Oireachtas Joint and Select Committees
Wednesday, 2 October 2013
Joint Oireachtas Committee on Justice, Defence and Equality
Gambling Control Bill: Discussion
The committee will now discuss the heads of the gambling control Bill. We are joined by Mr. David Hickson, director of the Gaming and Leisure Association of Ireland; Ms Catherine Colloms, director of corporate affairs and Mr. David Johnston, group general counsel, Paddy Power plc; Ms Susannah Gill, head of projects and policy, Betfair; Ms Sue Rossiter, director of projects and policy, Remote Gambling Association; Mr. Don Bird, director, Mr. Chris Piper, director, Association of Irish Showmans Guild; Ms Sharon Byrne, chairperson, Mr. Joe Lewins, vice chairman, Irish Bookmakers Association; Mr. Barry Quinn and Mr. Hugh Boyle, officials from the Department of Justice and Equality.
Before we begin, I draw the attention of witnesses to the situation on privilege. They should note they are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that where possible they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.
Members should also be aware that under the salient rulings of the Chair, they should not comment on, criticise nor make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.
I call on Mr. David Hickson, the Gaming and Leisure Association of Ireland, to make his opening statement.
Mr. David Hickson:
I thank the committee for the invitation to outline the Gaming and Leisure Association of Ireland’s recommendations and observations on the heads of the gambling control Bill.
The Gaming and Leisure Association of Ireland is a trade association made up of nine private member gaming clubs and online operators. Our members have all signed up to a voluntary code of practice, maintain the best available consumer protection standards and work on an ongoing and positive basis with anti-money laundering authorities, problem gambling experts and the Garda Síochána. Our members enforce strict age verification mechanisms, undertake customer due diligence and player tracking. Our staff are trained to implement responsible gambling policies and identify problem gambling, as well as to offer self-help information to customers when necessary.
Private member card clubs are deemed designated bodies under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. As such, they are obliged to register with the anti-money laundering unit in the Department of Justice and Equality and must appoint a money laundering reporting officer. The association has developed its own responsible gambling guidelines and literature which shows our commitment to providing our casino services in our communities in a responsible and sustainable manner. I would be happy to circulate this to the committee if it believes it would be helpful to its work.
For the past several years the association has worked with the Government to achieve and implement a workable regulatory regime for our sector. Existing legislation is not fit for purpose and major regulatory gaps exist. Given that gambling services can now be accessed on a 24-7 basis via the Internet on computers, tablets and smart phones, we believe prohibition as a regulatory tool is no longer tenable.
Accordingly, there is a clear need for a fully regulated gambling sector in Ireland and we welcome the parameters around which the proposed legislation is seeking to structure our industry. The legislation before us has the potential to put in place a strong legal framework and, with the right adjustments, will allow for responsible growth in the form of jobs and Exchequer contributions, as well as curtail criminal activity in the sector and protect the most vulnerable from the risks associated with gambling. With a well regulated and sustainable operating environment in place, we believe there is the potential to create a further 500 jobs in the casino industry over a short period; the possibility of generating heretofore untapped tourism streams; and the opportunity to provide gambling in a safe, secure and sophisticated environment. Based on our working knowledge of the industry and drawing on the experience of other regulated jurisdictions, we would like to make the following recommendations. I will then invite questions about both the current sector and its future potential.
A transitional arrangement must be put in place for existing private member gaming clubs so as to allow them to continue to operate and plan for future operations before, during and after the legislation and licensing process are put in place. We welcome the proposed creation of the Office for Gambling Control Ireland, OGCI, but recommend that this regulator be unencumbered by political interference or the appearance of it. Accordingly, "sole authority for the licensing of gambling" and "exclusive authority to grant, renew, revoke and revise any licence" should rest with a regulator with an expertise in the industry rather than the Minister of the day. This regulator must also be supported by adequate and effective enforcement mechanisms that will underpin the legislation from day one.
As profit margins in the casino sector are far lower than many assume, the proposed duration of a casino licence of ten years needs to be lengthened to 15 years so as to enable operators to secure a return on the initial investment required to establish a casino. There is a very modest limit proposed on gaming machines in casinos - 15 gaming tables and 25 machines. Currently, there are approximately 5,600 gaming machines in 57 licensed gaming arcades around the country, with approximately an additional 20,000 in unlicensed venues. Gaming machines are popular, but to make them commercially viable, a ratio of 2:1 will limit operators to higher stakes machines. A higher ratio of 5:1 would encourage operators to provide lower stakes machines also. Therefore, the multiplier regarding the number of gaming machines permitted in a licensed casino should be increased from two to five. We estimate that such an increase would still ensure less than 1% of the gaming machine population post-regulation would be housed in licensed casino venues.
An appropriate taxation level for all forms of gambling is a key component of the success of this regulation in order to prevent the proliferation of black market operators and provide business continuity for those of us operating compliant and regulated clubs. Equally, a taxation structure is required to facilitate the establishment of smaller venues in less populated areas.
All gambling services distribution methods - online or offline, casino, slot machines or sports betting - must be treated in an equitable manner with respect to regulation, licensing conditions and fees, taxation, player protection and supervision. The proposed restriction on opening hours for casinos must be amended in recognition of the fact that land-based casino operators compete directly with their 24/7 online competitors. We welcome the provision for alcohol licences in casinos but recommend that the same restrictions also apply to other gambling service providers. Rules applying to advertising and gambling should apply to all sectors equally. Remote gambling should be established in a manner that incentivises online operators to establish in Ireland, thereby creating a "hub" similar to that in Malta and the Isle of Man and potentially creating up to 5,000 jobs.
The GLAI is very grateful for the opportunity to appear before the committee and for its time in considering the points we have made. We look forward to working with it and the Government in the coming months and years to implement workable, long-term legislation to regulate an industry that has long been in existence in this country and crying out for sensible reform.
Mr. David Johnston:
I am the group general counsel of Paddy Power plc and joined by my colleague, Ms Catherine Colloms, our director of corporate affairs. We thank the joint committee for the invitation to attend.
