Memorandum from Camelot Group Plc (DGB
55)
EXECUTIVE SUMMARY
The UK National Lottery is one of the most efficient
and successful lotteries in the world. To date over £14 billion
has been raised for good causes and over £5 billion has been
returned to the Exchequer. In order that The National Lottery
(TNL) continues to maximise these returns, it is essential that
an enabling regulatory regime is in place and that TNL is able
to compete effectively in an increasingly competitive gambling
market.
In view of the guidelines set out for the scope
of this inquiry and the structure of response, we have limited
our comments. Further the clauses which will potentially have
the most impact on TNL are yet to be published. We will be submitting
a much more detailed response on the draft Bill to DCMS before
the deadline of 28 February.
1. THE GAMBLING
COMMISSION
1.1 Should The National Lottery be regulated
by the Gambling Commission?
In the draft gambling Bill the Government states
that TNL should continue to be regulated by the National Lottery
Commission (NLC), thereby remaining outside the scope of the Gambling
Commission. If this is to be the case, there are a number of core
regulatory principles which must remain consistent across the
whole industry, particularly in terms of player protection and
standards of social responsibility.
The draft clauses and the attached policy document
state that the Gambling Commission will determine its own policy
and procedures for its licensing and regulatory structures and
in so doing will consult a wide range of interests. Clause 20
states that the Gambling Commission shall consult with the NLC
where it is likely to have an opinion. Camelot believes that ongoing
and extensive consultation with the National Lottery regulator
is essential in order to ensure that regulation is consistent
across the industry.
The key issue going forward for the effective
regulation of TNL is that an enabling regulatory regime, comprising
a regulator who appreciates the issues and challenges facing TNL
in a deregulated gambling industry, must be developed in order
to ensure that returns to good causes are maximised.
It is also essential that the recent proposals
concerning the licensing and regulation of TNL are fully taken
into account in deciding on the choice of the appropriate regulator
for TNL. Effectively, the final structure of regulatory regime
for TNL is entirely dependent on decisions around the licence
structure and the nature of competition for any operating licence.
1.2 Codes of practice and the associated consultation
rights
Camelot believes that the codes of practice
developed by the Gambling Commission should be consistent with
those which have been set for TNL in terms of player protection
and social responsibility. It is essential that operators adhere
to these codes and that the Commission is rigorous in their application.
We will not know whether this is the case until the Commission
has been established.
It is also unclear at this stage what penalties
will be incurred if operators breach the codes of practice. It
is essential that any penalties imposed by the Commission act
as an effective deterrent to breach of the codes to ensure consistency
across the industry as a whole.
The draft clauses (clause 16, subsection 7)
state that the Gambling Commission should consult with a number
of interested groups before issuing or revising codes of practice.
Clause 20, subsection (1), says:
If in the course of the exercise of its functions
the Gambling Commission becomes aware of a matter about which
the National Lottery Commission is likely to have an opinion,
the Gambling Commission shall consult the National Lottery Commission.
Camelot believes that the requirement to consult
with the NLC ought to be mandatory and extensive, with specific
obligations in Clauses 15, 16 and 17. Clause 20 leaves the decision
as to whether to consult to the discretion of the Gambling Commission,
this may lead to inconsistency and omission.
In any event, it would be helpful to have representation
from the NLC on the board of the Gambling Commission in order
to ensure that the interests of TNL are protected and considered.
1.3 Future proofing—will the proposals
in the Bill create a regulatory structure that is robust over
time?
In order for the regulatory structure to operate
effectively in the longer term, regulation must be consistent
and sufficiently flexible so that innovation is not stifled. Camelot
is concerned that some elements of the proposals will remain unclear
until the Gambling Commission is set up, leading to inconsistencies
and uncertainty in the meantime.
Camelot has previously raised concerns relating
to the deregulation of gambling and its potential impact on the
Schindler ruling which ensures special protections for National
Lotteries across the European Union.
We are also concerned about the inconsistency
of the enforcement powers laid out in the clauses. The Gambling
Commission's powers of enforcement in relation to unlicensed operators
will be weaker than the powers in respect of licensed operators.
1.4 Regulation of Spread Betting by the Gambling
Commission or the Financial Services Authority
Camelot has no direct interest in spread betting.
However, we believe that as with all gambling products, the level
of regulation should be proportionate to the risk which that activity
poses. It is therefore, important that spread betting is subject
to the appropriate level of regulation in terms of player protection
and social responsibility.
