Bingo Primary Gambling Activity - Briefing

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1 Item 4 GCP(12)48 Bingo Primary Gambling Activity - Briefing For Board approval For Board briefing For Board steer For Board information Prepared by: Date: 13 September 2012

2 Executive summary 1. The Gambling Commission (the Commission) is concerned that operators converting to the bingo sector may result in a number of businesses that are licensed as bingo, but where the offer of bingo at a premises level is not sufficient to meet the requirements of Primary Gambling Activity (PGA). 2. The Commission will address this by first clarifying what we consider bingo to be, taking into account the variety of bingo offers available from operators; developing a line on what is a sufficient offer of bingo; and tackling issues related to both PGA and general compliance with existing operators whilst ensuring that new entrants to the bingo sector are made aware of the requirements. 3. Commissioners will also receive a presentation at the September Board meeting, which will provide examples of the types of premises and products outlined below, in order to help to describe further what this paper discusses. Alongside that, and as part of a broader programme of visits, Commissioners will have the chance to visit some of the business types described below in the course of the next quarter. Background 4. The Gambling Act 2005 (the Act) and associated regulations place restrictions on the types of businesses that are able to offer gaming machines. The intention within the Act was to remove gaming machines from all but specified licensed premises, premises that hold specific permits and those that fall within an exemption. 5. Section 150 of the Act provides for five different kinds of premises licences. Premises licences can authorise the provision of facilities on: casino premises; bingo premises; betting premises; adult gaming centres; and family entertainment centres. Only the latter two licences are designed for circumstances where machines are the only, or principal, form of gambling envisaged to take place on the premises. 6. In 2009, the Commission published a supplement to the Licence Conditions and Code of Practice (LCCP), which contained additional conditions and codes of practice that required operators to ensure that the PGA offered in gambling premises was that authorised by the licence. This was consolidated into the full LCCP in December 2011, becoming licence condition 16 and code of practice 9. Appendix 1 provides an extract from the Primary gambling activity responses document; this explains the Commission s views on PGA Licence condition 16 and code of practice 9 set out the requirements for PGA in relation to bingo operators. The condition states that: Gaming machines may be made available for use in licensed bingo premises only on those days when sufficient facilities for playing bingo are also available for use. In cases where bingo is exclusively offered by means of electronic bingo terminals or bingo machines, there must be more individual player positions 1 The Board paper Primary gambling activity background information, February 2012 (GCP(12)11) provides further background of the Commission s work to date with regard to PGA. Page 2 of 7

3 made available for bingo than there are gaming machines made available for use. 8. The code of practice provides further criteria that may be used to demonstrate whether the requirements around PGA have been met, including factors such as the ratio of space available, the extent and frequency at which the activity is offered, the promotion of the activity and so on (the full condition is reproduced at Appendix 2 for reference). A number of new entrants to the bingo sector have prompted concerns that the types of premises and models of gambling activity offered may not provide an offer of bingo sufficient to satisfy us that the primary activity offered is that authorised by the licence. 9. In March 2012, the Board were presented with a paper providing an insight on what sufficient facilities is likely to look like and why it is important to consider in the context of PGA. This paper is attached at Appendix The trend over the past couple of years has been the move to bingo by operators who have traditionally had Adult Gaming Centre (AGC) premises. Rather than opening new premises operators have tended to convert their existing AGC premises into bingo premises through either surrendering the AGC licence and applying for a bingo licence or (more rarely) by splitting existing premises, so that an AGC and bingo premises are housed within the same building. These premises are often referred to as high street or micro bingo premises [Exempt information under section 43 of the Freedom of Information Act]. 11. Operators involved reported that the move to bingo was driven by a number of factors. These included: An opportunity to fill the perceived gap in the market created when traditional bingo businesses moved away from the high street to bigger venues that tend to be sited on retail parks out of town. The ability to offer a better bingo product, while retaining their machine entitlements (see below). In AGCs bingo can be offered but only within the rules for prize gaming, which, alongside other restrictions, limit the amount that can be staked or won and prevent operators from offering games linked across different premises with progressive jackpots More recently other leisure businesses have also started to consider the possibilities a bingo licence offers. [Exempt information under section 43 of the Freedom of Information Act]. 13. Alongside the introduction of this new type of bingo premises, there have been a number of product innovations developed for and targeted specifically at the micro bingo market. 2 Section 290 provides that any type of prize gaming may be provided in adult gaming centres. Section 293 sets out four conditions that AGCs (amongst others) must comply with to lawfully off prize gaming. These are: the limits on participation fees, as set out in regulations (SI no The Gambling Act 2005 (Limits on prize Gaming) Regulations 2007), must be complied with all chances to participate in the gaming must be allocated on the premises on which the gaming is taking place and on one day; the game must be played and completed on the day the chances are allocated; and the result of the game must be made public in the premises on the day that it is played the prize for which the game is played must not exceed the amount set out in regulations (if a money prize), or the prescribed value (if non-monetary prize) participation in the gaming must not entitle the player to take part in any other gambling. Page 3 of 7

