Examination of Witnesses (Questions 140
- 145)
TUESDAY 20 JANUARY 2004
CAMELOT GROUP
PLC
Q140 Rosemary McKenna: What would
be the right body?
Mr Grade: For a multiple licence?
Q141 Rosemary McKenna: Yes.
Mr Grade: I just hope that this
idea can be headed off and that Parliament will not allow the
regulator this amount of discretion in making this decision. It
is far too important. We do not believe—and we are not alone,
I have not heard anybody yet support them in this idea—that
this is an idea which, if you care about returns to good causes
and the public good of the Lottery, will fly, and it will not
attract more bidders. The whole proposal is based on an assumption
which you can read—and I am sure you have read—in
their document that this will create more bidders. Well, two bidders
who have expressed an interest in the Lottery are the People's
Lottery and Lord Mancroft who is in this business who have both
said that this is the least attractive option, and less attractive
than a single licence. I am not quite sure why the NLC is pushing
this idea.
Q142 Michael Fabricant: Can I take
you back a little bit? You were saying in answer to my questions
that different games were cannibalised from others, and then Derek
moved on to the National Lottery for raising money for the Olympic
Games, and I wanted to ask you this: in your most recent answers
you were talking about the promotion, possibly, of the Olympic
Lottery through the internet and other such media. Would you be
able to create more players from overseas and do you anticipate
that? After all, the internet knows no national boundary and while
many people—even I—might be prepared to gamble on
the Lottery for the Olympic Games because of my "natural
patriotism", I wonder whether others through good promotion
overseas might be prepared to invest through the internet simply
because they want to see a good return?
Mr Jones: Unfortunately they would
not be able to do so under the current legislation.
Q143 Michael Fabricant: How can you
stop them?
Mr Jones: Because of the very
tight controls we have. In order to play our games you have to
go through a very detailed registration process. You have to be
age-verified, you have to have appropriate bank accounts in the
United Kingdom and residences, so we do make it so that people
from abroad cannot play our game—
Q144 Michael Fabricant: Would you
like that lifted?
Mr Jones:—and quite rightly
so because, clearly, under the terms of our licence we are only
operating a United Kingdom National Lottery.
Q145 Michael Fabricant: Forgive me
but following that up, as far as this £750 million is concerned,
and Adrian Flook is dead right in saying "How much is it
going to cost the Olympic Games anyway?", because I do not
think anyone is very good at trying to project costs 12 years'
hence let alone any government, would you welcome it if the government
said, "Okay, for the Olympic Lottery we will lift that proscription.
Anyone can play"?
Ms Thompson: It would be absolutely
opening the floodgates which are protected under European law.
There is case law called Schindler which protects national
boundaries so, under European law as well as British law, we cannot
sell outside the United Kingdom and equally nobody can come in
and sell their tickets here. We might gain if we were allowed
to sell Olympic tickets, although I am not sure we would necessarily—I
am not sure the French would want to play our games if we win
and Paris does not!—but, that apart, El Gordo, for instance,
the huge Lottery in Spain, would have a huge cannibalistic effect
potentially on United Kingdom National Lottery games, so I think
it is in all our best interests that the national boundaries stay.
Chairman: Thank you very much indeed;
we are very grateful. Before we move on, may I welcome the presence
in this room of a former member of this Committee, John Maxton,
and could I say that I hope his presence at Westminster is neither
accidental or temporary! Thank you very much.
Supplementary memorandum submitted by
the Chairman of Camelot Group plc
Thank you for the opportunity to give oral evidence
to the Committee on 20 January. I have attached a supplementary
memorandum which explains in more detail the ways by which competition
for the main section 5 lottery licence was increased between the
first and second licences and the changes which could further
improve the bidding process for the third licence.
1. Increases in competition—changes
introduced for the third bidding round: There were some important
changes to the second Operator's Licence which have improved the
bidding process for the third lottery licence. They are:
— Intellectual property rights:
The establishment of a comprehensive regime for the NLC to
acquire ownership of the intellectual property rights used in
running the National Lottery including; databases, rules and procedures;
and codes of practice.
— Retail network: An obligation
on Camelot to transfer ownership of terminals at the end of its
licence to a successor—the first licence required that operators
should replace all terminals, which—in effect—compounded
barriers to entry and added unnecessary expense in running the
operation.
— Property rights: Arrangements
providing for the transfer of other property and rights to a successor
have been extended—bidders will now have access to databases
of National Lottery players and National Lottery retailers.
— Management and market information:
More extensive obligations upon the operator to publish management
and market information. The data now available to bidders in the
third licence round will mitigate much of the cost of preparation
by competitors to the incumbent inherent in the first two bidding
rounds. This data includes information on the performance of the
lottery in the marketplace (including market research on playing
habits of consumers and viewing figures for the television show
associated with the lottery), giving bidders a more accurate assessment
of the market they are bidding for.
2. New initiatives to improve competition:
In addition to the changes which have already been introduced,
we believe that there are a number of initiatives which would
eliminate any actual or perceived incumbency advantage in bidding
for the third lottery licence. They are:
— Two stage bidding process: An
alternative two stage bidding process to reduce bidders' cost.
This would involve a first stage whereby bidders in the first
round would be required to prove their management competence and
the ability to present coherent strategies to develop The National
Lottery and the supporting infrastructure. If these criteria were
met, bidders would move to the next stage where they would be
required to submit detailed and costed bids for evaluation.
— Assistance with bidding costs:
Provision of funding for bidders costs. The costs of preparing
a full bid as in the first two bidding rounds are substantial.
However, if there was a two stage process, the first stage would
require a smaller level of investment. If assistance with bidding
costs was offered for the second stage, this may be an added incentive
to enter into the competition.
— Suppliers: Allowing companies
to bid without having to commit to key suppliers. Previously bidders
have had to specify key suppliers in their bids. This should no
longer be necessary as software developments mean that far more
companies will be able to offer these services.
— Competitive tendering: Encouraging
operator's ability and obligation to make best use of competitive
tendering and procurement arrangements.
3. Market Developments: The market
within which the lottery operates has matured since the first
bidding round in 1994. This in itself aids more robust competition
in the following two ways:
— Technology: In the first and
second licence competitions there were only two credible technology
suppliers available to potential bidders. However, developments
in technology mean that the there are alternative options for
any future bidders. Previously bidders have been required to specify
technology suppliers for the duration of the licence. We believe
that greater flexibility in this area would allow for greater
competition in suppliers over the licence period and would be
beneficial particularly in the information technology field.
— Competition in the Gambling Market:
At the time of the next licence round in 2009, the gambling
and gaming market will be much more competitive as a result of
the development of technology and of the deregulation of the market.
We believe that this in itself will ensure higher levels of competition
in the third bidding round.
2 February 2004
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