Paddy Power is one of the world's best known sports betting and gaming brands. We have our headquarters in Clonskeagh, Dublin and are listed on both the Irish and London Stock Exchange. We employ over 4,100 people globally, with 2,338 employees currently based in Ireland, and contribute €70 million per annum in taxes to the Exchequer. We hold gambling licences in Ireland, Northern Ireland, Great Britain, Italy, the Isle of Man, Australia, British Columbia and Nevada. This affords us what we consider a unique position in an Irish context in our knowledge and understanding of regulatory regimes and gambling regulation worldwide.
Paddy Power welcomes the publication of the general scheme of the gambling control Bill 2013 as a first step to creating a modern, regulated environment for gambling in Ireland. We support the bulk of the provisions of the general scheme, although there are some areas we believe could benefit from further clarity in any future draft legislation. We welcome the proposal to establish the Office for Gambling Control Ireland, OGCI. We believe an empowered and pragmatic regulator is essential for the growth of a modern and safe gambling industry in Ireland. We agree with the principle that flexibility and technology neutrality will be key elements of any successful regulated environment. In that context, we believe the legislation needs to avoid being overly prescriptive or granular and, therefore, unable to adapt to the fast-moving pace of change in the gambling industry and technology generally. Accordingly, rather than enshrining inflexible standards in primary legislation, we suggest the OGCI be provided with sufficient powers to enable it to develop codes of practice and conduct in order to allow it to quickly respond to market developments without the need for ministerial orders or amendments to primary legislation. Consultation with licensees and other stakeholders would be a key part of any such regime. We have seen this approach work well in other jurisdictions and believe it would allow for good regulation and ensure Ireland's regulatory framework remained current and relevant.
Paddy Power has always been committed to acting fairly and operating the most robust and stringent practices in the industry with regard to responsible gambling and age verification. We, therefore, welcome in principle the broad range of measures set out in the general scheme around player protection, including self-exclusion and the establishment of the social fund. We believe, however, that some of the sections regarding these measures may require further consideration and elaboration.
For example, while most operators operate a self-exclusion policy, there is no standardisation of approach across the industry. It is also widely recognised that there are serious challenges in ensuring multi-operator self-exclusion schemes work for both individuals and operators and we are concerned that these are potentially unworkable in a retail environment. This is something that will require further consideration and engagement by the industry with the OGCI to determine how best to implement this measure. We are fully supportive of the social fund referred to in head 77. However, the manner in which it is to be funded may warrant further consideration as the approach can vary in different jurisdictions.
There are three other specific sections we would like to highlight. The first is head 72 which enables the Minister to bring into effect rules governing advertising based on the principles listed in head 72(3). The principles listed in head 72(3) are, however, quite subjective and open to a wide degree of interpretation. We believe this is something that would be better dealt with in a code of practice developed by the OGCI or the Advertising Standards Authority for Ireland instead of being included in a ministerial order or primary legislation.
The rules in head 73 on promotions may also need some further consideration. Head 73 contains time-based restrictions on the offer of promotions in respect of both remote and non-remote services. We do not understand the rationale for this and believe the restrictions are unworkable in the context of the media we consume in Ireland and the global nature of the Internet.
Schedule 1 proposes quite a complex regime of 43 possible licence categories which I hope can be reviewed for the purposes of the Bill and perhaps rationalised for ease of administration.
We reiterate that we welcome the publication of the general scheme of the gambling control Bill and believe it will play an important role in establishing a modern, well regulated regime for gambling in Ireland. We look forward to playing a constructive role and providing any assistance we can in the development of that regime. If the committee has questions on the presentation or our submission, we will be happy to take them.
Ms Susannah Gill:
I am head of public affairs at Betfair which welcomes the opportunity to present evidence to the joint committee. In many ways, Betfair is a perfect example of how technology can and has overtaken existing regulation and, therefore, why the gambling control Bill is timely legislation that is being welcomed by the majority of stakeholders. As many members probably know, Betfair is purely an online betting operator that was created on the back of the wave of innovations since the invention of the Internet. It has made a long-standing commitment to Ireland and seeks to be a constructive partner to ensure the regulatory process in Ireland benefits all stakeholders, including the end consumer - punters, the Government and legitimate betting operators.
Since its launch in 1999, Betfair has grown to become a FTSE 250 company which employs 1,700 people worldwide. In Ireland the company has made significant long-term investment, with 100 jobs in its Dublin operations office and two data centres, which equate to a €30 million investment. Based on salaries, taxes paid and contracts with local suppliers, Betfair makes an annual contribution of approximately €18 million to the economy.
What makes Betfair different from traditional operators is its betting exchange model which uses technology similar to a stock exchange to allow it to offset its risk perfectly by exactly matching sports betting supply and demand in a way not previously done by traditional bookmakers.
Betfair now also operates a sports book product, offering traditional fixed odds betting like most of its competitors. The Internet has allowed the gambling industry to evolve significantly. Consumers now have access to a wide range of products and where price comparison has never been quicker or easier, this has driven up competition in the sector enormously. It is, therefore, right that the Government is overhauling existing legislation to establish a regulatory regime that will incorporate changes in the sector and the emergence of remote gambling for the first time. This will help to ensure any company taking a bet from an Irish resident, be it on the Internet via laptop or mobile device or over the telephone, meets the regulatory standards set by the Government. As with all such legislative proposals, there will need to be engagement between the Department for Justice and Equality, operators and other stakeholders to get the details of the legislation correct and viable for the years ahead as technology continues to evolve. Betfair is willingly engaging in this process and will help, wherever possible.
Members will have received our submission and we are happy to go through the matters raised in further detail. Betfair has restricted its comments on the Bill to the issues that are relevant to its business as an exclusively online gambling operator. Its primary observation is in the area of relevant entities and the licensing process. In a regulated gambling regime clarity is needed regarding which organisations are required to register and which individuals need to be listed on the licence application with the national regulator, in this case the Office of Gambling Control Ireland, OGCI. Betfair has been through licensing processes in many jurisdictions and our experience has led to our view that in all cases the number should be kept to a realistic minimum to avoid unnecessary burdens and costs on operators and the OCGI. For example, it is assumed that if the person listed as a nominated officer leaves the employment of a licensed operator, this will need to be notified to the OGCI and a new individual instated in this position. With potentially hundreds of licensed companies, this has the potential to be burdensome for all stakeholders.
Betfair’s other comments relate to several other areas. With regard to licence application costs, it is essential that the costs and logistics of applying for a licence are provided upfront for operators in order that they can plan accordingly.
