Split the games, regulator says

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The National Lottery should be split between several operators in future, according to proposals from the regulator, the National Lottery Commission, published at the end of September in response to the DCMS’s licence review consultation.

The NLC wants to be able to award licences to different private companies to run different types of games. It expects to leave the main Lotto game, which it considers to be a ‘natural monopoly’, in the hands of a single operator, but would then envisage perhaps awarding separate licences to other firms to run scratch-cards, internet-based games and so on. Brian Pomeroy, the incoming chair of the NLC, explained the advantages of this system: ‘There would be more turnover of licences, the lottery would not be so identified with a single company, and you’d be able to see how different companies operate – technically known as “competition by emulation”.’ The present lottery operator, Camelot, fiercely opposes such reform. Corporate affairs spokesperson Andrew Jones called the NLC’s proposals anti-competitive, saying ‘it won’t encourage bids – in fact it will deter people from bidding’. Camelot is backing an alternative option from the Government’s consultation paper, the ‘permanent operating company’ model.

The NLC disputes Camelot’s view that its proposals amount to a break-up of the lottery. Pomeroy said: ‘This is not a fragmentation. We envisage a handful of licences built around like-games or like-technologies. The NLC would go for public consultation at the time on what the package and structure of licences should be.’ The NLC has also proposed that there should be provision for a negotiated transfer of operating assets from old to new franchisee, to smooth the transition process and lower the entry risk for potential bidders. Alongside its central proposals, the regulator has backed several other options in the review paper. These include:

• keeping lottery regulation separate from the rest of the gambling industry, with its own separate regulatory body
• expanding the number of commissioners from three to, for example, seven, with the ability to co-opt even more during franchise bidding periods
• ending the bizarre annual rotation of NLC chair.

The NLC has also responded to the Government’s question about what should happen in the event that no bidder emerged for the next licence. It proposes that the Government create a reserve power to set up its own operating company to which the NLC could award a licence without having to go through a competition. The reserve power could also be invoked in the event that only one bidder threw their hat into the ring. This proposal neatly passes back to the Government the dormant but troublesome issue of whether to nationalise the lottery.