Joerg Hofmann Q&A: “The worst model is when a jurisdiction tries to reinvent the wheel”

Dr Joerg Hofmann speaks to Gambling Insider about European regulations and why restricting markets can only lead people to black markets.

in depth joerg hofmann 1

Should European countries look at the markets around them when they begin to look at regulating their own markets? Because cherry picking from those around can have both good and bad implications.

I think it's a good start because the worst model, in my opinion, is when a jurisdiction tries to reinvent the wheel within a microcosmic environment like Germany. I think it's a good step forward to reach out to other regulators and colleagues from other European jurisdictions. This could also include some regulators from the United States, although I believe that we are more mature in our experiences across the European Union.

Today, you can say that outside Europe as well. I think that copying some ideas is a good way to know what the tools of successful regulation are and to find out about the do's and don'ts of proper regulation.

The first thing to do is to define the goal of regulation, which is always player protection and fighting fraud, combating illegal markets or generating tax revenues. However, the most important goal of regulation is to channel traffic into the licensed market to protect the players there. If the channelisation rate is high, then something must be right. If it's not high, then something must be wrong. A good example of this is the current situation in the Netherlands. There is a discussion, and more than a discussion, to completely interdict non-targeted advertising. Advertising is one of the hot topics across all gambling-related jurisdictions, and if you look at Italy or Belgium, you can see a very aggressive approach to advertising.

The bottom line is, if you do not advertise, you cannot spread the message to the market that you are licensed, supervised and player-protecting. You can distinguish your offerings by doing it, so I think it's completely the wrong attempt and the wrong approach not to advertise. But regulators start to exchange knowledge and experiences, and sometimes it's really good to listen to them if you want to have an impact on shaping your own gambling regulation and see what works.

Same as with IP blocking and payment blocking, you can say it works. I remember in the old days when Norway was among the first to start payment blocking, they told me that it works. But the only result we see is the Norwegian banks and payment service providers are out of business. There are external groups providing transactions between players and operators. So, in an internet-facing black market, there is never a stop.

"Sitting in the office and making up your mind about what could be is never an approach that moves you forward"

Are there regulatory ideas throughout Europe that appear good on paper but don’t work in the real world?

So far, regulators have to learn that what they think is a good idea in practice doesn't always work. The same thing goes for restrictions. There are lots of discussions about imposing or implementing limits. I think it's a good idea to make sure that nobody can spend more money on gaming than they can afford. It's very important to address the financial risks and addiction problems, and it's certainly a top priority to identify these trends and protect the players.

However, if the player who makes the decision about where to play does not find attractive offers in their own jurisdiction because there are too many limitations (such as limits on deposits), they will look outside and find many black-market operators offering exactly what they want. As a result, the player moves outside the regulated area and the most sophisticated system of player protection will not reach out to the players. It's worth noting because it only works within the jurisdiction or within a system where the player is willing to play. The theoretical idea to shut down the black market is a brilliant idea if it works, but it doesn't.

So far, the attitude needs to change. A new generation of regulators should be more practically oriented, learning about the industry and talking to people. I think this applies to Germany – our Government should allocate a huge budget for our regulators just for travel, for the purpose of going to international conferences, speaking, listening and talking to colleagues in the industry to learn what's going on. Sitting in the office and making up your mind about what could be is never an approach that moves you forward.

What about the Kansspelautoriteit's (KSA) stance on the banning of non-targeted advertising in the Netherlands? Does that fall into the same category?

It's only non-targeted advertising if you can control the target group. Then, of course, it's admissible or tolerated. But I think even for non-target groups, the right approach is not to restrict advertising too much but to provide rules that everyone must follow. This includes no targeting of minors, mindful content and always telling the truth.

Additionally, the amount of advertising should not be too high. We've seen these developments in the UK. You can see around the corner on TV all the time. People, unions, churches and even regulators don't like it. Then, the Government responds and says, "we have to stop this. We have to reduce it." And they come up with a code of conduct, which never works before it's applied.

Regulators in the UK have adopted a similar method to the KSA, where no one under the age of 25 can advertise gambling and no sports stars can appear in any gambling advertisements whatsoever.

These are not minors but young adults who identify themselves with these people. I think this is nonsense because there is no evidence that this has any impact. And if you leave it to the black-market operators who practice and provide illegal advertising, at least on social media channels which reach out to this group, you leave a very vulnerable and targeted group of users out of protection because they may be targeted by competition.

There are some weird ideas about how to protect players and I don't know how people come up with these ideas. I think if there is a targeted group or a watershed, these things should be considered from time to time, but I don't think that's the right approach.

I think every group of people that is allowed to participate in games of chance because they have reached a certain age, which is usually 18 years, should be in a position to receive mindful advertising from licensed operators. That's so important that if they want to play, they know where to play. They should also be able to learn to distinguish between different coverings of protection and serious offerings and to understand licensing and, in some jurisdictions, the difference between legal and illegal offers.

Is there a blueprint that people should be following when you look across the European markets, including the UK, or is it just a great big mix?

"Why should a popular actor like James Bond be allowed but not a team player from a German football team?"

It's very difficult because it changes. Some years ago, we always talked about the Danish model, which I think serves as an example for regulation – even Germany, when they started in 2012 to establish the policy question gaining, this was copied from Denmark, and they had some good experiences with that.

The early thoughts of how to regulate gambling in 2005 in the UK, which ended up in the 2007 UK Gambling Act, were revolutionary and considered many issues mindfully. Then Italy became a good country when they realised they needed to collect some revenues, and although there was an earthquake, they learned to understand this industry step by step.

Until there was a U-turn in Denmark, taxes became an issue in Sweden, and if I'm not mistaken, it's just the other way around now. Taxes are more convenient than they used to be. Probably, I'm wrong, but you oversee these changes. The question before relating to these different approaches to advertising is something that goes up and down as well. We have similar provisions in Germany where you cannot use athletes or sports stars as brand ambassadors. Probably it makes sense, but is this really true?

Can you provide any evidence whether using athletes or sports stars as brand ambassadors could be harmful or not? For example, why should a popular actor like James Bond be allowed but not a team player from a German football team? I don't see a big difference. Perhaps regulators should focus on regulating how to advertise instead.

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