On the level of probity of licence holders, Betfair suggests the Department seek to adopt a similar approach to the United Kingdom with regard to the information it requires from licence holders, as set out in head 25. The UK Gambling Commission provides clear information on what is expected of companies wanting to become licensed, including a detailed operating licence application form for companies and a personal declaration form for relevant individuals within a company.
With the establishment of the OGCI, operators will expect to see secondary regulations, often called technical guidelines or standards, which will outline exactly how the licensing process will work, including the requirements for product testing prior to licensing. The Government should seek to work with the industry through formal consultation in order that operators have the chance to inform and share their experiences of regulations and processes in other countries. Final regulations should be published well in advance, a minimum of six months, before any new licensing regime becomes active in order to ensure operators wanting to apply for a licence have time to review and submit applications.
Betfair supports the introduction of the self-exclusion register under head 71 within a regulated gambling market in Ireland. The register would be most effective if it was shared with all licensed operators and it was made a licensing condition that operators could not accept new customers whose names were on the register. This would ensure an individual who had self-excluded from one operator could not open an account with another operator while his or her name remained on the self-exclusion register.
Betfair is also supportive of the establishment of a social fund to achieve the purposes of the fund set out in head 78. There is a need for clarity as to how the social fund will operate and at what level contributions from operators will be set. The establishment of a social fund could potentially mirror the operational structure of the Responsible Gambling Trust, RGT, in Great Britain. The gambling industry voluntarily funds the RGT which is made up of experts with a background in helping people with addiction, the gambling industry and the government. Betfair seeks to be a responsible operator and integrate corporate responsibility into its business practices wherever it has an office.
I am happy to take questions from members or supply further details which may be helpful to their work.
They are for all three speakers. Having read a considerable number of the submissions, I want to focus on three areas, the first of which is virtual gaming and betting. I am concerned, in particular, about horse racing and track meets. I have also observed virtual racing games being played on screens in betting shops in the United Kingdom. I do not know whether they are prevalent in Ireland. Is it appropriate to license these games in the same way as other forms of track meets?
The Irish Bookmakers Association and others referred to hours of business, particularly on Good Friday and Christmas Day. Is it feasible to prohibit on-line providers from offering these services? If, for example, an Irish user of Netflix can simply change DNS server to an American based server, how difficult would it be for a user of a betting website to simply change IP address in order to access a UK, French or American site on days when on-line gaming is not permitted? I am not necessarily looking for a solution to this problem, but I would appreciate the delegates' observations.
In regard to the social aspect of those who have difficulties with gambling, the social fund was mentioned by a number of speakers. I ask the delegates to set out their views in more detail. Unfortunately, I missed the opportunity to visit Betfair's offices, but I understand from my colleagues that they had an interesting overview of its operations. I am particularly interested in hearing Betfair's views, given the number of people it employs.
Mr. David Hickson:
I will begin by addressing the Deputy's third question on the social aspects of problem gambling. I have studied several of the studies produced in the United Kingdom and Canada and they seem to be somewhat standard in that between 73% and 84% of the population of the respective countries have gambled once in the past 12 months. Approximately 1% of the populations, on average, have problems with gambling. Between these two poles lie the low risk category which comprises 5.7% of the population and the moderate risk category, at 2.7%. The legislation aims to deal with the latter two categories. Most people can police themselves and know what they can afford to gamble, whereas a small cohort of problem gamblers need professional help. The legislation will be particularly helpful to those who are in the low to moderate risk categories. If the legislation does nothing other than require everyone who gambles to be over the age of 18 years, it will go 50% of the way towards what we are trying to achieve.
The Deputy also asked about availability online.
This is a fact of life and there is little we can do with it. In Italy they try to engage in ISP blocking for unlicensed operators. It is a partial solution and is not completely effective. To try to prevent problem gambling we will have to examine measures we can put in place such as self-exclusion, ensuring people are over 18 and having responsible operators who value their licence and reputation and who will monitor their players' behaviour in a meaningful way. The online sector can do that just as well as the land-based sector, and possibly more accurately.
With player tracking they can monitor the level of play in which players are engaging, establish what is normal for them over an initial period and monitor how they behave against that normality in the future. Then it is down to having staff who are able to be aware if some people might be going beyond their means. They might overhear a comment or see somebody getting frustrated, and they are able to intervene, bring it to a manager's attention, and the manager may offer the customer the option of self-exclusion. In a severe case they can impose a suspension for the person's benefit. I know this from personal experience.
The problem is some operators will do this on a voluntary basis but not all operators are doing it. An addict who is genuinely sick will not learn from one suspension but needs to be suspended across the board. We do not have that facility in place but this legislation can work towards establishing a linked-in self-exclusion register that we operators are obliged to send to a central database.
Ms Catherine Colloms:
I would reflect the views expressed here that it is very difficult to police the Internet and will be extremely difficult to shut it down for particular periods of time. One could attempt to do so but would risk failure. It could be examined but in practice would be hard to operate. Paddy Power in the UK supplies virtual racing. I am not sure what virtual games are.
Ms Catherine Colloms:
We supply it in response to customer demand. It is quite popular with customers but is one product across the suite of retail offers we have in UK shops. It is helpful in the sense that the racing customer who is particularly interested in racing can bet on races at different times of the day. It works well when one has a complete wash-out - one cannot predict what the weather will do - so it provides an extra product which is niche but popular. We have put it across shops in response to demand but it should be treated as any other product in terms of whether one would license that in a retail environment. It is a good product we supply across the UK.
The social aspect is a critical issue. All of us here would say we place the upmost importance on our responsibility to our customers. It is top of our agenda. We devote significant amounts of senior management time and investment to the issue. It is critical to ensure the structure of the scheme appropriately addresses the concerns and issues around social responsibility and how we tackle problem gamblers. There is much one can do, and some of this is set out in the scheme. We support the creation of a social fund. As Ms Gill said, there are some interesting models. The Remote Gambling Association, RGT, model in the UK is interesting in terms of how it examines research and helps the industry to determine best practice and how we can apply it. The idea of a self-exclusion register is interesting. We must examine how we could apply that in a retail context where it is much more difficult to apply.
