Five things we learned from the Gambling Commission’s Select Committee grilling

Gambling Commission (GC) CEO Andrew Rhodes fronted up to a grilling from the Department for Culture, Media and Sport Committee yesterday morning (5 September) as MPs looked to pick the brains of the regulator’s key execs.

Rhodes was joined by deputy CEO Sarah Gardner and executive director Tim Miller as the trio were subjected to questions, some engaging and some bizarre, for more than 90 minutes at the Palace of Westminster.

As MPs tried to wrap their brains around complicated topics such as VPNs and the catch-all term of the future ‘data’, Rhodes and his team were pushed on more interesting conversations, including the prevalence of the black market and the rumbling war of words on affordability checks.

And while these sessions tend to drag up old ground and trot out repeated lines, it will only add further fuel to the fire that is the debate around UK gambling.

Here, EGR details five key takeaways from the session, ranging from fake job titles to the impact of fines, and black-market miscalculations to ombudsman confusion.

Fine by me

With the GC having announced 13 enforcement actions this year against operators, totalling more than £40m in fines and settlements, the triumvirate were pushed on the efficacy of the system.

With the current system being pegged as a part of doing business as a gambling firm in the UK, and regulatory action baked into operating strategy, MPs asked if fines and settlements were viewed as a “necessary cost” by firms.

Rhodes rejected the suggestion outright, instead arguing that the regulator was “undoubtedly” seeing success from its regulatory actions.

Rhodes said: “I think you’ve just outlined the two greatest accusations that the Commission gets in this area. The first is that the industry is terrified of us and constantly lives in a state of perpetual fear that the Commission will turn up at any moment and hit them incredibly hard for no obvious reason.

“The second is that gambling operators simply shrug these things off. Neither of those things are accurate. We are definitely seeing less egregious cases, but we are not seeing their absence altogether. We are seeing an improving picture,” he added.

The CEO went on to stress that penalties were a last resort for the GC, arguing that a proactive and mutually engaged approach with operators would only be to the benefit of the sector.

He continued: “Penalties are something that happens at the end when the operator is either so egregious that the penalty is the right thing to do, or we’ve not been able to secure compliance straightaway. Our overriding strategy has been compliance at the earliest opportunity.

“The penalties that we have put in place have caused the industry some real distress. They are very profitable companies, but it does cause undoubted distress and we have seen a difference.”

The top candidate

As the industry prepares to shift to a statutory research, education and treatment (RET) model, and with the GC allocating £32m to GambleAware in July to support with the stabilisation of the system, Miller took the opportunity to explain the rationale behind the decision.

While the levy is set to increase to 1%, from its existing 0.1% basis, and with much furore over the dominance of GambleAware in receiving funds from the industry, Miller said the charity was best placed to organise funds during the interim period.

Miller said: “What we found ourselves with the sort of volume of settlements we were talking about, was that, frankly, we would have needed to put in place a proper commissioning framework in order to administer those properly. Now, as a gambling regulator. That’s not our role.

“A range of different people have a range of different views on [GambleAware] but they do have an established operating commissioning system in place.

“We felt in the short period between now and when a statutory levy comes into place, that was the most efficient and effective way of ensuring appropriate rigour around how the money is used.”

It’s not that big

To stand out among fevered debates in the UK gambling space takes some doing, and the black market, along with affordability checks, do a good job of taking up headline space. With anecdotal evidence and social media meltdowns on the prevalence of offshore firms and WhatsApp bookmakers, coupled with genuine and legitimate concerns over leakage, it makes for difficult wading.

An as yet to be fully released Yield Sec report put the black market at just 1% of overall UK gambling spend. However, people on the ground, including former Paddy Power exec Anthony Kaminskas, have claimed the black market is “absolutely thriving”.

Rhodes added his two cents to the debate, arguing that the black market was nowhere near as prevalent as some have made it out to be.

Rhodes said: “I think the risk is overstated [but] I don’t think there is no risk. We’ve been very active in the space of tackling illegal gambling.

