New Clause 6 - Enforcement by IP blocking

Gambling (Licensing and Advertising) Bill – in a Public Bill Committee at 3:15 pm on 19th November 2013.

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‘The Secretary of State shall have power to make regulations, in the form of a statutory instrument to be laid before and approved by both Houses of Parliament, permitting the Gambling Commission to block the internet access and internet protocol addresses of any licensed remote gambling operator which is found by the Gambling Commission to be in breach of its licence.’.—(Clive Efford.)

Brought up, and read the First time.

Photo of Clive Efford Clive Efford Shadow Minister (Culture, Media and Sport)

I beg to move, That the clause be read a Second time.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (International Development), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health)

With this it will be convenient to discuss the following:

New clause 7—Enforcement by financial blocking—

‘The Secretary of State shall have power to make regulations, in the form of a statutory instrument to be laid before and approved by both Houses of Parliament, permitting the Gambling Commission to—

(a) block the bank accounts of any licensed remote gambling operator found by the Gambling Commission to be in breach of its licence; and

(b) intervene in financial transactions between licensed remote gambling operators and certain customers in order to prevent certain customers such as problem gamblers from continuing to use the services offered by the operator, including by way of intervention to block certain credit cards and other means of payment.’.

New clause 8—Consultation on existing use of financial blocking and IP address blocking—

‘The Secretary of State shall procure a process to take place expeditiously whereby each of the current gambling regulatory bodies share information on their financial transaction blocking and IP address blocking powers and activities, and share and implement best practice.’.

New clause 10—Jurisdiction and enforceability of remote gaming contracts—

‘(1) Any contract between a person providing facilities for remote gambling which are used in the United Kingdom and the user of those facilities shall be deemed to be concluded in, and under the laws of, that part of the United Kingdom where those facilities are used.

(2) Section 335(1) of the Gambling Act 2005 shall apply to any contract between a person providing facilities for remote gambling which are used in the United Kingdom and the user of those facilities, irrespective of whether that contract is enforceable in the country or place in which the provider of those facilities is located.’.

New clause 11—Dormant accounts—

‘(1) The Secretary of State shall consult on appropriate ways to require licensed remote gambling operators to disclose (as a condition of their licence) the amounts held by them by way of—

(a) winnings of UK customers unclaimed for a period of more than one calendar year; and

(b) sums in dormant accounts of UK customers.

(2) A dormant account shall for this purpose be an account which has been inactive for at least one calendar year.’.

Photo of Clive Efford Clive Efford Shadow Minister (Culture, Media and Sport)

New clauses 6 and 7 relate to internet and financial blocking. New clause 8 proposes consultation on how that might be achieved, because there has been some discussion of whether such blocking is appropriate—it is certainly technically possible, but is it the most efficient  means of enforcement? Similar to an earlier amendment on spread betting, new clause 10 is about jurisdiction. What people licensed by the Gambling Commission do in other jurisdictions should be taken into consideration to determine whether those people are fit and proper. I will not go over that again, because the argument is similar.

New clause 11 is about dormant accounts. Here is an opportunity to require all new licensees and, through other measures, existing licensees to notify the Gambling Commission of all moneys that they hold in dormant accounts or unclaimed winnings. There are several million pounds in such accounts, and I believe we should ensure that that money goes back into treatment and research. Perhaps we could pool those resources and put them back into support, but before we can even consider that, we need to know what is there, and the Bill is an opportunity for us to think about that.

Regarding internet and financial blocking, we had some questions and answers on that last week in our evidence session. Jenny Williams said:

Ofcom did a big report, with which I am sure you are familiar”—

I was not, but I am now—

“on the difficulties of ISP or URL blocking and came to the conclusion that it is not cost-effective on the whole. You heard from the witnesses this morning that it is not that effective. It can be a disruption tool. Our colleagues in Italy, Norway and around the world, with whom we have discussed the virtues or lack thereof a great deal, say that it is very labour-intensive and disruptive but not that effective. The general view that we and Ofcom came to is that if you have a good open market with a wide range of products and other ways of tackling the illegal market, it is a totally disproportionate use of resources and can have a lot of unforeseen effects. You can over-block or block legitimate businesses. At this stage, therefore, it is not thought to be a sensible thing to embark upon.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 57-58, Q61.]

