Sponsorship And Gambling In England And Wales In 2007: New Opportunities Or New Pitfalls?

Originally published in Journal of Sponsorship Vol. 1, No. 2, pp. 194-201

ABSTRACT

The paper discusses the changes introduced by the Gambling Act 2005 to gambling advertising with a particular emphasis on the sponsor's involvement. Now all key parties in any way involved with an advertising campaign are caught by the Act and will need to be aware of its relevant provisions. The effect of the Committee of Advertising Practice and Broadcast Committee of Advertising Practice advertising standard codes, as well as the recent Gambling Industry Code for Socially Responsible Gambling, is assessed in relation to advertising and sponsorship, and new opportunities for gambling operators and brand owners are highlighted. Traps for the unwary are discussed and a sponsorship agreement terms checklist for brand owners and gambling operators is included. Reference to recent Advertising Standards Authority adjudications is made as they provide a useful guide on running advertising campaigns without attracting complaints and the regulator's attention.

INTRODUCTION

Much has been made recently of the new opportunities that the Gambling Act 2005 provides, not just for gambling operators, but for parties on both sides of the sponsorship business and those looking to associate themselves with the more trusted gambling brands. The types of new opportunity being considered concern both access to new markets/customers as well as raising profile and extending business offerings. But behind the hype, what is the true position? How do sponsors, those approached by or those actively looking for sponsors in the gambling business approach the issues?

FIRST, THE BACKGROUND

The Gambling Act 2005 ('the Act'), which came into force fully on 1st September, 2007, seeks to unify and update the existing legislation governing gaming, betting and participating in lotteries, all now coming under the definition of gambling. It is designed to govern all forms of gambling, apart from the National Lottery, and spread betting. The following sectors are therefore now included: casinos, bingo, gaming machines, betting, arcades, lotteries (except the National Lottery) and, for the first time, remote gaming. At its core are three key licensing objectives to ensure that:

• gambling is fair and transparent;
  
  
• gambling is free from crime;
  
  
• children and other vulnerable people are protected from being harmed or exploited by gambling.
  
  

In order to achieve these objectives a new licensing regime regulating gambling has been established, under the auspices of the Gambling Commission ('the Commission'), which has taken over from the previous regulator, the Gaming Board for Great Britain. All gambling operators based here must ensure that they have all the necessary licences in place from the Commission before conducting their operations, as it is unlawful to operate, or to advertise a forthcoming service, without the necessary licences being in place. Responsibility for the regulation of advertising by gambling operators is shared between the Office for Communication (Ofcom), The Secretary of State for the Department of Culture, Media and Sport (DCMS), the Commission, the Committee of Advertising Practice (CAP), the Broadcast Committee of Advertising Practice (BCAP) and the Advertising Standards Authority (ASA).

PREVIOUS PROBLEMS

Before the new gambling advertising rules came into effect on 1st September, 2007, such advertising was regulated by different pieces of legislation, and various broadcast and non-broadcast advertising codes of practice. Inconsistencies between the different sectors of the gambling industry were not uncommon. To give two often-cited examples: bingo clubs and lotteries were generally able to advertise on television, while betting operators and casinos were not, and bookmakers were able to advertise in newspapers, while again casinos were not, other than by a minimal amount of factual information in the classified advertisements, itself the result of a relaxation of the otherwise stringent rules. It was possible for betting operators and casinos to sponsor events, including events shown on television; however, the old legislation was not only piecemeal and inconsistent in its approach, it was also not designed to accommodate the recent rapid changes in technology, especially commercial use of the internet, since its enactment over 40 years ago. While the changes that the Act makes affect the whole of the gambling industry, and those working with it, this paper is focused on certain changes to the gambling advertising rules, with particular regard to the new possibilities and pitfalls in relation to sponsorship agreements.

It should be noted at this point that the Act does not apply to Northern Ireland, where the position remains basically the same as pre-September in England and Wales, although it should also be borne in mind that the CAP code and BCAP code on advertising — both updated with effect from 15th September, 2007 to take account of the liberalisation of gambling advertising by the Act — do still apply in Northern Ireland, therefore specific advice in relation to Northern Ireland should always be sought.

THE EFFECT OF THE ACT ON GAMBLING ADVERTISING

The Act modernises the gambling advertising rules by creating consistency across the industry, and introducing a new definition of advertising in s. 327, which is considerably broader in its application than was previously the case. Now a person can be advertising gambling in three different ways:

• if he does anything to encourage people to take advantage (directly or indirectly) of facilities for gambling;
  
  
• if he brings information about such facilities to people's attention with a view to increasing the use being made of such facilities;
  
  
• if he takes part in, or facilitates, an activity which either he knows, or believes, to be designed to encourage people to use gambling facilities, or he brings such facilities to people's attention with a view to increasing their use.
  
