CMA secures more undertakings as part of its investigation into online gambling

The Competition and Markets Authority (CMA) announced last week that it has agreed undertakings with Jumpman and Progress Play in relation to dormant accounts and withdrawal limits as part of the second limb of its investigation.

As with the previous undertakings agreed by the CMA, the Gambling Commission has stated that all operators are required to adhere to these standards set by the CMA. Jumpman and Progress Play were required to comply by 31 August 2018 and, unlike the previous undertakings, there is no grace period for other operators to change their practices to comply with the terms of the undertakings.

In summary, the terms of the undertakings require that:

• No maximum withdrawal limits: Operators must not place any maximum limit on the amount a consumer may withdraw from their deposit balance.
• Dormant accounts: Operators must not confiscate or deduct amounts from a customer’s deposit balance or otherwise affect the customer’s rights to funds in their accounts where the account is inactive or has become dormant.
• Age verification/KYC checks: Operators must not confiscate or deduct amounts from a customer’s deposit balance if a customer fails to comply with age verification or KYC requirements set by them (i.e. where the customer fails to respond to a request to provide specification documents or information).

The practice of placing maximum limits on the amount a customer can withdraw from their account has been commonplace in the industry and encouraged players to recycle their winnings. The CMA has found that such practices were unfair from a consumer protection perspective – and no doubt the Gambling Commission also has concerns from a social responsibility perspective.

Operators are likely to be pleased that the undertakings do not prohibit operators charging dormant account fees, provided that the operator complies with certain conditions. These conditions include:

• The account must have been inactive for at least 12 months.
• Prior to deducting any dormant account fees, the operator has unsuccessfully attempted to return the deposit balance to the last payment method used by the customer.
• Dormant account fees are imposed pursuant to a fair and transparent term in the operator’s Ts&Cs.
• The amount of the dormant account fee is a reasonable estimate of the costs directly incurred by the operator in relation to the ongoing maintenance of the customer’s account.
• Reminders are sent to the customer at least 30 days prior to the fees being imposed.

It is understood that some operators have historically sought to absorb dormant account balances into their bottom line as quickly as possible. Despite a term in the undertakings requiring that operators must not alter “the legal status of funds in a consumer’s Deposit Balance”, the CMA has clarified in its updated guidance that it considers operators are able to reclassify account balances for internal accounting purposes without appropriating customer funds held in them. The CMA has said that such reclassification would not necessarily be unfair or reflect an unfair practice where an account has been inactive for at least 12 months, provided that, amongst other things, there is no prejudice to affected consumers’ rights over the funds, it is clear to consumers that there are funds in their account that they can access, and consumers can access such funds easily.

The CMA undertakings appear to require that operators must hold dormant account balances indefinitely (or at least until the application of the dormant account fees reduces the balance to zero). As part of its Online Review in March 2018, the Gambling Commission said it acknowledged that dormant accounts are vulnerable to theft either by employees or following a data breach and was considering “introducing requirements for operators to remain in contact with consumers so that funds are not ‘orphaned’ / lost track of. For example, require funds to be sent back to the payment method after a period of inactivity (such as 3 months) or if they cannot be returned that after a defined period (6/12 months) those funds are sent to eg charity”. However the CMA did not consider this as part of its investigation, so it remains to be seen if the Gambling Commission will pick up this point at a later date.

The Gambling Commission is becoming increasingly focused on issues of consumer law and fairness, and we predict we are likely to see more enforcement action in this area. In light of this, as well as the impending changes to the LCCP which take effect on 31 October 2018 and which amongst other things will make it easier for the Gambling Commission to take action for breaches of consumer law, operators are well advised to review their current practices and terms and conditions to ensure compliance with these latest CMA undertakings.