Dark Patterns in Gambling?

In a recent article, we looked at the concept of so called “dark patterns” and the increasing scrutiny it is receiving from regulators in the UK and EU across consumer law, competition law, advertising and data protection. In this article, we focus specifically on the application of dark patterns in the gambling industry and the pressure the sector is coming under to address the use of these practices.

In the last week alone, the Behavioural Insights Team published its policy recommendations following its “Behavioural Risk Audit of Gambling Operator Platforms”. This report identified 25 design features on gambling operators’ websites which it claims put consumers at risk of making poor choices. A few days later, Citizens’ Advice published a report called “Tricks of the Trade: How online customer journeys create consumer harm and what to do about it”. The report looks at online gambling, alongside Buy Now Pay Later and subscriptions traps, as a high-risk market and business model where it argues bespoke legal or regulatory interventions are needed. We have also heard the Gambling Commission suggest that it is ramping up its teams and focus in this area. So, what are dark patterns and what are the potential implications for the gambling industry?

Online choice architecture and dark patterns – what are they?

Dark patterns are a subset of a broader term, “online choice architecture” (OCA). If OCA is something that you have not heard of, it is something that you will have at least experienced personally. Essentially OCA is the designs, systems, and procedures that a website or app implements to influence an end user’s decision making. OCA is a neutral term – it isn’t necessarily a bad thing and can in fact be helpful to a consumer. There are, however, certain forms of OCA that are considered by regulators to be deceptive, confusing or misleading and that potentially cause consumer harm. These, we call “dark patterns”. For further details on the types of OCA and dark patterns, and their categorisation by the Competition and Markets Authority (CMA), see our article here.

Increasing regulatory scrutiny

OCA and dark patterns have increasingly started to receive regulatory scrutiny in the EU and in the UK. In the EU, an express ban on dark patterns has recently been introduced by way of the Digital Services Act (DSA), which was adopted in October 2022. This follows the EU Commission’s publication of a 300 page study “Behavioural study on unfair commercial practices in the digital environment Dark patterns and manipulative personalisation” in May of this year, which is driving action in the European Union.

Meanwhile, the European Data Protection Board published guidelines earlier this year which offer practical recommendations as to how to avoid dark patterns in social media interfaces that infringe on GDPR requirements (specifically, in respect of ensuring fair processing, transparency, and data minimisation). You can find further details in respect of both in our article here.

Whilst there are no UK laws that explicitly reference dark patterns, this is not to say that such activities are unregulated in the UK. Depending on how a particular activity is undertaken, a range of laws and rules could be breached.

The CMA’s focus to date has been on the impact that dark patterns may have on both competition and consumer protection laws. In respect of the latter, their key concern is that such activities could constitute unfair commercial practices, which are prohibited by the Consumer Protection from Unfair Trading Regulations 2008 (CPUT Regulations). There is also scope for these practices to put a business in breach of advertising rules and data privacy laws, in the form of the UK Code of Non-Broadcast Advertising (the CAP Code) and the Data Protection Act 2018 and UK General Data Protection Regulation, respectively. The Advertising Standards Authority also issued a guidance note earlier this year on dark patterns and which techniques could fall within the remit of advertising regulation.

Dark patterns and the online gambling sector

Whilst compliance with consumer laws (including the CPUT Regulations) is important for any business, it is particularly the case for those regulated by the Gambling Commission of Great Britain. It is a condition of all licences issued by the Commission (under licence condition 7.1.1 of the Commission’s Licence Conditions and Codes of Practice (LCCP)) that licensees must ensure that they do not commit any unfair commercial practices within the meaning of the CPUT Regulations at any stage of their interactions with consumers. Likewise, licensees are obliged to comply with the requirements of the CAP Code (under social responsibility code provision 5.1.6 of the LCCP).

In his speech at the CEO Briefing at the end of November 2022, Andrew Rhodes, CEO of the Gambling Commission, alludes to the Commission having these issues on its radar when he said: “We will spend more time looking at offers, terms and practices that can disadvantage consumers and which go against our licensing requirements and we plan to increase the numbers of people we employ in this area. It also means you will see more focus from us on research that focuses on people too. Everyone experiences gambling differently and we want to do more to understand that, highlight it and discuss it.”

This comes as little surprise taking into consideration the attention that the prevalence of OCA practices in the online gambling industry is receiving within other circles.

BIT report into online gambling

The Behavioural Insights Team (BIT), also known as the Nudge Unit, was set up in 2010 by the UK Government to inform policy, before being partially privatised in 2014 by way of a joint venture with the charity Nesta, and finally wholly owned by Nesta in 2021. Its Gambling Policy and Research Unit, which is funded by the Gambling Commission from regulatory settlements, recently undertook an audit of 10 gambling websites between March and April 2022.

Their report (‘Behavioural Risk Audit of Gambling Operator Platforms’) was published in July 2022. The key concerns highlighted by the report touched on various dark patterns, including “sludge”, “dark nudges” and “information overload.” The findings included:

1. BIT found that it took longer, and was more difficult, to close an online account than to open one. They claimed this is due to a lack of clear and accessible instructions about the cancellation process, and minimal steps and frictions on registration.
2. Gambling management tools were often difficult to find, with the relevant webpages including too much information, and the process of using a tool exhibiting frictions. BIT found that it took, for instance, on average three more actions to set up a deposit limit compared with placing a bet. In some cases, after placing a bet the customer was prompted to bet immediately again, with a sense of urgency created by the presence of a countdown clock to the relevant upcoming event.
3. Several websites had a minimum account balance needed to withdraw money, which BIT claimed could hinder the closure of accounts.
4. BIT found that customers often received no feedback about the time or money they spent gambling during game play.
5. Websites often used defaults that were not in the customer’s best interests, for example including defaulted stake and quick deposit amounts, both of which were greater than the minimum amount.