  

To bring such gambling facilities to people's attention with a view to increasing their use includes arrangements where a name is displayed in connection with an event or product, and gambling is either the only or the main activity under that name, or the way the name is displayed has been designed to indicate that gambling is taking place under that name. This means that all the key parties in any way involved in an advertising campaign are caught by the Act. The new definition is clearly intended not only to catch the gambling operator placing an advertisement, but also the media agents working on the advertising campaign, the owner of the media channel over which the advertisement is carried, as well as any venue owner, or promoter, or artist, or other act which becomes involved in a promotion, sponsorship, brand-sharing arrangement etc where the gambling operator gets promoted in association with such an event, match or the like. It can reasonably be expected that the new freedoms on the part of gambling brands (for example, on television advertising) will enable other non-gambling entities to cannibalise sponsorship revenues from this sector and, particularly so, for major sporting brands.

THE ADVERTISING CODES

It is important to note that, in order to comply with the gambling advertising rules, consideration also has to be given not only to the Act itself, but also the CAP and BCAP advertising standard codes (which govern television and radio advertising) as well as the recently agreed, albeit currently voluntary, Gambling Industry Code for Socially Responsible Gambling ('the Industry Code'). Each of these codes has also been updated with effect from 1st September, 2007, to tie in with the Act, following quite extensive public consultation. The respective codes in full should always be considered in devising any gambling advertising strategy, sponsorship and/or campaign, and legal advice should be sought. In a very broad summary, the updated CAP and BCAP codes provide that advertisements must not:

• portray, condone or encourage gambling behaviour that is socially irresponsible or could lead to financial, social or emotional harm;
  
  
• exploit the susceptibilities, aspirations, credulity, inexperience or lack of knowledge of children, young people or other vulnerable people;
  
  
• suggest that gambling can be a solution to financial concerns;
  
  
• link gambling to seduction, sexual success or enhanced attractiveness or
  
  
• be likely to be of particular appeal to children or young persons, especially by reflecting or being associated with youth culture.
  
  

The Industry Code provides for:

• a ban on all broadcast gambling advertising before the traditional 9pm watershed, except for bingo and lottery advertisements (which were already permitted under the old regime) and sports betting advertising around sports events (this exception, both in the Act and this code, the authors are told, has led in part to the Tote's recent indication of its withdrawal with effect from 2008 from its Channel 4 sponsorship of racing coverage, driven in part by the perhaps greater likelihood of ambush marketing advertisements in the breaks);
  
  
• a ban on all gambling logos on merchandise aimed at children, in particular on children's replica sports kits, which was the subject of a considerable campaign in the press last autumn in the run-up to Christmas. Children's sports kits and other children's merchandise include all those that do not attract VAT.
  
  

It also follows from the application of the codes that gambling operators may not sponsor any television and/or radio programmes or stations that are aimed at children or young persons. While a gambling operator is not prevented from sponsoring a television or radio channel which is primarily aimed at adults, but which also features programmes which are aimed at or likely to appeal to children/young persons, the sponsorship may not be advertised during the time when those programmes are aired. The Act defines children as those aged under 16, and young persons as those aged 1617. The only exception appears to be the sponsoring surrounding televised sporting events, which is also exempt from the otherwise applicable 9pm watershed, in accordance with the Industry Code.

Those affected by the gambling industry decision in the self-imposed gambling Industry Code for socially responsible advertising to ban gambling logos on children's replica sports kit, most notably football clubs where such deals were previously worth up to £70m (this was the 2006 offer made to Manchester United by Gibraltar-based betting company Mansion — the club apparently refused the deal because it was unhappy about being associated with gambling), might well find this ban disproportionate, particularly as the Commission's findings following its public consultation in January 2007 showed that the majority of respondents were opposed to it. Thereupon the Commission, in its own position statement, established that removing sponsor branding from children's shirts would not be justifiable and arguably would be counter-productive. Among its reasons was that a ban on official sales would not suppress the desire of children and young persons to wear shirts matching exactly those of the club players and could possibly lead to a black market for shirts bearing the banned logos. It also could be presumed that teenagers would purchase and wear adult shirts. But it required gambling operators to consider excluding their logos from children's replica shirts in any new sponsorship deals.

