U.K. regulator will ask court to enforce Allwyn licence award of UK National Lottery License
Critics say Gambling Commission’s move in legal row risks depriving good causes in UK of up to £800m
10 May 2022
The gambling regulator will ask a court to force through its award of the next national lottery contract to the Czech-owned newcomer Allwyn, in a move critics say risks depriving good causes of up to £800m.
The Gambling Commission awarded the fourth national lottery licence to Allwyn earlier this year, triggering an immediate legal challenge from the incumbent Camelot and the media tycoon Richard Desmond, who also lost out in the competition for the lucrative licence.
The losing bidders are taking their case to the high court in October, with the Gambling Commission barred from moving forward with preparations to transfer the licence to Allwyn in the meantime.
On Wednesday, lawyers for the regulator will ask a high court judge to remove the temporary block that prevents it from signing an “enabling agreement” with Allwyn, which they will say risks delaying the transition and endangering payments to good causes.
But a source familiar with the legal battle said it was the regulator’s haste to push through Allwyn’s licence that risked diminishing payments to charities and sporting institutions.
They said the commission’s request to lift the block would, if successful, make it all but impossible to reverse the award to Allwyn, ultimately owned by the Czech billionaire Karel Komárek.
Camelot, its technology supplier IGT and Desmond would still go ahead with legal challenges but would effectively be suing for damages, rather than for the decision to be overturned.
The combined damages claim could cost the regulator up to £800m, they said, including costs incurred during the lengthy bid process.
Camelot would also seek compensation for income it would have made from running the lottery between 2024 and 2034.
“The Gambling Commission is essentially gambling with money meant for good causes,” said the source, adding that it would be more prudent for the commission to extend Camelot’s existing licence for a further six months, to allow the trial to go ahead.
Should Camelot succeed in its challenge, it would then continue to operate the lottery and no damages would be paid. If it loses, the award to Allwyn would stand.
The commission has granted Camelot a temporary extension before, when Sir Richard Branson launched an ultimately unsuccessful bid in 2000 to overturn a decision to give the Canadian-owned company the second national lottery licence.
A spokesperson for Camelot declined to comment.
A Gambling Commission spokesperson said: “We are confident that we have run a fair and robust competition.
“The lottery is a national treasure and since launching in 1994 players have collectively raised more than £45bn for 660,000 good causes across the UK, transforming lives and contributing to the arts, sport, heritage and communities.
“A delay to the implementation of the fourth licence poses a significant risk which could diminish funds going to these causes.
The former Camelot chief executive Dame Dianne Thompson wrote to the commission last weekend warning it to abandon its attempt to move forward with Allwyn’s licence, to “avoid any unseemly and unnecessary haste in legal proceedings and remove the risk to good causes”.
Courtroom showdown over fate of National Lottery
Gambling Commission seeks to push ahead with awarding contract to new operator Allwyn
6 May 2022
The gambling regulator will next week insist that it should be allowed to push ahead with issuing a new licence for the National Lottery, despite a legal challenge from current operator Camelot.
A two-day "balance of convenience" hearing is scheduled to start on Wednesday in which the Commission will ask judges for permission to sign a 10-year National Lottery licence with Allwyn Entertainment.
Allwyn, formerly known as Sazka, was selected as “preferred bidder” for the country's biggest public sector contract in a hard-fought tender earlier this year after promising a sharp increase in the amount of money raised for good causes.
Camelot, which has run the National Lottery since 1994, has launched legal proceedings in a bid to overturn the decision.
Typically, such a challenge would prevent the Birmingham-based regulator from formally appointing the Czech company.
The Camelot contract expires in February 2024, and it is feared that there may not be time for a handover if legal proceedings drag on. The commission is asking for permission to award the contract immediately as a result.
Camelot opposes the commission’s request and is understood to be instead pushing for its current licence to be extended for up to two years while hearings continue.
If judges side with the regulator, Camelot’s hopes of overturning the decision to pick Allwyn will be largely extinguished, well-placed sources say.
Camelot would instead be expected to seek an estimated £500m in damages - money which might have to come from the lottery's pot for good causes.
However, if the High Court sides with Camelot to delay the signing of the contract, sources close to the Gambling Commission and Allwyn claim that preparations to hand over the National Lottery will be disrupted.
Former Camelot chief Dame Dianne Thompson this week wrote to Marcus Boyle, the chairman of the Gambling Commission as well as Nadine Dorries, the Culture Secretary, saying the contract with Allwyn should not be signed until the legal process is completed.
