HomeInsightsSelect Committee Report Comments

The Culture, Media and Sport Committee of the House of Commons has now had a chance to take a look at the draft Gambling (Licensing and Advertising) Bill. Their report was published on May 1st and makes a frustrating read. It is obvious – both from the written analyses and the oral questions – that the Committee approached the task of scrutinising the Bill with inadequate anterior knowledge of the industry to assist it, including (question of Jim Sheridan (Q28)) having to ask what the age limit for gambling is, suggesting that gambling operators do ‘nothing’ for the vulnerable (Q31) and use ‘exactly the same arguments that drug dealers use’ (Q63). Even the chairman of the Committee was happy to base some questions on press reports as a primary source of information (Q107).

The confusion starts in paragraph 11 where it is admitted that ‘…the majority of operators currently targeting British consumers are subject to established and effective regulatory regimes’. This is echoed in paragraph 19 where the white-listed regimes and Gibraltar are referred to as ‘well-regulated’. There seems to be little dispute that the white-list is working and that UK punters predominantly gamble with reputable businesses. However in paragraph 12, gambling companies ‘based overseas’ are referred to by the Committee as ‘lightly [regulated] or unregulated’. This is puzzling because no white-list or regulated market regulator would characterise its regime as being ‘light’ or ’unregulated’ and in most cases they would see their regimes as substantially more robust than the UK’s (as would most EU-regulated operators). In paragraph 14 there is more internal contradiction, in relation to the specific yet fundamental matter of player deposit protection, where the Committee urges the UK Commission to ‘consult…on establishing a proportionate form of ‘ring-fencing’ or protection of player accounts by all UK-regulated online gambling operators’ as if this idea were a novel innovation needing to be implemented by the Brits by means of new laws. Despite Clive Hawkswood’s best efforts, the Committee did not seem to realise that most offshore operators (whose freedom from UK regulation it laments) already have extensive measures in place to protect the deposits of players, including independent trust structures with independent FSA-regulated trustees. Paradoxically, it is these operators with their higher regulatory protections whom the Committee wishes to include under far weaker UK regulation…ostensibly for consumer protection reasons. Unless the UK Commission mandates separated trust structures for player deposits as part of a revised LCCP, it is likely that even post-2014, UK players will stand a far better chance of actually getting their deposits cashed out under Manx or Alderney regulations than under the UK’s remote LCCP. So one of the primary touchstones of consumer protection – getting your money back – is not likely to be improved for the large majority of UK punters as a result of the new Bill. Nor, it appears, are British punters to be any more protected from the black market. In paragraph 38, it is correctly pointed out that the UK is already a ‘mature and open market, so it [is] difficult for black market operators to get a foothold’. So if the black market is currently as bad as it is going to be…and the vast bulk of UK punters gamble with DCMS-approved white list operators…why the new Bill? It is not as if the current legislation lacks offences with which to charge those offshore who unlawfully promote their services to UK punters.

The report comes across as muddled because the Committee is trying to do the impossible and failing. It is approaching the scrutiny of the Bill with the preconception that remote gambling is basically a suspicious business ‘doing exactly the same thing’ as Starbucks and Google in avoiding tax (Q40) and is ‘anti-competitive’ (Q43). The confusion in the report comes when the Committee tries to reconcile this negative attitude with the fact that there are actually very few substantive consumer protection issues affecting UK consumers.

Paragraphs 22 and following turn in earnest to the detail of the Government’s consumer protection concerns. Not only are there concerns about the ‘unregulated black market’ but also about ‘inconsistencies of standards and practice across the regulated market’. In this regard, reference was made to ‘new and emerging’ European jurisdictions where regulation may not be up to scratch. The official thinking seems to be that it is all a bit like the Wild West out there, and who knows what might happen with these dodgy Bulgarians – so let’s regulate everyone as a default policy, regardless of how they treat their consumers. A classic bureaucratic thought-process, one might say. The RGA gave this line of thinking commendably short shrift by quoting the UK Gambling Commission’s own regulatory impact assessment to the effect that ‘no specific public protection risks have yet arisen’. The official response to this – of which Sir Humphrey would have been proud – was that the assessment in fact said that no ‘issues’ had arisen…but that ‘risks’ remained despite (presumably) the absence of ‘issues’ and it is in anticipation of these amorphous ‘risks’ that we need to drive a coach and four through the principle of the freedom of movement of services. The word the Government used to describe this tilting at shadows was ‘prudential’ (para 25) and the Permanent Secretary in para 37 makes no bones about them being ‘of a mainly precautionary kind’. And further, if the problem is deficiencies in forthcoming Central European regulation, then could this not have been dealt with more proportionately by excluding individual jurisdictions whose laxity posed a genuine danger to UK consumers? As Clive Hawkswood pithily put it in his oral evidence (Q45): ‘name me one company in any of those [emerging countries] that is taking a bean out of the UK. I don’t know, unless you can show it…we are not aware of any new jurisdiction that is targeting the UK market, none at all’.

