Gambling Commission announces updates to guidance on fair terms and practices

United Kingdom

On the 16 February 2022, the Gambling Commission announced updates to its guidance to licensees on fair and transparent terms and practices. The updates come in the wake of the Commission having discovered recent instances of licensees using potentially unfair terms. Such terms are not only unenforceable under the Consumer Rights Act 2015 (CRA), but also put licensees in breach of their obligations under licence condition 7.1 of the Licence Conditions and Codes of Practice (LCCP), which obliges licensees to ensure their terms and practices comply with consumer law. All licensees would, therefore, be wise to ensure they understand and implement the updated guidance properly.

In this article we summarise the Commission’s concerns and the key aspects of its guidance, and underlying law, relating to these.

Unfair terms and practices guidance

Much of the Commission’s guidance reflects the undertakings that the Competition and Markets Authority (CMA) entered into with various licensees, following its investigation into the remote gambling sector back in 2017. After the investigation, the Commission made it clear that it expected all licensees to comply with the CMA undertakings, not just those party to them.

The guidance also elaborates on the requirements of the CRA, which provides that unfair terms are unenforceable against a consumer and requires consumer terms to be transparent.

Areas of non-compliance

In its public statement in respect of the updated guidance, the Commission flagged that it had found various instances of non-compliance, each of which is detailed below, which it deemed to fail to meet the licence requirements:

  • Terms that allow licensees to confiscate customers’ un-staked deposits
  • The Commission provides in its guidance that, other than where necessary to comply with regulatory obligations, a licensee must not impose terms that allow them to confiscate all or part of a customer’s money that has been deposited with them, and not staked.

  • Terms regarding treatment of customers’ funds where a licensee believes there has been illegal, irregular or fraudulent play
  • Under the CRA, a term is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. The Commission provides in its guidance that a term that gives a licensee the discretion to decide when and how it is applied would be unfair under that meaning. It states that licenses should not use terms that give them sole discretion as to if and how they are applied, particularly including terms covering the treatment of customers’ funds where a licensee believes there has been illegal, irregular or fraudulent play.

  • Promotions for online games that have terms entitling a licensee to void real money winnings if a customer inadvertently breaks staking rules
  • The CMA undertakings include the concept of “promotional play restrictions”, which are actions by a customer that are not permitted when playing a game on its own or in association with a promotion. The Commission’s guidance, in line with the CMA undertakings, provides that if a decision has been made that a customer is to lose winnings on the grounds of a breach of promotional play restrictions, the customer must be provided with a full explanation of the breach.

  • Terms that unfairly permit licensees to reduce potential winnings on open bets
  • The Commission provides in its guidance  that licensees should take care with terms designed to permit licensees to reduce potential winnings on open bets, as these may be unfair under the CRA. The guidance states that the Commission consider terms that oblige consumers to accept reduced benefits, in the form of lower pay-outs, to be unfair.

  • Terms and conditions that are difficult to understand
  • It is a requirement of the CRA that consumer terms are transparent (i.e. written in plain and intelligible English). In its guidance, the Commission re-state the requirements of the CMA undertakings in this regard too.

  • Welcome bonus offers and wagering requirements which may encourage excessive play
  • Oddly, there is no reference to bonus offers or wagering requirements encouraging “excessive play” in the Commission’s guidance (nor are there any restrictions in respect of this in the CMA undertakings). It is, however, a requirement under social responsibility code provision 5.1.1 of the LCCP that any reward / bonus offer must be operated in such a way that:

    1. neither the receipt nor the value / amount of the benefit is dependent on the customer gambling for a pre-determined length of time or with a pre-determined frequency (or altered / increased if the qualifying activity / spend is reached within a shorter time than the whole period over which the benefit is offered); and

    2. if the value of the benefit increases with the amount the customer spends it does so at a rate no greater than that at which the amount spent increases.

Whilst the Commission does not elaborate on this point in its public statement, it appears that offers encouraging “excessive play” would be those in breach of such requirements.

Co-authored by Jake Sargent Trainee Solicitor at CMS.