“However, every time I’ve heard someone say to me ‘people are going to the black market’, I’ve asked them the same question: ‘Tell me where?’. And I’ve not once had an answer. I have not once been given the name of an operator or a person or a location; anything I can act upon.”

The CEO did note that the research into the black market was lacking, with the regulator having established it as one of its six evidence gaps that resources will be dedicated to through to 2026.

Rhodes continued: “I think there are too many people claiming they know more than they do. Talking to operators based on what they see around Europe, I don’t think we have a large black market, but research isn’t as good as it needs to be.

“It’s also very difficult to estimate the size of something that is illegal. The evidence base isn’t as strong as it needs to be, and that’s why it’s in the research programme over the next three years.”

Just the one ombudsman actually

Another proposal put forward as part of the white paper into the Gambling Act 2005 review was the establishment of an industry ombudsman to deal with consumer complaints.

In July, Betting and Gaming Council director of innovation Wes Himes said the government’s target of establishment by next summer was “challenging”, with Miller adding that he wished to see its creation on schedule. Miller himself used to work for an ombudsman earlier in his career.

The executive director said: “We would like to see it established as soon as possible because we see in our own conversations with consumers the real need for clear, independent redress. It’s important, though, that what is established is properly independent, effective and has consumer confidence.”

However, Miller noted that should the waters become muddied in the field, with several ADRs (alternative dispute resolutions) already present not potentially falling back to allow a single ombudsman to flourish, it could prove to be a hiccup for customers.

Miller added: “I think we were clear that we wanted to see a single ombudsman that could deal with the entirety of customer complaints. You look at the criteria the Ombudsman Association set, they’ve always been very clear that having multiple ombudsmen or complaints systems within one sector is not desirable.

“I think consumers need to very clearly understand where they can go when they have a complaint. We are clear in our advice that the single ombudsman to deal with the entirety of those issues would be the right way to approach things.”

Astronauts and postcodes

There are not many things that get the industry’s back up more than affordability checks. Since rebranded to ‘financial risk checks’ by former de facto gambling minister Paul Scully, these “frictionless” background checks are public enemy number one for a vast swathe of the sector.

The frictionless aspect is set to see customers checked against bankruptcy, county court judgments and postcodes to determine socio-economic levels.

Low-end checks start on net losses of £125 on a rolling month or £500 within a rolling year. Enhanced checks then begin with net losses of £1,000 in a 24-hour period, or £2,000 over a rolling 90 days.

Labour MP Kevin Brennan took umbrage with the notion of frictionless checks, arguing data that could be potentially requested moving forwards was in addition to initial datasets laid out by Department for Culture, Media and Sport (DCMS) chief Lucy Frazer in April.

These include job titles, which have appeared in the consultation document launched by the GC, as well as Brennan noting that checks should be completed on an individual basis, and using postcodes to check affluency had overstepped the mark.

Below, is a transcript of Brennan and Miller’s conversation on the topic:

Tim Miller (TM): We have asked the question, should [job titles] be included. The reason we’ve asked that is operators themselves, many of whom are actually using that sort of information when accounts are being opened, have said it would be a really helpful thing.

Kevin Brennan (KB): If someone gave their job title in one of these frictionless checks, would they have to supply documentation to prove that they were telling the truth?

TM: No.

KB: Right, so you could just invent the job title. You could just say ‘I’m an astronaut’.

TM: What we’ve said in the consultation is it’s a piece of information that could helpfully go alongside…

KB: How would it be helpful if you don’t know if it is accurate?

TM: If you were looking at it by itself then I think that’d be problematic. But actually, what we said is, it could be a useless addition. This is a consultation. We’ve asked the question. I think it’s really important that we don’t lose sight of the fact that this is a genuine consultation.

The consultations will rumble on. Key figures will be questioned by MPs with knowledge gaps the size of the Grand Canyon. People will have a moan. Another day in UK gambling.