New data disclosure requirements

Posted on 15 August 2017. Source: Online Gambling Lawyer

New data disclosure requirements

The Gambling Commission has published (in two parts) its conclusions from its "Regulatory data" consultation, confirming plans to change certain requirements for the disclosure of data via regulatory returns.

What changes will be made?

Responses set out in Part 1 (published 23 February 2017)

In connection with certain land-based operating licence fee categories being calculated by reference to gross gambling yield (GGY) rather than number or size of premises, the Commission has identified certain additional data requirements, including:

  1. GGY derived from prize gaming in reliance on Adult Gaming Centre and Family Entertainment Centre operating licences;
  2. Separate regulatory returns for remote and non-remote Gaming Machine and Technical (GM&T) operating licences (as is the case for all other licence types); and
  3. Within those returns, itemised GGY figures for maintenance of, and the sales of certain component parts for, gaming machines.

The above changes came into effect in April 2017.

Responses set out in Part 2 (published 18 May 2017)
  1. Additional data will be collected via regulatory returns in the following circumstances: Where machines allow multiple categories of play, returns will be require GGY split by category.
    • Operators of lotteries will be required to confirm whether each lottery is conducted as part of wider branded lottery schemes ('umbrella lotteries').
    • Non-remote bingo returns will require electronic bingo terminal (EBT) revenues to be split between gaming machine style content and bingo games.
    • Betting operators will have to disclose numbers of self-service betting terminals (SSBTs) and GGY derived from them.
    • Relevant operators (including those in the remote sector) will be required to report on the number of time/monetary limits voluntarily set by customers.
    • Betting operators will be required to collect data on GGY relating to in-play betting and to report such GGY split between "football" or "other" in-play betting.
    • There will be a new requirement to disclose GGY relating to betting on eSports, which was previously reported under the "Other" betting category.
  2. Meanwhile, regulatory return forms will be simplified in the following ways:
    • Submissions for numbers of gaming machines in each category will be combined.
    • The list of draw types for non-remote society lotteries (and ELM operating licences) will be reduced.
    • Regulatory returns data on underage gambling will focus on those who gambled and were subsequently unable to verify their age. Data on those who entered the premises and were unable to verify their age will no longer be included in the return.
    • Questions regarding suspicious activity reports (SARs) will be removed from regulatory returns: SARs will continue to be reportable as key events.
    • Similarly, regulatory returns will no longer include trading and domain name data (changes will still need to be reported as key events).
    • The voluntarily field requesting customer demographics will be deleted. o The 'remote events' section will be removed, because the relevant data is now collected through key events.
    • The requirement to disclose RTP faults in regulatory returns will also be deleted because RTP faults will become key events.
  3. The remote casino, betting and bingo (RCBB) form will be amended to standardise data reporting requirements across remote and non-remote forms:
    • In certain sections of the RCBB form details of turnover and GGY will now be required (rather than turnover and pay-out, as now).
    • The RCBB list of casino products will be amended to reflect (broadly) the list of games shown on the non-remote casino form (excluding certain games less popular in remote gambling).
  4. Notably, Condition 15.2.2 of the Licence Conditions and Codes of Practice (LCCP) will also be amended to require operators to report group revenue profile by jurisdiction.

The changes set out in Part 2 of the response will come into effect in April 2018 (save in respect of the amendments to lottery returns, which may take place earlier).

What are the implications of the changes?

A number of the amendments will require some additional investment and work to ensure that the relevant data is captured in the required manner. The general direction of travel is for regulators to require greater levels of data, and in that context it is pleasing to note the removal of a number of duplicative data fields.

However, the most notable and potentially onerous change is the proposed amendment to LCCP 15.2.2, which will mean that licensees will, from April 2018, have to notify the Commission of significant or sustained changes to the jurisdictional revenue profile of their group (taken as a whole).

At present, B2C operators have to tell the Commission about any market from which they (the licensed operator) receive 3% or more of their total revenue (or, in the case of smaller operators, where the revenue is more than 10% of their total) as well as any markets which they actively target. In other words, information requirements (both at the application stage and through regulatory returns) do not currently extend to revenues received elsewhere in the group of companies.

Meanwhile, B2B operators are required to indicate what proportion of their revenues are derived from (a) GB-licensed operators, (b) operators licensed in non-GB point of consumption jurisdictions, and (c) from other operators where the B2B licensee may be unsure of the location of the end-user.  Again, the requirements do not extend to revenues earned elsewhere in the licensee's group.

The only exception to this is LCCP 15.2.2, which currently requires licensees to notify the Commission on their becoming aware that a group company that is not a licensee is advertising remote gambling facilities to those residing in a jurisdiction in or to which it has not previously advertised. However, if the group company has always advertised to such jurisdiction (or indeed, has done so since before the LCCP was amended to incorporate LCCP 15.2.2 in May 2015) the UK licensee would appear to be under no obligation to disclose such operations to the Commission.

This gap in the data available to the Commission regarding the activities of group companies explains why the Commission now proposes to amend LCCP 15.2.2.  From April 2018 LCCP 15.2.2 will require notification to be made when the 3%/10% jurisdiction threshold is passed (on a sustained or meaningful basis) for the group taken as a whole.   The actual wording of the revised licence condition is yet to be published.

Where a group of companies includes both B2B and B2C operators, the Commission expects those revenues to be aggregated, and we understand that estimates will have to be used in respect of B2B revenues where the licensee cannot be certain of the location of the end-user.

When the current 3%/10% threshold disclosure requirements were introduced in 2014, the Commission cited concerns about probity and financial stability. The Commission now says that collection of group data is required because revenues from grey markets elsewhere in a group might give UK-facing operators a "commercial advantage in Great Britain, for example by funding marketing spend in Great Britain".

We find this reason surprising, because the commonly accepted definition of a "grey" market is one in which the legality of the activity is ambiguous or unclear. This generally means not only that the jurisdiction has not legislated for remote gambling, but also that the existing law does not clearly prohibit the relevant activity (or does not apply outside of the jurisdiction).  It is therefore common for operators to choose to operate in "grey" markets and they generally do so on the basis of a reasonably coherent legal rationale (which is what the Commission has previously said it expects operators to be able to show).

So the Commission's chosen language now begs the question: Does the Commission view cross-subsidisation from "grey" (as opposed to "black") markets either illegitimate or otherwise unfair?

We expect that the Commission's approach to "other markets" will actually remain broadly the same (and that a reasonably coherent legal rationale will still be sufficient) but it will be interesting to see the exact wording of the new licence condition and any guidance provided in respect of it.  It will also be interesting to see what (if anything) the Commission will do with the new data. Certainly, operators will need to consider very carefully the disclosures they will be required to make regarding group revenue profile. 

While the Commission describes it as a "slight change", this extension to the disclosure requirements could be significant for many and will certainly bring greater scrutiny on unregulated activities.

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