Betfair and Sky Betting and Gaming are therefore now part of the same group, though they were not at the date when they gave evidence to this Committee.

274 Q 132 (Dan Taylor)

275 Q 132 (Conor Grant)

276 Q 132 (John Coates, Ulrik Bengtsson and Kenny Alexander)

277 Written evidence from RAiG (GAM0113)

278 Ibid.

279 154 (Neil McArthur)

280 Written evidence from RAiG (GAM0113)

281 Q 132 (Kenny Alexander)

282 Gambling Commission, Remote gambling and software technical standards (June 2017) p 12: https://www.gamblingcommission.gov.uk/PDF/Remote-gambling-and-software-technical-standards.pdf [accessed 18 May 2020]

283 Written evidence from Dr Elliot Ludvig, Dr Philip Newall and Dr Lukasz Walasek (GAM0089)

284 Gambling Commission, Remote gambling and software technical standards (June 2017) p 12: https://www.gamblingcommission.gov.uk/PDF/Remote-gambling-and-software-technical-standards.pdf [accessed 18 May 2020]

285 Originating with the Vagabonds and Beggars Act 1494.

286 Home Office, Time for Reform: Proposals for the Modernisation of our Licensing Laws, Cm 4696, April 2000

287 Gambling Review Report, paras 18.16–18.21

288 Written evidence from Estates Gazette (GAM0005)

289 A reference to Gambling Act 2005, section 153(1), which requires a licensing authority to “aim to permit the use of premises for gambling” if they think it is consistent with codes of practice and guidance issued by the Gambling Commission, with the licensing objectives, and with their own licensing policy statement.

290 Written evidence from the Local Government Association (GAM0057)

291 Written evidence from Leeds City Council (GAM0038)

292 Written evidence from Gerald Gouriet QC(GAM0045)

293 Gambling Act 2005, section 153(2)




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