Andrew Rhodes speech at the CEO Briefing 2022
25 November 2022
Note: this is the speech as drafted and may slightly differ from the delivered version
Thank you Sarah, good morning everyone. It’s a relief to be able to get to this point and I’m incredibly grateful to you all for being here despite the change of date.
Because what we have to talk about today is important. Today I want to discuss with you my vision for how the Gambling Commission will be carrying out its role in the years to come, what that means for you as operators but most importantly what that means for the people of England, Scotland and Wales who gamble.
So I’m going to explain how I want the Commission to approach our vital work and the three principles that underpin that. I’ll talk you through our determination to be people-focussed as well as evidence led in the years to come and what that will mean for our approach. I then want to discuss what that means for you. How we want to work with you to achieve our aims and statutory objectives and improve outcomes for consumers. But I’m also going to lay out how we are going to take forward our compliance and enforcement work: with compliance at the earliest opportunity the goal: from the expectation that this is day one of holding a licence for new operators, right through to quick adoption of enforcement outcomes for those who fail to meet our standards.
Some of you may wonder why I have not held an event like this sooner. The answer is quite straight-forward, really. Just as I did when holding a similar internal event a few weeks ago, I wanted to know I would be here to deliver on the vision I have set out. I don’t think anyone is well-served by being told what the direction will be only for that person to potentially disappear shortly afterwards because they were interim. I also wanted to take some time and to know what I thought.
It would be fair to say it has been a very busy time since I joined. I joined some months after the collapse of Football Index, which was followed by the independent review. There has been the fourth National Lottery licence competition – the most competitive process run since the Lottery started in 1994, which has led to probably the largest procurement litigation case in the world at the moment. We are working closely with Government ahead of the publication of the White Paper following the Gambling Act Review. We have also undertaken a significant amount of change within the Commission itself, with several new people joining us, including a new Chair.
Today is important for me because I think it’s a key part of my job to set out for you how I want us to work with you, as your regulator. Let’s be clear – you don’t have a choice about us and you’re not required to like us either, but that isn’t how I like to define relationships. I am going to be clear about what our role is and how we intend to carry that out, but I am also going to talk about what is difficult for us and for you. I and some of my Executive team who are joining me today are also looking forward to hearing from you and answering your questions a little later. But first, where we, at the Commission, see things today.
Whilst clearly disruption in different forms continues in today’s economy, the last few years in particular, have seen massive disruption across society which we still haven’t seen the end of. The COVID-19 Pandemic changed our society and as we well know in this room today, gambling and those who gamble were not immune to that impact.
Data we’ve published this morning shows the trends over the last five years and its clear the impact the pandemic had.
And our data, since Public Health restrictions eased, also shows the unbalanced nature of the impact:
- Year to March ’22, showed participation up by 3% reflecting land based opening up. Still lower than pre-pandemic though.
- In-person gambling participation rate increased to 26% (from 23% in year to March 2021) showing some signs of recovery since the pandemic.
- Online gambling participation remained statistically stable at 26%, compared to year to March 2021, but continues its long-term increase.
- And these figures have stabilised since March as well.
Contrary to what is sometimes said, we are not seeing inexorable growth in gambling. In fact, the top level data on participation remains pretty flat. There are clearly movements beneath those figures, with different demographics expanding or contracting. The delay in hosting the World Cup has probably skewed some of the participation levels in sub-categories of gambling too. We have also seen something like 4 times as much betting on political events during the past year, when compared to previous years, but then that has been a very eventful space.
To summarise things as we see them:
- Overall participation in gambling is stable and has not been growing.
- It is true that online has continued to grow, but the whole market is not.
- And whilst clearly online gambling grew rapidly during the pandemic when the land-based sector could not operate - or was heavily restricted – that was not a sign that gambling participation has exploded – it definitively has not.
But what this likely means is that competition is intense. You are all operating in a very competitive industry and your businesses are having to work harder than ever either to grow in the British market or make inroads abroad. We see that and we get it.