The gambling industry then proceeded to volunteer a self-imposed ban on children's replica shirts, possibly because it felt it could not refuse after the Portman Group offered a self-imposed ban on the inclusion of alcohol branding on children's replica shirts, and/or possibly because it hoped that the Commission would now not feel the need to regulate further.

THE STATUTORY OFFENCES

The seriousness of compliance, not only with the advertising codes, but also with the Act itself, is to be found in the broad range of offences listed in the Act. The Act gives the Secretary of State the power to make regulations that control the form, content, timing and location of gambling advertisements. At the time of writing (October, 2007), no such regulations have been made, and generally it is hoped that the updated advertising codes, taken together with the Industry Code, will remove the need for such regulations to be put in place. Widespread disregard of the codes by those in the gambling industry, however, would almost certainly result in such regulations being made possibly more restrictive than the current position. This should be checked carefully when any gambling advertising strategy and/or campaign is devised. It would be particularly important to comply with the regulations as noncompliance is an offence punishable by imprisonment for a maximum term of 51 weeks and/or a fine not exceeding level five on the standard scale (which currently stands at £5,000).

Equally punishable is the offence of advertising foreign gambling, other than a lottery which can still be advertised. The content of the advertisement is irrelevant, as the offence is territory specific and attempts to regulate which overseas operators can and cannot advertise their products in Great Britain. Foreign gambling is defined as:

• non-remote gambling taking place in a non-European Economic Area (EEA) state or outside Gibraltar (ie face to face or gambling on licensed premises);
  
  
• remote gambling (non-face to face) which is not subject to the relevant laws of an EEA state or Gibraltar.
  
  

In addition, the Secretary of State has the power to designate a country or place to be treated as if within an EEA state. This is known as the 'White List' and currently includes Alderney and the Isle of Man; Gibraltar is specifically mentioned in the Act as is treated like the EEA. Therefore, and to give a counter-example to the relaxation of the regime, it is now no longer possible for a gambling operator based outside those named territories to sponsor a British-based entity.

While it is certainly important for all the parties involved in an advertising campaign to ensure that both the regulations and the foreign gambling rules are not contravened, the principal statutory offence in relation to advertising gambling is to advertise so-called unlawful gambling. Unless a licence, notice permit, registration or exception to the Act can be relied on, all gambling is classified as unlawful. Again it is punishable by imprisonment for a maximum term of 51 weeks and/or a maximum fine of £5,000.

It is a defence for those parties more loosely associated with promoting or advertising gambling, which could include newspapers, magazines, websites etc that are carrying the advertisements, to show that they did not know, or could not have known that the advertised gambling was unlawful. But no such statutory defence is available to the venue owner or promoter or artist or act which becomes involved in a promotion, sponsorship, brand-sharing arrangement etc. While the gambling rules provide for exciting new business opportunities between gambling operators and other rights holders (discussed below), the latter will need to be aware of how the rule change may affect their liability, and will need to have effective protection built into any agreements preventing contravention of any of the rules unknowingly. (Please note that this paper is not intended to be an exhaustive guide to the statutory offences, the Act should therefore always be consulted in full.)

For gambling operators, there is an additional incentive to comply with the codes, especially the social responsibility parts. The Commission, in the June issue of the Licence Conditions and Codes of Practice document, states specifically that such compliance is a condition of the operator's licence, issued by the Commission; it follows that noncompliance could lead to such licence being withdrawn or not renewed, which is no better way to ensure such matters are taken seriously.

GAMBLING ADVERTISING IN AN INTERNATIONAL CONTEXT

The position in the USA, to say the least, is very confused. While the USA has not outlawed gambling advertising as such, the 2006 enactment of the Unlawful Internet Gambling Enforcement Act 2006 has effectively made online gambling, and thereby its advertisement, unlawful in the USA. While such online gambling may yet be legalised at least partially (the Skill Game Protection Act, which would legalise internet poker, bridge, chess and other games of skill was introduced in June 2007), many online betting providers such as Sportingbet, 888 and Paddy Power have decided to leave the US market for the moment.