Many things can be and are being done at an operator level. We devote a huge amount of time and energy to the issue and trying to ensure we can identify and assist anyone who presents with a potential problem. All our customer service agents in Ireland are trained by GamCare, the prime UK support service and information organisation for problem gambling. Those customer service agents are trained three times per year with repeat training to ensure they can try to identify people who have an issue, assist them and move them towards treatment or, in our case, self-exclusion.
One can take a variety of actions in the online world which allows one to track and monitor player behaviour. One can do much when people join and interact with the systems to let them be more in control of their gambling. We let people set deposit limits which cannot be changed. They have to go back into the system and ensure that time is set. That is critical and is something we would be willing to engage on in more detail regarding how we make it work.
Ms Susannah Gill:
I thank the committee for the kind reference to the committee's visiting BetFair. I am glad the committee found that useful. Hopefully that showed that most of the leading operators in the online sector are already very active in this area and are undertaking many initiatives to help our customers, whether on the education or practical side regarding the tools available to them. The problem is that there is no level playing field to ensure all operators must do that, which is why the Bill is so welcome. We can ensure that everything leading operators such as BetFair are already doing to educate their customers and provide information and tools is established across the board. For example, if customers want to self-exclude themselves that information could be shared centrally so if someone excludes themselves from BetFair they cannot sign up to Paddy Power online the next day. In that way all stakeholders will work together and pool our resources and energies to create a system that will help long-term with that small section of people who have a problem with gambling.
I have two points for Mr. Hickson. If any of us contact the Revenue Commissioners there is information readily available about the profit margins. In his submission he said he represents the regulated part of the sector. Can he expand on the margins available and earned? He pointed out in paragraph 4 of his submission that there are up to 20,000 unlicensed venues operating. Can he expand on that? That is a staggering number of unlicensed venues. Why are they unlicensed? Why are they not being monitored and policed? Can the Paddy Power representatives comment on the concern that in virtual racing there is a predetermined outcome? Who has access to that?
Mr. David Hickson:
We estimate 20,000 unlicensed machines, not venues. We represent the land-based private members' card clubs and they do not really operate machines. Some of them have two to six machines. I refer Deputy Niall Collins to the Licensed Gaming Association of Ireland, LGAI, which will appear before the committee next week. It is expert in that area whereas I am not.
Regarding the margins, typically for every €100 that passes over a gaming table, €84 goes back to players in winnings and the house keeps €16. The operator pays VAT at 23% leaving €12 to cover overheads, which typically run at approximately 9.5%, leaving a net profit margin of approximately 2.5%. With such a tight profit margin it would be difficult to get a return on the substantial early investment it would take to establish a standard of casino that would be on a par with other European venues.
Ms Catherine Colloms:
I can answer the Deputy's question on virtual racing, which is that it is a fixed odds number generator and, therefore, there is no predetermined outcome. Every time the race goes off, a fixed odds number generator sits behind the back of the system and the outcome is determined by that number generator at the finish so there is no predetermination whatsoever.
My understanding of virtual racing is that a number of horses run virtually on the screen and, therefore, the outcome has to be predetermined by a system or somebody. Before it ever starts, the outcome is determined. That is different from six horses or greyhounds running around a race track or the all-Ireland final.
Mr. David Johnston:
There is a random number generator behind it. It is not predetermined. For every race, there is a separate kind of jiggery pokery that goes on behind the machine from a technological perspective which determines the outcome but nobody knows what happens before the race starts. It is not a race that has been run before.
Ms Sharon Byrne:
I represent the betting shops in Ireland. We have virtual horse racing on our screens, along with roulette, cycling, tennis, etc. A company called SIS in the UK streams all the greyhound and racing pictures to every betting shop in Ireland the UK and it also provides a virtual product. A random number generator is housed in a secured location, which is audited and monitored by KPMG. SIS is paid for the pictures; it does not get a share of the revenue. A person is allowed to be up to the off time of a virtual event. Any bet placed after the off is void, win or lose. At the off of the race, no result is generated for that event at that point in time. Whatever graphic is coming to the line, whether it is a dog or a cyclist - they are quite real - the video that is beamed down will only represent the number after the bets have been placed, that is, after the off. For example, take the 10.03 race. The result is determined after 10.03 but all bets are placed prior to that, and therefore, the random number generator company, SIS or the bookmaker do not know what the number is. KPMG is employed by SIS.
I thank all the witnesses for their attendance and for their presentations. I would like to ask the Paddy Power representatives about head 77. Ms Colloms said the company has a reservation about how the social fund will be financed. Perhaps Ms Colloms might elaborate on how the company would like it to be funded. Is the reservation related to profit versus turnover?
Ms Catherine Colloms:
Yes. This is something that Betfair has picked up on and I am sure Ms Rossiter from the RGA will mention this. We think it needs looking at to understand exactly how it is funded in the context of turnover. There are other systems in other jurisdictions and the RGT model was referred to by Ms Gill. The way that model works is that a fee is levied against operators based on gross gambling yield. The reason for that is it reflects the fact there are different margins for different businesses. An online business has a different margin to a casino if it is incorporated or a bookmarker. All that does is it is a fairer application value. There can also be a system which looks at potentially a fee based on the number of licences or betting shops. It does the same thing in terms of financing the social fund but in such a way that potentially more fairly reflects the profits of the business.
Does Ms Colloms believe the fund should only be directed at people with addiction problems or could it be used for other social projects? Potentially, the fund could yield a significant amount and if there was a surplus, it could be diverted to other social projects. For example, a percentage of the profit or turnover of some casinos in America is channelled into the community. Do any of the representatives consider this to be a possible use of the fund?
Ms Catherine Colloms:
It partly depends on how the Government and members decide they want to construct the fund. There are models like in America where it is used in that way. Classically, that is not done in other regulated regimes. In the UK, the money goes specifically to research and educational assistance within gambling. It is something for the Government and members to consider in setting up that fund.
Ms Susannah Gill:
It relates to which entities and individuals get licensed. This is also currently part of the discussion on the Betting (Amendment) Bill which falls under the remit of the Department of Finance. When an operator needs to get licensed, there needs to be clarity about which entity they have. A company such as Betfair, which is now of substantial size, will have various entitles that all do different things and when it comes to getting, for example, an exchange, sportsbook or gaming licence in Ireland, it needs to be clear which entity in Betfair or other operators needs to apply for that. Within entities, we have sub-entities of our different businesses and it could become bureaucratic if all those sub-entities of the applicant entity also have to go through the licensing process and all the nominated individuals within them. It is a case of clarifying which entities and individuals are involved in the licensing process to make it manageable for both us operators applying for a licence but, importantly, also the OGCI, which has to oversee the entire process. It is something that would probably fall into secondary regulations and technical guidance as to exactly how the process will work for all stakeholders.