And there are a few observations that we are making as a result that I want to share with you. Before I do that, one of the subplots of my speech today will be re-emphasising what the Gambling Commission’s role is and what it is not. We are not an economic regulator – we are, predominantly a licensing regulator. We do not have a role to grow or contract an industry and we don’t have a view on how big or small that industry should be. Two jobs ago, I ran the welfare state operation for UK Government – 72,000 people, Op Ex of £2.5bn and spending of c£176bn. Welfare is often a very controversial issue and I genuinely didn’t believe that any job I did afterwards could be as contentious or politically split or sensitive as welfare. Then I joined the Gambling Commission.
Now, I find myself lobbied or criticised on all sides for conflicting things. That just comes with the job, along with occasional hate mail and death threats. I have said this many times now, but if you want to make people happy, you should sell ice cream for a living – don't regulate the gambling industry.
My strongly-held belief is that we must always be impartial as a regulator. This means we are not motivated by a particular set of beliefs about the industry we regulate, or the people who use it. This does not mean we don’t form opinions or that we won’t say things that are quite definitive sometimes. Especially if we think a given practice or behaviour is unacceptable.
That said, those observations we want to make.
First, mergers and acquisitions have continued at pace. The now top 3 operator groups in Britain have increased their market share from around 1/3 to 1/2 in just the last five years.
The top 10 groups now represent 77% of total B2C GGY in Great Britain and the top three groups will represent over 50% when recent mergers are accounted for.
Underlying market conditions may suggest the growth in market share of the top 10 could continue, as a result of the current economic headwinds and regulatory impact, as well as further return of retail.
What’s more the appetite for acquisitions continues and the focus of mergers and acquisitions seems to be driven by operator strategies to diversify into new jurisdictions, as well as a number of deals taking place in the B2B market space. It will be for the Competition and Markets Authority to consider if any this reaches their threshold at some future date, but for now I am simply remarking on the level of consolidation we are seeing within the industry.
Mergers and Acquisitions are a pertinent example of the complexity facing the regulator too. We are seeing more and more complex transactions or complex ownership structures. Licensing has become far more complex than it once was and this has accelerated in recent years. This means we need to rethink the way we approach this area from an operational standpoint as a minimum. There are also financial implications that come from this for us. We are seeing more novel products which push the boundaries of the definition of gambling and either look to capture existing market share or to draw new consumers into the market.
A number of the largest operator groups – some sat in this room - are stating revenues are down due to safer gambling measures they are introducing in terms of stake limits and affordability measures they have taken.
- They’re also suggesting the proportion of their revenue coming from high spending customers may be reducing, with a pivot towards lower spending customers.
- Two of the largest gambling groups in the UK have reported a significant fall in the proportion of income from higher spending customers.
- One of these has reported income from higher spending customers fall from 19% of income three years ago, to 5% now.
- Another operator has introduced automated financial vulnerability checks where they are rejecting 7% of customers at the point of where they look to open an account, due to serious financial risk.
I’m not saying these operators are getting everything right and I’m not saying the regulator wants to see people in general spending less on gambling either – our role is to permit gambling as long as it is safe, fair and crime free, not to make a moral judgment on how much money is spent on gambling. But operators, looking to move their customers away from behaviours that present a higher risk to the licensing objectives is something that we are watching with interest.
This is a difficult topic though and loaded with much opinion. Our view, as the regulator, is that these are your choices to make. We think it is interesting to see how some have altered practices and have made different choices.
And with all the drivers of such fierce competition in the British market, seeing companies more proactively managing risk and recognise the importance of sustainability is a welcome development.
Finally, that competition is also driving further innovation and not all of it is coming from regulated gambling. I’m not going to dwell today on either products based around online illegal gambling sites or emerging products. And by emerging products I’m talking about products such as non-fungible tokens - or NFTs - ‘synthetic shares’ and crypto currency, though these things are evolving all the time. On the first, we understand your concerns, we deal with this issue daily and have directed more resource to it. There is an inherent danger in consumers turning to illegal sites where they will have little or no protection or recourse.
