Posted by Woods Whur | Gambling, Licensing Law

The Chief Executive of the Gambling Commission, Sarah Harrison, spoke at the Lotteries Council Annual Conference last week and took the opportunity to reprise some of the themes that she has focussed upon in addresses to other sectors of the gambling industry during what will soon be her first 20 months in office.

Ms Harrison stressed the importance of delivering effective regulation in the public interest and the need to build public and consumer trust by ensuring fairness, openness and market integrity, in the interests of long term stability and business growth. This echoes what she has said to operators in other sectors of the industry, namely that consumer confidence inspires growth.

She took the opportunity to set out for her audience, composed of those involved in society lotteries, who are a wide range of charities, sporting associations and their commercial partners, her snapshot of the current gambling market landscape, the Commission’s priorities and the perceived issues in terms of regulating lotteries.

In terms of the market landscape, she pointed to the recent decline in participation in gambling generally, principally driven by a fall in participation in the National Lottery, but noted that nevertheless, approximately half of the British population have gambled in the last month, with some 12% gambling via society lotteries. She also underlined the massive increase in recent times in mobile and tablet gambling, which has increased from 13% to 18% amongst society lottery participants in the year 2015 to 2016. This is set in the context of a shift to remote play generally, with those participating in remote lotteries more than doubling over the last 5 years, from 15.5% in 2013 to 38.4% in 2016, with participation in non-remote lotteries falling at the same time, from 88.1% to 63.3% over the same period.

The Commission currently licences 178 remote lottery operators and just under 200 ancillary remote operators, albeit the move towards remote participation may be slightly slower than that being seen in other sectors of the gambling industry. However, it is interesting to note that participation in lotteries via tablet and similar devices is growing across age brackets, now being as prevalent amongst those aged 35 to 54 as it is for players aged 18 to 34, something that will not escape lottery operators’ notice, given the demographic of typical participants.

Ms Harrison also pointed out the increasing proportion of players who are attracted to gambling generally by advertising on television and social media, including, somewhat worryingly, those aged between 11 and 15 years, of whom, it has recently being shown, 9% have played gambling-style games at one time or another. Indeed, there is an increased focus by lotteries on advertising on television and social media, with some lottery operators using major television advertising campaigns to recruit players. Of those gambling online currently, almost half were prompted to do so by television campaigns, with 21% being attracted via social media.

The lottery industry statistics given by Ms Harrison were interesting – the Commission currently licences almost 500 society lotteries, and that figure does not include the smaller lotteries that are authorised by way of a registration with a Local Authority. The Commission also regulates 38 External Lottery Managers “ELMs”. Yet only 10 Local Authorities, who are entitled to promote lotteries in order to raise funds to be applied to the discharge of their statutory duties, are licensed by the Commission. This led me to wonder why this last figure is so low, and why so few Local Authorities have taken up this opportunity. This may be an area for potential future growth, however it cannot be denied that some Local Authorities might be put off by difficulties in making the figures work in order to comply with the various financial requirements and limits imposed by lottery law; in addition, it is a commonly held view that the work of Local Authorities is not a popular cause in the same way that the work done by other, charitable, organisations is – thinks criticisms surrounding potholes and refuse collections!

Ms Harrison quite properly lauded the significant contribution to good causes made by the society lotteries sector, with £480m worth of lottery tickets having been sold in the year ending March 2016, a 10% increase as against 2005 and an increase of well over 100% on the last 5 years. This is a tremendously impressive achievement. In addition, society lotteries give, on average, 43% of those ticket sales, or circa £206m in the last year for which figures are available, to be applied directly to the good causes they support.

Ms Harrison pointed to the incredible diversity amongst the lotteries sector in terms of the scale and types of products available and the causes that they support. That diversity continues to increase, with one lottery operator having successfully teamed up with a well-known high street bookmaker to sell scratchcards, and one ELM considering introducing a “fast-draw” lottery. Ms Harrison sees this diversity as an opportunity for growth, but she also stressed that it presents issues in terms of regulation, particularly against the backdrop of falling consumer confidence, which has declined, as shown in recent figures, in relation to the gambling industry generally, by almost half, with public trust in fairness dropping from 61% to 38% between 2008 and 2016.

Turning to the Commission’s priorities, in common with other speeches given in recent times and in line with the Commission’s Plan for Consumers published on 3 October 2016, Ms Harrison spoke of the core Commission priority of putting consumers at the heart of everything it does. She pointed out that the principles underlying the ambition apply equally to the society lotteries and National Lottery sector, such that consumers:

  • easily understand the product and are clear on the terms, such as the contribution to good causes;
  • are confident in knowing their rights and having access to information to help informed decisions;
  • appreciate the risk of losing, as well as winning;
  • have access to tools to help keep play safe and reduce risk of harm; and
  • know where to go, for example with complaints, if things go wrong.

In exchange for the relatively liberal regulation in this country of gambling in general and lotteries in particular, Ms Harrison made it clear that the Commission expects operators to harness the same sort of innovation they use to drive business growth to ensure that they protect and empower consumers. She urged operators to focus more on consumers and less on the regulator. This, she said, means not just meeting, but beating, regulatory standards and raising standards across the board.