The "balance of convenience" hearing next week will only consider the arguments for and against the regulator signing its contract with Allwyn.
Hearings on whether the commission made the right decision are to begin in October.
Camelot’s technology partner IGT, and the New Lottery Company - a bid backed by billionaire businessman Richard Desmond - have also launched legal claims against the decision .
The National Lottery ranks as the UK's biggest single public sector contract. Official filings value it at £6.5bn, but operators believe gross revenues over the next decade could easily top £8bn.
Camelot is likely to draw on experience from 22 years ago when the company, then owned by a British-led consortium, took the Lottery Commission to court and overturned a decision to award the lottery licence to a bid led by Sir Richard Branson.
Sir Richard’s ‘People’s Lottery’ was selected as “preferred bidder” in the summer of 2000 before judges ruled the selection process had been “unfair” towards Camelot.
Hilary Blume, the commission’s head resigned following the ruling, which was followed by Camelot prevailing in December 2000.
A spokersman for the Gambling Commission said: “In order to protect the integrity of the process, we will not be able to discuss the specifics until litigation has concluded.”
Camelot and Allwyn declined to comment.
Fate of National Lottery in legal showdown this week as Camelot fights to hold on to 28-year licence that billionaire Czech tycoon's company is poised to take
A new company could take over the National lottery, depending on a legal case
Camelot may lose its licence after 28 years to Allwyn Entertainment this week
Allwyn Entertainment has been chosen as ‘preferred bidder’ for a new contract
The Gambling Commission has gone to High Court to push the decision through
9 May 2022
The showdown over the fate of the National Lottery will be heard in the High Court this week.
Camelot could be set to lose its licence running the National Lottery after 28 years - with Allwyn Entertainment set to take its place.
The regulator insists Allwyn, owned by a Czech billionaire Karel Komárek, should be issued with the licence despite a legal challenge by Camelot.
The Gambling Commission will ask High Court judges for permission to sign a 10-year National Lottery licence with Allwyn.
A stay is currently in place, if lifted after a decision from the court Allwyn will be able to begin its transition plan to take over the lottery.
The National Lottery has been operated by Camelot Group since the first draw in November 1994, however the Gambling Commission has gone to High Court so Allwyn Entertainment can sign a 10-year licence to run the lottery
Formerly known as Sazka, Europe’s largest operator has fended off three competitors to operate the lottery after battling with the Canadian owned Camelot, Italy’s Sisal and media tycoon Richard Desmond.
The Gambling Commission launched the fourth National Lottery Licence competition in August 2020 with final bids submitted by all parties by October 19, 2021.
The fourth National Lottery licence period begins in February 2024.
Allwyn, was selected as ‘preferred bidder’ for the country’s biggest public sector contract on February 25 this year.
The company currently operates lotteries in the Czech Republic, Austria, Italy, Greece and Cyprus.
However, Camelot's chief executive Nigel Railton previously said that they believe 'the Gambling Commission has got this decision badly wrong'.
Following Allwyn’s successful bid, Chairman Sir Keith Mills GBE and Justin King, Chairman Elect, released an open letter following the firm’s selection as the preferred applicant.
It said: ‘The Gambling Commission’s decision signals a fresh start for the National Lottery; we plan to generate more money for good causes and the public purse, put draw-based games back at the heart of the lottery, and reverse the slide towards scratchcards and instant win games, giving due consideration to the wider societal impact these can have.’
Camelot has operated the National Lottery since its inception in 1994.
They oppose the regulator’s request and wishes for its current licence to be extended for up to two years while hearings continue. This has drawn criticism from industry insiders who say Camelot is just looking to cash in at the expense if good causes.
But if High Court judges side with the regulator, Camelot’s hopes of overturning the decision to pick Allwyn could be largely extinguished.
Camelot's 30-year hold over the National Lottery
When Prime Minister John Major launched ticket sales for a new National Lottery in November 1994, he said Britain would be 'a lot richer because of the lottery.'
'It is in every sense the people's lottery.'
Since then hundreds of millions of ticket stubs have been bought at shop kiosks and online, and some lucky 6,300 people have become overnight millionaires or multi-millionaires.
The lottery was a success from the start, with more than 20 million tuning in to watch the first ever draw on November 19, presented by Noel Edmonds.
The first Lotto numbers drawn were 30, 3, 5, 44, 14 and 22, the bonus was 10, and seven jackpot winners shared a prize of £5,874,778.
With a huge audience to entertain, the lottery attracted star talent to take part in draws, including the likes of comedian Bob Monkhouse, Monty Python star John Cleese and model Ulrika Jonsson.