The illegal market will always continue to evolve and is difficult to eliminate, so our efforts will increasingly be further upstream to seek to disrupt these illegal sites as much as possible. But we cannot see this as being about the lowest common denominator. We cannot reasonably argue that some practices should continue because illegal gambling is worse. We cannot condone bad practice in the legitimate market and I think you would all agree with me on that. I think the risks from the so called black market are overstated, but that doesn’t mean I don’t think they exist. On the second, these products are becoming increasingly widespread and through them, what products can be defined and regulated as gambling is becoming increasingly blurred. We are watching and whilst they are often beyond our remit, we will have questions of any operator who is taking risks in this space.
We have also deliberately increased our level of international working with other regulators to try to bring further consistency to regulation where we can. I think this is important as many of you operate in multiple jurisdictions, so any consistency we can achieve, assuming that is a positive consistency, has to lead to a better regulatory landscape. A key focus of our increasing interaction with those international regulators has been in building a combined effort to tackle illegal gambling sites. Clearly between the regulators there is a difference between illegal gambling sites that face into a jurisdiction where they must have a licence and operators who have customers in countries where the operator cannot seek a licence. Hence this is why I refer to illegal gambling sites as opposed to saying black market as these can mean quite different things.
All businesses want to grow. In an ultra competitive market, innovation and risk may well be legitimate. And some of the changes we are seeing are to the benefit of consumers and their safety. But what I want to remind everyone here today is whilst the Commission understands that you are operating in uncertain and competitive times, we expect the care of your customers to be your first priority, we demand that that you achieve compliance with our standards and we will not tolerate business practices that put consumers at risk by design.
But what can you expect from us in the years to come?
I’ve been at the Gambling Commission almost 18 months now. And in that time – besides being reminded that if you want to be popular you shouldn’t work in regulation – I’ve learned a few things about this sector, I’ve spoken to a fair number of you here today about your businesses and I’ve been able to get to know my amazing colleagues and their work. And thinking on this led me to three principles that I want to run through the work of the Commission in the years ahead.
- Putting people first
- Doing the right thing
- Regulation that works for all
Easy to say but what does it mean?
Appropriately, let’s start with putting people first.
The Gambling Commission is a people-focussed regulator. We are a people business. We are here for everyone. Now you’ve no doubt heard the Gambling Commission talk about itself being an evidence-led regulator. This is true and its not going to change. But what we’re now making clear is that everything we do must always start with consumers.
And that means all 22 million people who gamble regularly and the wider societal impact as well. The Gambling Commission is here to safeguard the interests of all 22 million people who gamble. Clearly, we will often speak more about those experiencing harm or who are at risk of doing so. We know that gambling addiction can lead to very severe outcomes and we’re obligated to reduce that as much as we possibly can. It is also true that tens of millions of people will engage with gambling in one form or another and will not experience harm.
By talking about everyone who gambles as opposed to those suffering severe harms, it doesn’t mean the Commission is going to stop pushing for safer gambling, with consumers exposed to less risk. But it does mean speaking more about another of our statutory objectives: to ensure gambling is fair and open. This means we will spend more time looking at offers, terms and practices that can disadvantage consumers and which go against our licensing requirements and we plan to increase the numbers of people we employ in this area. It also means you will see more focus from us on research that focuses on people too. Everyone experiences gambling differently and we want to do more to understand that, highlight it and discuss it, including with everyone in this room. An area I’ll come back to later.
Putting people first also means continuous improvement for our own people too, attracting, developing and supporting the right people, leading to them doing the right thing at work.
Which brings me on to the second principle, doing the right thing. And what do I mean by that? It means doing what is right, even if it means it is difficult. Being clear on our statutory remit, as an effective regulator and licensing authority. We will be guided by insight and make evidence-led decisions that are in the best interest of the gambling public. Our interventions and policy work will be driven by a growing level of consumer and industry insight. I said we are an impartial regulator – for that to be true we need to rely on evidence, data and research and that includes when you want to influence us. Sentiment and strength of feeling is important and certainly not to be ignored, but high-quality evidence is critical when we make decisions that can have far-reaching consequences.