Jenny Williams, the UK Commission’s Chief Executive, was more aware of the complexities than the Committee. Cautiously, she correctly pointed out that although she had ‘no reason’  to suppose that (for example) the big companies in Gibraltar were not properly regulated but that not being the responsible regulator, she couldn’t promise as much: ‘I do not know and I do not have the information…so I cannot provide any assurance…about approximately 80% of the market that has been regulated outside Great Britain’ (para 34). This too repays some thought. Surely it was the purpose of the original DCMS white-list criteria to certify that the relevant offshore jurisdictions did comply with UK standards and expectations? Was non-compliance with UK standards not the reason why Kahnawake was refused white-list status? The whole point of the white list criteria was to confirm that UK regulatory principles were reflected in the relevant offshore regimes so that UK consumers might safely gamble in those places. Places that were not white-listed or based in the EEA might not target their services at UK consumers and the extraordinarily wide definition of ‘advertising’ in Section 327 of the Act was intended to clobber them if they did.

The awkward precedent of the white-list regulations – and the fact that existing law provides the authorities with the ability to take action against non-EEA operators – was obviously something that needed to be explained away in the course of proceedings. The two reasons given for why we need new regulation don’t come across as terribly compelling (para 35). In the first place it is claimed that there are now ‘many more’ countries in the EEA which have de-regulated their markets and the UK Commission can’t keep pace with the different regimes. Secondly, there is an eccentric reference to social gaming and the vulnerable which is not illuminated by a footnote that describes ‘social gaming’ as non-profit making and ‘cost-free’. If social gaming was a problem one might have expected an adjustment to the ‘money or money’s worth’ language in Section 6(5)(a) of the 2005 Act.

The Committee showed little appetite for the complexity of ECJ jurisprudence on the subject (Q90 has a member of the Committee asking the RGA for their views on the application of EU law). It noted that the ECJ permitted member states a broad discretion to exclude gambling from the fundamental freedoms of the TFEU and was reassured by the Permanent Secretary at the DCMS that the measures contained in the Bill were proportionate and necessary for the achieving of enhanced consumer protection for British citizens. Everyone concluded with confidence that any challenge from a ‘disgruntled’ operator in the courts was doomed to fail despite the RGA’s contention in Q90 that ‘none of the evidence or statistics indicates that there is a significant problem that would justify this new regime’ going largely unchallenged. Although mention was made of the EC’s ‘Towards a comprehensive framework for online gambling’ (para. 27), the need to ‘encourage international co-operation and a common approach’ to regulation (para 13) and close liaison and exchange of good regulatory practice across Europe (para 39), there is no written record of any suggestion that the sanitisation of emergent EU regulated markets would be something more appropriately effected via the EC’s harmonisation initiative or indeed by inter-regulator dialogue.

Perhaps as a nod to the weakness of the ‘main’ arguments for the Bill, and a chance to raise the spectre of criminality to the advantage of the Bill, much is made of match-fixing and suspicious betting activity. Insufficient detail is passed to the UK Commission and there are, apparently, data protection issues in some jurisdictions around passing the relevant information to regulators, especially foreign ones (para. 44). Again, the arguments seemed to be tentative. The Sports Rights Owners Coalition rightly suggested that the UK should ‘set a high standard of regulation’ but the objections to the existing regime seemed to be more that the process was difficult to administer and not that it was insufficient to deter criminality. One supposes that match fixing and corruption is no more encouraged in Gibraltar and the Isle of Man than in the UK or elsewhere.

All in all, the thinking on the part of the Committee is no clearer or crisper than the vague fears and unsubstantiated concerns that formed the official commentary on the Bill itself. As the RGA pointed out in oral evidence, one can speculate endlessly on what risks there might potentially be, out there in the cyber-cosmos, but the UK has had an open and mature remote gambling market for some time and surely the precedent of reality should count for something?

For further information, please contact Jason Chess, Partner, Wiggin LLP. 

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