(Category: The future of affiliate marketing)
Posted by joginvik
Saturday 10 March 2012 - 13:05:47

As the remote gambling industry continues to face up to the challenges posed by the newly regulated European environment, Stephen Ketteley of DLA Piper discusses how affiliates, similarly, need to adapt.

THE EXTRAORDINARY SUCCESS of the remote gambling industry and, by proxy, the various affiliate marketing networks that service it, owes as much to basic online marketing capabilities as to affiliates?? open willingness to provide on-the-ground assistance in jurisdictions where operators would themselves fear to tread.

It is an established principle that where a particular jurisdiction takes issue with the supply of remote gambling services to its citizens, then it follows that the marketing of such services within a jurisdiction is likely to constitute an offence. But as the industry faces up to multi-jurisdictional regulation, the comfort that remoteness of supply provides continues to be eroded.

This article considers the consequences to affiliates of the march towards European regulation.

The on-going conflict between lawyers and ???marketeers??

Leading up to the implementation, in Great Britain, of the Gambling Act in September 2007, the authorities made it clear that certain marketing messages aimed at drawing attention to certain remote gambling businesses were prohibited if they contained explicit references to money or money??s worth. As such, any mention of bonuses, jackpots and the like were off limits until the law finally came into force.

Always remembering that the remote gambling industry is comfortable with a myriad of local laws and the challenges of applying such laws to their activities offshore, many sought to ignore the aforementioned prohibitions and continued regardless. However, at the time, the mainstream media became quickly aware they may be publishing prohibited advertisements and committing an offence themselves.

I recall being asked to attend a meeting by a client, a mainstream media company, where its in-house lawyer and its marketing director where at loggerheads with respect to whether they could service an offshore operator who was looking to use their services to undertake what was, in my view at the time, prohibited advertising.

The operator was happy to pass the local?? risk onto the media company and offered them an annual retainer worth ten times what they would commit to spend if the marketing company insisted on abiding by the content-related rules. Needless to say, the lawyers won the argument and, with far more at stake, the media company wisely decided to take the ten percent and sleep easy.

This story illustrates an interesting dilemma that the industry faces - namely, reconciling the strict legal position with the commercial reality. It can be difficult for operators to successfully compete against one another when they have dramatically different attitudes to compliance with local laws. Some operators wilfully ignore marketing regulations or restrictions in order to get their message across. Indeed, it was arguably unrealistic for lawyers to demand unwavering compliance with all relating marketing restrictions by the remote gambling industry when to do so could simply make them uncompetitive. However, it may be that things are set to change.

The advent of national licensing regimes

Any participant in the remote gambling market is being forced to assess the impact of the rapidly regulating European market on their involvement. Hitherto, many of these stakeholders have been able to create risk rationales based upon the remoteness of supply and the lack of enforcement appetite or ability. But with regulation, such rationales are becoming defunct and the advent of regulation will have a direct effect on the way operators and their affiliates interact with the public.

The application of advertising codes of practice in the UK to the gambling industry has continued to cause operators problems and it is the behaviour of many operators?? affiliates that can be considered to be the root of such problems. The advertising codes do, in theory, apply to all ???advertising?? (and you can construe that term very widely). The reality is that the Advertising Standards Authority (the ASA, the UK??s advertising regulator) has limited ability to pursue any third-party who is supplying marketing communications into the United Kingdom from offshore. Some remote operators, however, may have local presence within the jurisdiction enabling enforcement risk to bite (e.g. those with retail estates within the UK). They cannot ignore advertising rules and have, by and large, tried to abide by them (weak sanctions aside). Thus, a number of multi-national operators are already geared up to cope with the marketing restrictions similar to those new, local laws that will apply to them in other jurisdictions. As European nations continue to introduce regulation, operators will need to analyse and understand the jurisdictional nuances between them, as failing to do so can lead to reputational damage or regulatory censure. Affiliates will need to be kept closer than ever before.

Regulation is catching up with technology (again)

In March 2011, the ASA??s remit was extended into the online environment. At the time, I attended a fascinating session at the ASA in which operators in attendance expressed some dismay at the suggestion that they should be responsible for the content of marketing communications published by their affiliates as they claimed that their policing such communications was literally impossible. It was somewhat predictable that the ASA??s response to this was, ???hard luck, it is your responsibility to police your marketing affiliates???. Regulation will have limited scope to accommodate commercial convenience, particularly where such emotive topics such as social responsibility are involved.

Such issues were again highlighted by the ASA successfully banning an advert run through Facebook by an 888 affiliate. Whilst the content of that advert (Addicted to slots? was fairly extraordinary, more so was the way in which an advertising regulator successfully took extra-territorial action to effect the removal of a marketing communication yvithin an international social network. Facebook tried to distance itself from the issue by blaming the operator who, in turn, blamed its agency. In reality, both the operator and Facebook fell short. Shortly after this, the social network clarified its position on gambling ads.

The adaption of affiliates to the regulatory market

The challenge for affiliates to remain commercial and yet abide by any policies put in place by their paymaster operators will become an interesting one to observe. The passage of new local laws that specifically apply to affiliate activities will cause a number of them to reflect long and hard where such laws are passed in their home nation. For example, some affiliates in the soon-to-be regulated Spanish market are dismayed at their apparent joint and several liabilities for any unlicensed operators?? actions where said affiliates provide local marketing support. Indeed, the Italian system provides a further, interesting insight into how things may develop elsewhere as operators need to clear much of their marketing literature with AAMS before publication (this includes banner ads). One wonders how this will develop and whether the days where an affiliate was supplied tools and materials by the operator and then left to its own devices are numbered.

Local laws aside, it is also likely that the compliance will be imposed upon affiliates by operators through the installation of affiliate management policies. As local regulation continues to develop, the marketing teams will again find themselves having to relent to the lawyers?? views. As operators seek and obtain licences throughout European jurisdictions, they need to be clear on any conditions that may be attached to their licences that may prescribe the type of marketing that can and cannot be undertaken. Furthermore, social responsibility remains a key component of many licensing initiatives and the consequences of breaching licence conditions through failure to scrutinise the behaviour of affiliates could be considerable.

The associated compliance represents yet another expense of regulation for operators as they may need, on a jurisdiction-by- jurisdiction basis, to assess local marketing laws (which often sit in legal frameworks entirely independent of gambling regulations) and be prescriptive about what affiliates can and can??t do, have clear terms and conditions in place and make sure they actually monitor what affiliates do.

The application of such data protection laws will become more pertinent as they become easier to enforce at a local level. Again, the behaviour of affiliates will need to be closely monitored by operators that, as regulated entities, have a heightened sense of responsibility when it comes to their use of personal data.

Finally, with regulation of gaming could come the ultimate challenge for affiliates - being regulated themselves. Junket operators already require licensing in a number of places - is it really beyond possibility for such a burden to extend into the online arena?

Self-regulation - the industry must take the lead

The gambling industry continues to be challenged on a political and/or moral level and can help itself by policing the content of marketing communications published in its name. Any advert that can even be remotely considered as ???socially irresponsible?? must be avoided at all costs as, whilst there may be a short-term gain, there will almost certainly be a long-term loss. Various regulators are clear that the industry must control its affiliates and will hold operators responsible if they don??t. There will always be those that assess the lack of meaningful sanctions available to advertising regulators and take their chance. But as compliance with advertising restrictions becomes an integral part of on-going licensing obligations, the need to comply becomes all the more important for all involved.

???With regulation of gaming could come the ultimate challenge for affiliates - being regulated themselves. Junket operators already require licensing in a number of places - is it really beyond possibility for such a burden to extend into the online arena????

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