The Gambling Commission has unveiled its reformed enforcement strategy used to tackle operators in breach of gambling regulations, following the recent conclusion of its consultation issued in January of this year. In line with the changes proposed in the consultation (a summary of which can be found here), the Commission has now confirmed that:
- higher penalties will apply for breaches, particularly in respect of “systemic and repeated failings”;
- licence reviews (both for operators and personal management licences) are now on an equal footing with other regulatory tools, removing the current bias towards settlements; and
- discounts may be offered on a time-limited basis, to encourage early settlements.
The new strategy, which prioritises ‘putting the consumer first’, is effective from 5 July 2017 and impacts no less than four of the Commission's guidance documents:
- Statement of principles for licensing and regulation (the revised version of which can be found here);
- Licensing, compliance and enforcement under the Gambling Act 2005: policy statement (the revised version of which can be found here);
- Statement of principles for determining financial penalties (the revised version of which can be found here); and
- Indicative sanctions guidance (the version introduced by the consultation which can be found here).
The Commission has amended its ‘Statement of principles for determining financial penalties’ with the aim of imposing higher penalties for regulatory breaches, especially where systematic and repeated failings occur.
The revised policy now breaks penalties down into two elements: (i) the removal of the detriment to customers/the gain made by the licensee due to the breach; and (ii) the penal element, which reflects the seriousness of the contravention. The Commission now not only takes account of the damage caused and recouping the gain made, but imposing additional sanctions to deter further wrong-doing.
The Commission provides further clarity on how it will calculate penalties and the factors it will take into account when determining the appropriate amount. Interestingly, the expanded list of factors in the policy document not only includes whether there has been a repeated breach or failure by the licence holder itself, but also whether any of its group companies have previously been in breach. Also of note is the fact that the Commission will consider whether the breach arose in circumstances that were similar to previous cases the Commission has dealt with (emphasising a need for licensees to learn from the previous settlements and decisions published by the Commission).
Removal of bias towards regulatory settlements
The Commission’s proposal to shift away from reliance on voluntary settlements was in particular met by criticism by many of the respondents to the consultation. Amongst these was the claim that licence reviews should be an option of last resort and only used with caution. Respondents also asserted that “moving away from working with the industry and a changed approach to settlements is not likely to be effective”, and that the pre-existing balance pursued by the Commission was in fact satisfactory.
Despite this, the Commission has re-emphasised the need for it to have the full range of regulatory tools at its disposal and maintained its position. In its response it stressed the fact that settlements have become accepted and expected over time, leading to them no longer being a sufficient deterrent. The regulator did, however, acknowledge that voluntary settlements will still continue to be one of the tools available to them and that they do not intend to move to a situation in which they favour licence reviews – their aim here is merely to remove what they perceive to be a bias towards voluntary settelements.
Discounts for early disclosure and settlement
The Commission previously proposed new provisions to deal with credit being given to licensees for early disclosure, with such credit potentially in the form of a reduction in any penalty due, as set out in the "Statement of principles for determining financial penalties".
The Commission has confirmed that, whilst they stop short of setting specific time-limits, licensees should be aware that it is in their interest to make disclosures to the regulator as soon as they are able to do so. Whilst some respondents raised concerns that a focus on timely disclosure could lead to the creation of a system of plea bargaining and cause the Commission to overlook other relevant factors in respect of responses (such as the quality of the response), the Commission has confirmed that it does not anticipate that the new approach will create any tension between the quality of information and speed which it is provided. Further they moved to dispel fears that they would enter into plea-bargaining about alleged breaches and stressed that they will not necessarily credit early disclosure in every case anyway.
General shift in focus to consumer protection
In addition to the above, there has also been a general recalibration of the Commission’s focus with regard to its enforcement strategy, towards consumer protection. In the Commission’s response, the regulator emphasised that:
“There is nothing new about placing the consumer at the heart of the regulatory system. However, a fast-changing gambling industry requires all of us to stay alert to changing consumer experiences, including new risks to the detriment of consumers. Placing a greater emphasis on consumer interest ensures that both operators and regulator recognise and respond to these changing circumstances, whilst remaining consistent with the licensing objectives”.
The statement was made in reply to the claim by some respondents that the emphasis on putting the consumer first was inconsistent with the Commission’s remit as set out in the licensing objectives. The Commission commented that – although not explicitly stated in the licensing objectives – a clear focus on the consumer and the wider public interest is embedded in the licensing objectives. The Commission did, however, acknowledge that it could have been clearer communicating how its approach in this area relates back to the licensing objectives.
Linked to this, a number of respondents also claimed that in pursuing consumer interests the Commission is failing to balance its obligations to the industry. The Commission were fairly robust in their response to this, however, stating that:
“Our legislative framework does not create competing duties to the public and to [the] industry which we are required to balance. The focus of the licensing objectives is to protect the consumer and the wider public. However, as with other statutory bodies we have to exercise our powers in a way that is compatible with fairness and natural justice. The industry can feel assured that when taking decisions we will always seek to ensure that those decisions are lawful, rational and reasonable”.
The Commission’s full response can be accessed here.