Building bridges: The tough task of repairing relations between the UK regulator and operators

It would be safe to assume that expectations ahead of UK Gambling Commission (UKGC) chief executive Andrew Rhodes’ speech to a selection of industry CEOs at the end of November were not high. The fact that it was seen as a surprise that Rhodes struck a somewhat mollifying tone during his 40-minute speech at a closed-door event held in London is telling, and the feedback from this event compared with previous hectoring from his predecessor, Neil McArthur, were chalk and cheese.

The transcript published by the Birmingham-based UKGC even includes a few gentle jokes. It doesn’t record if anyone laughed, but the sense of a CEO understanding that a purely antagonistic relationship between the operators and suppliers and its regulator is sub-optimal is at least clear.

“I don’t think the Gambling Commission is perfect,” he told his audience. “The good news is nobody else thinks we are either, so there is perhaps something everyone will actually agree on.” He added: “I want us to be a more discursive regulator – I want more discussion and more engagement. I want that to be on the right things. I want us to be the trusted voice on gambling. An impartial regulator.”

Check the record   

The outward signs of tension between the UKGC and the sector have been mounting up. There are three broad areas where, at least from the industry’s standpoint, the regulator has failed to live up to the levels of impartiality generally required of a public body.

One is the response to the Public Health England (PHE) review of gambling-related harms published in September last year. Work undertaken by Dan Waugh at gambling consultancy Regulus Partners, including various freedom of information (FOI) requests, has uncovered numerous areas where the UKGC appears to have dropped the ball.

First, the FOI requests show the UKGC endorsed the report, and its contentious finding that gambling-related harms cost the economy £1.27bn, without having first even read it and in the knowledge PHE wanted to adopt an approach to wagering “similar to how we tackle tobacco consumption”. The regulator described PHE’s work as “important and independent” but has since (rather implausibly) denied this represented an endorsement.

Andrew Rhodes, CEO of the UK Gambling Commission

Specifically, the UKGC knew that some of the estimates contained within the findings were unreliable. In a document obtained under FOI, it described as “inaccurate” the claim that 409 suicides a year were associated with problem gambling, stating that “reliable data does not exist” to support such contentions. Despite this, it knowingly allowed its advisory board for Safer Gambling to publish a call for regulatory action based on the bogus claim.

Even after the Department of Health and Social Care admitted there was a mistake in the methodology that was used to arrive at the suicide figure (which directly underpinned the £1.27bn cost estimate), the UKGC continued to endorse the findings. Then there is the regulator’s own Pilot Gambling Prevalence Study from May, which substantially overstated levels of gambling participation (when compared against audited data).

It also made an elementary error in assessing the likely accuracy of ‘problem gambling’ estimates by failing to consider how pandemic lockdown measures might distort comparisons between 2018 and 2021. The pilot survey used the results to claim that greater collective harms are experienced by non-problem gamblers than by people with a gambling disorder.

The charge sheet finishes with the Strategy to Reduce Gambling Harms launched in April 2019 and which expired three years later. But not before the UKGC appeared before Parliament’s Digital, Culture, Media and Sport Select Committee and was forced to admit it had “no idea” whether the £40m it had distributed to support the strategy was “used wisely”.

Moreover, the UKGC admitted that the £40m was distributed without requiring that recipients conduct any evaluation of their work or even guarantee the work would be carried out. The UKGC has provided no further updates despite the strategy’s three-year term having expired, suggesting it may have been abandoned altogether.

The word on the inside

The response to the speech has been guarded. On the lawyer front, Tamsin Blow, partner at CMS Law, said it demonstrated “willingness by the Gambling Commission to take a step back and reflect on how it approaches the industry and its regulation”.

“Operators should not rest on their laurels. Rhodes was clear that care of customers must be an operator’s first priority, that the Commission will not abandon enforcement action and the black market is not a reason not to regulate,” she adds. “He also flagged a new area the Commission is going to crack down on more firmly – fair and open terms.”

“Rhodes promises early intervention by the Commission and this would be a significant positive step forward,” she says. “The Commission has a big task on its hands to achieve this when current timelines are considered – enforcement action is generally concluded over a year after the issues are identified.”

Bahar Alaeddini, partner at Harris Hagan, agreed that the speech “appeared to be a notable shift from the approach adopted by his predecessor”. It included an emphasis on the UKGC’s role primarily as a “licensing regulator” and not an “economic regulator” and, most critically and perhaps in response to fierce (and justified) criticism, acknowledgment that it is not its role to make “moral judgement on how much money is spent on gambling”.

So much for outward appearances. But what is perhaps even more damning is how interactions with those who have engaged – or attempted to engage – with the other side of the fence in Birmingham are described. Words such as inconsistent, unapproachable, confused, politicised and dismissive are used by people who have had dealings with the UKGC on a day-to-day basis to characterise their interactions. While the charged atmosphere around gambling might infect the public space, the extent to which this is translated into the sphere of the working relationship between the regulator and the sector is dispiriting.

Waugh says: “A market regulator that is required to ensure that its licensees behave with integrity, transparency and accountability seems unwilling to lead by example and this inevitably undermines its moral authority as well as its prior, pre-2018, reputation for fair play and competence.”

