Analysis: Heeding the regulatory warning shots

When 888 was hit with a record fine over its social responsibility failings there were discussions on the TV news that evening, but the £2.3m fine that was given to Ladbrokes Coral seemed to pass by relatively unnoticed. While it made the mainstream news in the UK it wasn’t one that got much attention. It was definitely a more busy news day, but there is also a law of diminishing returns with the media and this is already old news.

The scale of the fine, an amount roughly equivalent to the money lost by the players, and the nature of the rebuke by the Gambling Commission would not have sent news editor’s pulses racing. “It is the responsibility of all operators… to ensure they are protecting their customers and step in when there is behaviour that might indicate problem gambling,” Sarah Harrison, chief executive of the Gambling Commission, said in a very muted statement.

Gambling fines for social responsibility failings are already old news. And this should be a concern to the industry for two big reasons.

Symphony apathetic

The first is the danger of apathy. It’s tempting to put the fine into the context of Ladbrokes Coral’s overall business, where it’s less than 1% of digital revenues alone, but basing fines on the scale of the operator and not the scale of the offence seems a dangerous route to head down. Nonetheless the end result is this doesn’t immediately appear to strike fear into the hearts of the gambling sector or raise much more than a shrug from the wider business community.

Ladbrokes Coral share price barely moved on the news and is actually up slightly at the time of writing and the firm said in a statement these were all failings of the past and it’s corrected any mistakes in both culture and operations. “The Ladbrokes Coral business has moved on since these cases occurred,” CEO Jim Mullen said, “and the mind-set of the Board and the management is that there can be no short cuts on delivering our social responsibility and anti-money laundering obligations.”

He added that it was right “others can see the extent of our mistakes and try to learn from them”, but what really has the industry learned from this? A cynic could say it has learned the wrong lesson, that a level of contrition and a willingness to pay a fine and commit to changes should be enough to cope with any existing failings in the business. And as a result it seems possible the overall impact will not be the industry wide top-to-toe reviews that need to take place.

Escalating conflicts

Peter Nolan, industry consultant, is more optimistic and thinks the number and scale of the recent fines will and should act as a wake-up call to operators. “This appears to be the approach to be taken in the future by the UKGC and there are nearly £16m in fines under the new regime since 2015,” Nolan says. “I think this is an area where both small and larger operators will need to focus on and improve their customer interaction standards going forward.”

“I think the fines and also the impact on the reputation of the operators in this current climate will mean that the delivery of responsible gaming will be much more of a strategic imperative. The challenge will be for responsible gambling to be part of a company’s DNA – where everyone in the business “owns” the strategy – not just Customer Service or Compliance teams. Also Strategy needs to be owned and led from top of the  business.”

The real question is just how significant and immediate these changes will be. Many online gambling have a well-established operational culture that requires a major shift to bring up to the level now expected by the Gambling Commission. Operators need to be willing to invest in technology and training to start to take a more active role in recognising problem gambling and in many cases will need to absorb the bottom line hit that results from it. But is the industry really willing to act without either a carrot or a sizeable stick? Because the second major danger is that of escalating enforcement action.

Solving the problem

“I think there have been a lot of genuine improvements by operators over the last ten years,” Nolan argues. “This is reflected in the Gambling Commission’s own findings that shows no statistical increase in problem gamblers since 2010.” And he adds that it’s not as simple as flicking a switch to turn off problematic behaviour. “In my experience it can be very difficult, with the imperfect information available to operators, to be certain that customers are problem gamblers.”.

“Engaging with the customer to discuss their betting behaviour can also be difficult as generally they don’t want to interact and there is a real chance they’ll take offence at the suggestion they may have a problem and leave the operator. Smaller operators’ revenues can be more affected by the performance of VIPs and there can be a creative tension between effectively managing the commercial relationship with the VIP and ensuring responsible betting.”

But there is the sense from conversations with operators that if real, significant action isn’t taken, the Gambling Commission will begin to wield even more significant punishments in future. Sources have previously told EGR that the commission is looking to “take someone’s licence away” and there appears little doubt that it cannot simply continue to dole out fines to operators making the same mistakes.

“As I said before there has been no statistical change in percentages of problem gamblers since 2010 so it could be said that the GC is making a big point,” Nolan adds. And he concludes that operators must adapt to changing public expectations or risk being the next firm in the firing line although he adds this is not a problem he expects to be difficult to solve. “No-one I have ever come across in UK betting industry wants to have problem gamblers in their business no matter how much they bet.”