Mario Galea CEO

1. Consumer Protection Policy Framework Online Gaming Responsible Gaming Day European Parliament 17 April 2008 Mario Galea CEO

2. The Agenda • WHY do we need a consumer protection policy for online gaming? • WHAT policy to ensure adequate consumer protection? • HOW can one implement effective consumer protection • Is online gaming different from other forms of gambling therefore requiring the same or different measures for consumer protection?

3. ‘Universal’ Principles of Responsible Gaming • To ensure that all games are fair and delivered in a transparent manner • To protect children and vulnerable persons • To keep gaming free from crime, corruption and money laundering How are these being translated into effective measures

4. Critical Regulatory Factors • Regulatory power is delegated through the national gaming policy instituted in legislation. • The regulator must be the guardian and a tool to implement policies and a hierarchy of objectives • Today the dynamics of the online gaming industry are so volatile that requires a regulator to have in depth industry knowledge • Knowledge of the supplier and consumer • Must know where real and potential risks lie (assessments) • Knowledge of control points of online gaming system (production to consumption)

5. The Regulator The Player The Operator The Balancing Forces Model Supranational (EU, Regulatory Fora) Intergovernmental Regulatory Domain Government, Policy makers, Enforcement Agencies . . . Information and Awareness Programs – offers preventive and curative measures Control Access, Monitoring and Supervision mechanisms Co and self Regulation, Pursue Profitability Expects maximum protection Consumer Domain The players, family, communities, agencies, NGOs…. Industry Domain Other Operators, ancillary service providers and their lobbies. . . Increasing attractiveness of Gaming Product and accessibility Seeks economic benefit

6. The Regulator The Player The Operator Unbalancing the Forces: Supranational (EU, Regulatory Fora) Intergovernmental Monopoly Domain Consumer Domain The players, family, communities, agencies, NGOs….

7. The Regulator The Player The Operator Online Gaming Regulation Challenge Supranational (EU, Regulatory Fora) Intergovernmental Can never under control Does not have jurisdiction Requires co-operation from peer regulators at the point of consumption Can be fully under control This is not the case today Industry Domain Other Operators, ancillary service providers and their lobbies. . .

8. A Good Policy • The first step towards a good regulation policy of any sector, is the separation of the operational from regulatory functions. • One cannot realistically pursue economic profits whilst advocating policies that restrain and ‘promote’ responsible consumption, in the name of consumer protection, at the same time. Irrespective of how those economic profits are distributed

9. Policy - Regulatory Power Meter

10. The Predominant Gaming Policy Abnormality Protection by Monopolisation of supply within national borders Prohibiting supply From outside national borders

11. Limited Knowledge Availability for Policy Formulation • The incentive so far to research problem gaming has been largely to justify existing market structures. • There is only limited understanding and research to establish cause-effect relationship, linking potential problem and pathological gaming to availability and access to gambling, and more specifically online gaming. • There is even less understanding of the extent to which policies are effective in terms of mitigating adverse consequences associated with problem gaming in a online gaming environment (e.g. Player exclusion) • Often the attitude that “something must be done” leads to “symbolic” actions undertaken even when there is no hard evidence to substantiate the outcomes of the remedies being considered • How similar or distinct is online gaming from traditional gaming?

12. Traditional vs. Online Gaming • Responsible gaming Benchmark Level – should we use the same benchmark? Traditional Gaming Online Gaming Onsite Supervision More Research Knowing the Player Proven methods of player protection

13. Self Regulation • Should be a private governance system where operators cooperate to set and meet standards • Such system may be: • to avoid government regulation or • to enhance an industry's reputation where it is crucial to profits • How much is self regulation effective or is it good enough (when compared though other forms of gaming) Control Access, Monitoring and Supervision mechanisms Increasing attractiveness of Gaming Product and accessibility Seeks economic benefit

14. Example: Actual vs Theoretical Payout • Most Online casino websites claim their best monthly payout • This is known as Actual Payout which is a meaningless indication of game fairness • Slot machines are tested for actual/theoretical payout index known as volatility which is a confidence level that vary according to the number of games played.

15. Standards vs Self Regulation • Other forms of gaming do not have self regulation, but technical standards • Self Regulation cannot replace technical standards • Self regulation has turned into a marketing tool promoting competitiveness rather then responsibility. • The consumer is confused with the information provided hindering him from making a good judgment

16. Responsible Game Policy • The basis of player protection in slot games is the definition of a game: Player Session A Game Another Game Idle Mode Idle Mode Idle Mode Game Element Cash In Start of Game End of Game Termination Cash Out Player cannot wager more credit during this period

17. Malta’s Position on the Power Meter Achieved Framework for Control Points and Mechanisms for Player Support Desire to be more Preventive than Curative

18. Current measures undertaken by LGA towards consumer protection in online gaming • Operators’ side, such as:- • Ensure that players deposits and winnings are safeguarded. • Ensure that games are fair (prescriptive and interventional measures) • Players’ side, such as:- • Players can set limits on time and spend • Ensure that players complaints are dealt with • Public awareness, e.g. of risks associated with gaming, of fraudulent gaming opportunities (e.g. email) (empowering and support measures)

19. Achieving the Regulator’s Player Support objectives • Focus on preventive rather than curative measures • Preventive measures require evidence and knowledge of the causal effect linkages • Effective consumer protection is achieved when there is a direct relationship between the consumer and regulator using the same consumption channel/s (access, independence, psychological and timeliness factors) • Develop relationships with the larger Consumer Domain in order to provide support to players who need it • Online consumers are more likely to file complaints than traditional players. • Continuous development of vertical CRM systems and resources to address specific needs of online gambler

20. A long way to go. • Only Malta and the UK currently have established independent gaming regulators. • Other Member states declared to have started the process of restructuring to provide for such institutionalisation of gambling regulation policy (e.g.: Sweden, Italy, France) • Independent gaming regulation is in its infancy as utility regulation was in the 90s and its policy design and mechanisms would necessarily have to go through the pains of transition. • Independent gaming regulation is not equal to de-regulation!

21. EU Level • Till today, the distinction of online gaming has only served for exclusion from internal market initiatives – it needs to be owned and governed at EU Level • Establishment of independent regulators – prioritisation and institutionalisation of regulatory responsibility for consumer protection • Administrative co-operation between Member States in order to enhance the effectiveness of consumer protection polices and measures (formation of regulatory group) • Commissioning of systemic research and education programs to improve understanding and policy formulation

22. Thank You Email: Mario.Galea@lga.org.mt Website: www.lga.org.mt