4 Issues Gaming machine entitlements 14. Our initial concern, given our experience with movement to the betting sector, was that these conversions were simply a mechanism to enable operators to exploit the differences in machine entitlements, specifically access to category B gaming machines (restricted to Category B3 and B4, excluding B3A), rather than a move to create genuine bingo businesses. The concern was that operators would develop premises with a superficial or limited bingo offer, which would not meet the requirements of licence condition 16, that could serve alcohol (see paragraph 17) and therefore would not fit within the intentions of the Act. When we first started to see these conversions bingo premises were allowed to have up to eight category B machines, while AGCs could have up to four. 15. In July 2011, changes to the category B allowances were introduced, which levelled entitlements for AGCs and bingo premises. Despite this we continued to see conversions. Even before that the Commission had noted that in most cases the premises converted did not result in an increased machine entitlement as often this involved the de-splitting of former AGC premises to form a single bingo premises. It appears that there is a general feeling within the industry that a move to become a bingo operator provides greater commercial opportunity than remaining solely in the AGC sector, and that this rather than greater access to gaming machines is a key motivation. 16. Our view is that the level of risk to PGA in these types of premises (although remaining) is somewhat different to that seen in the betting sector, where operators only gain access to a category B2 gaming machines through obtaining a betting operator and premises licence. There is a currently broad public discussion about related issues such as the proliferation of betting premises on the high street. This type of public discussion is unlikely to occur in relation to micro bingo premises. With AGC conversions, operators gain no advantage in terms of machine access or numbers; however it does enable them to continue to operate a very similar business, with an additional gambling function. Our concern here is that operators who move to bingo implement the correct balance of bingo versus machine offering in order to ensure that the requirements for bingo PGA are adhered to. This differs when considering the move by other leisure businesses to bingo [Exempt information under section 43 of the Freedom of Information Act]. In both cases the move to hold a bingo operating and premises licence (as opposed to simply offering bingo under the rules for pubs and clubs 3 ) will enable them to offer more machines, both in terms of category and number than other leisure premises without an operating licence. [Exempt information under section 43 of the Freedom of Information Act]. 3 Bingo is a class of equal chance gaming permitted on alcohol-licensed premises, and in clubs and miners welfare institutes, under the allowances for exempt gaming in Part 12 of the Act. There are regulations setting control on this from of gaming to ensure that it remains a low stakes and prizes activity (SI No. 1940; the Gambling Act 2005 (exempt Gaming in Alcohol-Licensed Premises) regulations 2007 and SI No.1944; The Gambling Act 2005 (Exempt Gaming in Clubs) Regulations 2007 In addition, new rules were laid down in the Act about the playing of bingo specifically in alcohol-licensed premises, clubs and miners welfare institutes (also within Part 12). Where the level of bingo played in these premises reaches a certain threshold (more than 2,000 in a seven day period in either money taken of prizes awarded), it will no longer be authorised by these rules and a bingo operating licence will have to be obtained from the Commission for future bingo games. The aim of these provisions is to prevent bingo becoming a predominant commercial activity on such non-gambling premises Page 4 of 7

5 Alcohol licences 17. An important distinction between what is permitted in bingo clubs and what is permitted in AGCs is that the former can be licensed for alcohol and the latter cannot. The PGA requirements are important in maintaining the intended difference. Alongside that, the default conditions attached to bingo premises licences, which set out the times at which gambling facilities can be made available, allow gaming machines to be offered outside of the hours that bingo can be. 4 Our concern is that extended opening hours in converted premises, which do not provide a sufficient offer of bingo could result in the establishment of premises that are essentially all-night AGCs that are able to sell alcohol. 18. For other leisure businesses, the move to bingo has the advantage of retaining their alcohol licence entitlement for the whole of their premises. Alternative options, such as adding an AGC to their club or pub premises, would give them greater access to gaming machines, but would limit the areas where alcohol could be served and consumed. Novel businesses/fair and open 19. Premises converted from AGC to bingo tend to vary greatly from the traditional bingo premises. Most conversions are achieved by the addition of a bingo product, the adaptation of an existing bingo offer that had previously offered bingo as prize gaming, or both. Generally, little or no layout or construction changes are made to the premises and there are no distinct areas where customers can play bingo. From a consumers perspective it is often difficult to tell that the premises has changed from a machines focussed AGC to a bingo premises. 20. So far, the conversions (and planned conversions) from the broader leisure sector are also unique in the bingo sector. Although normally the entire premises is subject to the bingo premises licence, and bingo can be played throughout the premises, the layout and other activities previously carried out also remain. This means that despite the premises being licensed gambling premises, often the majority of their business is linked to the other activities available. 21. As well as raising issues related to PGA, this could cause concern under the fair and open licensing objective. In both types of premises we need to ensure that the operator makes it clear to their customers the types of premises they are entering. 22. At present, the rate of conversion from AGC to bingo has slowed, with at least one of the larger operators reporting that they will be returning their converted premises back to AGCs in the next quarter. This is because the commercial advantage they had perceived with the move to bingo was not realised in practice. 23. We currently have two leisure conversions. One holds category C licence and is currently operating 15 premises. Their licence entitles them to operate up to 50 premises. The other has applied for two category A licences, which would entitle them to run up to four premises on each licence. They are planning an initial pilot of four premises (two under each licence). Depending on the success of these pilots we may see more applications from businesses with this sort of background and/or rapid expansion of those that we have already licensed. For example, the latter of the two 4 The default bingo premises conditions set out that bingo facilities in bingo premises may not be offered between the hours of midnight and 9am. However there are no restrictions on access to gaming machines in bingo premises. Page 5 of 7

