The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits April 2013 Contents Contents Page number Introduction 3 Background information 4 Evidence of FOBT problem gambling 18 Responses to DCMS questions 38 Referencing 53 Appendices 58 2 The Campaign for Fairer Gambling: Triennial Review Submission Introduction This document is a consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits. This response is primarily related to B2 gaming machines in betting shops, which have been more commonly known as Fixed Odds Betting Terminals (FOBTs). The term FOBTs refers to the machines and is used throughout the document. The term “B2 content” refers to the non-B3 content on FOBTs throughout the document. The answers to selected questions in the Review can be found towards the end of the document. All document content, all identified reference links and all appendices are supporting evidence to the answers. Summary B2 content should be removed from FOBTs. This could result in the removal of the B2 machine classification in its entirety. Respondent details The respondent is the Campaign for Fairer Gambling[1], which also operates the Stop the FOBTs[2] Campaign. The Campaign is non-profit with no commercial benefit or motive. It was co-founded and co-funded by Derek Webb and Hannah O’Donnell, who have profited from gambling through the creation and marketing of gambling game content, related litigation proceeds and associated asset sales. They have now sold all house-advantage based gambling game content and have retired from that business. Their business entities Prime Table Games in the UK and the US retains the rights to PTG Poker, which is an improvement to card-room player(s) against player(s) poker. This is not being marketed and has never generated any revenue. Two retained Campaign consultants have also contributed to this response. Matt Zarb- Cousin became addicted to FOBTs at the age of 16. He appeared on a Dispatches TV programme explaining how he was allowed to gamble under-age in school uniform. Adrian Parkinson was a regional manager with Tote Sport responsible for the roll-out of the FOBTs. He witnessed first-hand that gamblers converting to FOBTs were becoming addicted. He appeared on a Panorama TV programme explaining that some shop staff were becoming addicted to FOBTs. This response has been co-ordinated by bcsAgency, who represent the Campaign. 3 Background information History of FOBTs Over 10 years ago there was a tax on betting shop turnover, which also applied to FOBT turnover. This tax was removed and a gross profit tax was introduced[3]. As part of that deal, bookmakers agreed to locate their telephone betting onshore rather than offshore[4]. The bookmakers have since generally reneged on that deal[5], thereby reducing their tax payments in the UK. Removing the betting duty on machines meant that games with lower house advantages could be introduced. Prior to this, machines in licensed betting shops were not generating substantial revenue. By putting roulette on the machines, they became an overnight success. Campaign Consultant Adrian Parkinson was responsible for the two Tote betting shops, Kidlington in Oxford and Addington in London, that were among the first dozen shops to test roulette on FOBTs. Each shop went from hundreds of pounds to tens of thousands pounds cash take on FOBTs within one week. The machines were called Fixed Odds Betting Terminals, or FOBTs. The odds were fixed at pre-set amounts (as opposed to fixed in the sense of rigged). They were considered betting terminals because the betting took place within the premises on terminals that were, crucially, linked to a server located outside the premises. If FOBTs were simply gaming machines with the software inside them they would have been in breach of the law. In 2002 the Gaming Board for Great Britain expressed concerns over the introduction on FOBTs, claiming that the machines were sophisticated tools, with no legal limits on prize money and could fuel the danger of addiction in the betting world. The introduction of casino-style games on FOBTs could have been interpreted as a covert attempt by bookmakers to introduce casino-style gaming into a bookmaking environment. Peter Dean, Chair of the Gaming Board for Great Britain told a leisure machine association convention: "Their proliferation is a breach of the spirit and intent of current legislation.There are special dangers associated with machines because of their potentially addictive characteristics." [Appendix A] In fact, the Gaming Board for Great Britain, the regulator at the time, filed litigation against William Hill related to FOBTs, but did not proceed with the case. To ensure they retained FOBTs, bookmakers argued that gambling was where the gambler was, in the shop, not at 4 the out-of-shop server. But they had taken an entirely opposite position