3. Memorandum submitted by
the Gaming Board for Great Britain
INTRODUCTION
1. The Gaming Board is the regulatory body
for casinos, bingo clubs, gaming machines and the larger society
and all local authority lotteries. As such, we have restricted
our comments to the first two questions raised under licensing
and regulation in the Committee's press notice, viz:
Is the Lottery Commission the right body to regulate
the National Lottery?
Should the responsibilities for awarding licences,
on one hand, and regulating their implementation, on the other,
be divided between different bodies?
2. Under the Government's proposed Gambling
Bill currently being considered by a joint scrutiny committee
of both Houses of Parliament, a new single regulatory authority,
the Gambling Commission, will be established to supervise all
aspects of gambling with the exceptions of the National Lottery
(regulated by the National Lottery Commission) and spread betting
(regulated by the Financial Services Authority). Under these circumstances,
the Board believes there are only two practical alternatives;
either the National Lottery remains under the control of its own
separate regulator or responsibility should be transferred to
the new Gambling Commission.
CONSIDERATION
3. Currently, the National Lottery Commission
(NLC) can be said to have three separate, but overlapping, duties:
(i) to ensure that the National Lottery,
including all lotteries that are part of it, is conducted fairly
and properly;
(ii) subject to that, to maximise the returns
for good causes; and
(iii) periodically, currently every seven
years, to conduct competitions for the licence(s) to operate the
National Lottery.
4. As the Board made clear when it submitted
evidence to the Committee's previous (2000-01) inquiry into the
operation of the National Lottery, it has no doubt that the Gambling
Commission could successfully carry out the first of these duties.
In this respect, a prime responsibility of the Commission, under
the proposed Gambling Bill, will be to ensure that gambling of
all sorts is conducted in ways which are fit and proper, are fair
to the players and offer protection to children and vulnerable
persons (see clauses 1 and 14 (a) of the draft Bill, set out in
the annex to this note). These will be areas in which it will
have expertise and, in a sense, the National Lottery operator(s)
would simply be one, or perhaps a few, amongst the many other
bodies which the Commission will be required to police. Indeed,
amalgamation in this way should bring, possibly substantial, economies
of scale.
5. There is a potential conflict between
the second NLC aim above and the aim of the Gambling Commission
set out in clause 14(b) of the draft Bill (see annex to this
note). The Board's view is that the conflict could be overcome.
In both cases, the prime duty is to ensure the probity and reputation
of the sectors concerned and it is more a matter for the operating
companies, and not the regulator, to maximise revenue within the
constraints of the legislative regime. But, if the Gambling Commission
were to take on responsibility for regulating the National Lottery,
the wording of the relevant duty or aim would need to be modified
to avoid any potential conflict; it should not form part of the
duties of the Commission to maximise the revenues of any of the
operators it regulates.
6. It is however less clear that the Gambling
Commission would be best placed to conduct the periodic competitions
for National Lottery licences. Here the Board would simply repeat
what it said in its previous submission in October 2000. Although
the Gambling Commission will in the normal course of its duties
be granting licences to companies wanting to establish gambling
operations, that work will concentrate on the probity, competence
and financial wherewithal of the applicants and the Commission
will not be required to choose between competing bids.
7. We believe that, potentially at least,
there could be difficulties in the Commission conducting, and
in particular demonstrating that it had conducted, a fair competition
for National Lottery licence(s). It would inevitably have developed
a relationship with the existing operator which, assuming that
operator was a bidder, must have some impact on its decision,
although that could also be said of the NLC. More generally, it
would be quite likely to have to choose between competing bids,
some of whom were from operators well known to it and others who
were not. One requirement in letting the licence(s) will be to
maximise revenue. As indicated above, it will not be part of the
Commission's duties in other areas for which it would be responsible
to ensure profit maximisation in granting licences and indeed
it is possible to envisage circumstances in which it might conflict
with those duties, for instance when the Commission applies conditions
designed to ensure that it fulfills its duty of protecting vulnerable
persons from harm or exploitation (see clauses 1(a) and 14(a)
of the draft Gambling Bill given in the annex to this note). The
potential for accusations of dual standards would seem to be present.
The Commission would also have little expertise in assessing economic
cases.
8. As the Committee's second question in
paragraph 1 above indicates, none of this is however fatal to
the suggestion that the Gambling Commission might take over duties
for regulating the National Lottery. For instance, it is possible
to envisage a system in which the Secretary of State established
a time limited group to let the contract(s) for the licence(s).
Those appointed would have had no involvement with the Lottery
or potential bidders, thereby demonstrating impartiality. The
Gambling Commission would still have a significant role as it
would be well placed to conduct probity and background investigations
into the bidders and present a report on its findings to the selection
committee. Advice on the economic feasibility and financial viability
of the bids could be obtained from appropriate private sector
consultants, as we believe is currently done. The committee would
make its decision based on all this information.
CONCLUSION
9. In summary, therefore, the Gaming Board
believes that the Gambling Commission could police and monitor
all gambling operations, including the National Lottery. The Commission
could also play a major part in the periodic competitions for
licence(s) by investigating and vetting the competing bidders.
But the NLC's current duty to maximise returns for good causes
would need to be modified to bring it into line with Clause 14(b)
of the draft Gambling Bill. And there is a case for a separate,
time limited, body or committee to be established when necessary
to invite bids, decide between them and appoint the operator(s)
of the National Lottery.
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