Gambling

Written evidence submitted by Camelot Group of Companies (GA 24)

1. Summary

- Camelot believes the rushed manner in which the Gambling Bill was passed in the wash-up period before the May 2005 General Election resulted in too little scrutiny. While the 2005 Act expressly excluded The National Lottery, we do not think the consequences of the Act on the Lottery were sufficiently considered.

- The material change in the nature and behaviour of some society lottery operators since the passage of the Gambling Act has already upset the equilibrium between society lotteries and The National Lottery. This is an unwelcome trend and government and Parliament should be aware it is an issue that is likely to grow in significance. The Committee may want to consider this development as part of its inquiry.

- An unintended consequence of the implementation of the Gambling Act is that, in some instances, it has been the vehicle for bracketing gambling and the Lottery too closely together. This is an invidious trend.

- The Gambling Commission, by and large, has been an effective regulator. The proposed merger of the Gambling Commission and the National Lottery Commission is a real opportunity to create a new framework for regulating The National Lottery that will reduce bureaucracy and increase efficiencies for both the regulator and the operator – whilst maintaining the necessary (but not excessive) levels of protection for the integrity of the National Lottery, players and other stakeholders.

- Camelot has Gold Standard measures it applies to protect young and vulnerable players.

2. Introduction

2.1 Camelot, the operator of the UK National Lottery, welcomes the opportunity to respond to the Culture, Media and Sport Select Committee’s enquiry into the implementation and operation of the Gambling Act 2005.

2.2 Camelot runs the most cost-efficient lottery in Europe, with around 4% of total revenue spent on operating costs. Each week Camelot generates around £28 million for the Good Causes. To date, our players have raised over £26 billion for the Good Causes, with more than 350,000 individual awards made across the UK – an average of 119 lottery grants for every postcode district. At around 40% of total sales (around 28% to the Good Causes and 12% in Lottery Duty to the Government) Camelot returns a higher proportion of lottery revenue back to society than any other major lottery operator in the world in percentage terms.

3. The Gambling Act 2005

3.1 While we appreciate the reasons why the previous Labour Government thought it necessary to tidy up and update the disparate elements of legislation covering the gambling sector, we believe the rushed manner in which the Bill was passed in the wash-up period before the May 2005 General Election resulted in too little scrutiny.

3.2 Camelot believes that one effect of this has been to blur the distinction between other forms of gambling, which is wholly commercial, and The National Lottery, which plays a unique role in public life by raising money for the Good Causes – and is separate from the rest of the gambling sector as a matter of long-standing public policy.

3.3 It was in recognition of this crucial distinction that when The National Lottery was established by statute in 1993, Parliament decided that it should be governed by its own legislation and regulatory regime. This cordon sanitaire is important because it clearly differentiates the Lottery from mainstream gambling. Maintaining this ‘clear blue water’ is as important today as it was 16 years ago.

3.4 Our concern is that an unintended consequence of the implementation of the Gambling Act is that, in some instances, it has been the vehicle for bracketing gambling and the Lottery too closely together. This is an invidious trend. For example, the Act meant that the CAP and BCAP rules on advertising had to be revised. The revisions have resulted in the gambling sector being accorded greater freedom – e.g. being able to advertise on terrestrial television – while the Lottery has had more restrictions imposed on it than before. Both Camelot and the NLC objected to BCAP increasing the content rules on the age of persons featured in National Lottery advertising from 16 to 25. Not only did this change fail to reflect that the National Lottery has a different age limit compared to mainstream commercial gambling, it also failed to take account of the fact that the then existing rules for advertising The National Lottery had never led to any significant public concern or regulatory action.

3.5 A further example of this bracketing of The National Lottery with mainstream gambling was the previous Government’s decision (under the terms of the Audio Visual Media Services Directive) to prohibit product placement for the National Lottery – thereby directly aligning it with gambling. We did not, and still cannot, understand the rationale for this given the accepted policy separation between the National Lottery and mainstream gambling. We have written to the current Government asking for this decision to be reversed.

4. Regulation

4.1 The proposed merger of the Gambling Commission and the National Lottery Commission, however, is not a development that we think necessarily risks blurring the distinction between the National Lottery and the broader gambling sector. It no longer seems logical or necessary to have a single purpose regulator. The Gambling Commission, by and large – to our minds – has been a good and effective regulator. The Commission consulted widely and well on how it intended to regulate before the Act was fully implemented in September 2007. It has also embraced the Hampton principles of better regulation, which we fully support, and is a model we would hope to see followed when the Gambling Commission and the National Lottery Commission are merged as proposed in the Public Bodies Bill.

