Culture, Media and SportsWritten evidence submitted by MyLotto24 Ltd

RE: SCRUTINY OF THE DRAFT PUBLIC BODIES (MERGER OF THE GAMBLING COMMISSION AND THE NATIONAL LOTTERY COMMISSION) ORDER 2013

We welcome the opportunity to provide feedback on the proposed merger of the Gambling Commission (GC) and the National Lottery Commission (NLC) as part of the extended consultation currently being conducted by the Culture, Media & Sport Committee.

Company Background

MyLotto24 Limited, registered as a limited liability company in England and Wales and based in London, was founded in 2007 by Tipp24 SE. Tipp24 SE itself was founded in 1999 and has been listed on the Frankfurt Stock Exchange (SDAX) since 2009. Since 2007 MyLotto24 Limited has operated under a combined remote gambling licence issued by the Gambling Commission.

MyLotto24 accepts bets on the outcome of a number of foreign lotteries and acts as bookmaker for a number of partner companies, including Tipp24 Services Limited (also licensed by the Gambling Commission). More recently, MyLotto24 has extended its partnerships to include non-gaming brands, such as sports clubs, who wish to offer our lottery-style betting products to their customers. Such partnerships are typically operated under MyLotto24’s existing licence. Though the majority of MyLotto24’s revenue has historically originated from a customer base mainly consisting of customers in other European countries, we are expanding our UK presence through partnerships. MyLotto24 has always met its responsibilities, in full, for betting duty and corporation tax, totaling £35.5 million in 2011 (£18.1 million and £17.4 million respectively) and £31.2 million in 2012 (£19.6 million and £11.6 million respectively) and maintains a good compliance and social responsibility record.

MyLotto24 is a dynamic and ambitious company that has achieved a position we consider to be unique within the gambling industry; that of being able to guarantee full payment of multi-million pound prizes across a number of lottery-betting markets. We achieve this through an innovative combination of our own cash reserves, traditional insurances and an insurance linked securities product. Despite not achieving the same volume of sales as a traditional lottery operator we can match prizes and pay winnings to customers in a single payment. In compliance with the Gambling Act 2005, we do not accept bets on the outcome of any lottery forming part of the National Lottery.

Concerns Regarding Conflicts of Interest

Our central concern with the proposed merger of the GC and NLC is what we consider to be the significant potential for conflict of interest between the respective statutory duties of the GC and NLC, sufficient enough that we consider the merger to be without benefit and indeed unfavourable for existing gambling licensees.

As the Culture, Media & Sport Committee has itself reported, the two bodies do not share the same objectives. We believe there to be a risk that the NLC objective “to secure that the net proceeds of the National Lottery are as great as possible”1 may lead to unreasonable and unwarranted influence being exerted upon existing gambling regulation. The result of this is likely to be more restrictive licence conditions placed upon gambling companies who conduct any licensed activity considered to present competition to the National Lottery.

Whilst we recognise and support certain shared regulatory objectives, such as preventing underage and excessive play, we believe that as an industry there is already a collective response to these issues as well as many examples of shared best practice and information transfer participated in and led by regulatory bodies and licensees alike, both within the UK and offshore. We do not expect the merger of the NLC and GC to advance work in this area or, indeed, that current evidence of problem levels suggests an enhanced response is especially required.

The reassurances provided to date, regarding good governance arrangements and segregation of duties cannot be considered sufficiently clear as to give confidence that the potential for conflict of interest and undue influence has been mitigated.

Limited Financial Benefit

We are aware that the NLC has been co-located in Birmingham with the GC since January 2012. Having reviewed the Impact Assessment, it appears that the financial benefits, both immediate and on-going, have already been largely realised through the co-location and that negligible additional benefit will be realised through the merger itself. Whilst we do not necessarily contest the accuracy of the proposed savings, we do not feel the financial basis for the merger justifies the conflict it can create.

Furthermore, we anticipate that the merged-body would be regularly challenged to demonstrate its governance controls and to defend with greater frequency its decisions where it may be argued that influence has arisen from the competing statutory duties. This in itself could place a demand upon resources and limit or cancel-out entirely any suggested enhancement to the value for money for licence fee payers or the public.

We extend our thanks again for the opportunity to contribute to your consultation process and would be happy to expand upon our response if required or helpful.

May 2013