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| "Guilty Mallard?" |
By Dan Waugh, Partner
“If it looks like a duck, sounds like a
duck and walks like a duck it’s unlikely to be a horse.”
One of the problems with regulating gambling in a relatively
permissive society like Great Britain is that the target simply refuses to
stand still. Changes in technology and consumer behaviour propel gambling
companies forward in search of ways to grow the market and to capture greater
share – sometimes rubbing up against the confines of regulation.
If the regulatory cords are tied too precisely, they may
become outmoded and so create loopholes; too loose and they give rise to
inconsistency of interpretation and possible exploitation.
This is the sort of problem that the Gambling Commission has
been grappling with in trying to ensure that licensing regimes are used for the
purposes intended (and more specifically to guard against the proliferation of
machine gaming in ‘ambient’ premises). Attempts to set some measurable
parameters around the principle of ‘primary purpose’ (the idea that a betting
shop licence should be used primarily to offer betting, a bingo licence for
bingo and a casino licence for table games) have been met with predictable
entrepreneurship (often manifested in tokenism) from the industry. This in turn
has led the Commission to seek to implement the well-worn ‘duck test’.
The ’duck test’ which focuses on outcomes rather than
compliance tends to trump the industry’s best-laid arguments. The recent
travails of DraftKings and FanDuel in the USA illustrate the point. The daily
fantasy sports sector may be correct in asserting that their activities are
exempted from the proscriptions of UIGEA and the Bradley Act; but if the
regulator decrees that the carve-out is being exploited to offer sports betting
by proxy, there will be only one winner.
Back here in Britain, local authorities may soon be asked to
consider whether a bingo club is really a bingo club, not on the basis of technical
specifications (bingo positions vs slots, floor space allocation, revenue
splits) but on whether it meets their expectations of what a bingo club should
be.
It is a common sense approach to licensing that the
Commission hopes will put paid to pubs masquerading as bingo clubs, arcades
aping casinos and betting shops bereft of sports. In some respects it may be
seen in the same vein as the current regulatory emphasis on impact and
effectiveness rather than simply compliance – a renewed recognition that the
spirit is every bit as important as the letter of the law.
There is of course the risk is that the proposed new
approach leads to inconsistency of interpretation between local authorities;
but the Commission will be only too aware of its task in meeting this
challenge.
Perhaps the more important concern is that in applying the ‘duck
test’ to licensing, we are once again addressing symptoms rather than getting
to the heart of the matter.
Britain’s terrestrial gambling operators are – generally
speaking – a fairly well-behaved and conservative bunch. The widespread
inventiveness in licensing that we have seen since the Gambling Act has often resulted
from challenges to the traditional business model (such as the smoking bans of
2006 and 2007 or the casino duty increase of 2007) rather than base avarice. Sometimes covetousness creeps in where
there are obvious regulatory imbalances (e.g. FOBTs being permitted in betting
shops and not arcades; bingo clubs having better slots entitlements than pubs)
but deep down this has been about the need to adapt to a changing world.
As I have argued in previous articles (notably http://regulusp.blogspot.co.uk/2015/02/time-to-think-outside-box.html),
the prognosis for licensed gambling venues in Great Britain is worrying and
this is largely because they are still defined by parameters set in the 1960s
and the needs of a dwindling band of customers. Our arcades, betting shops and
bingo clubs are looking increasingly anachronistic while the much vaunted rise
of the casino has somehow failed to materialize. Gambling activity seems to be
shifting inexorably to remote channels – a trend that may not be unambiguously
positive.
Against this backdrop, it is unsurprising that operators
have become more enterprising in how they interpret regulations. Done in the
right way, it can even serve to force positive change. Several years ago, I was
involved in the process to supplement machine numbers in bingo clubs through
multi-licensing – a response to a restriction in the Act that limited clubs to
just four jackpot machines per premises (at a time when some clubs were receiving
up to 1,000 visits a day). With no evidence of harm arising from the machines
expansion in bingo clubs, successive governments have relaxed restrictions and
so largely obviated the need for multi-licensing.
Nevertheless, the rise to prominence of machine gaming in
venues where it is intended to be a secondary activity is a justifiable source
of concern for the Gambling Commission as is the land-based industry’s growing
dependence on those machines. Application of the ‘duck test’ is a sensible response
to current challenges (notably Greene King’s attempts to deploy bingo licensing
in community pubs) but it is unlikely to end the game of cat and mouse over
licence definitions, precisely because it does not address the root cause of
incipient obsolescence. It asks the question of whether the licensing regimes
are being adhered to rather than whether the licensing regimes are themselves
appropriate.
This is existential stuff for the industry but will never be
a priority for government; so the onus is on companies to address it. Put
simply, if our ambitions fail the Commission’s ‘duck test’, perhaps it is time
for us to consider whether we wish to be ducks at all – particularly those of
the sitting kind.