Constant attempts to reinvent the offering for the primetime Saturday slot in the run-up to draw led 20 game shows over the years, such as Dale Winton's In It to Win It and Brian Conley's We've Got Your Number where contestants answered questions for cash prizes.
A second lottery draw, Thunderball, was introduced by Camelot on 12 June 1999.
Throughout the early 2000s and 2010s, Camelot saw off attempts to take over their licence and was renewed or extended four times until 2024. Its 28-year hold on the UK lottery has led Camelot to be described as one of the most efficient and robust lotteries in Europe, but has also meant criticism.
The excitement and novelty value of the weekly lottery draw is not what it used to be, and the game shows have not featured since 2017.
In 2018, Camelot was criticised over a falling amount of money raised for good causes, with a National Audit Office report finding that its profits had risen by 122% over seven years while returns to good causes only grew by 2%.
MPs have also criticised Camelot's a move towards app-based games rather than traditional draws, claiming it risks worsening problem gambling and reducing the amounts given to good causes.
More recently, Camelot has responded to declining sales by launching new products, such as Euromillions, with huge rollover jackpots, and Set for Life. where players can win £10,000 a month for 30 years.
It has also sought out new markets with scratchcards and online instant win games, which give players a much greater chance of winning small amounts of cash.
These games have proved popular, but because more money is handed out in prizes, a smaller percentage of the ticket price goes to good causes.
The New Lottery Company, headed by Desmond, is not challenging the regulator’s decision but is seeking to recover costs.
A two-day ‘balance of convenience’ hearing is scheduled to start on Wednesday, May 11, when the Commission will ask judges for permission to sign the new 10-year National Lottery licence with Allwyn.
The main decision facing the court is whether the stay currently in place preventing the final award to Allwyn should be lifted.
If the stay is lifted, Allwyn can begin implementing its transition plan to take over the lottery by February 2024 (even as Camelot pursues its claim in court).
The transition process includes mandated monthly meetings between Camelot and Allwyn.
Lifting the stay would place Camelot in a very difficult position as it would have continued investment into the lottery to ensure good causes are still returned.
Camelot would also have to actively assist the transition to Allwyn as the operator of the fourth licence.
Watford-based Camelot would be expected to sue the regulator for an estimated £500m in damages - money which might have to come from the lottery’s pot for good causes.
If the stay is not lifted, the transition to the fourth licence will remain paused as the case proceeds through the courts.
This would force the government into extending the third licence and could require legislation as transition would simply not be possible in the designated time frame. It would also see Camelot rake in profits for an extended period of time whilst the future of the lottery remains in limbo.
On March 22 this year Camelot received a £3.15m fine from the regulator for failures linked to its mobile application.
The first related to the app informing up to 20,000 players that their winning draw-based ticket was a non-winner, when they scanned the ticket with the device’s QR reader, between November 2016 and September 2020.
The second failure involved 22,210 players who purchased a single draw-based ticket through the app being charged for and receiving two tickets.
All of those players have been identified and either refunded for the duplicated wager or where duplicate wagers were winners, these were honoured as such on a duplicate basis.
Allwyn has promised a sharp increase in the amount of money raised for good causes. Allwyn has pledged to donate £38 billion to good causes over the next decade - up from £16 billion donated by Camelot since 2012.
According to official statistics Camelot’s profits increased by 122% between 2012-2017 while returns to good causes only increased by 2%.
The current operator is incentivised to sell more scratch cards and Instant Win Games because they are more profitable.
Camelot has prioritised the launch of new scratch cards at higher price points and with high prize pay out percentages.
Higher pay out scratch cards and instant win games attract more customers with a minimal increase on good causes returns because most of the sales price goes to prizes rather than good causes.
Money from National Lottery Draw based games has fallen 11 percentage points in the last six years.
In 2016-17 the prize fund accounted for approximately 68% of gross sales for scratchcards, compared with 49% for draw-based games.
Based on the mid-2016-17 sales mix, Camelot retains 3% from additional net sales of draw-based games bought in a shop and 7% from additional net sales of scratchcards.
The National Lottery ranks as Britain’s biggest single public sector contract.
Official filings value it at £6.5bn, but operators believe gross revenues over the next decade could easily top £8bn.
In 2000, then owned by a British-led consortium, Camelot took the Lottery Commission to court and overturned a decision to award the lottery licence to a bid led by Sir Richard Branson.
The hearing takes place at the Technology and Construction Court in the Rolls Building on May 11 and 12.