I thank everyone for the presentations and submissions, which were interesting. I raised an issue with the chief executive officer of Paddy Power two years ago at a Fine Gael meeting about people being refused mortgages, the primary reason for which was the fact that they had an online account with Paddy Power. The CEO said the company was engaging with the Financial Regulator and financial institutions at the time. How did that go? Are there protocols in place now between the company and financial institutions?
We are not quite at the end yet. In fairness to other members, perhaps Ms Colloms will engage with the Senator about that after the meeting. It is not covered by the heads of the legislation and we have to stick to them. It is an interesting question.
I welcome all the groups and I thank them for their submissions. Do all three groups support a new comprehensive framework for gambling in this country? Is that principle agreed by all three groups, with the exception of changes to heads 72, 73 and 77?
With regard to the addiction issue, what is their response to people's concern about this aspect of their industry? This issue is raised by many citizens and parents, in particular. How many people are directly affected by this gambling addiction? Is it 1% or 5%?
Reference was made to gambling being limited to over 18s. However, some of these addiction issues can go underground and lead people to worse places.
On the safety and security issue there is potential for money laundering through certain aspects of the industry. I believe Mr. Hickson mentioned that members of his association had a very good relationship with the Garda and the security services. Is that relationship really strong? Many people have concerns that money can disappear into aspects of the gambling industry.
I have a question on virtual racing. Many people have concerns about it being beamed in from the UK without proper regulation in this country.
Before answering that, I wish to return to Senator Conway's question. It is extraordinary that someone with a betting account can be barred by a financial institution from getting a mortgage. I invite all groups to reflect on that and come back to us if that is what is happening. It is a very good question. While I accept it is not contained in the heads, it is peripheral to it. The witnesses may not have an answer to it now because it was not within the original scope. However, it is a very relevant question to which we may return.
Ms Susannah Gill:
I know the issue the Senator raised came up when we spoke previously. I asked our teams who deal directly with our customers whether a customer had ever contacted Betfair about this issue. While I cannot speak for any other operator, from Betfair's point of view, we have never had a customer ring us to inform us he or she had a problem with any financial institution because of his or her Betfair account.
Mr. David Hickson:
I will attempt to deal with Deputy Finian McGrath's questions. We have highlighted addiction issues and are responding to people's concerns. A concerned family member can contact an operator and flag concerns about a loved one. The problem our sector has is that following such a contact having been made, the Data Protection Act prevents us from engaging in a real way with these individuals. We would like some provision in the legislation enabling us to meet these individuals - which is typically what we try to do anyway - to discuss their concerns. We encourage them to bring the person about whom they are concerned with them to a meeting so that we can try to establish whether the concerns are justified and if the person with the problem can be encouraged to self-exclude or alternatively we can suspend. We lack the legislation to support us in that effort.
Money laundering is a myth - I suppose Hollywood in the 1930s must take much of the blame for this. Since July 2010 all private members card clubs are required to be registered with the AML unit in the Department of Justice and Equality. As such we are subject to inspection by the Department. We must engage in proper "know your customer" policies and procedures. Customers must verify their identify, typically by providing a copy of their passport or driving licence, which is retained on file. There is a proper membership system so that every visit to the operator is logged. In terms of player tracking, it is possible to monitor if they are coming in five times a week, once a week, once a month or whenever. If there is a change in their habits it can form part of the evidence when trying to assess if someone has a problem with gambling.
Once they are inside the venue we engage in what we call player tracking. We monitor if players decide to gamble with more than €200 or €300 and we keep a record of how much they might buy in for, how much they cash out for and overall how well or badly they are doing. This is what is expected of a regulated sector. The problem we have at the moment is that it is not an equal playing field. While some operators are very serious about compliance, others are less serious.
Mr. Don Bird:
The Irish Showmen's Guild was established in 1954 to look after the interests of the showmen who operate Irish based funfairs, fairgrounds and circuses. We currently have 105 members representing about 80 families. Most of our members run small, family-owned operations and have been involved in the industry for several generations. The Irish Showmen's Guild is affiliated to the European Showmen's Union, a trade body representing the interests of showmen at European level. The work of the guild involves a broad range of technical, social and administrative issues relating to our industry and recognises the importance of working with all relevant statutory bodies in the regulation of our industry.
The Irish Showmen's Guild was proactive in the drafting of the original Gaming and Lotteries Act 1956 and subsequent amendments. In previous submissions, particularly in 1984 and 1999, the guild highlighted areas within the Gaming and Lotteries Act 1956 that were causing difficulties for our members and the enforcement authorities. Our concerns and recommendations for change have remained consistent throughout the decades.
Within head 1, definitions and interpretation, the definition of "gaming" constitutes probably the most important part of the Gaming and Lotteries Act 1956 that adversely affects the operation of traditional fairground prize stalls. The original definition of gaming as "playing a game, whether of skill or chance or partly of skill and partly of chance, for stakes hazarded by the players" has failed to keep abreast of technological change and progress. It is the opinion of our members that the traditional fairground prize stalls such as hoopla, darts, delph, coconut-shy or other variation of prize stall with redemption of non-cash prizes should be considered separately from the proposed definition of gaming.
The nature of the traditional fairground prize stall involves the direct presence of a fairground operator who must travel and operate his particular prize stall as opposed to a gaming machine which can be sited and operated without the direct supervision and operation of the owner or operator. It is the personal presence of the fairground operator which sets the traditional fairground game apart from the gaming machine. In this instance the stake required must cover the fairground operator's costs, including the substantial cost of transportation of the funfair from site to site and the cost of the prizes, wages and rent.
The general scheme of the proposed gambling control Bill 2013 proposes to define a funfair as a fair consisting wholly or principally of the provision of amusements and subsequently defines gambling as amusements. Gaming and the presence of prize stalls in particular are never the main activity of the funfair.
