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Electronic gaming machines: lessons from Norway

In recent months both sides in the contentious debate around mandatory pre-commitment (MPC)—where players would have to pre-set the amount they were prepared to lose on electronic gaming machines (EGMs)—have cited 'evidence' from Norway to support their respective arguments. As this Parliamentary Library Background Note explains, supporters of MPC have pointed to Norway to argue in favour of MPC. Meanwhile, those opposed to MPC, including those in the clubs industry, argue that the evidence from Norway shows that MPC won't work.

How can the same evidence be used to support opposite sides of the argument?

Norway banned EGMs in July 2007 in response to ongoing concerns over the harms from problem gambling. EGMs had become the subject of tighter controls because of concerns they contributed to problem gambling in Norway. In 2003 the government began efforts to impose greater control on gaming machines but these were met with considerable resistance from the gaming machine industry. In January 2009 new gaming machines—known as video lottery terminals (VLTs)—were introduced under the control of the state operator, Norsk Tipping. These VLTs were configured to make them less harmful, including: a mandatory limit on the amount players could gamble, mandatory breaks in play, lower bets, lower prizes and player exclusion options. Players were also required to use a cashless smartcard to play and all machines were connected to a central server. These machines became increasingly popular; the number of active players rose from 85 000 in 2009 to over 99 000 in 2010 (see Norsk Tipping's 2010 annual report, p. 67).

So, what evidence from the Norwegian experience has been cited to support MPC? A study by Ingeborg Lund in the Journal of Gambling Studies, found that following the ban on EGMs, key gambling indicators, including total gambling participation, gambling frequency and gambling problems in Norway, all fell—in some cases significantly. Interestingly, Lund found no evidence of the development of an illegal EGM market, or of substitution of EGMs with other types of gambling, such as internet gambling.

However, opponents of MPC point to other findings that would appear to contradict some of Lund's conclusions. They argue that there was actually an increase in internet gambling in Norway after the removal of slot machines, as well as an increase in reports of gambling harm associated with this mode of gambling.

Gambling data reported by Norsk Tipping in its annual report showed that participation in internet gambling had increased and calls to gambling helpline services from internet problem gamblers nearly doubled between 2008 and 2010, although the numbers were still small. An increase in the proportion who were classed as problem gamblers was also observed, rising from 1.9 per cent in 2008 to 2.1 per cent in 2010. Players at moderate risk of developing a problem also increased, from 2.1 per cent in 2008 to 2.3 per cent in 2010.

Conversely, by 2010 a higher proportion of the population in Norway were reporting no gambling problems; the proportion without problems rising from 85.2 per cent of the population in 2008 to 87 per cent in 2010. There was also a decline in the proportion of low-risk gamblers, from 10.9 per cent in 2008 to 8.6 per cent of the population in 2010.

So, how are we to interpret what appear to be conflicting evidence? As the paper points out, some of the shifts detected in the survey data are relatively small, so how much can be gleaned is uncertain. In the case of problem and moderate risk gamblers, an increase in prevalence of just 0.2 per cent was considered by Norsk Tipping to be 'within the margin of error' from the 2008 survey. Secondly, the methodology used by the survey company, Synovate, was revised between the survey dates, raising questions over the comparability of the two surveys.

Thirdly, data on utilisation of helpline services may not be the best indicator of problem gambling prevalence. As noted in this previous Flagpost a significant proportion of problem gamblers never access help services, so relying on such data as a proxy for gambling problems has only limited usefulness. Further, the increase in participation in internet gambling may simply reflect an ongoing trend towards internet-based technologies, rather than a substitution effect.

The paper notes there are some key differences between Australia and Norway that raise questions over how comparable the two are when it comes to the issue of EGM reform. These include, among others: differences in the types of EGMs with Australia's configured for more 'intense' play; differences in where EGMs are located—Norway's EGMs are located in supermarkets, train stations and petrol stations, ours are in clubs, pubs and other hospitality venues; and differences in the internet gambling environment—Australia prohibits internet casino games, but these are permitted in Norway.

The paper points to other useful lessons that can be learnt from Norway. Firstly, the reduction in harm from gambling following the EGM ban in Norway strongly suggests that EGMs were significant contributors to these harms, and helps justify arguments for greater EGM controls. That Norway successfully replaced its EGMs with ones configured to reduce harm but which have gone on to be popular among players may reinforce the view that greater controls on EGMs can be achieved without trading off player enjoyment. It also underscores the ability of governments to overcome vested interests, although progressing such reforms will require a sustained effort. A further lesson is that the trend to online gambling will continue, regardless of whether or not MPC is implemented here. This presents problems for policy makers, as many Australians currently gamble on overseas based websites, beyond the reach of our regulatory regime. How to minimise harm and support responsible gambling initiatives will be particular challenges in this environment.