Cookies on Pinsent Masons website

This website uses cookies to allow us to see how the site is used. The cookies cannot identify you. If you continue to use this site we will assume that you are happy with this

If you want to use the sites without cookies or would like to know more, you can do that here.

Government implementation of EU laws could leave some gambling unregulated, warns OFT

The way that the Government intends to implement new EU consumer protection laws could result in some gambling contracts between operators and consumers going unregulated, the Office of Fair Trading (OFT) has said.12 Nov 2012

The OFT warned (31-page / 220KB PDF) that excluding gambling contracts in their entirety from the scope of the EU's Consumer Rights Directive (CRD) had the potential to expose consumers to situations where some gambling contracts are "unregulated".

Last year the CRD was finalised following agreement by the European Parliament and Council of Ministers. It will give consumers across the trading bloc uniform rights to withdraw from online and distance purchases by 13 June 2014.

In August the Department for Business, Innovation and Skills (BIS) consulted on plans to implement the new EU rules into UK law. It announced its intention to 'copy out' the provisions of the Directive "unless this would not offer sufficient certainty or there are other overriding reasons not to do so". It said the approach would ensure that "UK law accurately reflects the intention of the Directive" without going "beyond the requirements of the Directive by 'gold-plating' it".

The CRD sets out rules that would apply to all business-to-consumer contracts, although individual member states are free to exempt contracts agreed in certain sectors from the rules. One of those areas is gambling.

"It is our view that areas such as financial services and gambling are better covered through existing, sector specific legislation and that, therefore, we should not pursue the option of extending the [Directive] information and cancellation provisions to these sectors," BIS said in its consultation document.

Under the CRD a contract for gambling is said to involve "wagering a stake with pecuniary value in games of chance, including lotteries, casino games and betting transactions". A recital in the Directive states that "member states should be able to adopt other, including more stringent, consumer protection measures in relation to such activities."

The OFT said that whilst it understands and accepts the "rationale" for excluding gambling contracts from the scope of the CRD, it said that in a UK context it would create potential gaps in the law where consumers have "no protection".

"Given the increase in online gambling we feel that consumer protection in this area needs to be very carefully considered," the OFT said in its response to the BIS consultation. "The exemption in the CRD for gambling contracts refers to contracts 'which involves wagering a stake with pecuniary value in games of chance, including lotteries, casino games and betting transactions.' The OFT is concerned that if the CRD is implemented by merely copying out this provision some contracts may be considered to fall within the exemption but may not fall under the definition of gambling as set out in the Gambling Act 2005".

"As [the Directive] makes clear, the rationale for excluding such contracts is so that Member States can put in place increased consumer protection measures in this area of potentially high detriment, not that such contracts will be completely unregulated. In the UK such protection is created by the Gambling Act and the supervisory regime it creates. Therefore, we believe that the exemption should be clarified to ensure that only contracts which fall within the supervisory regime created by the Gambling Act should be exempt from scope of the CRD," the regulator added.

Under the Gambling Act 'gambling' is defined as "gaming, betting and participating in a lottery'. What is meant by each of these three concepts is expanded upon further within the Act.

'Gaming' refers to "playing a game of chance for a prize". This includes "a game that involves both an element of chance and an element of skill, a game that involves an element of chance that can be eliminated by superlative skill, and a game that is presented as involving an element of chance, but does not include a sport".

'Betting' refers to the act of "making or accepting a bet on the outcome of a race, competition or other event or process, the likelihood of anything occurring or not occurring, or whether anything is or is not true".

A 'lottery' is defined as being an "arrangement" whereby people pay to win prizes through a process based "wholly on chance" or where the prizes are allocated following a series of processes with the first process reliant wholly on chance. Participating in a lottery which forms part of the National Lottery is generally not considered to be 'gambling' under the Gambling Act.

The CRD contains provisions on information that must be given to consumers before they buy goods or services either on the trader's premises or away from the trader's premises, both in cases where the trader is present - such as in the consumer's home, or at a trade fair - and online. It also contains provisions relating to delivery times, surcharges and "additional payments" for 'extras', which will now have to have the active or express consent of the consumer before they can be added to a transaction. This will prevent retailers from including "pre-ticked boxes" online.

Once in force the Directive will prevent traders from charging consumers extra for communicating with them via telephone following the conclusion of a contract. Traders will also be prevented from introducing surcharges for payment methods, such as for using credit or debit cards, above what it cost them to deliver the means of payment.

Separate to its plans to implement the CRD, the Government has also set out its intention to form a new Consumer Bill of Rights to display rights for shoppers and simple, standardised remedies for when things go wrong in one document. UK consumer law is currently laid out across 12 different Acts and sets of regulations, such as the Distance Selling Regulations and the Consumer Protection from Unfair Trading Regulations.