I went and had a look at Ofcom’s report, entitled “‘Site Blocking’ to reduce online copyright infringement”. It looked at a variety of techniques used to block access to sites, including internet protocol blocking, which is modifying internet service provider network equipment to discard internet traffic destined for a blocked site; domain name system alteration, which is changing the ISP service that translates domain names into IP addresses, so that the user is told that the site does not exist or is directed to an informational page; URL blocking, which is the blocking of specific items, such as web sites or addresses—ISPs already block URLs supplied by the Internet Watch Foundation—and packet inspection, which is blocking techniques that examine network traffic either at a high level, called shallow packet inspection, or a more detailed level, which is deep packet inspection.

The report looked at the effectiveness of each system as well as hybrid combinations. It found that

“none of these techniques is 100% effective”,

but recognised that

“site blocking could contribute to an overall reduction in online copyright infringement”.

It rightly recognises the difficulty of preventing circumvention by more determined users, but does not rule out the use of blocking as a wider part of tackling online copyright infringement; it states that

“site blocking could still play an important role in helping to tackle online copyright infringement.”

Ofcom did not conclude that site blocking was not a suitable method of blocking. It was trying to block someone from infringing copyright. Here we are talking about someone going to a clearly identified site where the regulator has identified illegal or irregular activity. As the report also points out:

“Just because it is technically possible for site operators and end users to circumvent blocking, it does not mean that in practice they will universally do so.”

We should also consider the fact that the report was looking predominantly at copyright infringement. That is an illegal activity, whereas gambling is not. A user looking to breach copyright might be more likely to circumvent the rules than one looking for a place to bet. Putting a block or notice on a site could also help to prevent users from accessing unlicensed sites when it is their intention not to do so.

As the Ofcom report recognised, copyright infringement measures are more effective when part of

“a wider mix of measures, such as education”.

Combining measures on ISP blocking with public awareness campaigns about kitemarks and Gambling Commission regulation would assist in preventing a black market. This is a consumer protection issue: why would we not want to have these protections at hand? Why make it easier for an illicit market to develop?

Similarly, with financial transaction blocking it seems that enforcement has been dismissed too quickly. As was pointed out during our evidence sessions last week, in a mature, open market, financial transaction blocking can be effective. I will quote Dan Boucher:

“I have heard some references to the effect that its results are mixed; I would like to suggest that in a mature and open market financial transaction blocking is very effective.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 36, Q89.]

That is the key point. Our market is an attractive one and a lot of people will want to operate in it. A lot of benefits can be gained from being part of that legal market, so in that sense it will be a self-regulating market. That type of blocking of transactions could be something that the industry would welcome.

There was wide support for enforcement measures, including from sports groups. Nic Coward, the general secretary of the Premier League and former chairman of the Sports Rights Owners Coalition, told us in evidence:

“We therefore want there to be an effective enforcement regime so that the regulated community—the operators—know that there are serious issues that must be dealt with, and that if they are not dealt with, there will be consequences.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 7, Q3.]

Gareth Wallace of the Salvation Army said:

“We certainly agree that ISP blocking would be extremely valuable.”

Dan Boucher said:

“Mindful of that, the failure of any enforcement mechanism in the Bill is of real concern...The Bill will tighten up consumer protection only if it does two things: first, it should insist that those who can advertise get a licence, but secondly it should prohibit those who do not have a licence from accessing the UK market. Financial transaction blocking is probably the most  effective way of addressing that.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 35-36, Q89.]

As I have already said, he went on to stress the effectiveness of financial transaction blocking in a mature and open market.