The Planning and Development Act 2000 (Certification of Fairground Equipment) Regulations 2003 refer to the definition of a funfair as having the meaning as defined in section 239(1) of the Act of an entertainment where fairground equipment is used. The guild contends that section 6(1) of the Gaming and Lotteries Act 1956 sufficiently clarifies this by stating:
Gaming carried on at any place as part of a circus or other travelling show shall not be unlawful gaming if---We suggest that a more appropriate definition of "funfair" might be an entertainment where fairground equipment is used and gaming is not the main activity of the event. A prize stall in a fairground situation certainly involves a non-monetary prize game. This suggestion does not include the potential use of a gaming machine in a travelling fairground gaming arcade both of which are clearly defined in the general scheme.(a) gaming is not the main activity at the show,
In May 1999, the then Minister for Justice, Equality and Law Reform, Mr John O'Donoghue, established an interdepartmental group to review the regulatory environment within which gaming and lottery activities are carried out.
The review group's report suggested that, subject to appropriate safeguards, gaming in line with the revised legal requirements should be permitted in association with events such as funfairs, carnivals and other special or one-off events. It recommended:
The arrangements for these events should be such so as to provide for adequate safeguards in order to prevent under-age gaming.
Gaming in conjunction with carnivals, travelling shows [funfairs] etc., conducted in accordance with the general provisions of the new legislation, should be allowed under temporary permit from the Gaming and Lotteries Authority. Such permits may attach additional conditions as appropriate to the circumstances.
The subsequent report of the casino committee, Regulating Gaming in Ireland, noted that the "Committee is not recommending preferential treatment for already licensed operators in that industry; it is simply acknowledging that they are engaged in lawful activity and that, in developing the new licensing regime, careful consideration should be given to the status of this sector”. The casino committee could have avoided ambiguity by separating its consideration of what definee an amusement hall and a travelling fun fair. We are delighted to note that the general scheme defines both separately.
On head 70, "No 'young persons' as employees or players", if not appropriately amended, the Gambling Control Bill 2013 would potentially impose an age limit on participants at the traditional fairground prize stall. There should be no age limit imposed on participants in these family activities. We wholeheartedly agree that the age limit for gaming machines should be increased to the suggested 18 years and that they should be confined to specific areas to achieve the primary purpose of protecting vulnerable people, including children.
On head 54, "Hours of business", many of our members attend annual seasonal festival events throughout the country. As part of festivals and community events, music and street entertainment can go on late. The proposal within the general scheme that a mobile gaming facility at funfairs and circuses conclude at 10.30 p.m. is, therefore, unreasonable when compared with the proposal that gaming in a public place such as a shopping centre and airport concourse must conclude by midnight.
We thank the committee for the opportunity to make this presentation. We will, of course, be happy to reply to questions committee members may have.
Ms Sue Rossiter:
I thank the joint committee for inviting me. I represent the Remote Gambling Association, the largest trade association representing the on-line gambling industry.
RGA membership is restricted to operators and software suppliers. The operators must be licensed for gambling purposes within the European economic area, the Isle of Man and the Channel Islands. The members of the RGA have substantial experience in engaging with legislators, regulators and other stakeholders to ensure remote gambling is conducted in a fair, safe and crime-free environment. This experience is based on operating in fully regulated jurisdictions where it is possible for private sector operators to obtain a licence on a non-discriminatory basis.
The licence objectives and the bulk of provisions in the heads are supported by the RGA. However, in our submission we set out a number of suggested improvements. Rather than restate all of the arguments outlined in the submission, I will recap our recommendations.
Although outside the scope of the legislation, the Government should acknowledge that the regulatory regime cannot be considered in isolation from the tax regime and should ensure the tax burden is not so onerous that it will undermine the regulatory system and its social objectives. Where possible, the expertise and experience of the gambling industry should be utilised by the Government and the regulator and a constructive dialogue sustained throughout the process. It should be established that remote operators must apply the regulatory requirements to those who are normally resident in the State.
On the OGCI, success will be dependent largely on appointing people with the right skills and experience. The OGCI should establish an intelligence-gathering and sharing function to help safeguard the integrity of sport. As a point of principle, licence fees should not exceed the cost of regulation and the requirement for an extensive range of suppliers to be registered with the OGCI should be removed or limited significantly.
We have questions on the definitions in the Bill. The definition of "bingo" should be expanded to cover all forms of the game, as this has caused us problems in other jurisdictions. Some flexibility should be introduced in order that the OGCI can take full account of management control factors as part of an assessment of overall viability rather than being overly constrained by the one criterion of having adequate reserves.
Customers should have the option of being able to exclude by particular products; the self-exclusion register should be restricted to Irish residents; the self-exclusion period should be a minimum of six months rather than one; and customers should be able to use other methods to self-exclude rather than being restricted to doing so in writing.
We recommend early engagement between the OGCI and its licensees to consider how best to apply the new regime in a way that is practical and effective. As others have mentioned, contributions to the new social fund, irrespective of whether it is voluntary or compulsory, should be based on a percentage of company gross profits, not turnover; the sponsorship rules should be amended in order that a potential source of valuable funding is not denied to professional sports; and there should be consistency between licensing periods for comparable land-based and remote gambling activities.
These are our key recommendations. We, too, will be more than happy to answer questions committee members may have.
Thank you very much, Ms Rossiter. I am struck by how technical the subject is. Ms Rossiter mentioned more than once the need for expertise - people who know various aspects of the industry - that point is coming across again and again. I now invite Ms Byrne to maker her presentation.
Ms Sharon Byrne:
We are delighted to have the opportunity to join the joint committee to discuss the proposed Gambling Control Bill 2013. We commend the Minister for Justice and Equality, Deputy Alan Shatter, and his Department for getting the Bill to this stage, the huge amount of work they have done and how they have always been accessible and willing to discuss and understand any issue within the industry.
Betting shops employ more than 6,000 people in Ireland and we have been trying to compete with the online and mobile side of the industry for many years under the burden of legislation which predates the Constitution. Betting shops use pencil and paper, while every customer in our shop has the online world in his or her pocket. We look forward to the Bill levelling the playing field and allowing our shops to provide the service they always have enjoyed using the latest modern technologies. This will allow us to continue to be a major contributor to the Exchequer, create valuable jobs and facilitate further investment in our sector.
