IOL Article May 2017

Gambling Commission impose first financial penalty for advertising issues

IOL Article May 2017

Gambling Commission impose first financial penalty for advertising issues

The Gambling Commission has imposed a financial penalty on BGO Entertainment Ltd (BGO) for misleading advertising on its own and its affiliates’ websites. The penalty of £300,000 is the first imposed for breaches relating to advertising and followed a review under section 116 of the Gambling Act 2005 of the remote casino and bingo operating licence held by BGO. The review commenced in September 2016 on the grounds that the Commission: had reason to suspect that activities may have been carried on in purported reliance on the licence but not in accordance with a condition of the licence and suspected that the licensee may be unsuitable to carry on the licensed activities.

On 8 May 2015, following a public consultation, new licence conditions relating to the marketing of offers came into effect. Social Responsibility Code Provision 5.1.7 requires licensees to abide by any relevant provision of the Committee of Advertising Practice (CAP) code and the Broadcast Committee of Advertising Practice (BCAP) code, which relates to ‘free bet’, ‘bonus’ or similar offers. In particular, advertisements must state significant limitations and qualifications. Marketing material must not amount to or involve misleading actions or misleading omissions. These rules apply to all forms of marketing communications, including social media and affiliate marketing.

Also of relevance to BGO’s affiliates, Social Responsibility Code Provision 1.1.2 requires licensees to take responsibility for third parties with whom they contract for the provision of any aspect of the licensee’s business related to the licensed activities. This means that licensees are considered responsible for the actions and behaviour of third parties with whom they contract, which includes marketing affiliates and advertising networks.

In June 2015 the Commission asked remote operators to provide information regarding their compliance with the code provisions on marketing and advertising. The Commission found that a number of operators were not compliant as they published adverts with significant limitations and qualifications relating to promotions which were potentially misleading to consumers. BGO were one of those operators and the Commission contacted them on rectifying the issues.

 

It appears that the Commission were not satisfied with the response from BGO who failed to take prompt and effective action to address the issues identified. BGO repeatedly provided assurances to the Commission that they understood the requirements and had taken action to ensure that they were met. Yet the Commission found evidence of continued non-compliance in that advertisements on BGO’s own website and the websites of third parties remained potentially misleading by failing to include significant limitations and qualifications of promotions.

 

In May 2016, BGO commissioned a Copy Advice Audit of its website from CAP. The review assessed marketing communications on BGO’s website and considered its conformity with the CAP Code.The audit made several recommendations in relation to what significant limitations and qualifications should be included in the advertisements on BGO’s website. Unfortunately BGO did not initially follow those recommendations and it’s website and those of its affiliates remained in breach of Social Responsibility Code Provision 5.1.7.from May to July 2016.

 

BGO did belatedly make the changes recommended in the audit in late July 2016. However, the Commission continued to find and capture evidence of on-going breaches in relation to advertising on the websites of third parties with which BGO had a contractual relationship in August, September and October 2016. As a result the review commenced.

 

In addition to finding BGO in breach of Social Responsibility Code Provision 5.1.7. they also found BGO acted in a way which cast doubt on its suitability to carry on the licensed activities because it failed to take timely and effective action to address the breaches once made aware of them and they provided inaccurate assurances that the problems had been

addressed.

 

BGO received a formal warning as well as the £300,000 financial penalty.

 

Horserace Betting Levy Regulations 2017 come into force

On the 25th April the Horserace Betting Levy Regulations 2017 came into force and provide that all bookmakers and betting exchange operators who hold remote operating licences who take bets on British horseracing are now liable to pay the Levy.

The Gambling (Licensing and Advertising) Act 2014 was introduced to require that all gambling operators, who engage with British customers, wherever they are located, must hold a Gambling Commission licence.

Following the introduction of the Act, the Government determined to ensure that a level playing field was applied to both British-based and offshore remote gambling operators who take bets on British horseracing in respect of their contribution to the Horserace Betting Levy.

The DCMS’ consultation on extending the Horserace Betting Levy issued in June 2014 explains that the “main purpose of linking collection of the Levy to holding a Gambling Commission licence is to provide a fairer basis for competition between remote gambling operators who take bets on British horseracing wherever they are based.  The Levy is collected from the gross profit of betting on British horseracing (i.e. horseracing in England, Scotland and Wales) and distributed to help improve horseracing and, in particular, breeding and veterinary research and education”.

The Levy is charged at the rate of 10% of the amount of profits raised on leviable bets in a Levy period in excess of the exempt amount, which is set at £500,000.

Government Announces Exemption for Gambling Sectors under New Money Laundering Requirements

On the 15th March HM Treasury published its response to consultation on the EU 4th Money Laundering Directive and decided that all gambling sectors should be exempt from the new regulations, except for remote and non-remote casinos. The announcement was welcomed by the wider gambling industry.

The Treasury’s National Risk Assessment classified the gambling sector as low risk in relation to other regulated sectors, based in part on several mitigating factors including the legislative framework that gambling operators are subject to and the regulatory control exercised by the Gambling Commission.

This maintains the status quo in the gambling sector, with only casino operators required to comply with the Money Laundering Regulations once they take effect.

High Court challenge to grant of large casino licence in Southampton and the latest on the new casinos.

The final hurdle to a new large casino in Southampton appears to have been cleared. In February Southampton City Council defended a Judicial Review by Global Gaming Ventures (Southampton) Ltd following the authority’s decision to grant the large casino licence to Aspers for a site at the Royal Pier.

The grounds for Global Gaming Ventures High Court challenge were that the councils Advisory Panel should have undertaken a mathematical calculation of the benefits of each proposal and secondly, that an alternative tenant should have been considered, replacing Aspers, for the Royal Pier site.

Mr Justice Jeremy Baker rejecting the application as he did “…not consider that either of the matters relied upon by the claimant give rise to an arguable ground upon which to judicially review the defendant's decisions, either to grant a provisional statement to the interested party in respect of a large casino, or to refuse to grant such a statement to the claimant.”

Asper’s new large casino in Southampton will join those they already operate in Milton Keynes and Stratford, the Genting at the NEC in Birmingham and the recently opened Victoria Gate casino in Leeds, operated by the applicants of the Judicial Review in Southampton, Global Gaming Ventures. This leaves three of the large casinos yet to be developed, in Great Yarmouth, Middlesbrough and Hull. Provisional Statements have been granted to Pleasure and Leisure Corporation plc, Jomast Developments and Apollo Resorts and Leisure Ltd respectively.

Looking Forward

At the time of writing this article, we await the much anticipated decision from Court of Appeal in the matter between Greene King and the Gambling Commission regarding the Commission’s refusal to grant Greene King an operating licence authorising bingo in pubs, and the Government’s consultation on gaming machine stake and prizes. The consultation, which has been delayed by the election, will be of particular importance to bookmakers, as we are likely to see a significant reduction in the £100 stake of the B2 gaming machines in betting shops.

For further information on this issue contact Partner and Head of Betting & Gaming, Nick Arron, 0115 953 8500.