DGA Industry event – Sarah Gardner Keynote speech, 10 January 2023
11 January 2023
Note: this is the speech as drafted and may slightly differ from the delivered version
Thank you. Hello everyone, ‘Hej’ (pronounced ‘Hi’) even. It’s great to be here speaking at the DGA Industry Day. Before we go any further I should probably say ‘tak’ for letting me come to your event and give a speech in English. Given I’ve already said the two words I know in Danish it’s for the best, but it still shows what great hosts you are.
Ten years since the Danish market liberalised is an important milestone for gambling in Denmark but also for the wider industry. Like our story in Great Britain, whilst liberalisation opened up the potential for growth, innovation and consumer choice, those ten years have not been without their challenges. In our over fifteen years of existence, we’ve seen many of the same challenges at the Gambling Commission. Taking a moment to reflect on the successes and the challenges in what is at times a hyperactive industry is vitally important. Particularly when that same drive for innovation from industry means we as regulators must be prepared to do the same.
So, I want to talk to you about how we see the challenges you face today, how they reflect similar issues we are tackling in Great Britain and what lessons there may be for you in our experience. I also want to spend some time banging the drum for more collaboration between regulators and how the close ties between the Gambling Commission and the Danish Gambling Authority can be a strong example for others and potentially be a springboard for greater success in the future.
But first, as fellow mature, liberal gambling markets, let’s take a moment to discuss how we got to where we are today and what we see is going on at present on both sides of the North Sea.
As in Denmark ten years ago, gambling in Great Britain was transformed around 17 years ago with the Gambling Act 2005. It’s the piece of legislation that
- set the Gambling Commission up just over 15 years ago,
- is the reason that in terms of products available, channels for accessing them and ability to advertise to the public, Great Britain is considered one of the more liberal regulated markets in the world and,
- allied with the 2014 Act that made our regulation of online gambling based on point of consumption, it’s led to us being responsible for the largest regulated online market in the world.
As of today, the industry as a whole in Great Britain is worth over £14 billion in Gross Gambling Yield a year and by their own figures employs tens of thousands of people across Great Britain directly and in the supply chain. Like all sectors of the economy, gambling - especially land based gambling - was hit hard by the pandemic but since the UK re-opened in 2021, we’ve seen different parts of the gambling sector recover at different speeds.
In Great Britain, we don’t have a regime that regulates volume of gambling other than where it puts consumers at risk of harm or risks breaching our other licensing objectives. As a result changes in participation rates can give us clues as to what is happening to the industry and how it is behaving. With that in mind, our most recent statistics show:
- in year to September 2022, overall participation in any gambling activity, in the last four weeks, remained statistically stable at 44%
- in year to September 2022, the in-person gambling participation rate significantly increased to 27%, although this figure still remains below the pre-pandemic level
- and the online gambling participation rate has significantly increased to 27%, continuing its long-term upward trend.
- And whilst we are in the process of updating our methodology for both participation stats and gambling harms prevalence, our latest problem gambling rate as measured by the short form PGSI is statistically stable at 0.3%. The moderate risk and low risk rates are also statistically stable at 1.1% and 1.8%, respectively.
So, 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 for us – as I’m sure is the case here - is that competition is intense. We license gambling slightly differently to you. Whereas you license the operator group as a whole, we license individual operators and individual activities. So as of the start of last month, we licence 455 remote operators who hold 1 or more licences, of which 243 are B2C operators. When you ratio for population, this isn’t radically different to Denmark. However, across those 455 remote operators, we license 863 different gambling activities. Overall, including land-based, we regulate 2,419 gambling operators and 3,339 gambling activities. This helps demonstrate the fierce competition that is ongoing in the market. In Great Britain we’ve noticed a few trends as a result of this and I think they will have clear cross over into other jurisdictions like Denmark.
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. And I know this is a similar story here, with the top three operators representing over 50% of the online casino market and the top 10 over 80% whilst those shares of the market are even higher for online betting. We think the unstable economic picture across the world – as well as regulatory pressures in some jurisdictions - is helping to keep driving further M&A as we look ahead this year too.
Potentially more interesting from a regulator’s perspective, we also see a number of the largest operator groups 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.
We don’t say these operators are getting everything right, we aren’t trying to put them on a pedestal, but when we see operators looking to move their customers away from behaviours that present a higher risk to our licensing objectives? Well that is something that we are watching with interest.
This level of competition is also driving further innovation and not all of it is coming from regulated gambling. I know illegal online gambling is a major concern here in Denmark. We understand your concerns because in many ways we share them. We deal with this issue daily and have directed more resource to it. 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 there is an argument, sometimes made in Great Britain, that just because there are illegal sites and unregulated gambling - with no protections and bad outcomes for consumers - we should scale back or stop some of the interventions we think we need to make in the regulated market to mitigate against the risk of consumers jumping from regulated gambling into unregulated gambling. I cannot accept this argument. Indeed, I believe that no regulator should knowingly allow bad practices of the type we are talking about here, practices which can cause harm, to carry on in the regulated market. And whilst we – like you – have a level of concern about illegal online gambling and it will always be an important focus for us, we have no time for those risks being overstated, without credible evidence, either.
Finally, innovation is also leading to experimentation, promotion and use of emerging products such as non-fungible tokens - or NFTs - ‘synthetic shares’ and crypto currency. These are products that we think gambling regulators need to be keeping watch on. They are becoming increasingly widespread and through them, what products can be defined and regulated as gambling is becoming increasingly blurred depending on each jurisdiction’s rules. For our part 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.
A competitive sector that is always pushing the boundaries and innovating requires us as regulators to also constantly look to update, improve and innovate how we hold the sector to account and keep gambling fair, safe and crime-free.
