Memorandum from Inter Lotto (UK) Ltd (DGB
87)
1. INTRODUCTION
Inter Lotto (UK) Ltd is a privately owned UK
company, incorporated in 1995, and certified by the Gaming Board
for Great Britain as an External Lottery Manager.
Inter Lotto is a member of the Lotteries Council,
and wishes to associate itself with the submissions, both written
and oral, that the Council will be making.
Inter Lotto makes this submission because the
Draft Bill contains one provision, Clause 77 (2), which, by restricting
the frequency of society lotteries, would render the existing
business of Inter Lotto illegal, resulting in the withdrawal of
its only game and removing a vital source of income from the charities
for which Inter Lotto operates.
2. BACKGROUND
Inter Lotto's business, since incorporation,
has been to manage lotteries on behalf of UK humanitarian charities,
pursuant to the Lotteries & Amusements Act 1976, as amended.
Between 1995-96 an affiliated company of Inter
Lotto operated scratchcard (instant) lotteries on behalf of 16
different charities, raising over £5 million. It became apparent
that it was impossible to compete against the National Lottery
because of "Instants" superior prize fund (return to
the player), and Camelot's dominance of the high street retail
market (35,000 prime sites), and the business was sold.
Between 1997-98 Inter Lotto managed on-line
lotteries through almost 1,000 pubs throughout the UK, generating
almost £1 million for charity. These lotteries were frequent
draw lotteries with draws taking place every seven minutes, and
over 25,000 lotteries took place during its 10 month existence.
(This lottery was terminated as a result of insoluble technical
problems relating to the provision of lottery services by a sub-contractor).
Between 2000-01, Inter Lotto managed a daily
lottery in CTN shops in the M62 corridor (Liverpool /Manchester
to the east coast). Maximum average weekly sales achieved were
approximately £37 per terminal per week, and thus the lottery
ceased. This mirrored Littlewoods' experience with a similar lottery
in Strathclyde the previous year.
Inter Lotto has concluded that scratchcard,
daily and weekly lotto type lotteries cannot be run commercially
(ie by an external lottery manager) in competition with the National
Lottery, and that the only viable terrestrial lottery is one retailed
through outlets where the National Lottery does not operate. Inter
Lotto has therefore targeted its lotteries through pubs, rather
than high street shops.
3. INTER LOTTO'S
CURRENT LOTTERY
ACTIVITIES
Since November 2001 Inter Lotto has been managing
another on-line lottery on behalf of a number of charities, with
draws every five minutes and is presently run in 279 pubs.
While not yet commercially successful, these
lotteries are, after six years of hard work, and considerable
capital expenditure, on the verge of viability. More importantly,
they are currently producing £12,000 per week for charity—£624,000
pa.
Inter Lotto, with the active support of several
leading pub companies is expanding distribution (the retailer
base), to achieve 500 (750) pubs by mid 2004, and 1,500 by 2004-05.
By 2005 this game alone could raise £2.5
million pa for the charities.
4. THE DRAFT
BILL
Clause 77 (2) will effectively render this type
of lottery illegal. At the same time daily lotteries will become
illegal, and weekly or bi-weekly lotteries would become unviable.
If applied to the National Lottery, all the
current games (with the exception of "Instants") would
be unlawful.
5. WHAT IS
THE REASON
FOR THIS
PROVISION?
Inter Lotto believes that DCMS did not intend
to affect daily and weekly draws, and had not understood the consequences
of this clause, despite over two years planning.
Inter Lotto believes the prime purpose of Clause
77(2) is to prevent Inter Lotto from managing its pub based five
minute lottery on behalf of numerous charities (list attached).
Since 1997, when Inter Lotto launched its first
pub lottery, it has been threatened with Government interference.
Despite confirming the legality of this type
of lottery, and the grant of Inter Lotto's External Lottery Manager's
certificate by the Gaming Board, and in the full knowledge of
Inter Lotto's plans and the capital invested, two weeks prior
to launch the Home Office suddenly announced their opposition.