We will work in the open too, being transparent about what we're doing. And when paired with transparency, understanding can lead to trust. So to help build further trust we will keep our language simple, even if topics are complex. We must make sure our information works for our audiences and that doesn’t just mean data managers at operators or researchers working at universities. It means the general public.
This also means what we publish is meaningful and you can draw reasonable conclusions from it.
And finally, regulation that works for all. One side of this is simple and I’ve already touched on it today: we will focus on the areas that matter and we expect compliance on behalf of people who gamble. At every point, we want operators to be asking themselves how they can be compliant from day one.
But the first thing it should mean is from day one of holding a licence from the Commission, an operator is compliant with our rules. For many operators this is the case but still, for far too many it isn’t. But when failings are found our expectation is still going to be compliance at the earliest possible opportunity. When a failing is found how can you make sure you are back to compliance as soon as possible?
For our part, our strategy will be to secure compliance at the earliest possible opportunity. This means that sometimes we won’t pursue formal action because we have secured the appropriate outcome through other means – the operator has come back into compliance. But where we offer such a solution, failing to take that opportunity would be a sign of how seriously an operator is taking their responsibilities.
With a regulatory philosophy of early intervention, securing compliance at the first possible opportunity, this means I and my senior team will be doing a great deal more interaction with operators than we might have at times previously. Some of those conversations will be routine, some will be uncomfortable for you and some may be at points when you know you have a problem to fix.
And to be clear, there may well be times when some of you will actually wish you were seeing less of us. And if you end up feeling that way, it’s likely because talking to me will be the least of your worries about the Commission’s engagement with your business at that point.
I’m not trying to pick a fight when I tell you this. But as I’ve just said, transparency and understanding are vital. And I want you to know where you stand.
And we will also look to make that clear for you in other areas too, such as our aim to move to consultation windows. We think this will mean regulation that works for all and ultimately that will lead to better outcomes for people.
I talked earlier a bit about the Gambling Commission being people-focussed as well as evidence-led. I think that’s an important thing to stress. We will permit gambling so long as it is safe for people, so long as it is fair for people and it is crime free. But it’s rare 22 million people agree on anything and that is certainly the case with gambling. With views ranging from outright bans, demands I prosecute any of you that refuse someone’s custom through to a preference for an unlicenced free for all.
Whilst I don’t accept that you can’t balance protecting people from harmful or unfair outcomes with freedom of choice, clearly, Government has a big role to play in making the judgment about where that balance should be sought. It will be an important step for everyone in this room when a White Paper is published for the Gambling Act Review. But that hasn’t stopped us at the Commission taking action where we have felt it necessary to make gambling fairer and safer and whilst the Review progresses, it won’t going forwards either.
That said, if we’re going to focus on improving outcomes for consumers, it’s more important than ever that we understand what motivates and drives consumers. That’s why we’re also putting our consumer research at the heart of what we do. Our ‘Path to Play’ research, published earlier this year, is the latest step in this process. I’m sure that many of you in this room today will have your own versions of this work, that your business makes use of.
In ‘Path to Play’, we wanted to explore what the typical consumer journey looks like, from the beginning of a gambling interaction to the end. And it was vital this was from the perspective of the consumer. Not my perspective as the regulator, not yours as the operator, but the view of the consumer:
- We wanted to better understand what factors influence them, where there may be greater risks for some players, and identify key touch points or opportunities for intervention.
- The overall aim was to create a framework of the ‘path to play’ showing the key milestones and stages gamblers go through when they gamble, which the Commission can then use to shape its policy development work, ongoing research and wider communications – ensuring the experiences of consumers are at the heart of what we do.
- Of course, we didn’t set out to develop a ‘one size fits all’ model. We know that gamblers and their experiences all have their differences. But taken as a framework, we hope it and the approach that follows can help us going forwards.
- We recently invested in our consumer research for the next three years and I look forward to being able to share more of what our consumer research is telling us going forwards and what it will mean for our plans to make gambling fairer and safer too.
