Andrew Tait Consultant Solicitor
UK Gambling Commission enforcement: a step too far?
This article was first published in EGR Compliance September 2018.
The UK Gambling Commission’s stance on regulatory enforcement since 2015 has significantly changed from one relying on the letter of the law to one focused on the spirit of the law. The Licence Conditions and Codes of Practice (LCCP) have evolved to enshrine this change, with the emphasis now on operators to apply the licensing objectives in a more subjective manner.
This means that operators can’t just adhere to and interpret the LCCP as a list of strict requirements but must instead understand the principles behind them, and practically apply them. Indeed, in the Commission’s latest consultation process, it states :
“LCCP does not prescribe detailed rules, but describes the outcomes that we expect licensees to achieve within the framework.
“As well as raising standards by setting minimum requirements, we will also continue to support industry to put consumers first through guidance, advice and supporting the sharing of industry best practice. As set out in our strategy, we want a focus on ‘what works’ and we will drive and develop across the gambling landscape a culture of trialling and evaluating interventions”.
This change to a more subjective approach is not unexpected given that 2015 was the year the UK changed its gambling licence regime from one founded on mutual recognition of EU and white listed jurisdictions, to one requiring all those providing facilities for gambling to British based persons and suppliers of gambling software to have their own UK gambling licence. This in turn spawned an avalanche of remote gambling applications from all quarters, making a rigid rule based regulatory system hard to apply. Also a more flexible regime was needed to tackle the operationally and technologically advanced remote sector, which is perceived by many to carry higher risks due to its lack of physical customer interaction, its reliance on aggressive marketing in the acquisition of new customers, and its use of new mobile technologies and social media marketing to blanket consumers of all ages, at all times and in all locations with gambling oﬀers and inducements.
According to the Commission’s review of online gambling published in March 2018, the UK has the largest regulated online gambling market in the world, generating £4.7bn gross gambling yield (GGY) per annum, and is expected to continue to grow strongly.
In December 2014 only 15% of British people gambled on-line; currently it stands at 34% and is expected to reach 50% in a few years’ time. Almost all the operators are based outside the UK, many with a global remit addressing multiple geographies through an array of direct and indirect online and off-line based promotions, marketing and operational practices. This has led to many of them failing to sufficiently raise their standards and adopt best practices based upon knowledge and understanding of their players’ behaviours, which is essential when it comes to addressing the Commission’s chief concerns of keeping crime out of gambling, treating customers fairly and protecting the vulnerable, all in a subjective way.
The industry, particularly the online sector, now seems to be deluged by a continual series of enforcement actions taken by the Commission itself or in cooperation with other regulators, such as the Competition and Markets Authority (CMA). Many in the industry see themselves as victims of a political and media backlash against their legitimate business and profit generating objectives, compounded by the fear of problem and under age gambling and duped punters being blown completely out of proportion.
So, is this a step too far, with the Commission stepping beyond its regulatory mandate in its zeal to appease politicians and the media? Or is it perhaps the Commission trying to re-shape the industry so that it builds its own protective measures and adopts a holistic, proactive approach to the fair treatment of customers, thereby ensuring player trust and loyalty – in other words, a real blessing in disguise?
UK facing operators can either embrace this high gambling compliance benchmark by proactively and continuously improving their own standards or decide that the time and cost burden needed to come up to scratch means that they are better oﬀ leaving the British market. However, one thing operators cannot do is ignore the Commission’s push for the industry to perpetually improve itself.
Doing nothing is not an option and depending on individual operators’ business plans and risk appetites, they will need to decide their next steps. Hopefully the rest of this article may help in that decision.
A step too far?
There has without doubt been a considerable uplift in enforcement activity by the Commission over the past few years. This has focused on three main areas: anti-money laundering (AML), problem gambling / self-exclusion, and marketing / unfair terms. Not only has the frequency increased but the level of sanctions has also escalated to crippling levels, such as £7.8m in the case of 888 and £6.2m for William Hill.
AML has been particularly fertile ground with 13 instances of regulatory action taken, 8 since 2016 and an ongoing investigation into 22 operators (with a minimum of 5 facing licence reviews) still in the mix. The Commission reviewed and upgraded its enforcement strategy in 2017  with the clear intention of increasing the level of financial penalty in order to galvanise the industry to take action. The severity of these penalties will depend on a number of published factors  a key one of which is the need to learn from past mistakes irrespective of whether they are the operator’s own or published failings of others. This imperative has been repeated time and time again, hammered home in the Commission’s latest report on its enforcement activity . If the key learnings and suggested best practices stemming from that report are not already in place or in the process of being implemented, then those operators should immediately make it their highest priority.
Operators are often at the mercy of their customers and suppliers whose actions can drag the operator into the firing line of enforcement by the Commission. This is very apparent in the case of customer workarounds of the operator’s self exclusion controls. A determined problem gambler using technology and his own ingenuity may eventually find weaknesses in systems not specifically designed to combat this risk. Skybet were fined £1M for failing to address this concern.
The suppliers in question are often aﬃliate and media marketing companies, who advertise operator brands and promotions on their sites. Despite operator guidelines, content approval processes, prescribed template promotions and other precautions, the aﬃliates still breach gambling marketing and consumer regulations. Lottoland and BGO suﬀered regulatory enforcement due to their aﬃliates’ marketing breaches. In another case involving SkyVegas, despite the fact that an aﬃliate created a non-compliant advert without discussing it or being commissioned, approved or sanctioned by Sky Vegas, the Advertising Standards Authority (“ASA”) still held that Sky Vegas was responsible for the ad.