4.2 The merger is a real opportunity to create a new framework for regulating The National Lottery that will, if implemented appropriately and without simply incorporating the current NLC infrastructure and practices wholesale into the Gambling Commission, reduce bureaucracy and increase efficiencies for both the regulator and the operator – whilst maintaining the necessary (but not excessive) levels of protection for the integrity of the National Lottery, players and other stakeholders. That is why we support moving from regulation by detailed approval/permission [1] (as at present) to regulation by Licence to Operate [2] , which is what the Gambling Commission does and is the norm for many other areas of regulation.

4.3 It is important that reform of the regulatory regime should be approached as the occasion to introduce root and branch change to improve efficiency and help to generate greater returns to the Good Causes. Approaching it as a minor cost-saving measure in which, for example, NLC staff are simply transferred to the Gambling Commission’s HQ in Birmingham without a fundamental overhaul of the whole regulatory structure and Licence will not work and should be strenuously resisted. To date, we have had no clear steer from Government as to how they envisage the new merged body working, which is a matter of growing concern to us. We would not, for example, want the merger to result in The National Lottery being effectively brought under the scope of the 2005 Act through the back door, since the Act by and large expressly excluded the National Lottery.

5. Society Lotteries

5.1 The National Lottery has always co-existed comfortably with society lotteries and we recognize the valuable part they play in raising funds for a wide range of charitable causes. However, since the passage of the Gambling Act external lottery managers have become much more commercial in their thinking and much more aggressive in their marketing. The emphasis has begun to shift away from the benefits to charities of taking part in a lottery and much more towards the attractions of a big win. It is, perhaps, no coincidence that the British Gambling Prevalence Study 2010 found that participation in lotteries (excluding The National Lottery) has doubled since the last study in 2007 (from 12% in 2007 to 25% in 2010).

5.2 When the operator, Chariot, launched the Monday lottery in 2006 they deliberately criticized The National Lottery in order to try and attract players. While Monday failed, their tactics demonstrated the damage that could be inflicted on The National Lottery’s reputation. Such commercialisation of society lotteries and their activities remains a danger.

5.3 It was as a result of this danger that we – and the National Lottery Commission – opposed the previous government’s decision to double the prize limits for society lotteries from £200,000 to £400,000. We warned at the time that this could have a negative impact on The National Lottery and that government and Parliament should be aware that these sorts of superficially attractive measures ran the risk of tipping the Lottery into a position from which it would be difficult, if not impossible, to recover. It is for this reason that we urge the Committee to look at this specific issue as part of its enquiry.

6. Player protection

6.1 When the Gambling Commission was consulting on the principles it would apply to regulating the gambling sector, Camelot described the Gold Standard measures it applies to protect young and vulnerable players.

6.2 We minimise the risks our games pose to players from the earliest possible stage of developing and selling a game – from our initial research and game design, to the way we promote our products, the training we give retailers and staff, and the security measures we employ online.

6.3 The design process

Camelot uses two tools to assess the potential risk a game can pose at the design stage:

- GAM-GaRD, developed by Nottingham Trent University, evaluates those aspects of a game that could cause problems for a vulnerable person. These include ease of access to games, how often they can be played and jackpot size.

- The Games Design Protocol (GDP), meanwhile, assesses whether a game is of above-average appeal to vulnerable groups – namely those under 16, low income groups and people with addictive tendencies. If the results show that a game poses an above-average risk, Camelot will either revise the product or review additional factors, such as its advertising and marketing strategy. If this does not reduce the risk to a satisfactory level, we will not launch the game.

6.4 In-store vigilance

Retail accounts for the majority of National Lottery sales, so it is imperative that retail managers and their staff understand their role in preventing underage and excessive play.

Our sales team provides retailers with training on how to address underage and excessive play. 4,000 people attended this training in 2009/10. We improved the training during the year, to raise awareness of our strategy of encouraging many players to spend small amounts, and of how to refer players for help should they ask for it. We also regularly include information in Jackpot, our magazine for retailers, about the importance of protecting consumers.

Through our mystery shopper programme ‘Operation Child’, each year we recruit young people aged 16 or older, but who appear younger, to try and buy a lottery ticket or Scratchcard without identification. If a retailer refuses the ticket sale on the first visit, we send them a letter of congratulation. If the retailer sells to a test purchaser, we arrange a second and, where necessary, third test purchase. If they sell three times, we will remove their lottery terminal.

We carry out about 9,000 visits a year. In 2009/10, we visited 758 stores a second time, and paid 28 stores a third visit. Just one sale was made on the third visit and we removed the Lottery terminal from the store. First-time refusal rates remained ahead of our 90% target at 90.2% .

6.5 Online protection

We run the largest online lottery in the world, with over four million people registered to play online. Interactive play makes our games more accessible, but we recognise the need for effective online consumer protection measures.