The issue was first raised at Prime Minister's
Questions, on the instigation of a political lobbyist, retained
by one of Inter Lotto's commercial competitors.
In December 1997 the Government published the
(draft) Lotteries (Frequent Draws) Bill for a three week period
of consultation, on the day Parliament rose for the Christmas
Recess. Following application for Judicial Review by three of
the promoting charities, the period was extended to five weeks.
Amongst those consulted were industry competitors,
with a direct financial interest in supporting the Government,
fifteen Local Authorities in Ulster, where society lotteries do
not exist, and a number of religious groups opposed to all gambling.
No benefiting charities were consulted.
Strong opposition from the voluntary sector,
including NCVO, ICFM and 35 leading charities, and in both Houses
of Parliament caused the Government to drop the Bill.
6. THE BUDD
REPORT
Paragraph 28.40 describes the Government's objections.
These included opportunities for repeat play, no limit on entries,
continuous draws throughout the day, and immediate pay-outs. However,
these features exist in most types of gambling—for example,
it would be patently absurd, if not illegal, to limit entries
or to refuse to pay winnings: indeed no such restrictions exist
or are proposed for the sale of National Lottery tickets.
Paragraph 28.42 states "We share the concerns
expressed by the Home Office…about the problems that rapid
draw lotteries could create. Our reservations may be increased
if lotteries remain available to 16 and 17 year olds, for whom
the attraction of repetitive play may become more crucial."
At paragraph 28.43 Budd recommended "that
the frequency of on-line lottery draws should be restricted to
one a day in any particular premises".
Sir Alan Budd confirmed that the only relevant
representations received came from the Home Office, but that he
was not shown the hard data detailing 25,000 such draws, that
officials had earlier conceded proved their concerns were groundless.
7. A SAFE BET
FOR SUCCESS
The Government's White Paper, at paragraph 4.43,
states "the frequency of draws should be no greater than
one a day". No explanation is offered to justify this restriction.
8. THE GOVERNMENT'S
CONCERNS
(a) The Mix of Alcohol and Gambling
The Home Office quoted Mr Donald Trump describing
Keno (a superficially similar, but significantly different game)
as "the crack cocaine of gambling—a lethal mixture
of alcohol and addictive gambling". Mr Trump made this remark
when lobbying against the introduction of a keno type lottery
in New York. The Governor disagreed, and the game was introduced
in 1987—but Mr Trump's concerns do not seem to have materialised.
The link between drinking and gambling is anecdotal,
as little relevant research has been undertaken, but in its 1996
report "Casinos and Bingo Clubs", the Home Office states
"We are not aware of any evidence to suggest that this (alcohol)
is a factor in excessive gambling or other problems".
Alcohol is also available in Bingo Halls, where
the new "linked games" offer opportunities for multiple
staking, and six figure jackpots.
It should be noted that the vast majority of
UK pubs have slot machines, generating a throughput estimated
at £3 billion per annum. Although there is a substantial
body of research indicating that some players can and do play
excessively, there is no suggestion that slot machines should
be removed from licensed premises. Indeed, the Gaming Board is
currently consulting on stake and prize increases for slot machines.
Pubs have always played a central role in charity
fundraising, and society lottery tickets have been sold in pubs
since 1976. Several of the charities promoting Inter Lotto's lotteries
operate in the field of drug and alcohol treatment. It is inconceivable
that these organisations would seek to raise funds via a medium
that might cause the very problems they were established to address.
Those charities have made their views known to officials.
(b) Under age gambling
Inter Lotto has always voluntarily restricted
the sale of its lottery tickets to those aged 18 and older. All
lottery terminals are situated in premises licensed for the sale
of alcohol, and at present all lottery sales made by Inter Lotto
are attended rather than vended sales. It would therefore be difficult
for a young person to buy a ticket for an Inter Lotto lottery,
And, indeed, there are no reports and no evidence that the sale
of Inter Lotto's lottery tickets to under age players takes place.