There are risks that operators will try to circumvent our measures, but that is no reason to turn our backs on the opportunity the Bill gives. If the Minister will not accept new clause 6 or new clause 7 being added to the Bill, I urge her at least to consider new clause 8 and to consult on the potential for financial transaction blocking and IP address blocking. We are being told by regulators that it would not be effective, but the Ofcom report certainly did not conclude that blocking was not worthwhile; in fact it concluded that blocking could work if it was part of a basket of measures such as we would have in an advanced licensing system, including kitemarking and links to advice, along with proactive investigation to identify irregular activity and check up on operators that might not be doing enough to identify problem gambling habits.

As for the issue of unintended consequences of blocking sites, that would in fact be a reason for the industry to try to be clean and to play its part in identifying irregular activity that might result in blocking that impinged on the activities of the industry itself.

So I would err in favour of stronger enforcement action, rather than being cautious because of the possibility of unintended consequences. On balance, the conclusion of the Ofcom report is that that is a risk worth taking. Therefore, we are not dismissive of this as an effective measure. I think we should be looking very seriously at this.

As for new clause 10, I think we should give every power we possibly can to the Gambling Commission. If one of their licensed operators is operating somewhere else and they are found to be in serious breach of one of the licence conditions here—for instance not reporting on suspicious activity—the Gambling Commission should say, “We are not going to put up with that, that was quite a serious breach,” and it would have the power to revoke a licence. We are not saying it must revoke the licence; we are saying it should have the right to consider that. I think that power would have a weight of influence over the activities of some companies elsewhere which would be of benefit to the wider industry in preventing some of the more illegal elements about which we are concerned.

On dormant accounts, we had the report from the right hon. Member for Bath on the subject in 2010. The Government have said that after this Bill is passed, they will legislate to deal with dormant accounts and unclaimed winnings. In my opinion it should be part of the conditions under which people are licensed that they have to report that money from day one. This is an opportunity to deal with that. I know that the Minister is going to say that she has powers to do that under the Gambling Act but that has not happened. We have to wonder why.

This is important. I do not think this money should just be left there; it has not been earned by the industry and could be put to good work. Admittedly an element of the money would have to be retained by the industry because if people turn up and claim that money it has to have a reserve to be able to pay out. However, this is  an opportunity for that money to perhaps go into protecting the integrity of sport. It could go into research. It could go into developing new forms of treatment. The bulk of it could perhaps be reinvested in grass-roots sport. Who knows where it could go, if we were to identify this sum of money. I would urge the Minister to act on this. I am interested to hear her comments on dormant accounts.

Photo of Gerry Sutcliffe Gerry Sutcliffe Labour, Bradford South 3:30 pm, 19th November 2013

I note what my hon. Friend says about new clause 11 on dormant accounts. This issue has been with us for many years. The right hon. Member for Bath (Mr Foster) produced a report in 2010 that highlighted that there were millions of pounds available in such accounts. We tried to get a voluntary arrangement with the industry at the time to release this money.

The Government must be consistent in this case and follow what they have done with dormant bank accounts, and with the national lottery regulations—if prizes are not claimed over a period of time, the money goes back into good causes. The Bill presents a great opportunity to put this wrong right and, as my hon. Friend the Member for Eltham has suggested, the money could be spent on research, education, treatment and grass-roots sport. That money is there, available now and should be used.

As I say, we could not reach a voluntary arrangement with the industry and I think the Government are going to have to act. The difficulty is that the Government will say, “We will look at it again, we will not tag it to this Bill.” However, we are unlikely to have another gambling Bill this side of a general election, which means it will be another two years before we can get to this money which could be used for sport and other things. I hope that the Minister can take this proposal away and look at it. Drafting the required clause is not a significant job and although her officials may tell her that it is too hard, it is in a box that says: “It can be done”. The officials might not want to do it, but it can be done and should be done.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Human Rights)

I want to speak on new clauses 6 and 7 and echo the words of the shadow Minister. We were unhappy that new clause 9 did not succeed, but we are ever hopeful that the Minister may consider it at a later stage and tighten the legislation when it comes to self-regulation. As I explained in my previous speech, progress in relation to protecting problem gamblers has been very slow. When we finally have a Bill that claims to be about player protection—after, if I am counting correctly, four Ministers and about six years—it proposes to liberalise advertising and allow more companies to enter the market.