6 businesses mentioned above has 1400 premises of the types they are converting in the pilot that is ten times the number of our largest bingo operator. Bingo definition 24. In contrast with all other licensed forms of gambling, bingo is not defined in the Act. The development of new bingo products, which are very different from traditional live bingo and which have been attractive to new entrants to the sector, has given rise to concern about whether they are indeed bingo or whether they may be illegal lotteries, betting or casino gaming. 25. The question of what constitutes bingo is important when considering PGA in bingo. Unlike betting, bingo is not required to be constantly available in order for gaming machines to be offered, but the bingo product must be legal and the offer and the uptake must be sufficient. 26. As an example, a product called [Exempt information under section 43 of the Freedom of Information Act] that was developed by a group of leading AGC operators, is being used in a number of converted AGCs and is the product that [Exempt information under section 43 of the Freedom of Information Act] has chosen as their sole bingo offering. Some of the games offered via [Exempt information under section 43 of the Freedom of Information Act] appear to be lotteries when examined against the definition of the Act. The lack of participation, where customers can scan a ticket within a set number of days, is one aspect of the product that is being considered. If it were decided that such activities were not bingo, these operators would be in breach of the PGA conditions and would be offering a gambling activity not permitted by their licence. General compliance 27. Experience with conversions to date has indicated that alongside PGA concerns, there are a number of general compliance issues. This applies both to the leisure businesses who have very limited experience of gambling regulation and to those who, although experienced in the regulations associated with an AGC business, have not dealt with bingo regulation previously and are therefore not successfully implementing policies, procedures and training to accommodate the differences in the requirements. These include the requirements for personal management licences, access by children and young people, and the technical requirements that apply to different forms of bingo. Actions to date/next steps 28. We agreed that we needed to formalise the Commission view on best and worst practice in relation to bingo PGA. In order to do that we have first drawn up an advice note, this provides the Commission s view on where the boundary between bingo and other forms of gambling lies. 29. The draft advice note What constitutes bingo is currently being tested with industry stakeholders, prior to being presented for Commissioner input/sign off at the October Board meeting. The draft document is included at Appendix 4 to provide Commissioners with a view of the direction of travel in advance of that. The advice note is scheduled to be published at the end of October Page 6 of 7

7 30. Once the advice note is finalised, the Commission will decide whether it is necessary and appropriate to produce a set of indicators (similar to those issued for the betting industry), which further clarify the PGA requirements set out in the licence conditions and codes of practice, or whether the advice note, taken alongside those requirements is sufficient. We will also consider whether changes to the conditions and codes themselves may be a more effective option. 31. The licensing and compliance teams have been monitoring applications (both operator and premises) and supported by the sector team have been providing information regarding PGA and the additional/differing requirements. Compliance managers have also been supporting licensing authorities, as and when applications are received. The Commission s Local Authority Liaison Unit, working with the bingo PGA project group, have also provided case specific information to a number of licensing authorities as required. 32. Where we have identified issues with existing operators we are taking action to ensure that they become compliant. We have identified a single point of contact to ensure consistent messages and have been requiring the submission of compliance plans and more regular information in some cases. Equally where issues have been identified with new bingo products we have taken steps to address these. 33. As set out above, to date our broad approach has been to educate new applicants as to the requirements attached to being a bingo operator, drawing particular attention to PGA. Over the next quarter we will be carrying out a review of the regulatory returns and compliance assessment data we hold on these types of businesses in order to identify any particular issues. This is likely to result in some thematic programmes of work across a range of operators, and specific interaction with individual operators. Although we are keen to identify risks to PGA, we will not be looking at that data in isolation. Instead we will use all of the data in order to ensure that we can identify and seek to address any risk that has appeared due to the introduction of these new forms of bingo business. Page 7 of 7

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