SkyBetting & Gaming (SkyBet) announced on 4 September that it is to close down its UK-facing affiliate marketing programme amidst increasing regulatory pressure on the remote gambling industry and the sector’s use of affiliates, and heightened scrutiny of gambling advertising in general.

Affiliates – individuals and businesses that earn a commission from driving customers to gambling operators’ websites – are widely used by remote operators to acquire new players. The use of affiliates has, however, recently started to attract greater regulatory scrutiny, and SkyBet’s decision is the first (and probably not last) high-profile example of the industry turning its back on this marketing method in the UK.

In the notice to terminate distributed to its affiliates, SkyBet set out its rationale for taking this action:

“As you will be aware, the regulatory landscape in which the industry operates is developing and maturing and operators are experiencing increased obligations regarding their regulatory responsibilities and level of compliance. In order to continue to operate in a compliant manner, we feel that operating the Programme is no longer viable and that managing the output of affiliates presents a significant risk to our business from a regulatory perspective. It is for this reason that we have chosen to terminate the Programme.”

With such a big player in the market shunning affiliate marketing, it will not be surprising if other operators follow suit. Reports have surfaced that LadbrokesCoral have also significantly reduced their dependence on affiliates, following a recent internal review.

Turning of the regulatory screw

Regulatory concerns in respect of the use of affiliates have started to mount up. Over the past year the remote gambling sector has had to grapple with an investigation from the UK’s data protection regulator – the Information Commissioner’s Office (ICO) – into the use of personal details to promote gambling websites by over 400 companies, all believed to be remote gambling marketing affiliates. The investigation focuses on spam marketing via SMS and was instigated in response to the number of complaints raised by the public about spam texts.

The Gambling Commission, meanwhile, have been quick to emphasise the need for operators to take responsibility for the actions of their marketing affiliates and the risks of using such marketing. In April of this year, the Commission imposed its first penalty on a gambling operator for advertising failings, fining BGO Entertainment Limited £300,000 following a licence review. The fine was imposed as a result of the Commission finding that nine adverts on BGO’s website and fourteen adverts on websites of its affiliates for promotions were misleading (in contravention of the CAP Code) and in breach of the Licence Conditions and Codes of Practice (LCCP).

In addition to this action by the Commission, it is rare that a week goes by without the Advertising Standards Authority (ASA) ruling against an operator for breaches of advertising regulations. In particular, recent cases – such as the ASA’s decisions against Apollo Entertainment and Sky Bingo - have included examples where the advertising was undertaken by an affiliate on the operator’s behalf (sometimes without the operator’s consent). Despite the affiliate acting in breach of its contract, the ASA has ruled against the operator, rather than the affiliate.

These instances led the ASA to publish ‘Gambling on Affiliates?’, guidance issued in July warning of the risks of gambling operators using affiliate marketing. Whilst the ASA’s guidance is nothing new, it does serve as a timely reminder to operators of their obligations in this area and in particular that primary responsibility for compliance with advertising codes remains with the gambling operator (even if the marketing materials in question are created by the affiliate). It is also worth noting that it is a condition of the LCCP that all licensees 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”.

As well as ensuring compliance with the general rules on misleading advertising, the ASA explains in its guidance that operators should also ensure they comply with those rules that are specific to the gambling sector. In particular, operators should ensure that all affiliate ads are:

  • socially responsible – they must not, for instance, be targeted at those under the age of 18 and marketing teams need to be able to demonstrate that they have taken reasonable steps to place or target advertisements appropriately. Marketing content should also not suggest that gambling could provide financial security or that gambling could improve a consumer’s personality or self-image. The ASA’s ruling against Coral Interactive (Gibraltar) Ltd in July also illustrates that the ASA deem gambling ads that suggest peer pressure, disparage abstention or suggest that personal qualities would be enhanced by gambling are in breach of the CAP Code;
  • obviously identifiable as adverts - The ASA recommends labelling communications with wording such as “Ad” in a sufficiently prominent position where the context alone fails to identify it obviously as a marketing communication. In March the ASA also provided further, and more in-depth, guidance on the presentation of online affiliate marketing; and
  • communicate any significant conditions – a failure to do so will result in the advert being misleading. The ASA’s recent ruling against Nektan (Gibraltar) Ltd t/a Sapphire Roomsis a good illustration of this.

Claims of dubious affiliate practices

To add further pressure, the Guardian has recently published two somewhat sensationalist articles making claims about dubious practices being undertaken by affiliate marketers. An expose published by the newspaper on 31 August suggested that some gambling operators were using third party data houses to help their marketing affiliates target vulnerable customers. Only a day later, the newspaper followed this with an article claiming that affiliates disguising themselves as tipsters were deliberately recommending long shot bets that were unlikely to win.

Such press, in combination with recent regulatory action, suggest that the marketing method’s days may be numbered. It has proven an incredibly effective means by which operators have acquired new customers but, in the current climate, operators may start to weigh up the commercial benefit against the regulatory risk and impact on public perception and reputation that this can have.

Undoubtedly, advertising gambling in Great Britain is in a state of flux, with further regulatory restrictions in light of recent events likely and advertising forming part of the Triennial Review. Operators would be wise to watch this space.