Better research, better data focussed on better outcomes for consumers. We want to work with you to deliver that.
Today I can tell you we are working on putting together a one day Conference that will take place on the 9th March next year. It will be designed to bring us all together: operators, researchers, we as the regulator and others to improve how we design and commission research, collect and use data and collaborate to improve the evidence base. And improving the evidence base will help us all improve outcomes for the 22 million who gamble, as well as their communities.
As I hope this demonstrates, with society re-opened, at the Commission we’re going to be doing a lot more to engage with industry. And we want that to be increasingly about positive collaboration.
The work already happening with industry on developing a Single Customer View is a collaboration, along with the ICO, that we value and that we welcome. Progress is being made and we look forward to more next year.
In order to discuss key issues and projects I also will be looking to bring together groups of CEOs and senior Execs, by sector or issue as well. And I value the working relationships I and my team have with your trade bodies, including those who are here today. These help us collaborate on shared challenges and allow for both sides to have a frank exchange when that is needed.
But unfortunately, whilst we want to get to a place where collaboration with industry to go beyond basic standards is our day-to-day, the reality is that too many operators are still failing to live up to their obligations as set out in our Licence Conditions and Codes of Practice.
And so we will be pursuing a policy of compliance at the earliest possible opportunity. As I’ve already said, we will look to be pragmatic if it leads to better results for consumers faster. Where we see early warning signs or we having concerns we will look to engage with you to try resolve things quickly. That is less likely to work for serious breaches and it would be wrong for us to take an insufficiently robust approach. If we don’t think someone is using the opportunity to sort a problem out quickly, don’t be surprised if I ask for a call.
Our compliance and enforcement teams have been busy enough in recent years:
- In the last 11 months alone 16 operators have paid out a total of £45m because of regulatory failures. A further two have had their operating licence suspended because of regulatory concerns.
- For comparison, in the whole of 2016/17 full financial year we took action against 3 operators who paid out £1.7m for regulatory failures.
And what does the non-compliance that we’re dealing with look like? Well I can tell you we’re not talking about breaches of our rules that could be considered ‘grey areas’ and we’re not talking about incidents that happened years ago either. In live casework we’re still seeing too many clear cut stories of people suffering as a result of preventable harm. Stories like:
- Not carrying out any meaningful responsible gambling interactions with, or placing any effective restrictions on the account of, a customer who spent £245,000 in three months despite knowing she was an NHS nurse earning just £30,000 a year
- Failures to oversee local staff or area managers to escalate potential concerns with customers sooner, including one shop customer who was not escalated despite being known to be a delivery driver who had lost £17,000 in a year and another was not escalated despite staking £173,285 and losing £27,753 over the same time period.
- Or giving a customer they knew was an NHS worker earning £1,400 a month a monthly deposit cap of £1,300
This simply can’t continue. I know from your feedback in meetings, that many of your businesses and your investors have also taken notice and are striving to improve. But there are also too many who are yet to get the message. So our enforcement team now have a clear focus on those who are seriously or persistently non-compliant, including those who simply are not prepared to live up to the requirements of their licence.
To be clear we don’t want to be in this space. We would rather not be talking about escalating enforcement action, leading to bigger settlements and bigger fines. In the ideal world this would be the last resort. But whilst non-compliance continues to look like the examples I’ve just given, that’s where we are.
I will be very straight with you, as I generally am. I am sick of talking about non-compliance and I am already tired of it defining how we see the industry you are in and the experience of too many consumers. It is not everyone in this room, but whether you like it or not, the serious non-compliances we see are defining how all of you get perceived. It defines how you are lobbied against and it defines how Government, politicians, the media and a raft of others picture you. Some of you may not care – it's not my issue, it’s yours but it can have consequences for all of you. I’m going to set out for you now where my focus is and where I would like it to be and how I want us to get there.
The slide I am showing you now is not real data – it's just an illustration of a point. I have said this before but it bears repeating – the industry has improved and I do not doubt for a second that there have been big steps forward in lots of areas. Things that we might regard as not good enough today, might have been best practice ten years ago. That’s the nature of change and improvement.