Online gambling advertising may create other problems — and not just in the USA. This is because online advertisements might be available outside the jurisdiction (say the UK) for which they were created. While they might comply with UK legislation they might breach applicable laws and regulations (including conduct codes) in other countries. This could entail undesired liability issues. Within the European Union (EU) at least the E-Commerce Directive offers some protection. Under the Directive a company based in the UK only needs to ensure compliance with UK law and regulations, and those of the other member states can effectively be ignored (subject to important exceptions such as the terms of consumer contracts). This protection applies even where the advertised products are sold in such member states. The problem remains that, in certain mainland European territories, France in particular, the current local laws which are intended to preserve local state-controlled monopolies and which are themselves in breach of the free movement of goods and services provisions under the EU treaty are still being enforced against operators based outside those territories who may seek to promote their offerings in such territories. A good example of this was when bwin sponsored the Monaco football team and the directors were arrested when the team launched the sponsorship at a French football ground.

NEW BUSINESS OPPORTUNITIES

The modernisation of the gambling rules results in new permitted forms of advertising, such as perimeter signage at sports grounds by online gaming operators inviting participation in their services, which in turn creates new business opportunities for gambling operators and brand owners. Gambling operators may negotiate access to the brand owners' mailing lists, subject to necessary data protection consents, in order to organise joint marketing activities, such as holding a football club's members' only betting tournament in the club's stadium, organised by the gambling operator, or similar such events. While these new opportunities are exciting news for the industry, brand owners have to be aware that they are now also under a duty to comply with the gambling advertising rules, as discussed above. Gambling operators should be familiar with the rules, individual rights holders may not be.

SPONSORSHIP AGREEMENTS AS OF 1ST SEPTEMBER, 2007

Non-Exhaustive Checklist For Brand Owners/Right Holders

In order to protect their interests under sponsorship agreements entered into after 1st September, 2007, brand owners or other rights holders looking to enter into agreements with gambling operators may want to consider inclusion of the following terms:

• a warranty from the gambling operator that all the necessary licences have been obtained and will remain valid prior to the launch of and during any advertising campaign;
  
  
• a warranty that the rights holder will be informed immediately should the necessary licences have been revoked, or are threatened to be revoked;
  
  
• a warranty that the gambling operator will comply with the gambling advertising rules including the Industry Code, CAP and BCAP codes;
  
  
• an indemnity from the gambling operator should the rights holder incur any costs in relation to the breach of the advertising rules;
  
  
• a right of prior approval of all advertising campaigns and marketing campaigns which makes reference to the rights holder's products;
  
  
• a notification of, and the rights to participate in, any regulatory complaint or investigation following any complaint to the ASA about a relevant campaign.
  
  

Non-Exhaustive Checklist For Gambling Operators

Gambling operators may want to negotiate the incorporation of the following terms within the agreement:

• access to rights holder's customer/ members mailing list, subject to the necessary data protection consents having been obtained, in order to stage joint or single marketing activities;
  
  
• a right to stage events at the rights holder's grounds for a fixed number of days a year;
  
  
• a general obligation to work on developing suitable joint products;
  
  
• an obligation on the brand owners/rights holders to undertake a certain number of mailings jointly with the operators each year;
  
  
• a first right to renew the arrangements, once the initial term expires, to maximise the value of the relationship;
  
  
• introductions to all other relevant suppliers to the rights holders/brand owners to explore possible affiliate arrangements.
  
  

In addition to these, and as pointed out above, gambling operators must take account of the new CAP and BCAP updated sections of their codes and the Industry Code.

THE ASA'S ADJUDICATIONS

It is worth noting the recent ASA investigation of Ladbroke's first television advertising campaign, albeit not directly related to sponsorship arrangements. Once ruled upon it can be taken as a useful guide on running advertising campaigns and sponsorships without attracting the regulator's attention or giving competitors reason to complain to the regulator. Such attention is worthwhile avoiding, because aside from the negative publicity that can result from an adverse adjudication on such a complaint, the ASA can require the advertiser to submit future advertising to them for pre-clearance, or even instruct their members to deny the advertiser media space to run future advertising campaigns. Ladbroke's television advertising campaign starring ex-footballers such as Ian Wright being challenged to 'put his money where his mouth is' by his mates will be the first test case for the new rules and regulations under the Act. The ASA has received four complaints so far and has now launched its investigation. It has been alleged that the advertisement targets young males and, more specifically, 'male bravado and peer pressure'.

CONCLUSION

Potentially, this is a new minefield for many gambling operators which have not been used to advertising or promoting their product in any public space before.

It is also an unknown area for those looking to link up with such operators, with the hope of substantially increasing their business. This is also new law, with no decided rulings or cases to help guide the unwary; ignorance is not a good defence, so taking advice from those more familiar with this space and the new rules makes sense, especially while some of the grey areas remain to be clarified. Opportunities are there for those who can work within the new framework to maximise their return, but pitfalls exist at many turns for those who cannot.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.