This is despite the fact that the Gaming Board
has now authorised some telephone lotteries that are clearly vended
sales, and that Camelot sells its tickets on-line across the Internet
(also clearly vending). Inter Lotto believes that proposals in
the Draft Bill to change regulations relating to remote gambling,
to take account of modern technology, is sensible, but is unclear
why this relates only to the manner in which tickets are sold
"remotely", but excludes terrestrial (traditional) products.
(c) Excessive or addictive play
The Policy document published in November 2003,
to accompany the Draft Bill, states, at paragraph 4.50, "The
draft Bill also aims to reduce the problem of repetitive play
in lotteries that can offer high prizes".
Inter Lotto is unclear what "the problem
of repetitive play" constitutes. We are aware that there
is some evidence that the ability to re-play rapidly in slot machines
can lead to excessive play, and there is some research that concludes
that this can also take place amongst scratchcard players, but
there is no evidence that this occurs in respect of frequent draw
lotteries such as Inter Lotto's.
Inter Lotto's lotteries draw every five minutes.
This must be compared with slot machines in the same outlets which
can be played every 37 seconds, with re-plays taking place every
seven seconds. In its recent agreement with Bookmakers, in respect
of FOBTs, DCMS has agreed to permit games to be played every 30
seconds, with re-plays every 20 seconds.
However, in its 1997 Consultation Paper the
Home Office quoted research from the USA purporting to prove the
government's argument. The report, Gambling and Problem Gambling
in New York: A replication survey, 1986-1996, by Dr Rachel
Volberg was commissioned by the NY Council on Problem Gambling.
Both the NY Council on Problem Gambling and
Dr Volberg were unaware that their report had been used in this
way, as permission had neither been sought nor obtained, and the
Home Office's conclusions differed substantially from Dr Volberg's.
It also transpired that officials had not actually
seen the report, but were quoting, out of context, a passage they
felt was helpful to their case. It was later withdrawn.
(d) Chasing losses
It has also been argued that players would be
tempted to chase their losses. This is a misconception. Chasing
losses occurs when, following a loss, players double their stake,
and repeatedly double until they win. In a lottery this is impossible
to do, as there is only the ability to buy a fixed price ticket
(£1). The fact that the stake is always the same in a lottery
gives players no incentive to make "multiple bets";
in other words to buy several tickets. There is no perceived benefit,
and therefore no incentive to chase losses.
In practice there is no evidence to back the
claim that players chase losses, and anecdotal and sales evidence
indicates it does not occur.
(e) A "potential problem"
Throughout its publications the government refers
to "potential problems", and the "risks associated
with repetitive play", and "the problem of repetitive
play".
Between 1997 and 2003 Inter Lotto has managed
over 100,000 frequent draw lotteries in the UK—more lotteries
than any other company, including Camelot. Inter Lotto has computerized
data detailing each draw and each pub: and has the ability to
observe sales via computer, as they take place. This data relating
to each lottery is filed with the Gaming Board, and is thus in
the public domain.
Inter Lotto has received no complaints from
or through either the Gaming Board, Local Authorities, Police
Forces, pub companies, national or regional press, or Gamcare,
in respect of these lotteries.
Inter Lotto is unaware of anyone except the
Government, who associates lotteries with these "problems".
Furthermore, apparently these remain "potential problems".
When will this potential be realised? 100,000 lotteries have been
drawn throughout the UK in 1997-98, and continually since 2001,
and yet these problems have failed to materialise. In the meantime,
rather than destroy what is potentially one of the largest sources
of charitable funds in the UK, why not conduct research to ascertain
the facts?
9. RESEARCH
In 1997 Inter Lotto offered to pay for independent
research into all aspects of these lotteries, but the Chairman
of the Gaming Board, Lady Littler, declined to accept. The offer
was repeated to the Home Office in 1998, and DCMS in 2002. Ministers
again refused the offers. Inter Lotto is unaware of any other
relevant research, either in the UK or from around the world.
