Gambling Commission imposes £627,000 penalty package on LeoVegas for misleading marketing and failings in their handling of customers who had self-excluded

On 2 May 2018, the Gambling Commission announced that it has imposed a £627,000 penalty package on LeoVegas for misleading marketing and failings in the online operator’s handling of customers who had self-excluded.

The Gambling Commission initially commenced a review of LeoVegas’s licence but concluded matters on the basis that LeoVegas will pay a £600,000 penalty, will divest itself of any funds received as a result of the failings, and will pay £13,000 towards the Commission’s costs.

During its investigation, the Gambling Commission found that LeoVegas:

• was responsible for 41 misleading adverts
• failed to return funds to 11,205 customers when they chose to self-exclude and close their account
• sent marketing material to 1,894 people who had previously self-excluded
• allowed 413 previously self-excluded customers to gamble without speaking to those customers first or applying a 24-hour cooling off period before allowing them to gamble.

This enforcement action follows closely behind a number of other penalties imposed by the Gambling Commission in recent months for similar breaches, including against Bwin, Lottoland and BGO for marketing failings and SkyBet, SunBets and 888 for self-exclusion failings.

Marketing

The Gambling Commission identified that LeoVegas or its affiliates published 41 website advertisements between April 2017 and January 2018, and of these:

• 31 failed to state significant limitations and qualifications relating to promotions, despite there being space to do so (eight on its own website and 23 on affiliates’)
• 10 misled consumers, as the information needed to make an informed decision was presented in an unclear manner.

LeoVegas is said to have acknowledged the breaches of the Licence Conditions and Codes of Practice and the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) and has implemented various changes and improvements to processes and procedures to address these breaches. These include:

• review and revision of all policies and procedures relating to marketing compliance, in order to ensure compliance
• recruitment of a marketing compliance officer in both legal and affiliate teams
• training programme for marketing personnel, including CAP rules
• compliance approval of marketing as part of the sign off process
• actively seeking CAP advice as appropriate
• limiting the number of affiliates and excluding email or SMS messaging
• improving affiliate processes around on-boarding, breaches and terminations
• ·overhaul of affiliate terms and conditions
• affiliate training on compliance obligations through an information programme and guidebook
• compliance audits on affiliates to identify and remedy any issues revealed.

This action serves as yet another reminder to the industry of the importance of ensuring that all advertising – whether published by the operator itself or by its affiliates – is clear and not misleading.

Whilst the industry continues to grapple with the problem of how to ensure the activity of marketing affiliates is lawful, the Gambling Commission has once again made clear that it will seek to hold operators responsible for the activities of their affiliates. LeoVegas is not the first operator to take the decision to limit the number of affiliates operating in its affiliate network in order to tighten monitoring and controls to better ensure that the marketing activities of these third parties is compliant with relevant requirements.

Self - exclusion

Following receipt of a complaint from a self-excluded customer on 1 June 2016, LeoVegas performed a review of its systems. The complainant had, following receipt of marketing material, been able to access their account and gamble. The review identified a software error which had occurred on 1 April 2016 and reactivated accounts where a self-exclusion or time-out had expired, despite no positive steps to return to gambling.

As a result of this error:

• 1,894 customers who were formerly self-excluded were sent marketing material without first agreeing to accept such material
• 413 customers who were formerly self-excluded were able to gamble without contacting customer services or being given a 24-hour cooling off period. A total of €226,877 (approx. £200,000) was deposited by these players over a period of two months.

LeoVegas accepted it has breached certain of the requirements relating to self-exclusion, including those contained in social responsibility code provision 3.5.3(1) which requires that licensees must have and put into effect procedures for self-exclusion and take all reasonable steps to refuse service or to otherwise prevent an individual who has entered a self-exclusion agreement from participating in gambling.

Further, ordinary code provision 3.5.4(5)(e)-(g) states licensees should take all reasonable steps to ensure that:

• at the end of the period chosen by the customer, self-exclusion remains in place, for a minimum of 7 years, unless the customer takes positive action to gamble again;
• where a customer chooses not to renew, and makes a positive request to begin gambling again, during the 7 year period following the end of their initial self-exclusion, the customer is given one day to cool off before being allowed to access gambling facilities. Contact must be made via phone or in person; re-registering online is not sufficient; and
• ·notwithstanding the expiry of the period of self-exclusion chosen by a customer, no marketing material should be sent to them unless and until they have asked for or agreed to accept such material.

Compliance with ordinary codes is not mandatory but licensees must have in place alternative arrangements to achieve the same effect. LeoVegas accepted that it did not have such an alternative approach.

Whilst conducting the review into self-exclusions, LeoVegas identified 11,205 self-excluded accounts with outstanding balances in breach of the requirements in social responsibility code provision 3.5.3(5) which states that licensees must close any customer accounts of an individual who has entered a self-exclusion agreement and return any funds held in the customer account.

LeoVegas has already returned balances to players where possible. They have identified c.€16,500 (approx £14,429) in outstanding balances, with the majority being less than £1.00. LeoVegas will divest itself of those funds by making an equivalent donation to charities for socially responsible causes.

LeoVegas is said to have improved and tested its system design so that it is more robust and meets the provisions in the ordinary code, and tightened its access controls and has now implemented procedures to process the return of account balances within 48 hours of a self-exclusion. Every quarter it will also reconcile any account balances which could not be returned, or which are under £1.00, and make a donation of the equivalent amount to charities for socially responsible causes.

Lessons for the industry

As with other enforcement cases, the Gambling Commission expects operators to consider the issues raised by the LeoVegas investigation and review their own practices to identify and implement improvements.

The Gambling Commission directs other remote operators to consider the following questions to avoid these issues:

• Do you understand the marketing rules outlined in your licence conditions and the CAP codes? How do you keep up to date with, and implement, CAP advice and ASA rulings? Do you train staff in them?
• Do you make use of the CAP Copy Advice service?
• Do your internal marketing sign off procedures include a compliance check?
• You are responsible for your affiliates. How do you vet and monitor them to ensure they operate compliantly? How frequent are your audits of their activity? What are the contractual consequences for them failing to comply?
• Do your self-exclusions remain effective at the end of the chosen period? Are your self-excluded customer data sets sufficiently segregated, until such time as positive action is taken? How do you meet best practice set out in the ordinary codes?
• Do you make use of all available information, including complaints, to identify potential procedural weaknesses?
• How promptly do you return funds to a self-excluded customer? What do you do with balances which cannot be returned? Are they divested?
• Can you demonstrate that you embed learning from public statements and other available sources?