regarding their remote (internet, online or mobile) gambling entities. These entities argued that gambling was at the server, not where the gambler was, and some had obtained “paid legal opinions” to support this position. This meant that these entities could justify doing business anywhere, regardless of the view taken by the relevant authority pertaining to its legality. So bookmakers took opposite legal positions to maximise their commercial opportunities and the Department for Culture, Media and Sport (DCMS) ignored this anomaly. The bookmakers agreed to draw up a Code of Conduct in order to avoid legal issues. Suppliers of FOBTs assisted the bookmakers and set up conditions that would have no impact on the profitability of FOBTs. The main conditions were to set a maximum stake of £100, a maximum prize of £500 and a maximum of four FOBTs per shop. Other conditions in the Code of Conduct included restricting the casino table game content to roulette only and not allowing credit or debit card transactions on FOBTs. However, these conditions were circumvented as blackjack and other casino table games were added and the ability to make a service counter deposit by credit or debit card for remote loading onto the machine was already planned. During the Code of Conduct prior to formal legalisation, FOBTs were “put on probation” according to DCMS[6]. But DCMS did not explain who the probationer was, or how the probation would be conducted. The so-called “probation” was vacuous and unsubstantiated, its purpose to espouse the pretence that adequate monitoring of FOBTs would take place. DCMS wanted to ensure the proliferation of gaming machines that had occurred overseas did not happen in Britain, so the Code of Conduct limited each shop to four FOBTs. But DCMS did not have to legalise FOBTs, and could have refused betting licenses to bookmakers on that basis. Following the final implementation of the 2005 Gambling Act in 2007, FOBTs had become known as B2 machines. The software could now be contained within the machine itself, so the betting terminals had evolved into gaming machines. In 2011, the DCMS select committee recommended lifting the cap of four FOBTs per betting shop. Despite visiting just one betting shop during their inquiry, the committee visited both Australia and Macao. One committee member was Philip Davies MP, who has since been 5 the subject of an inquiry carried out by the Parliamentary Commissioner for Standards related in part to non-declaration of a financial benefit from Ladbrokes when questioning the CEO of Ladbrokes in that committee hearing[7]. The select committee had two special advisors. One of them, Peter Collins, was an academic advocate of super-casinos. His Salford research facility receives annual funding from bookmakers. The other special advisor was Steven Donahue, son of Lord Donahue, who with Philip Davies MP is a member of the All Party Betting and Gaming Group. The government sensibly rejected the committee’s proposal to remove the restriction of four FOBTs per betting shop. Another significant aspect of the approval of FOBTs was the research commissioned by the bookmakers’ trade association, the Association of British Bookmakers (ABB). The research was independently and professionally conducted and independently and professionally peer- reviewed [Appendix B]. However, the peer-reviewers noticed a discrepancy in the weighting, which was subsequently questioned. The survey in the betting shop had been conducted on the busiest days. Whilst this might make sense from a time and cost perspective, it meant the research was skewed. Simply, on Saturday, premium racing and sports attract the casual gamblers who bet once a week on those activities. FOBT gamblers and core over the counter gamblers are just as likely to be in a betting shop on any other day. Therefore, the research was over-representative of “over the counter” gamblers and under- representative of FOBTs gamblers, the very group that the survey was designed to be researching. Therefore, the research commissioned by the ABB was flawed. The ABB is now asking DCMS to maintain the status quo on FOBTs. But the reality is DCMS should never have allowed this status quo in the first place. So the status quo should not be the recommended government policy. 6 Actions of the ABB against the Campaign The ABB has made representations to the DCMS in the pre-consultation stage and will certainly do so in the Triennial Review itself. But these representations must be put into some context. It should always be remembered that the ABB is a trade organisation acting solely in the commercial interests of its members. Firstly, the ABB has written to MPs and national newspaper editors criticising the Campaign. One of their assertions is to state or imply that the Campaign has some form of commercial benefit, interest or motive.