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Consultation response

Changes to the licence conditions and codes of practice on High Value Customers

Response to consultation on strengthening controls on how licensees incentivise high spending customers.

  1. Contents
  2. 3 - Changes to social responsibility code provision 5.1.1 – Rewards and bonuses

3 - Changes to social responsibility code provision 5.1.1 – Rewards and bonuses

We proposed the following addition to existing social responsibility code provision 5.1.1 – Rewards and bonuses:

Proposed wording

Social responsibility code provision 5.1.1
Rewards and bonuses – SR code

All licences (including ancillary remote licences), except gaming machine technical and gambling software licences

  1. If a licensee makes available incentives or reward schemes for customers designated by the licensee as ‘high value’, VIP or equivalent they must be offered in a manner which is consistent with the licensing objectives. Licensees must take into account the Commission’s guidance on high value customer incentives.

Consultation questions

  1. Do you agree with the proposed new wording of the social responsibility code 5.1.1?

  2. Do you agree that concerns regarding the management of HVCs can be addressed with the proposed additions to social responsibility code 5.1.1 and associated guidance?

  3. Do you agree with the proposed use of guidance to help explain the new LCCP requirements?

Respondents views

There was broad support for the proposed changes to SR 5.1.1 (2). Overall, respondents considered the wording to be clear whilst, critically, reinforcing the need for licensees to act in accordance with the licence objectives when managing High Value Customers.

Some respondents sought further clarification on whether High Value Customers included those individuals that received lower value incentives such as a £5 cash match.

It was suggested that, given the broad scope of SR 5.1.1, the accompanying guidance could draw clearer distinctions between different environments (e.g. online and gambling premises) and sectors (e.g. high-end casinos, arcade and bingo regulars), particularly those land-based sectors where HVC schemes are less prominent.

In a similar vein, it was suggested that a distinction be made between high value incentives and high value customers as it was possible for certain low cost products, such as customer free prize draws, to offer high value prizes, such as racecourse hospitality.

It was proposed that the SR code provision 5.1.1 clarify that the guidance be applied in instances where a licensee makes available enhanced incentives or reward schemes for customers designated by the licensee as ‘high value’ by virtue of their spend or anticipated spend.

An alternative approach could be to focus on rewards, bonuses, benefits and invitations to hospitality which are over and above routine promotional activities to ensure a clear distinction with low level, ad hoc incentives.

Conversely, it was suggested that licensees might misapply the guidance and offer enhanced incentives to non-HVC members during periods of high-spend, especially where such individuals had not experienced significant losses.

It was suggested that SR code provision 5.1.1 explicitly require licensees not to harm the customer, and that this be used as the threshold for automatic sanctions at an order of magnitude greater than the HVC losses.

Others responded positively to the recognition that HVC schemes and customers were likely to vary between licensees and considered the guidance provided a clear account of our expectations.

Some commented that the guidance provided practical advice on implementing the revised code provision and, if implemented effectively, would help raise standards, improve player protection, and facilitate the detection of criminal activity.

Respondents noted our commitment to consult publicly for substantive changes to the guidance and highlighted the importance of allowing stakeholders to properly consider and comment on minor amendments.

Respondents felt that the use of must and should within the SR code and guidance respectively, created a level of ambiguity which some licensees could use… to continue potentially harmful practises.

Alternative wording for the code provision was proposed to the effect of:

Licensees must be able to demonstrate the extent to which they have put the Commission’s guidance on High Value Customers into practice, how they have done so and, where appropriate, the reasons why specific measures have not been implemented.

A similar observation was made in relation to the term we expect, which it was proposed created further ambiguity as to the status of the guidance. We have summarised our response to the concerns related to the status of the guidance in the other issues section of this response.

Whilst not proposed during the consultation, several responses expressed concern that a blanket ban on incentives would negatively affect both recreational and professional poker players, whose margins often rely on ‘high volume’ rewards.

Respondents pointed to key differences between poker and other online games and suggested that the former be exempt from an outright ban.

Our position

It would not be practical to provide a one size fits all definition as to what constitutes an HVC.

However, we can confirm that the guidance applies to those schemes that offer tailored or personalised incentives linked to high value spend and/or frequency of play. This excludes ad hoc, non-personalised bonus offers that are generally made available to large numbers of consumers.

High value prizes linked to promotions such as customer free prize draws are generally not tailored towards a specific individual consumer and would not therefore be in scope.

Whilst we note that HVC schemes appear more prominently in certain sectors, it would not be appropriate to exempt specific licence types given potential for such schemes to be adopted more widely at any given time.

We consider our description of tailored or personalised incentives to sufficiently capture the type of schemes and consumers that are in scope of the revised SR code provision. We noted the proposal to distinguish HVC incentives from routine promotional activities but concluded that this distinction is clearly made in reference to tailored or personalised incentives linked to high value spend and/or frequency of play.

Similarly, this description applies to instances in which licensees offer enhanced incentives to customers during periods of high spend, on the basis that such offers will be specifically linked to high spend and/or frequency and tailored to a specific customer at a specific time. The individual will be offered such incentives on account of being deemed a VIP, High Value Customer or equivalent.

It is important to note that SR code 5.1.1 applies to both rewards schemes and incentives. This guidance is not intended to cover general customer reward programmes.

We will be vigilant where licensees seek to circumvent the intention of this guidance and where necessary that will prompt further prescriptive requirements for specific licensees.

The requirement for licensees to reduce the risk of gambling related harm is implicit in the need for licensees to offer incentive or reward schemes in a manner which is consistent with the licensing objectives.

Failure to meet this requirement will result in regulatory action, the severity of which will be determined by the seriousness and scale of failings on the part of the licensee.

We consider the wording of the guidance to be consistent with an outcome-based approach and avoids a prescriptive ‘one size fits all’ regulatory requirement. The effectiveness of this approach relies upon licensees taking responsibility for ensuring they operate their businesses to comply with both the letter and the spirit of the requirement.

Licensees are on notice that where this approach fails to deliver the outcomes required, we will propose more prescriptive requirements either for specific licensees or through additional general licence conditions.

We note the concern expressed by poker players on the impact that a blanket ban on incentives could have.

We have not proposed a blanket ban on incentives, but we do expect amended SR code provision to be applied in a consistent manner to all players deemed eligible for high value reward schemes or incentives, irrespective of the gambling activity they are participating in.

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HVC Response - 2 - Introduction
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HVC Response 4 - Know your customer - assessing and mitigating risk