We are told by the Gambling Commission that it has the tools it needs for enforcement; that it can prosecute owners of gambling websites that offer their services to UK citizens without an appropriate licence. This is as untested as the other forms of enforcement because to date the Gambling Commission has not had the powers to prosecute firms without a licence unless they had equipment in the UK. These powers have also remained untested until now. So even though the principle is that we need evidence-based legislation, we get a Bill that works on the assumption that the Gambling Commission has the powers to prosecute, but we do not know when or how it will and or how successful it will be if it decides to prosecute. That is the crux of the matter.

Moreover, when it comes to enforcement it is also a surprise to note that the highest penalty in the Gambling Act for providing an illegal venue for gambling is a 51-week prison sentence. I mention this because the Treasury consultation on how to implement the enforcement of taxation on a point of consumption basis mentioned a maximum sentence of seven years’ imprisonment for tax avoidance. I think hon. Members will agree that this is a somewhat higher sentence than 51 weeks. It also shows that the Treasury means business and that has to be applauded. That is why I support the provisions of new clauses 6 and 7. However, I would like to see enforcement in place by IP blocking and financial blocking before this Bill takes effect. It would be more effective if that was the case. That is why it would be better to have the wording in the Bill, rather than the measure be treated as delegated powers to be brought forward as secondary legislation.

On both of these new clauses, I remind hon. Members that while they do not have a 100% success rate abroad, they are likely to work well in this country. We have a mature and open gambling market where less blocking is necessary and where there is less incentive to go to illegal sites, because the odds on offer are in any event competitive. Moreover, if they do not manage to block every transaction, the mechanisms are still very useful both as deterrents and as educational tools. That is helpful.

As deterrents, the terms of the new clauses would provide enough of an incentive for a firm to apply for a gambling licence, rather than try to circumvent the blocks. As an educational tool, the blocks could be set up in such a way that ISPs or financial institutions notify customers that they are about to enter into a transaction with a company that does not hold a UK gambling licence. In a mature and open market, this should offer enough of an incentive to seek financially secure and socially responsible gambling.

Even if the technology can be circumvented, let us not make the unobtainable goal of 100% transaction blocking the enemy of every significant success that is and can be obtainable. On new clause 6 specifically, I am curious why it does not include IP blocking for a company that never applied for a licence. Perhaps the Minister would say whether this anomaly could be addressed at a later stage. I look forward to her response.

Belgium, Denmark, Estonia, France, Germany, Israel, Italy and Slovenia are some of the western countries said to use IP blocking. Why can we not join them? This seems to be something that we could do together and do well. On new clause 7, I have similar questions. Why block financial transactions to companies that are in breach of their licence, but not companies that never applied for a licence in the first place? Surely we should be blocking illegal gambling sites and those that break their licensing conditions. I presume that that is the issue; if it is not, it certainly should be. I appreciate subsection (b), which the Gambling Commission could use to develop a one-stop shop for self-exclusion without the need for the industry to be involved. Although that is a good step forward, the industry should be involved. I would like to see an additional provision that instructs the Gambling Commission to develop, as part of the licensing codes and conditions of practice, a requirement on the industry to facilitate a one-stop shop for self-exclusion.

I applaud the Government for introducing the Bill in principle, but I am profoundly concerned that although it is supposed to provide better regulation and consumer protection, in practice it is likely to leave problem gamblers in a much more vulnerable position. That could be put right by the introduction of financial transaction or IP blocking and the introduction of a one-stop shop for self-exclusion from online gambling. To that end, I welcome the new clauses, but I wish that they went further. I implore the Government to think again, and I ask the Minister to consider tabling Government amendments on Report to introduce the measures I have outlined. If I may, I will borrow some of her words and change them slightly: problem gambling “is a scourge. It does not discriminate and permeates across age, race, sex and gender; it crushes self confidence and destroys lives.” For the sake of those things, we should be a society that does more and does it better.

