A gambling ombudsman
The UK government published its long-awaited review of the 2005 Gambling Act before Christmas, and operators will be preparing their submissions over the coming weeks against a backdrop of cancelled sporting events and closed shops. Amongst a flurry of largely anticipated regulatory proposals, one has elicited surprisingly little debate, but could alter the operating landscape in unexpected ways.
The creation of a gambling ombudsman, first mooted by former deputy Labour leader Tom Watson MP, is the proposed cure for a blind spot in consumer protections. The Gambling Commission’s statutory responsibilities extend only to the regulation of companies, and it has limited jurisdiction in which to resolve consumer complaints unless there has been a breach of licence conditions. In the absence of redress from the regulator or the operator in question, punters are faced with either funding their own appeal through the courts or taking their complaint to an independent ‘alternative dispute resolution’ provider (ADR) of which a number are already licenced by the Gambling Commission. These gambling ADRs resemble ombudsmen but are also limited in their authority, adjudicating on narrow contractual or transactional disputes based on evidence voluntarily supplied by the operator. They cannot requisition information and have no ability to consider the more subjective areas of misconduct that relate to an operator’s duty of care to a customer.
On paper then, an ombudsman appears to make sense, and even the Gambling Commission has shown its acquiescence. Many operators have also accepted that, of all the battles to be fought during the forthcoming review, an ombudsman is an easy trade compared to online stakes and prizes. It offers a tangible win for government and it’s an expedient way to neutralise some of the more incendiary customer complaints that are regularly trailed through the tabloid press.
But this sanguine view ignores some fundamental risks in applying a statutory ombudsman model in a leisure industry context.
The first is cost to the consumer. In the year 2000, the Financial Ombudsman Service (FOS) was established by statute with a budget of £23 million and some 450 employees. It aimed to resolve 70% of cases within six months and 95% within a year. But in its latest annual review the FOS revealed that its annual expenditure had ballooned to £276m, employees have risen ten-fold to 4,500 people and the cost per case sits at £920 against a starting budget of £650. In an exposé by The Guardian last year, it was also alleged that many consumers were waiting for up to two years for cases to be adjudicated and ten months to be even assessed.
Some of the above are no doubt attributable to specific issues in financial services such as PPI, but it’s a fact that the creation of an ombudsman in itself fuels a complaints culture, often driven by a claims industry that grows up in its shadow. This creates additional cost for operators in having to fund the ombudsman’s caseload, but more significantly in the need for more internal resource to manage those inquiries. At a time when companies may well be facing new levies to fund both the regulator, addiction treatment, education, and research, these costs will ultimately be borne by the consumer.
The second issue is the impact of an ombudsman on regulation itself. Unlike other sectors, there is no explicit duty of care between a bookie and their customer. Whilst the gambling review is setting out to resolve issues such as affordability tests and loyalty programmes, the risk is that an ombudsman becomes a back door to further regulatory change where the Gambling Commission has no statutory competence. Or that it cuts across other bodies, such as the Advertising Standards Authority, that also have a longstanding role in resolving consumer complaints.
The third issue is cultural. Ombudsmen exist to protect the consumer from the over-mighty power or indifference of big organisations. In times of low trust in government and public institutions, they are a tool of open government to enfranchise consumers and ensure the fair exchange of goods and services. But if the value exchange in gambling is less about the financial transaction than it is the entertainment, the risk is that a vast bureaucracy is born to manage what is, for the vast majority of players, a very small investment for an intangible return.
The tragedy for the gambling sector is that an ombudsman will likely become yet another power base from which its legitimacy will be attacked. A more effective and even accommodative complaints-handling process across the sector might have headed this off at the pass. But opposing it now will smack of an industry out of step with its commitments to customer care, despite an ombudsman having little place in an entertainment context.