So how do we do that? In such a varied, innovative and competitive sector, what is likely to draw our attention and where are we likely push on? And what can we say about the Danish market in relation to that?
We must start of course with the Gambling Act Review. Announced by the British Government in December 2020, we have supported our sponsoring Department – DCMS – with it since. It is often described, not unreasonably, as a once in a generation opportunity to update our gambling framework and we look forward to the publication of a Government White Paper that will indicate next steps. I find this another interesting point of similarity between ourselves and the DGA. Whilst the current moves to look at gambling legislation in Denmark are more focussed, looking at marketing and advertising, that both jurisdictions are looking to review key parts of their regulatory regime underlines the importance of constant innovation and improvement. Operators don’t stand still and neither can we.
Your own review of Marketing reminds me of the important work that the Commission carried out in relation to High Value Customers - often called VIPs – and our work with another UK regulator on Terms and Conditions. In both areas, we intervened when evidence was clear - that consumers were being exposed to unacceptable risk of harms or were being treated unfairly. I think both are rather good examples of how we have varied and adapted our approach to ensure we deliver the right outcomes so let me say a little more about each of these.
On HVCs/VIPs, a mixture of collaboration with industry, followed by our own consultation and regulatory changes has resulted in a complete overhaul of industry practice. Now, before any operator makes a customer a VIP they must:
- establish that spending is affordable and sustainable as part of the customer’s leisure spend
- assess whether there is evidence of gambling related harm, or heightened risk linked to vulnerability
- ensure the licensee has up to date evidence relating to identity, occupation and source of funds, and;
- continue to verify the information provided to them and conduct ongoing gambling harm checks on each individual to spot any signs of harm.
Even before these rules came into effect in late 2020, industry measures brought in as a result of Commission initiated work had led to the number of so-called VIPs dropping by 70%.
Regarding Terms and Conditions, the Commission carried out an expansive review alongside the Competition and Markets Authority of industry terms and conditions. The CMA is the regulator in the UK which regulates markets in the consumer interest and so has the relevant expertise in consumer legislation. This work found that terms and conditions in gambling were too often loaded too heavily in the operator’s interest, which resulted in unfairness for the consumer.
Working with the CMA, we were able, in effect, to establish what fairness looks like in the gambling context and so outline a standard of how the terms and conditions outlined by operators must be fair to their customers. To reinforce this, we took steps to make clear we would take strong enforcement action against any operator who let their customers down in this way. One learning from this work is that there is a need to be consistently vigilant and to continue to keep the pressure on. Whilst we saw a sizeable drop in unfair T&Cs for a number of years after the joint work with the CMA ended in 2018, we have recently started to see an uptick again and are now taking further action to remind some operators of their obligations in this space. This is an important issue which affects all gambling consumers and we will keep it under review.
Whilst the Gambling Act Review will no doubt have a big impact on our work going forward this year, there are a number of things we are already prioritising at the Commission. Both come back to driving up the standards that people can expect from licensed gambling firms.
First, our relentless drive for compliance continues. Our Compliance and Enforcement teams had a very busy 2022:
- 17 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.
2023 looks like it may continue the recent trend but from what we hear back from industry leaders, we think the message is starting to get through.
But we know if we want industry to do better for consumers, so must we. A big part of that is continually improving the data and the research we commission, collect and publish. Last year we successfully completed a Participation and Prevalence Methodology Pilot. The result that we are most interested in is that the pilot suggested the new methodology is sound and ready to be experimented with and then scaled up to become our new official statistic. We are now in the experimental phase and when we launch it fully, later this year, it will be surveying around twenty thousand people a year – one of the largest participation and prevalence surveys of its kind.
We are also committed to improving the evidence base more widely as well. And so, this March, for the first time we will hold a one-day Conference specifically designed to bring everyone 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 in Great Britain, as well as their communities.
Another critical priority for the Commission this year is to continue working with fellow regulators to deepen international collaboration. We see greater collaboration amongst all gambling regulators across the world, as the essential next step in tackling the challenges that the global gambling market pose for us all.
Around 50% of the operators licenced in Denmark are also in licenced in Great Britain. In a world where many of us have the same companies, operating at the same scale, offering the same products, why shouldn’t we share notes on how they are performing?
We already look to share best practice and learning from each other’s experiences but clearly this is an area we can all do more. At the Commission we want to have a meaningful conversation with you about how we can turn ideas like this into a reality. And we want to do that now.
Happily, the Gambling Commission and the DGA already have a strong working relationship that regularly delivers results for gambling consumers on both sides of the North Sea.
- Together we have collaborated on Joint IAGR Technical standards and CEN data standardisation work.
- You have supported us by sharing best practice on novel products and your annual games testing audit which we have since implemented.
- And we have been happy to share what we do on compliance assessments and our work licensing B2B operators.
The relationship between the GC and the DGA is strong, deep and vital. It is a clear example of how we want gambling regulators the world over to be able to collaborate and communicate. The quicker we can all find ways to work together in pursuit of fairer and safer gambling, the better for all of us, as the challenges we face will continue to become more complex. I know today can be part of that process.
10 years since Danish liberalisation is a major milestone. It hasn’t been easy. Speaking from the Commission’s experience, years 11 – 15 don’t get any easier either! The last 10 years have also seen rapid and constant innovation and competition in the global gambling sector. A key learning I think is that if we’re to do our jobs properly as regulators we need to embrace continual innovation and improvement as well.
And part of that has to be collaboration with each other. The more we share best practice, support each other in our work with multi-national operators and work towards higher standards for consumers across jurisdictions, the safer and fairer gambling will be for people everywhere.
Thank you for inviting me to speak today, I’m looking forward to your questions and I and the Commission look forward to working even more closely with the DGA for another 10 years.
Last updated: 11 January 2023
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