Virtual racing was born out of the foot and mouth disease epidemic. It struck our industry for seven weeks I think about eight yeas ago. During that time there was no horse racing and nothing to bet on in the shops and SIS, the picture provider, obviously had no product to give us. I like the Bill's proposal that anybody providing a virtual service should be authorised to do so and be regulated. I recommend that he or she be audited as stringently as possible. Some virtual service providers would receive a black mark and we would not condone them in any way. I fully support the Bill's proposals on how people can bet on virtual products.
I emphasise that the industry in Ireland is a lot smaller than that in the United Kingdom. There are 9,000 shops in the United Kingdom but only 1,000 in Ireland. Before the start of the recession, we had 1,365 betting shops; today, there are 1,014.
This is in part due to natural market settling and, owing to the recession, to people not having sufficient money. We believe a body is absolutely necessary for the industry and that it should be properly resourced in terms of expertise in respect of auditing and regulation. This will be a challenge given that the industry here is much smaller than that in the UK.
Social responsibility is a fundamental building block of this legislation. Seven years ago, the Irish Bookmakers' Association commenced funding a charity in Northern Ireland called the Dunlewey Centre, which is an addiction service. It is a registered charity which does work for the PSNI and other bodies, including GamCare in the UK. People in Northern Ireland who contact GamCare are referred to the Dunlewey Centre. It operates a Freefone number seven days a week and employs 40 counsellors across Ireland who provide free face-to-face sessions to those affected by problem gambling, including families and friends. The Dunlewey Centre is fully funded by betting shops. We are seeking recognition of its work during the past seven years and that it be recognised in the legislation as an approved supplier of responsible gambling services. The centre does exemplary work and is totally independent and regulated in Northern Ireland. We highly recommend its work.
Currently, Irish betting shops do not engage with persons under 18 years of age. They display details of counselling services, including free phone numbers, and allow persons to self-exclude. All staff have received training at the Dunlewey Centre and as such are able to identify those whose gambling is escalating. I would like to think that betting shops are compliant in this area and fully support the recommendations in this regard as provided for in the Bill. As the service is fully funded by bookmakers, no bookmaker can escape paying for it. The company that provides the racing pictures bills every betting shop in Ireland. Large operators have agreed to pay €150 per shop per year, with small independent shops paying €75, which means approximately €150,000 is provided by the betting industry for the provision of counselling services.
We believe the level of expertise available in this room could be of benefit to the Department. We are happy to be of assistance in addressing the issues of this extremely complicated industry. I thank members for their time and am happy to answer any questions they may have.
Ms Sue Rossiter:
A person using an online service would have an account that includes his or her e-mail address. That person can contact the customer service centre by phone or email requesting to be self-excluded. The person would usually receive a call back or a return e-mail to confirm the request before the self-exclusion takes effect. This ensures the person is interacting with the customer services and is fully aware of the implications of self-excluding.
Ms Sue Rossiter:
It can be done. However, it is not always recommended. It is accepted that the best way for people to overcome their addictions is to recognise them and engage in ongoing counselling and supports. A person who is excluded by one service could open an account with another. A whole raft of measures would need to be put in place to prevent that.
Ms Sue Rossiter:
While that would be a useful exercise, the sharing of personal data is prohibited under European data protection legislation. In Denmark, information on people who self-exclude is held by the Danish regulator. Anybody who applies to open a new account is checked against the self-excluded list. The Netherlands is also proposing to legislate for this. A number of other regulators, who are aware of the difficulties with information being held only by operators, are intending to go down this route. If there is to be universal self-exclusion the list should be held by a regulator or someone appointed by him or her to do so, thus allowing us to get round the European data protection regulations.
Ms Sue Rossiter:
Currently, the person who has the problem must self-exclude. This cannot be done on his or her behalf by another person. Different companies have different ways of operating. Some would identify the person and send him or her information, and others would decide to send information to the family so that they can work on the issue with the person concerned. Different things work for different people.
Ms Sue Rossiter:
The rule of thumb is that they stand for six months. However, any decent bookmaker would pay out on dockets older than that. The percentage of uncollected winnings is small. I had betting shops for 17 years and used to do my own auditing and so on. The bulk of uncollected winnings relate to errors by staff in translation. For example, when a person places a bet in a betting shop a photograph of the slip is taken and the customer is given a copy of it. The staff member then inputs the information into a computer. There could be up to ten horses on a docket. Often when staff are busy they make errors when inputting information. The majority of outstanding pay-outs relate to errors. As chairperson of the association I receive letters from people in England who had attended the Listowel races and are seeking payment from bookmakers on dockets. The percentage of uncollected winnings is tiny.
Perhaps Ms Byrne would elaborate on the manner in which the amount to be paid by each bookmaker to the Dunlewey Centre is determined.
With regard to shows, concern has been expressed in relation to head 70, which relates to access to family activities. How in Ms Byrne's view can we get around this? Having brought children to various amusements down through the years, I can see the attraction. Is the concern that if head 70 remains as drafted children will not have access to amusing activities such as the hoopla or the catching ducks?
Ms Sharon Byrne:
We hold budget meetings with the Dunlewey Centre once a year. During the meeting, the centre sets out the figures in terms of the number of counselling sessions the previous year. However, we do not go into that in too much detail. We leave such issues to be dealt with by the charity.
They will tell us how much they project they will need to run it next year. We increased the fee this year; it was €100 or €120 per shop but it was raised this year because there was a wish to start putting a little more into marketing and making the service a little more widely known. It was agreed that the larger players, with a substantially higher turnover per shop than the smaller independents, would pay double.
Mr. Don Bird:
Our concern is specifically that as stated by Deputy Corcoran Kennedy. The 1956 Act was a little elusive in how it treated prize stalls at fairgrounds and made some effort to exclude them by saying that gaming was not illegal at a fairground if it was not the main activity. With the heads of the gaming Bill, we are specifically concerned that the new definitions for what is a funfair and gambling or gaming bring us to the core. A prize stall could be construed as a gaming instrument and, in effect, we would not be allowed to have people under 18 playing in what we would consider a family activity. It is a major concern.
I have a quick question regarding betting shops. The social responsibility is quite impressive but is it a voluntary process when staff in the shops attend the training courses? They have human contact, which means prevention can occur very quickly. Are all of the associated shops engaging in this training once or twice a year? I imagine businesses are suffering considerably because of online domination of the industry but what would be the average profit margins?