Our interactive channels – www.national-lottery.co.uk and Play by Text – are certified by GamCare (in fact Camelot was the first organisation in the UK to achieve GamCare certification), which means they meet high standards of consumer protection. We have many measures in place to protect players and maintain this certification:

- Our online age verification system is accredited by Interactive Age Check (iAC), a system which compares the information players provide when they register with details in public databases to verify their identity and that they are over 16

- Players have to register to access our games, meaning they have to prove they are 16 or over. Even trial games are only available to registered players

- The maximum weekly spend is £350, to which we add winnings up to and including £500. Customers can set their own, lower spending limits if they prefer

- People can play a maximum of 75 Instant Win Games each day.

- Players concerned about their use of our games can ban themselves temporarily or permanently from all Instant Win Games, or from specific instant-win and draw-based games. This year on GamCare’s advice, we removed the cooling off period for players asking to be permanently excluded

- Reality checks on gaming screens, which force players to take a break between games

- Every page of our website carries a link to the Responsible Play section.

- We encourage people to assess whether they are playing responsibly, using a set of assessment questions, and by providing on-screen summaries of the time and money they have spent

The result is that the UK National Lottery is ranked just 60th in the world in terms of per capita spend, despite being the seventh largest lottery in the world in terms of sales.

7. Remote gambling etc.

7.1 In May 2010, Camelot wrote to the Gambling Commission to register concern about Ladbrokes and Paddy Power offering bets on the outcome of the UK National Lottery – specifically on Lotto – on their websites, operating from Gibraltar and the Isle of Man respectively. Betting on the outcome of The National Lottery is prohibited under UK law and we remain concerned about a development that we believe offends the spirit, if not necessarily the letter, of the law. This situation has not been helped by the previous Government setting a high remote gaming duty for operators. The effect of this has been to drive some previously UK based operators off-shore or for other operators to remain there. This is one of the fundamental weaknesses of the 2005 Act.

7.2 The real problem for player protection – including National Lottery players – is that generally speaking, the Act does not address the problem of off-shore operators who are effectively unregulated and arrange matters so that none of their servers etc are located onshore, thereby avoiding the sanctions of the Act relating to unlicensed operation.

7.3 In addition, under section 95 of the 2005 Act, general betting operating licences, pool betting operating licences and betting intermediary licences must be subject to the condition that nothing may be done in reliance on the licence in relation to a bet on the outcome of a lottery which forms part of The National Lottery. It does not appear to be the case that breach of the condition would necessarily lead to revocation of the relevant licence, nor that a breach would constitute a criminal offence in itself unless the sale took place on licensed premises. We think there is a [good] case for extending the criminal offence so that it applies whether or not the sale is on licensed premises – thereby making the law consistent – and for specifying that a breach of the licence condition should lead automatically to revocation of the licence, in order to ensure that the policy which the 2005 Act seeks to enshrine is effective.

7.4 Likewise, the 2005 Act makes it a mandatory condition of premises licences that the premises shall not be used for the sale of tickets in any lottery in respect of which the sale of tickets on the premises is otherwise prohibited. However, it does not seem that the consequences of breach – whilst it would effectively involve the commission of a criminal offence by breaching the National Lottery Regulations 1994 (as amended) – would necessarily include revocation of the relevant licence, which we believe it should.

7.5 In the past we have also raised concerns with the Gambling Commission about operators offering Lottery Style Games on their websites, which in our view are designed to make players think they are playing a lottery, when in fact they are betting. To date, no action has been taken.

7.6 Camelot responded to the DCMS ‘Consultation on the Regulatory Future of Remote Gambling in Great Britain’ in June of last year. We supported the move to improve consumer protection and regulatory consistency by the introduction of a licensing regime for remote operators, despite the challenges of regulating the internet. We noted that the current regime, which permits the advertising of gambling services in the UK from other EEA states, appears flawed in the sense that it assumes that the law and regulation relating to gambling in all such states is equivalent to that in the UK or is otherwise adequate to provide sufficient comfort that operators located in such states are appropriately controlled.

7.7 While we applaud the efforts of DCMS and the Gambling Commission to develop a regulatory framework for remote gambling, we believe that the key issue for the current, and any future regime, will be to ensure that it is enforced both in relation to those offshore operators who are licensed in the UK and those who are not. Effective enforcement is critical, and we suggested that the only way seriously to apply appropriate safeguards in relation to overseas operators is to seek to eliminate their access to banking facilities or internet service providers which are located in Britain. This approach has been successful in other jurisdictions, such as the Netherlands.

June 2011


[1] This is the form of regulation currently practised by the NLC. In essence, under the National Lottery licence, a large number of operational issues need reference to the NLC for consideration and approval before they can be actioned by the National Lottery operator. This form of regulation is more commonly seen in situations where the actions of the regulated body are seen to have immediate implications for life and safety – and even then only in the most important situations.

[1]

[2] This form of regulation is increasingly common, and is practi s ed in some of the most significant areas of regulated activity. In essence, under this model, any detailed assessment of the capabilities, approach, quality control systems and methods of working of a regulated organisation are made at the time any initial assessment of permission (“licence to operate”) is made and granted.

Prepared 29th July 2011