Right now, there are still too many extremes. There are too many cases where we see things that nobody thinks is OK. For those of you who have had enforcement action, in the vast majority of cases – almost all – there is no dispute that the breaches are real and serious and nobody wants to excuse or defend them. These are not technicalities, grey areas, debatable interpretations or complexities. For the complaints and grumbles I get about the regulations being difficult or things not being clear, the actual issues we see are not in that category at all – they are totally avoidable, they are recent and they are being repeated.
The peaks you see are those awful cases that embarrass everyone. Where do I want us to be? I want the headache of what happens when we don’t see those things anymore and instead we are talking about more complicated and harder to solve challenges about where the right balance of risk is. We’re not there yet and I want us to get there quicker. For those of you who press me on what we do about the ‘Black Market’, I would have more resource to dedicate to that if we did not have to spend so much time on these extremes. I really do understand the commercial risk to you all of unlicensed gambling and how unacceptable it will no doubt feel if you are not experiencing the issues I have just talked about but feel the regulator is not doing as much as you would like to see.
There is something else I want to say to you all. Be careful what you wish for.
You have something very valuable in the regulations you have, even if you don’t think it or know it. This is not my first role in regulation of a major industry and I have worked in a field with highly prescriptive legislation and for all the precision and clarity that supposedly brings, it also brought unintended consequences and a lack of flexibility.
You have regime that is primarily outcomes-based. That is worth an enormous amount and I wouldn’t wish it away. We regularly get requests to specify precise intervention points and actions and we could do that, but I am not sure that level of detail would be a good thing at all. Inevitably, what would work well for one business would not for another. What would be too low for one, might be too high for another. Just look around this room at how different your individual business are. I know from the invitation list – there is a very large spectrum in here and you represent about 3% of the total number of operators we licence.
In having a primarily outcomes-based regime it means you have the ability to set processes that suit your customer types and your risks. That is what good regulation looks like. There is risk too – set those too high, have poor interactions when they are needed or not follow those policies at all and you’ll have a problem, but so might the consumer. This cannot be a surprise. I have looked at quite a bit of casework since I have been in this role and the majority of issues have come from not following organisational policy and poor or no interaction. This is totally avoidable.
If you want to have banded intervention points based on broader company types, you can do that now with your trade bodies. I hear a lot about bodies wanting to set standards – you can do that now, and we will happily engage with that.
Too much of what I have said today is negative, but I can’t come here today and not lay some of that out. However, there are other things I want to emphasise too. I don’t think the Gambling Commission is perfect. The good news is nobody else thinks we are either, so there is perhaps something everyone will actually agree on. I want us to be a more discursive regulator – I want more discussion and more engagement. I want that to be on the right things. There are some particular initiatives I want to work with you all on that I think will make regulation more effective and easier to manage. In the coming months I will be talking to you about that. I also now intend to introduce an account management approach for the largest operators so there are defined points of contact so we can manage our relationship. I want more talking and less letters. In addition to the conference I mentioned earlier, we will have sector-based and GGY-based round-table discussions and working level groups where we need them. This has been my plan for some time, but we had hoped for a bit more stability around our regulatory landscape and I think we are now close enough to that to do the things we have intended to do.
I want us to be the trusted voice on gambling, as an impartial regulator. This is a very contested area and I have no intention of attempting to referee the competing views – I have no doubt we would fail in that task, so strong is the conviction and emotion. However, we will be saying and doing much more publicly to try to bring some balance to the debate.
I am glad you have taken the time to come today. I really do appreciate it. As a regulator, we are here for all 22 million consumers and that means we will do some things differently. I want us to have a different sort of relationship and we need to see the extremes I have talked about today gone from this industry. Putting people first, Doing the right thing and regulation that works for all. These will be the guiding principles for the Commission in the years to come. We want to work with a compliant industry to take this forward and make gambling fairer, safer and crime-free.
And we stand ready to work with all of you to do just that.
Last updated: 25 November 2022
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