Photo of Helen Grant Helen Grant The Parliamentary Under-Secretary of State for Culture, Media and Sport

I thank the hon. Gentleman for his suggestions on enforcement, which include IP and financial transaction blocking, and on dormant betting accounts. New clauses 6 and 7 would give the Secretary of State powers to permit the Gambling Commission to introduce financial and IP blocking. New clause 8 would make a commitment to require gambling regulators to share information on financial and IP blocking, and to share best practice.

I share the concerns that the Bill should be enforceable, and I believe that it is. As we have heard, there is mixed evidence about the effectiveness of IP and financial transaction blocking. I will remind members of the Committee of what some of the knowledgeable witnesses who gave up their time to give evidence said about IP and financial transaction blocking. Mr Clive Hawkswood, CEO of the Remote Gambling Association, said:

“our experience in lots of other jurisdictions is that they are not wildly successful.”

Peter Howitt, CEO of the Gibraltar Betting and Gaming Association, said:

“The evidence is incontrovertible that none of those measures, in themselves or in combination, achieve the effect of keeping local consumers away from unregulated operators.”

Paul Bittar, the chief executive of the British Horseracing Authority, said:

“There are obviously jurisdictions around the world where those sorts of controls are in place. As to how effective they are, it is debatable.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, ; c.6,Q3, c. 23, Q61.]

Those knowledgeable witnesses cast considerable doubt on the effectiveness of IP blocking and financial transaction blocking. They can be disruptive and labour-intensive, and can result in the blocking of legitimate companies. Because 97% of websites reside on addresses shared with other websites, there is a strong likelihood that blocking a single IP address would block access to multiple sites. Those are all factors that we must take into account in considering the shadow Minister’s proposals.

The shadow Minister rightly mentioned the Ofcom report from 2010. The Ofcom report was indeed about copyright infringement activity. It refers to many measures and says that in some cases they can be effective, but it goes on to indicate that the evidence is mixed about the effectiveness overall. I am making the point that we  must be careful; and even if we are careful now, the situation may change in the future. We must of course keep this matter under review. I will keep talking to the industry; we will keep talking to regulators and other colleagues across Government.

I do not feel that it is necessary to add a clause requiring a consultation on the existing use of ISP and financial transaction blocking. Should I or the Secretary of State feel that having a consultation is necessary, we already have, as I am sure the shadow Minister is aware, the powers to do that.

I want to take a moment to highlight to the Committee what consumer protection methods we have and how they are enforced. Then I will say a little more about new clauses 10 and 11. Where illegal operators attempt to target British consumers, the Government and the Gambling Commission are confident that action can be taken, through the existing enforcement mechanisms, to disrupt and stop unlawful gambling. Those include action on illegal advertising, consumer education and, ultimately, prosecution. One of the commission’s key enforcement tools is to take action against third-party carriers of unlawful advertising in Great Britain. That has led to broadcasters, carriers of sponsorship and search engines removing unlawful advertising. It has proved very effective to date.

In addition and if needed, the Gambling Commission has powers to prosecute unlicensed overseas gambling operators, including in absentia. However, it is worth noting that the majority of large gambling operators transacting remotely with Britain-based consumers also have a land-based presence, so if the offshore group company was operating unlawfully, the commission could, depending on the specific circumstances, take action against personal management licensees common to both companies.

Player education is another important tool in combating the use of unlicensed gambling services. The remote reforms will enable the Gambling Commission to provide clear messages to consumers in Britain that they should ensure that they transact only with Gambling Commission licensed operators.

With all those tools already shown to be effective, I do not consider that ISP and financial transaction blocking would be appropriate enforcement mechanisms to include in the Bill, but I will of course continue to review the issue from time to time and take action should we feel that it is necessary to do so.

As for new clause 10, the EC Rome I regulation sets out the rules for determining what law governs any particular consumer contract. Rome I provides that consumer contracts will be governed by the law of the place of the consumer’s habitual place of residence unless the parties expressly choose otherwise. To the extent that the new clause is designed to set down a blanket rule about the choice of law or enforceability of a gambling contract, it conflicts with Rome I and therefore would be unenforceable in English law.

