With the Gambling Commission’s consultation on VIPs now closed, industry observers predict what future regulations will govern how firms interact with their most valued customers.
How gambling companies court their High Value Customers (or VIPs) has become one of the more controversial issues in this year’s debate over gambling reform in Britain.
As the Gambling Commission describes, the “management and incentivisation” of these highrollers poses two regulatory challenges.
Firstly, VIPs “are more heavily engaged gamblers in terms of their gambling spend, the frequency with which they gamble, or both,” putting them “at greater risk of gamblingrelated harm.”
Secondly, their “disproportionate financial value” to firms means “regulatory compliance can conflict with short-term commercial objectives.”
As a result the regulator has investigated repeated violations, mostly regarding cases where harm was not prevented where it could or should have been, but also in areas where firms failed to prevent the proceeds of crime being spent on gambling.
Already this year at least two influential groups – the All-Party Parliamentary Group on Gambling-related Harm and the House of Lords – have offered their views on how this particular area of the UK market should be policed.
The former’s considerably less sophisticated report recommended simply that: “VIP accounts and incentives should be banned.”
“The Gambling Commission itself has identified the dependence of the gambling industry on VIP customers who are disproportionately likely to be addicts,” said the APPG. “We are concerned [that] fines to companies for offering inducement inappropriately have very little impact on this well-resourced and well-funded industry”.
In an all round more nuanced report, the House of Lords situated the problem within the broader recommendations over affordability checks, and the way firm’s staff are incentivised to keep players spending.
“It should be a condition of an operator’s licence that the salaries and bonuses of employees of the operator, its subsidiaries or affiliates should not in any way depend on the length of time or frequency that a customer they are first in contact with gambles or the amount spent or lost or the profit made by the operator from that customer,” said the Lords Report.
The Commission itself has issued its own draft Industry Guidance for High-Value Customers, which, while far from an outright ban suggests a deepening of regulations in key areas: predominantly, knowing your customer (in terms of both problem gambling and money laundering) and new rules on incentivisation to ensure it “does not encourage risk behaviour such as chasing losses, excessive time or money spent gambling.”
But which will win out?
According to both Steve Ketteley, commercial, regulatory and tech lawyer at Wiggin, and licensing expert David Clifton, of Clifton Davies Consultancy, the future is likely to be closer to that favoured by the Lords and the Commission: VIP schemes can remain, albeit with tighter regulation, oversight and accountability.
“It is our view that we will end up with an industry code almost identical to Draft HVC Guidance rather than a prohibition,” said Ketteley. “That will result in not only deep regulatory oversight of HVC schemes but constant external scrutiny.”
While clearly a big win for the industry, the political tension around the issue should be adequate pressure to ensure firms comply.
“It does feel like the industry has been given a ball it really can’t drop,” he added. “If the industry is shown to be unable to meet the challenges that are being laid down by the House of Lords, particularly, then one could see a difference of approach in the future where the concept of rewarding loyalty becomes something that the legislature simply refuses to permit any more. If operators are unable to find the right balance between commercial objectives and consumer safety, one can expect the regulator or the legislature to step in.”
Meanwhile, speaking at the SBC Summit in Barcelona, Clifton concurred: confident enough even to describe the consultation as “a done deal.”
The outcomes he expects include the new guidance to be “materially the same as, if not identical to” the Commission’s draft; along with a new social responsibility code to ensure VIP schemes or rewards fit the existing licence commitments.
The broad effect will be a further building on already advancing focus on affordability, “possibly with a definition of the minimum affordability steps that operators should take, in line with a House of Lords Select Committee recommendation.”
“My money is on these changes coming into force as soon as December or January,” Clifton added.