Inter Lotto made clear then, and willingly confirms
now, that if any hard evidence or research comes to light, showing
that its lotteries cause an unacceptable degree of excessive play,
it will cease, or substantially amend, its lotteries immediately.
Inter Lotto is a responsible company, founded primarily for the
purpose of raising funds for charity, through the medium of society
lotteries, and actively supports responsible social policy.
The only relevant academic work is a short report,
commissioned by Inter Lotto in 1997, before these lotteries were
launched, written by Dr Mark Griffiths, of Nottingham Trent University,
former chair of Gamcare, which did not support the Government's
view.
In 1998 the Home Office Minister claimed to
have seen a similar game in Las Vegas: however there are no lotteries
in Nevada. Similar games exist in some states in the USA, but
they include multiple staking and a $1 million jackpot—rather
different from a £1 stake and a £25,000 jackpot which,
in Inter Lotto's present game, has not yet been paid out and which
carries odds of 8.9 million:1. In simple terms, similar games
in the USA are structured as bets not lotteries, and are not comparable.
Inter Lotto believes the "similar game" the Minister
saw in Las Vegas, was Casino Keno, which cannot be compared with
a lottery in the UK.
10. OTHER FACTORS
Similar lotteries are operated in Australia,
New Zealand, 17 US States, Canada, and throughout the EU—including
a very successful version in France, launched last year. There
are no reports of any social problems, excessive play, or of players
chasing losses.
Having seen all 25,000 lottery returns filed
in 1997-98, Home Office officials conceded their concerns were
groundless. This has been conveniently ignored.
There are no similar restrictions on the National
Lottery. The NLC has a duty not to license games that might lead
to excessive play—there is no evidence of excessive play,
so this game could be licensed to Camelot.
Why should the Gambling Commission not be granted
a similar duty?
In no other part of the Draft Bill is a specific
game banned by primary legislation. Is this appropriate for a
framework Bill?
The overall purpose of the Bill is to de-regulate
and modernise an important industry, while imposing sensible and
flexible regulation for the 21st century.
Why has one small company and one product, in
the smallest and least controversial part of the industry, been
singled out for this draconian and fatal treatment, with no credible
reason given, and no evidence?
SUMMARY
1. Clause 77(2) of the Draft Gambling Bill
will render all society lotteries, except scratchcards and raffles,
illegal.
2. The National Lottery has no such restriction,
which would prevent it promoting any of its existing games, except
"Instants".
3. Despite Government denials, this measure
is primarily aimed at one company and one product: since 1997
no other organisation has attempted to introduce this product:
officials virtually admitted this at a recent ILG meeting.
4. The restriction in Clause 77 (2) is opposed
by the Lotteries Council, and the issue was not raised in any
submission to Budd, response to the White Paper nor in any other
way.
5. This restriction will prevent charities
from raising money via lotteries, in a way the Government claims
to support, as successive governments have since 1976.
6. The Draft Bill seeks to modernise and
de-regulate the gambling industry: Clause 77 (2) is a new and
uncalled for restriction on an existing lawful lottery activity.
7. The Government has provided no evidence
to support its concerns.
8. Organisations with proven expertise in
gambling and other social problems do not support the Government's
view.
9. This provision (Clause 77 (2)) is inappropriate:
the ability to regulate individual games should lie with the Gambling
Commission, as it does with the National Lottery Commission, which
should have powers to commission research, and allow tests of
new products.
10. The Draft Bill proposes to give wide
powers to the Gambling Commission to regulate "remote gambling",
while at the same time, on the face of the Bill, increasing restrictions
on society lotteries.
All documents, reports and other data referred
to in this submission can be provided to the Joint Committee,
upon request.
Inter Lotto would be happy to provide further
information to the Joint Committee, or any of its members, and
is willing to give Oral Evidence if required.
The Directors of the company would like to invite
the members of the Joint Committee to visit a pub selling our
frequent draw lottery tickets, to judge the product for themselves,
and to visit the company office in west London, at their convenience.
December 2003
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