Dan Waugh, Regulus Partners

Of course, the well-publicised enforcement actions seen over that period play their own part in contributing to the poisoned atmosphere. In Rhodes’ speech, he noted that in the last 11 months 16 operators have paid out a total of £45m because of regulatory failures, while two more (bet-at-home in July and Goldchip in May) have had their licences suspended due to regulatory concerns.

Rhodes said he would be “straight” with his audience on the list of enforcement actions. “I am sick of talking about non-compliance and I am already tired of it defining how we see the industry you are in and the experience of too many consumers,” he said. “It is not everyone in this room, but whether you like it or not, the serious non-compliances we see are defining how all of you get perceived. It defines how you are lobbied against and it defines how government, politicians, the media and a raft of others picture you.”

Mending relationships

So, what hope is there for a reset of relations? The tone of the speech was certainly welcomed by those that attended. One attendee, who opted to remain anonymous, suggested Rhodes was “statesmanlike, even impressive” and noted somewhat caustically that he “didn’t have the irritation levels” of McArthur.

“Clearly, he appears to want to move away from process and wants more discussion with operators,” the attendee added. “But does the behaviour match the rhetoric? Is this a genuine effort to reset relations? Where the rubber hits the road is on an operational level and at present it is in that arena where relations have seriously broken down.”

As one industry source put it, there is “scar tissue” that is the result of the breakdown in relations. Rhodes’ words will help to soothe the wounds, but the industry is wary, and the upcoming (as and when) white paper is set to be the next pain point. Rhodes himself touched on the white paper, pointing out that “making the judgement” about where the balance between the freedom to gamble and the prevention of harm sits with the government.

But he added that while it would be an “important step for everyone in this room” when the white paper into the Gambling Act 2005 review gets published, it “hasn’t stopped us at the Commission taking action where we have felt it necessary to make gambling fairer and safer and whilst the review progresses, it won’t [stop us] going forwards either”.

These words were perhaps the most telling in the speech. If the industry has one overriding fear about the white paper, it is not so much about what is contained within it. Rather, it is worries about how the UKGC interprets its work in the wake of its publication that is the cause for most concern.

Sources point out that when some of the details of the white paper were leaked this summer, there was “evidence of a difference of opinion between the Commission and the DCMS”. Multiple sources bemoan the lack of discussion between the operators and the regulator over what is likely to feature in the white paper, with the UKGC apparently blanking requests to talk over industry proposals. But as one source says, “it’s already too late for the white paper”.

Moreover, there is a growing suspicion, given the extent to which the government has dragged its feet that, in the words of another well-placed industry source, there is “stuff contained within the white paper that the ministers have failed to get squared away and are going to hand over to the Commission to deal with via consultations”.

Hospital pass

“In a way, the industry is terrified of that,” the source continues. “At the moment there is legislative and political scrutiny, and if this gets published and the political legislative circus moves on, and into that space comes the Commission, then they can start interpreting it how they like.”

In this scenario, with the government running scared of anything that might need primary legislation – therefore opening it up to potential defeat in a Commons vote – the industry fears that key issues such as affordability and staking levels will be handed to the UKGC to set the parameters. “It is a growing anxiety,” says the same industry source.

It is against this backdrop the speech by Rhodes should be viewed. One way of reading it would be to suggest both he and the UKGC are aware that it and the industry will need to cooperate better to implement the conclusions contained within the white paper. But another comment from Rhodes suggests this might not be the route taken. Addressing previous concerns over a lack of guidance on interpreting current regulatory guidelines, he warned the CEOs present to be “very careful what you wish for”.

“You have a regime that is primarily outcomes-based,” he continued. “That is worth an enormous amount, and I wouldn’t wish it away. We regularly get requests to specify precise intervention points and actions and we could do that, but I am not sure that level of detail would be a good thing at all. In having a primarily outcomes-based regime it means you have the ability to set processes that suit your customer types and your risks. That is what good regulation looks like.”

That could be interpreted in a very different way though; it could be read as suggesting the UKGC will let operators get on with their jobs but should they fall out of line, they will subsequently hammer them and let the industry take whatever it can from the subsequent regulatory warning. Arguably, this appears to be a shoot-first-and-ask-questions-later approach that can leave operators dangerously exposed.

The UKGC has not fared all that well with the public scrutiny it has faced in recent years with both the National Audit Office (2020) and Parliament’s Public Accounts Committee (2021) producing excoriating reviews in recent years.

These encounters might have been expected to prompt reform. But as one industry commentator notes, “rather than cleaning up its act, the Commission appears to have sunk deeper into the mire; and this must at some point prompt action from the government”.

The political climate is far from ideal for the politicians to do anything other than, as suggested recently by the de facto gambling minister Paul Scully, get the white paper “out the door”. With the government more intent on washing its hands of anything to do with gambling, it leaves the industry hoping that the sentiment of Rhodes’ speech does presage a change of approach from the regulator. But industry insiders are sceptical.

“You are turning a tanker around here,” says a source. “I think they are sensitive to criticism, and I think it leaves a mark. But that can go one of two ways; they can get truculent, or they can say they are going to improve things. We have to hope it is the latter.”