It may seem harsh that operators are being held culpable for the failings of others, despite taking reasonable precautions. It is forcing many operators to carry out defensive-across-the-board compliance measures rather than take a risk-based approach, such as the elimination or severe culling of aﬃliate campaigns and intrusive proof of customer funds / affordability checks. This has a negative impact on their business and is off-putting to customers who are often driven to unregulated “black market” operators as a consequence.
The findings of the ASA on certain gambling adverts has given concerns to the industry, such as the Ladbrokes / Iron Man case, in which the use of this Marvel character in ads was initially thought by the ASA to be appealing to, and therefore targeted at, children. However, Ladbrokes quickly pointed out that it was only used in retention campaigns to existing customers verified as over 18. The ASA eventually reversed their decision, whilst still holding out that the use of the Iron Man image was appealing to children despite strong evidence from Ladbrokes to the contrary. Indeed, the ASA’s stance on certain popular adult culture figures such as Marvel and DC comic heroes as alluring to children and therefore out of bounds for gambling marketing without age filters, is controversial given the predominate adult audience which actually watch the films and read the comics .
The findings of the ASA are important as they are reviewed by the Commission who may and sometimes do take enforcement on the back of them. This has been the case in many instances of online gambling promotions, where significant terms need to appear in the ad itself with the remainder one click away. This is irrespective of space limitations except in the most extreme cases. Significant terms are interpreted by the Commission as being something important enough for a customer to decide whether to participate in the promotion or not. This creates problems as operators are also expected to be as specific as possible, including their grounds for voiding bonuses based on certain types of activity (rather than relying on broad powers of discretion).
Therefore if you are a certain type of bonus abuser, then a specific term applying and banning your activity may indeed rightly put you off opting for a promotion. However to add this term into a small banner ad will be an issue. Already adverts are expected to contain wagering requirements, minimum bet amounts, time limits, applicability to new–customers-only and so on. If operators need to insert anti-fraud type wording to the ad, as was case in the ASA ruling against Slots Heaven  , then banner ads and the like would become untenable, instead a half page or more would be needed to contain all the “significant” terms.
One of the major complaints raised by operators especially small to medium-sized ones with fewer resources, is the time and cost needed to meet the expectations of the Commission. For example, operators warned via ASA and perhaps the Commission itself that certain ads do not comply with transparency and non-misleading requirements, can spend 100s of man hours dismantling landing pages, aﬃliate campaigns, web links and other online advertising machinery in an attempt to eliminate the non-compliant promotions.
So, in theory, it could mean that something as small as a technical glitch or a missing link could result in the Commission coming down hard on the operator with fines which usually exceed £100,000. Operators could be forgiven for thinking that their good intentions to protect and be as fair as possible to their customers, coupled with their herculean efforts to comply, are not always fully taken into account and appreciated by the Commission.
In some cases, such as the recent CMA led initiatives around own-deposit withdrawals and restrictions due to co-mingling with bonus money , meant that operators had a relatively short time frame to reconfigure, and in some case completely rebuild, their bonus engines. Where major technical overhauls are required to comply with tight compliance deadlines then the industry’s product development roadmaps are put on hold and instead all their resources dedicated to compliance led initiatives.
Therefore, there seem to be justifiable grounds to support the argument that the Commission has gone too far too quickly in its enforcement zeal for the industry to adjust and build up a proportionate and sustainable level of compliance. All it takes is a complaint from a bonus abuser, self-excluded problem gambler with technical know-how, or an underage player with no risk of losing their deposit money, to trigger a formal investigation into an operator’s systems and procedures. As controls are by their very nature risk-based and not prescriptive, perceived weaknesses based on a technical, non-operational viewpoint may lead to the operator being caught up in a vicious cycle of correction and reappraisal, with any minor failing after the initial [failing] putting them firmly on the Commission’s watch list as well as incurring a penalty.
Click here to read Andrew Tait’s follow-on article, which looks at whether the Commission’s uplift in enforcement isn’t actually a blessing in disguise.
 Proposed Changes to LCCP linked to the fair and open licensing objective, Consultation January 2018 http://www.gamblingcommission.gov.uk/PDF/consultations/Proposed-changes-to-LCCP-fair-and-open.pdf
 The GB Gambling Commission’s enforcement strategy: changes and implication for the industry, Online Gambling Law Review, Andrew Tait and Andrew Cotton https://www.incegdlaw.com/en/knowledge-bank/the-gb-gambling-commission-s-enforcement-strategy-changes-and-implications-for-industry
 Gambling Commission’s: Statement of Principals for Determining Financial Penalties, June 2017 http://www.gamblingcommission.gov.uk/PDF/statement-of-principles-for-determining-financial-penalties.pdf
 Gambling Commission’s: Raising the Standards for Consumers, Enforcement Report 2017-1018http://www.gamblingcommission.gov.uk/PDF/Raising-standards-for-consumers-enforcement-report.pdf
 CMA action in the remote gambling sector: Overview for industry https://www.gov.uk/cma-cases/online-gambling
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