It should be noted that, whilst BIT alleges such practices negatively impact consumer outcomes and competition, they are not claiming that such practices are in breach of the law. BIT’s key concern is to identify design features that may cause consumers to make choices not in their best interests, and to work with the industry to find appropriate solutions.

Following the report, BIT held workshops with various stakeholder groups, including operators, in order to devise a shortlist of policy recommendations. In November 2022, BIT published five recommendations for immediate action, which are designed to address the findings in the report and include:

1. Customers should be able to unsubscribe from marketing in one click and not be signed up to additional products or sister companies.
2. Customers should be kept informed of their account activity to reduce the risk of fraud.
3. All gambling management tools should be easy to locate, evidence based, and without visibility of adverts.
4. It should be as easy to close an account as it is to open one.
5. Operators should be required to contribute to testing what works, and sharing their results publicly.

Given the funding BIT receives from the Gambling Commission, it would be safe to conclude that the Commission will be considering these recommendations carefully and we expect at least some of these issues to be given focus in upcoming compliance assessments.

Citizens’ Advice report

On 1 December 2022, Citizens’ Advice published a new report on online choice architecture called “Tricks of the trade: how online customer journeys create consumer harm and what to do about it.” In the report, Citizens’ Advice claim there is a strong case for regulating digital design and argue for an outcomes-based framework which requires businesses to “put consumers at the heart of design”. It also makes a case for certain design practices to be banned. The report looks at online gambling as one of three “high risk business areas”, alongside “buy now pay later” and subscription traps.

The recommendations in the report are split into two parts. The first set of recommendations apply broadly to all B2C websites. These include:

1. The government using the forthcoming Consumer Bill to create a requirement on business to take consumers’ best interests into account when considering digital design, along the lines of the FCA’s consumer duty.
2. The government using the Consumer Bill to place a duty on sectoral regulators, such as the Gambling Commission, to consider the case for introducing additional rules and guidance around how firms in their markets make decisions around design.
3. The Department for Business, Energy and Industrial Strategy should take forward a review of online design practices which are likely to be manipulative and move to ban these.
4. The CMA should set out guidance for business on best practice around features such as scarcity claims.

The recommendations made in the Citizens’ Advice report specific to the online gambling industry include:

1. DCMS ensuring that the gambling white paper adopts “safer by default” as standard practice for online gambling platforms, including reality checks, stake limits and deposit limits being applied automatically on sign-up, with an option for customers to opt-out rather than opt-in.
2. DCMS should look at how adaptive features, which change according to consumers’ gambling habits, can be used to help protect the most vulnerable customers.It gives an example that those currently in debt or at identifiable risk of falling into it should not receive targeted advertising or bonus offers.
3. The gambling white paper should include a call for design changes that promote the best interests of consumers, including increased clarity about when real gambling is happening and real spend (opposed to bonus or free play) is taking place, limits on the number of bonus offers a customer is exposed to and removal of all barriers to withdrawing winnings.

Implications for the gambling industry

Dark patterns are high on the CMA’s agenda. It is ramping up its data science unit and in the past week has launched an investigation into the Emma Group in connection with its use of urgency claims, such as countdown timers. It has also launched a consumer-facing campaign called “The Online Rip Off Tip Off” which alerts consumers to “sneaky sales tactics” used online by retailers.

Whilst the enforcement action launched against various remote operators by the CMA in 2017 and 2018 seemingly put to bed certain practices industry-wide, it should not be assumed that the remote sector won’t once again be in the CMA’s cross hairs, simply because it has been so recently. Operators should also be reminded of the UK Government’s proposals to vastly enhance the powers the CMA has - enabling it to directly enforce eye wateringly high fines of up to 10% of global annual turnover for consumer law breaches – when assessing the risks here.

The CMA attention, and the recent reports from BIT and Citizen’s Advice which put online gambling websites under the spotlight for these practices, could also ultimately lead to action from the Gambling Commission. Whilst the Commission could look to implement new regulations or guidance to prohibit certain activities in the longer term, the fact that non-compliance with consumer law and advertising codes may put a licensee in breach of its licence (and thus open the door to the Commission to exercise its extensive enforcement powers) alone should give operators pause for thought.

Whilst AML and safer gambling concerns remain at the very top of the Gambling Commission’s agenda, we are seeing continuing focus on consumer law and fairness issues from the Commission, including targeted compliance assessments in this area, as well as consumer law issues forming a part of licence reviews (as the recent BetVictor case illustrates). As noted above, the Gambling Commission has also reinforced in recent speeches that this remains a priority area for them.

Takeaways

The idea of “fairness by design” - planning a businesses’ processes and use of technology with consumer law compliance and fairness at its heart – is fast gaining traction in the gambling industry and beyond. With dark patterns receiving increasing regulatory attention generally across all sectors, coupled with the scrutiny the online gambling industry specifically is coming under for these practices, remote gambling operators would be wise to consider their website and app design across the entire customer journey – from advertising and sign-up through to termination of the relationship - and whether changes should be made now, before regulatory intervention and wider claims ramp up in earnest.