As spread betting is now increasingly recognised
as a sector of the gambling industry in its own right, those companies
who provide this service should be required to make a contribution
to the Gambling Industry Trust.
2. PROTECTION
OF CHILDREN
AND VULNERABLE
PERSONS
2.1 Provisions of the Bill relating to social
protection
Until the Gambling Commission is established
and has decided on the content of any codes in this area, it is
difficult to know whether the safeguards are in place. The codes
must ensure that there is consistency throughout the industry
whilst recognising that regulation should be proportionate to
risk.
2.2 Gambling Industry Charitable Trust—its
funding, role and independence; and the extent of existing research.
Although Camelot was involved in the establishment
of the Gambling Industry Trust, a decision was taken that it was
not appropriate for Camelot to be part of the Trust at that time.
However, we have now decided to review this decision.
3. THE PROPOSED
SECTORAL FRAMEWORK
FOR GAMBLING
REGULATION
3.1 Casinos—the potential for US-style
resort casinos, issues concerning their ability to regenerate
rundown areas and their impact on other areas of the industry
Although we have no specific comments regarding
the provisions within the draft clauses, we would like to stress
that standards of player protection must be as high as those imposed
on TNL and that the impact of wider modernisation on TNL is measured,
evaluated and incorporated into regulation where necessary.
3.2 Remote Gambling—the ability to regulate
effectively, given the increased accessibility of gambling on
the internet and its impact on consumers
Camelot believes that any regulation in this
area must ensure that the same high levels of propriety are required
in the online environment as in the offline environment. These
measures must ensure that players are adequately protected and
that systems are efficient and secure whilst giving operators
the flexibility to operate efficiently.
Regulation across the industry must be proportionate
to the potential level of risk involved in the gambling activity.
The Gambling Commission must set the same high standards across
the rest of the gambling industry as those set for TNL by the
NLC.
It is still unclear what tax regime will be
established for the remote gambling environment. Camelot believes
that any regime must continue to allow TNL to maximise returns
to good causes.
3.3 Gaming machines and Amusement with Prizes
(AWP) machines—the impact of the changes in regulation on
businesses providing ambient gambling facilities, the potential
exposure of children to gambling, the appropriate licensing regime,
maximum stakes and prize values
This is an area where high levels of player
protection must be ensured as slot machines generally present
the highest level of threat in terms of problem gambling, as has
been demonstrated in Australia.
3.4 Bingo clubs—the possible impact
of deregulation on existing clubs
The draft Bill signals in clause 63 subsection
(2), the removal of the limits on linked and multiple games and
the need for a special licence. In Camelot's original submission
to the Gambling Review Body we pointed out that a number of the
proposals relating to bingo would allow bingo to move into the
traditional territory of The National Lottery without the requirement
of returning 28 per cent to good causes and 12 per cent to the
Exchequer. We still believe this to be the case and due to the
strict regulations which govern how Camelot governs TNL, we are
unable to counter these threats in the way that other commercial
operators would by diversifying into their markets.
We therefore, recommend that any changes to
existing regulation enforced by the Gambling Commission, should
only take place after a thorough review of the impact on TNL and
thus the Good Causes. It is important that future regulation should
reflect this.
3.5 Tax implications—how the proposed
deregulation will fit with the existing tax regime for different
aspects of gambling
Camelot believes that National Lottery products
should not be subject to the current 12 per cent lottery duty,
but should fall within the same gross profits tax regime as other
sectors within the gambling industry.
3.6 Society Lotteries
In our original submission to the Gambling Review
Body, Camelot expressed concern that there was a danger that Society
Lotteries may potentially encroach on the territory of TNL. This
is an area which we will continue to monitor in terms of any potential
overlap, which may occur as a result of the relaxations in clause
211 relating to rollovers.
3.7 Prize competitions
In the guidance notes which accompany the Bill
it is clear that the Lotteries and Amusements Act will be repealed
although there is no mention of this in the Bill. Therefore, it
is not clear what the intention is with regards to prize competitions.
We believe that it is important for prize competitions
to be defined particularly in terms of the requisite degree of
skill required. Allowing the operation of competitions which do
not require a substantial exercise of skill will potentially have
a negative impact on TNL.
We have consistently said that there needs to
be a clear definition of prize competitions and that their outcome
should be determined by the exercise of skill. We do not believe
that the proposals to date have achieved such clarity. Camelot
will continue to monitor developments and will comment on the
draft clauses on this issue once they have been published.
January 2004
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