Non-disclosure agreements – a warning from the UKGC?

The Gambling Commission published guidance on non-disclosure agreements on 31 January and it confirms, if there was any room for doubt, that they are to be used with caution.

The issue of non-disclosure agreements is not limited to the gambling industry.  The trouble really began with the spotlight shone on the use of non-disclosure agreements in harassment and discrimination cases. But what started with Harvey Weinstein and Sir Philip Green is having an impact on the attitude to all settlements of claims between parties where there is a potential inequality of bargaining power.  The government confirmed on 14 February that it will be consulting on measures to improve the regulation of non-disclosure agreements and it is not yet clear what the scope of that review will be.

Against that backdrop, the Guardian reported that Ladbrokes had allegedly entered into an agreement with the victims of a player who stole to fund a gambling habit, which expressly prevented them from reporting the matter to the Gambling Commission. The Commission is conducting an investigation into the practice of operators settling with consumers on the understanding that they won’t notify regulators or law enforcement agencies about their concerns. Given the Gambling Commission’s ever-increasing focus on openness and fairness, the guidance that followed comes as no real surprise.

In short, the guidance provides that the Commission will consider that a non-disclosure agreement would be “improperly used” if its effect was to deter someone from making a report to the Commission, another regulator or a law enforcement authority or alter their report or co-operation with them. The Commission is also concerned if non-disclosure agreements deter someone from seeking or obtaining effective treatment for problem gambling.

Transparency

This guidance does not alter a gambling operator’s fundamental obligations under the Gambling Act and the Licence Conditions and Codes of Practice.  The Commission states that failure to follow the guidance may result in regulatory action. In fact, the only part of the LCCP that the Commission expressly relies on as the grounds for the new guidance is Licence Condition 15, which relates to the obligation on operators to make reports to the Commission.  There is a potential connection – the Commission can reasonably ask why a responsible operator would wish to prevent a player from making a report to the Commission if it intends to comply with its obligation to report in full – but it is not a complete regulatory framework for taking enforcement action on the issue of non-disclosure agreements. Nevertheless, if the industry does not comply with the guidance, operators may expect not only regulatory interest but also further regulatory changes to enforce compliance.

The guidance does not prevent operators using non-disclosure agreements in all circumstances.  It is clear that non-disclosure agreements may be valid in a commercial context, for example in a settlement with a supplier.

As regards to players (or the victims of crime for the purposes of funding players) the safest course is: (i) to enter into a settlement agreement without any limitations on disclosure; or (ii) where some limits are placed on disclosure to state in clear terms that it would not prevent the customer from reporting the matter to the Gambling Commission or any other relevant regulator or authority.

Author: Tamsin Blow, partner, CMS Litigation and Arbitration Group

Tamsin Blow is a partner in CMS’ Litigation and Arbitration Group. She specialises in regulatory, public law, commercial and media related disputes for the gambling industry and regulatory advice on anti-money laundering and social responsibility.