January2017

The perils of following suit

Given the intensity and hostility of political and media scrutiny of gambling at present, one could be forgiven for thinking that our industry has reached some sort of nadir. The twin threats of regulatory tightening and tax increase have come to haunt industry executives in recent years – with the two combining to erode operator margins. Yet if political-regulatory incursions have created irritation in boardrooms, a far more threatening spectre may be waiting in the wings – litigation.

Lawsuits against gambling companies are nothing new. In their 2014 review ‘Status of Canadian Compulsive Gambling Litigation’, Igelman and Kelly cite numerous cases in North America from as far back as 2001 where gambling operators have faced legal challenges for failing in their duty of care to protect customers from harm.

A number of these cases were thrown out by the judiciary – sometimes (as with Poulos et al. vs Caesars World et al.) through an absence of specificity. Yet such cases are not necessarily frivolous and several have been settled out of court by the defendants. In one particularly colourful example, Lisa Dickert sued the Ontario Lottery and Gaming Corporation after she crashed her car on the way home from a “52-hour gambling binge at the Point Edward Casino”. Presumably the fact that Ms Dickert had previously self-excluded from the casino did not help the OLGC’s case and they chose to settle.

Such instances illustrate the importance of maintaining effective controls but more worrying are those suits where the gambling itself is alleged to pose a public health risk. The charge that specific features or modes of gambling (usually slots) are inherently harmful seems to echo the tone of tobacco litigation and strikes at the very heart of how the industry makes its money.

In 2001 a CAD $578m class action was brought against Loto-Quebec in relation to harm arising from the playing of video lottery terminals (and the absence of public health warnings). In 2010, the action was settled out of court for CAD $50m with Loto-Quebec anxious to avoid risking a precedent judgement.

In 2017, Aristocrat and Crown Resorts are joint defendants in a lawsuit in Australia’s Federal Court brought by former pokie player (and gambling addict), Shonica Guy. Ms Guy’s claim is based upon the premise that “misleading features” such as ‘losses disguised as wins’ and the illusion of ‘near misses’ on certain Aristocrat machines contributed to the development of her gambling addiction.

Meanwhile in Newfoundland and Labrador in Canada, the Atlantic Lottery Corporation faces litigation in relation to allegations that VLTs were “programmed to create cognitive distortions of the perception of winning, intended to keep the consumer engaged and losing money”.

While the impact of litigation to date has been relatively modest, a second development may well raise the stakes. Advances in the study of the neurological effects of gambling are shedding new light on the causes of gambling addiction. In particular, such studies may in time influence where courts perceive the problem in problem gambling to lie – with the player, the game or the adequacy of protective measures.

Earlier this month, a team drawn from Cambridge University and the University of British Columbia published a study of the brain’s responses to gambling cues. The headline findings were that (in the 19 cases examined), participants exhibited similar neural activity for craving as identified in similar studies of substance addiction. The migration of pathological gambling from impulse control disorders to substance-related and addictive disorders within the fifth edition of the American Psychiatric Association’s Diagnostic and Statistical Manual (DSM-5) may prove to be a salient development in how gambling addiction is perceived.

In this country, the need for evidence-based decision-making is commonly evoked as a defence against regulatory intervention – but perhaps operators should be careful what they wish for. The more we learn about why some people develop problems with their gambling – and why prevalence rates (and possibly harm) appear higher with particular modes of gambling – the more evidence accumulates that might one day find its way to court.

In recent years, a number of studies in Great Britain have identified cohorts of problem gamblers or customers exhibiting concerning behaviour. Whether individuals identified in such studies (or via the much-vaunted diagnostic algorithms of leading operators) should be allowed to continue gambling unchecked would appear to be a fairly straight-forward ethical question but legal considerations are more complex.

Litigation against gambling companies in Great Britain has been sporadic and largely unsuccessful. Dr Margaret Carran, an expert on gambling law at City University in London believes that under current legislation, a claimant would need to prove that the actions of a gambling company caused harm – and causation is notoriously difficult to prove.

Of course, it is not all about winning the case. By simply shining a light on the gambling industry, litigation has an effect. The Shonica Guy suit in Australia is backed by the anti-pokies lobby group, the Alliance for Gambling Reform; while in Britain, Tony Franklin who campaigns on gambling issues, went on Twitter this week to recruit litigants for a Fixed-Odds Betting Terminals suit: “If you want to be added to a list for a potential #FOBT class action lawsuit then like this tweet / message me /DM me.”

Caption: anti-gambling campaigners in Britain are taking a leaf out of Australia’s anti-pokie playbook

As things stand, it seems unlikely that we will see successful litigation in this area (in Great Britain) any time soon; but things can change. The current cases in Australia and Newfoundland are not the first to explore the question of who is to blame for gambling-related harm and they won’t be the last. Meanwhile, neuro-science may be gradually tilting the balance in favour of the plaintiff; and a successful suit in one jurisdiction may in time lead to similar outcomes elsewhere.

The industry has achieved progress in recent years in terms of social responsibility but it hasn’t always been clear what impact corporate initiatives have had in terms of harm reduction. This is why the Gambling Commission has been urging licensees to demonstrate effectiveness in this area (rather than simply effort). While not all operators have welcomed these exhortations, the threat of litigation ought to provide an incentive for the industry to get ahead of the curve.

At a time of formal review, Britain’s gambling industry will wish to present itself in the most positive light possible. It seems likely that the recent DCMS call for evidence will have resulted in a deluge of partisan and contradictory submissions (both from proponents and opponents of gambling expansion) rather than a balanced weighing of the facts. This is natural; yet far-sighted operators will also be considering the perils of challenges through the courts. In this area, early adoption of insight and intellectual curiosity on harm are likely to prove considerably more valuable than spin.

The old and rather simplistic debate between blaming the person or the game is moving on. This is undoubtedly positive in terms of addressing harm but it also puts the spotlight squarely on the effectiveness of social responsibility measures. In this changing environment, the rewards for developing effective harm minimization programmes are likely to be much higher, but the penalties for failure could be significantly greater.