Gambling industry hit by tsunami!

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Gambling companies in the UK are being hit by a tsunami of regulatory intervention and it doesn't look like the industry will be out of the waves anytime soon.

It's difficult to believe that before the Gambling Act 2005 came into force (on 1 September 2007), the betting industry was largely unregulated (as the Gaming Board primarily dealt with land-based casinos and bookmakers only had to obtain a permit from their local licensing magistrates). Moreover, until 1 November 2014, and implementation of the Gambling (Licensing and Advertising) Act 2014, nearly all remote operators were not subject to regulation by the Gambling Commission as they were located outside of Great Britain.

Having therefore experienced a period of relatively light regulation, in the last few months the pendulum has swung rapidly to the other extreme and, as the Gambling Commission's chief executive, Sarah Harrison, made clear in a speech earlier this month, if anything, the pressure is only going to get more intense.

Over the last few weeks, the industry has experienced: commencement of a triennial review of gaming machines (with the focus very much on FOBTs); a review of gambling advertising (added as part of the triennial review); an investigation launched by the Competition and Markets Authority (in conjunction with the Gambling Commission and the Advertising Standards Authority) looking at the fairness of online operators' terms and conditions and practices (see here); a crackdown by the Information Commissioner's Office on the use of personal data by gambling affiliates (see here); the Minister responsible for gambling, Tracey Crouch, indicating that online bookmakers would be required to pay the expanded Horserace Betting Levy at 10% (see here) and, in the background, there is implementation of the 4th Anti-Money Laundering Directive, the impending taxation of free plays (see here) and possible changes in the VAT regime.

You might think that this is enough for the industry to be getting on with but, in her speech at the Gambling Commission's "Raising Standards" conference on 8 November, Sarah Harrison made it very clear that she is expecting operators to do more and faster to meet their regulatory obligations and this was underpinned by a proposed change in the Commission's enforcement strategy. In particular, she said:-

"One of the principles in the Commission's existing statement for licensing and regulation is a preference for pursuing compliance through means that stop short of a licence review, in favour of a regulatory settlement. We propose to remove this bias in favour of settlement. We will put access to all tools, including licence review, (both of the operator and personal management licences), on an equal footing.

In addition, we will propose changes to our statement on financial penalties with the likelihood of higher penalties going forward, in particular where we see systemic and repeated failings. Our principles on penalties already reflect the need to remove profits from non-compliance, take account of costs and consumer harm, and deter poor compliance but higher penalties are likely if we do not see behaviour changing.

While our consultation on enforcement policy changes will develop over the coming months, I want to make it clear that all cases relating to breaches which date from now, will be likely to attract higher penalties, should that be a necessary outcome."

The message from the Gambling Commission's chief executive is therefore very clear – up your game or you are liable to be punished. But for anybody who wasn't getting the message, Sarah Harrison, in her conclusion, said:

"But you need to raise your ambitions and your sights higher. You need to step up the pace of change – in how you handle customer complaints; ensure advertising is clear; simplify terms and conditions; develop your risk management strategies on money laundering; evaluate the impact of social responsibility initiatives – and, working across all these areas, in how you do more to share best practice."

This does not appear to be mere happenstance but a perfect storm of a relatively new chief executive of the Gambling Commission determined to make her mark and a new Government which appears to be significantly less favourably inclined to the gambling industry than any in recent memory and significantly more prepared to intervene in the market.

You have been warned!