Ms Harrison also referred to the main tenets of the Commission’s 2017 to 2018 Business Plan, which sets out other priorities which are relevant to lotteries. These include tackling unfair advertising and terms and conditions. Lottery operators must lodge any new lottery terms and conditions with the Commission at least 28 days before lottery tickets go on sale in reliance upon them, and they must also notify players of any material change to their terms and conditions. In my experience, these requirements frequently give rise to doubt with the first, at least, often being missed. Lottery operators would do well to review the position within their own organisation insofar as terms and conditions are concerned, in order to ensure that they are compliant.

Ms Harrison also reminded Conference delegates of the intention, set out in the Business Plan, that the Commission will, in future, impose tougher sanctions in cases of persistent or systemic regulatory failures, but will also offer reductions in sanctions for those operators who recognise their failures quickly and take steps to put things right for consumers.

She also pointed to the review which is currently being undertaken by the Commission of Alternative Dispute Resolution (“ADR”) Entities, and this includes considering the role of IBAS, which is the ADR for the lottery sector. With complaints to the Commission concerning gambling operators and transactions having risen by 300% over the last 2 years, the Commission is looking at reducing the number of approved ADRs, in order to ensure consistency.

Ms Harrison’s speech also referred to the Commission’s relatively new requirement, that larger operators provide it with an Annual Assurance Statement (“AAS”). This is composed of an annual review of compliance with licensing obligations by an operator, the lessons learnt in the past year, and how the operator will build regulatory compliance for the coming year. It involves a commitment at Board level to focus on raising standards. In the world of lotteries, the requirement to lodge an AAS currently applies to the People’s Postcode Lottery and to the Health Lottery.

Ms Harrison also took this opportunity to announce that work is about to commence on the next National Lottery licence competition. Even though the award of the contract is not due to take place until 2023, preparation is starting now. She also mentioned that the Commission will be advising the new Government on its gambling review, following the 2015 Select Committee Report. This review touches upon issues which affect the lottery sector, particularly the very much desired increase to financial limits applying to large society lotteries licensed by the Commission, and those within the sector will await the outcome of that review with interest.

Ms Harrison then turned to consider the issues perceived by the Commission to be of concern in regulating the society lottery sector. She gave a very welcome acknowledgment that the sector occupies a unique place in the gambling industry, agreeing that society lotteries exist, first and foremost, as a means of fundraising to enhance and enrich aspects of British public life. Ms Harrison also made it clear that the Commission understands that the main motivation for many participants in society lotteries is supporting the relevant good cause. She also lauded the strong and collaborative relationship that has been built up between those in the sector and the Commission over a number of years. Nevertheless, she was at pains to point out that lotteries remain a form of gambling that not only requires regulation, but also presents unique challenges that are brought about by virtue of their unique position.

In what was probably the most significant part of her address as far as the audience was concerned, Ms Harrison covered issues surrounding transparency in lotteries. She said that, given their role in generating money for good causes, the motivation of players to participate and the trust that the public put in society lotteries to deliver, there is a particularly high benchmark relating to the transparency of terms and conditions and, in particular, the contributions that society lotteries make to good causes.

Ms Harrison said that the Commission agrees with the recommendation of the Select Committee that all lotteries should be more transparent. She went on to say that the Commission will be considering whether further regulatory requirements are necessary in relation to obliging society lotteries to declare the percentage that they give to the good cause which they support. She stopped short of declaring that this will be a legal requirement but in my view, this seems to be a “done deal”. Given that the sector gives an average of 43% (taken against the statutory minimum of 20%) directly to good causes, I should imagine that this move will be welcomed by most, although perhaps not some, operators.

Ms Harrison also highlighted branded or umbrella lottery schemes, where multiple lotteries are promoted under a single brand. She stressed the need for ELM’s and societies to make it abundantly clear to consumers which society lottery they are being invited to participate in. Again, she said that the Commission is looking to bring in new regulatory requirements in this respect. Any new measures will first be the subject of public consultation.

The other key issue identified by Ms Harrison was the rapid evolution in the range of lottery products available with, for example, “instant style” products being becoming ever more popular. She said that this involves a blurring of the lines between various gambling products: society lotteries, the National lottery and commercial gambling, and that this “changes the hierarchy of harm”, that is to say that, as they evolve, society lotteries are capable of moving from their current position where they are seen as low risk to a position where additional harm from participation is possible, as they evolve towards more mainstream gambling products. Ms Harrison signalled that the Commission will be looking into this issue, but that it also expects operators to consider the implications of any new products that they introduce or channels that they use. Although society lotteries generally are still considered as low risk by the Commission from a problem gambling point of view, it expects operators to continue to promote responsible participation as the market evolves and products change.

For me, one of the big “takeaways” of this speech was the recognition on Ms Harrison’s part that society lotteries do operate in a different environment and with different objects, as compared to other sectors of the gambling industry. With this in mind, Ms Harrison signalled the Commission’s intention to relax certain aspects of the Remote Technical Standards insofar as they relate to society lotteries, which already benefit from a more “light touch” approach than that applying to other sectors of the gambling industry. Ms Harrison also announced that the Commission intends to relax the automated self-exclusion requirement applying to society lotteries. This was particularly gratifying for me as I flagged up with the Commission some time ago the fact that it appears unnecessary for these requirements to apply to remote society lotteries that do not offer “instant-win” products. These changes will doubtless form the subject of public consultation in due course. I will report again, once further details are known.