In the majority of cases, the effect of Rome I will be that English law governs the contract entered into by a British consumer with a foreign operator on its website. In the small number of cases in which a different law governs the contract, the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 still apply to those contracts. Offshore  operators cannot deprive consumers of the protections afforded to them under those laws. That is made clear in Gambling Commission licence condition 7, which requires licensees to satisfy themselves that the terms on which gambling is offered comply with those laws.

For those reasons, the new clause is not necessary to achieve the consumer protections sought by the hon. Member for Eltham and I do not intend to accept it.

New clause 11 deals with dormant accounts. I have heard from a number of hon. Members today on that important matter. The Government have been clear, and I have made it clear in Committee and on Second Reading, since my right hon. Friend the Member for Bath (Mr Foster) delivered his report on dormant betting accounts and unclaimed winnings, published in 2011, that we will consider his recommendations after the Bill has been enacted.

We do not need to legislate for any appropriate consultation on a change of licence condition. As the shadow Minister reminded me, we already have powers under the Gambling Act to impose a specific licence condition if we choose to go in that direction.

Photo of Gerry Sutcliffe Gerry Sutcliffe Labour, Bradford South 3:45 pm, 19th November 2013

I hear what the Minister is saying and I shall hold her to her word, because the issue is important. The right hon. Member for Bath has raised the matter on numerous occasions. We have an opportunity. I accept what the Minister is saying. If we do not need legislation, that is fine. However, can we please include the recommendations? It needs to be done. The money is there. It can go into all sorts of good works. It needs to happen.

Photo of Helen Grant Helen Grant The Parliamentary Under-Secretary of State for Culture, Media and Sport

I hear exactly what the hon. Gentleman says. His message is loud and clear. I take on board his passion and determination to get the best possible result. He mentioned the extra money that could go towards sport, which is a very good thing.

To make a commitment now to consult on the means to gather information would be premature in advance of considering the recommendations. If in due course we wish to progress the recommendations or we consider it necessary to enhance our understanding in any way, we will act to gather the information and consult in the appropriate way.

Photo of Clive Efford Clive Efford Shadow Minister (Culture, Media and Sport)

I am not pushing anything to a vote, but there are important issues that we will perhaps return to and they might be discussed in the other place. There are conflicting views about IP and financial blocking. I heard the evidence that suggested that it does not work, and the Ofcom report was prayed in aid in saying emphatically that it did not work. That is what the report said; that is not what it concluded. It stated that there were problems, but it was worth doing, and I think we should take that on board.

We do not suggest that the provision is a silver bullet that would solve the problem. It would be part of a panoply of things. The Minister spoke about education being part of it. Many things would be part of an enforcement and monitoring regime, and IP and financial blocking would add to its strength.

I take the point that the Minister has powers to consult on anything she likes, including IP blocking. On the issue of jurisdiction, if the Gambling Commission  cannot deal with matters under its own licensing code—if it cannot take information from other jurisdictions about activities that are not licensed by the Gambling Commission, although operators should be able to influence the Gambling Commission in terms of whether they are fit and proper operators to trade and advertise to customers here in the UK—the Minister should take that on board and include the provision in the Bill.

New clause 11 is a no-brainer. Why would we not include it? I am sure there is support on all sides. We need to be stern with the organisations. They will not cough up money easily, otherwise it would be happening now. We need to ensure that the powers are there, even if that means going back to the 2005 Act to make sure that the Secretary of State already has sufficient powers to require remote businesses, which will become part of the licensing regime when the Bill is enacted, to comply and contribute money that has been gambled by people within the UK. I do not suggest that they should contribute money taken from other jurisdictions, but money that is gambled here or left in dormant accounts or not claimed as winnings should be reported and made available for all the sorts of things that we have discussed.

As my hon. Friend for Bradford South, who has a tremendous amount of knowledge around all these issues, has said, “Please, Minister, take it away and make sure this happens”. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.