Ms Sharon Byrne:
I cannot impose training on anybody but I look forward to this legislation ensuring that everybody must attend training and contribute to the fund. A few members do not pay it so it would be nice to see the entire industry paying, ensuring that if a business is to get a licence, staff must be trained by a body set out by the Bill. An average betting shop makes approximately 12% per year, so we repay €88 in every €100 we take in. The average shop turnover, if we include the big guys, is approximately €2.5 million. An average turnover for a small independent business - there are 400 of these in the 1,014 - is approximately €1.5 million. For a shop to break even, taking into account costs like betting duty and expenses of €160,000, there would have to be a turnover of €1.5 million. That is why the independents are closing - which happens every day - or selling. The 12% figure is the industry average.
I want to tease out the issue of profitability, as there was a 2.5% figure mentioned. Is there not a mathematical equation surrounding this? The witnesses are definite that from every €100 spent in the facility, €88 is given out, but that does not seem to add up. Is there a projection of the profit to be made with bookmakers and casinos? The perception with the public is that the bookmaker always wins eventually. The witnesses are all pretty smart and well-presented people, and the industry is well resourced, so I presume people look at the figures over the course of a year. I do not accept the 2.5% profit figure over the course of the year. Nobody in the public will buy that. I am going to be provocative and seek a reply.
Mr. David Hickson:
Unfortunately, the information in Ireland is pretty thin on the ground and only a couple of operators are fully audited by accountants and adhere to best practice in that regard. I know from my own experience that the figure is approximately 3%. I did some online research on Monarch Casino & Resort, Inc., which reported a net profit margin of 4.8% as opposed to an industry average of 2.2%. In America, the percentage depends on the leverage that businesses have with debt, and many companies sought Chapter 11 bankruptcy a few years ago because they were so highly leveraged that they could not cover their interest repayments. Unfortunately, based on my research, there is no one size fits all approach, and the profit can depend on the product mix. Some of the resorts consist of hotels and salons, as well as machines and tables, so it is very hard to find a number that fits everything.
Mr. Joe Lewins:
With betting shops, there are a number of products and 65% of the betting shop product is horse racing. One can win or lose in that. The figures for Paddy Power and Ladbrokes are declared, and the Paddy Power figure was 11.7%, with 1% betting duty to pay on that, meaning it goes to 10.7%. The costs will be approximately 9% or 10%, so that is where the 1% to 2.5% figure comes from. The Ladbrokes figure is approximately 13.2% and the same mathematics can be done to bring the final figure to 3.2% or 3.1%. The product mix determines the margins. Horse racing is at 65%, with greyhound racing at 15% or 16% and virtual gaming at approximately 15%. Soccer is getting much stronger. The margins are approximately 2.5%, and they can be measured over the past five or ten years as the historical data exists for private limited companies.
Ms Sharon Byrne:
It should not be based on turnover or profit but rather the need of the fund. For example, this is a very high turnover business with a low margin. I cannot see the relation to turnover working. Some shops would have 5,000 regular customers per week and others may have 1,000, so turnover or profit cannot be a measurement. It should be a price per sector.
Mr. Joe Lewins:
With regard to turnover, the betting industry is a churn business. If a person goes to a betting shop with €10 and is lucky enough to back a winner at 7/1, that person has €80 in his or her pocket. That €80 could play out for the rest of the day. Turnover is a somewhat fictitious figure as the original bet might be €10 but it could lead to €90 or €100 in bets. It would be difficult to use turnover as a result.
Will the witnesses comment on sponsorship? The Irish Bookmakers Association has indicated the restriction proposed in head 74 is onerous and will result in significant reductions in sports funding for many organisations. It maintains the objective of protecting children can be achieved through the implementation of suitable guidelines without the serious consequences for the financing of so many sporting organisations. We have had the same issue with other products and other committees have dealt with sponsorship, so it might be useful to tease out the views on that. What will happen if the Bill goes ahead as proposed?
Mr. Joe Lewins:
The Bill suggests one can only advertise odds 12 hours before an event. Take Punchestown, where Boylesports, Paddy Power and ourselves would be sponsors. We sponsor what is called the World Hurdle. To maximise the promotion, we would like to advertise what the odds are to win the World Hurdle more than 12 hours beforehand. If we are constrained and are only allowed to do anything to market or promote 12 hours beforehand, bookmakers and others would review the value of the sponsorship. The sponsor is making people aware of the brand, which is why one sponsors. The 12-hour restriction on being able to advertise the odds would be restrictive for betting shops and sponsors. If an event is taking place two months hence, such as Cheltenham, not being able to-----
Mr. Hugh Boyle:
The Department is very impressed with the amount of care and attention the parties have shown in preparing their submissions. They have certainly given us some very good ideas and information. We will certainly take it on board as we work through this. I thank them for their time and effort.
On behalf of colleagues, I would like to say the same. We are quite impressed with the work and effort that has gone into this. We are updating legislation which is quite old. Some of it was enacted before television, so it goes back a while. Much work is involved and it is highly technical. I take the point that we all need advice and expertise in this very technical and very evolving area.
If anyone, listening here, in television land or in Internet land, has something to say on this matter, this is their opportunity to send submissions to us because we want to try to do the best we can with the legislation as we proceed together to bring about the best possible outcome for everybody.
We have done this with nine pieces of legislation. This pre-legislative scrutiny gives legislators the opportunity to have an input into the legislation and to question and engage with experts and members of the public on it. It is an extremely valuable way to proceed. In the past legislation was produced by Departments and it was very hard to make any changes to it. We now have an opportunity to suggest changes. We cannot promise that they will be made but we are certainly listening.
Mr. Hickson raised the issue of the regulator being independent from the Minister and said that is an important matter. I do not have any objection to that but will he elaborate on why that is so important?
We had quite a discussion with the Minister this morning on data protection at a European level. Next week he will go to a Council meeting on that issue. For the information of members, we will have a briefing from the Data Protection Commissioner at 9.30 a.m. next Wednesday. We might be able to engage on some of the issues which arose today. It is very opportune. At 2 p.m. next Wednesday, we will have the second day of hearings on the Gambling Control Bill.
I sincerely thank the witnesses for their input and for being here today. We will work through this. If they have anything more to say, please keep in touch with us.