THE NATIONAL LOTTERY

REGULATION & SOCIAL CONCERNS

EUROPEAN CONFERENCE ON GAMBLING, 21-23 SEPTEMBER 2000

Introduction

          SLIDE 1 - TITLE SLIDE

·                    Thank you for your introduction.

·                    I'd like to explain to you today about the regulatory background to the UK National Lottery, and particularly about the regulatory framework that specifically addresses social responsibility - or consumer protection.

·                    In the next 30 minutes or so:

SLIDE 2 - SUMMARY

·                    First I'll set the scene.  The National Lottery - what is it?

·                    Second, I'll do a little bit more scene-setting with a quick overview of the basic legal framework that currently applies to the National Lottery.  As part of that I will explain how this framework addresses social responsibility in particular.

·                    Third, I will devote a main chunk of my presentation to explaining how the National Lottery Commission exercises its responsibilities under that framework to promote social responsibility.  This is split into three main parts:

-         ensuring all players are treated fairly

-         ensuring as far as possible that playing remains fun and does not become excessive

-         ensuring that under-age participation is minimised

·                    Fourth, we have recently held a competition in the UK for the next 7 year licence to operate the National Lottery, and I will say a little about the ground rules we set for the competition to improve further the framework for social responsibility.

·                    Finally, I will say a little bit about the National Lottery in the Internet age, the issues it raises for social responsibility, and how those might be addressed.

·                    In thirty minutes, you are not going to get a huge amount on each of these five topics, but I hope it will give a flavour and include a bit of 'something for everyone'.

·                    And if I don't cover your own particular burning issue, then, if I have scheduled this properly, there should be time at the end for questions.  And if that's not enough then there's always e-mail!

Topic 1:  Context: The National Lottery - What Is It?

·                    And so into the first 'scene-setting' topic - what is the National Lottery?

SLIDE 3 - THE UK NATIONAL LOTTERY

·                    The UK National Lottery began relatively recently - 1994.  Far later than many other countries. 

·                    It was set up in response to the desire to generate new revenue for good causes, such as arts, sports, charities and heritage.

·                    The National Lottery has two types of game.  On-line games which allow players to make a choice of numbers which are then entered on the system for a draw.  And 'Instants' - or NL scratchcards - where the player scratches a coating from a card to reveal reveal symbols that may - or may not- indicate that the player has won a prize.

·                    The most well-known and popular on-line game is the main draw on a Saturday and Wednesday night.  For a £1 stake, players stand the chance to win or share in a jackpot typically of the order of £5-10m. 

·                    A year ago, Thunderball was introduced, a smaller draw that takes place after the main draw and which offers a smaller jackpot but better odds of winning a prize.

·                    Two other on-line games have also been offered in the past.  Big Draw 2000 was a one-off draw at the time of the Millennium Celebrations, which offered, for the first time, guaranteed million-pound prizes.  And Easy Play, a football game promoted by Vernons Lotteries, went on sale in August 1998.  Unfortunately the game was not as popular with players as had been hoped and lasted just one season.

·                    All National Lottery tickets are sold through a network of some 35,000 retailers across Britain and the Isle of Man.  Subscriptions can also be taken out for the main on-line games. 

·                    Whether the Lottery is a success or not is not something I want to discuss in the round today.  But it has raised more money for Good Causes than was expected - some £8bn since launch - and the main draw has become a national institution, with some two-thirds of households playing in a typical week. 

Topic 2:  Context - The Basic Legal Framework

         SLIDE 4 - THE BASIC LEGAL FRAMEWORK

·                    Parliament, through The National Lottery Act 1993, amended in 1998, set the basic framework for running and regulating the National Lottery. 

·                    The Act established the five-strong National Lottery Commission, with overriding duties to:

- ensure the Lottery is run with propriety

- ensure that players' interests are protected

- and, subject to the above, to maximise the proceeds for Good Causes.

·                    The Act gives the Commission two main functions.  It is responsible for:

-         licensing a body to run the National Lottery - setting up and operating the   infrastructure (all the systems)

-         licensing bodies to promote individual lotteries as part of the National Lottery (eg. the main draw, Thunderball, and each Instants game are all operated under separate licences)

·                    The Act also provided for the Secretary of State to issue directions to the Commission, in particular covering licensing matters.  For example - what matters the Commission should take into account in deciding whether or not to grant licences, and what conditions the licences should contain. 

·                    The Act also provided for the Secretary of State to introduce regulations, through the Parliamentary process, to regulate how lotteries are to be promoted - for example, setting statutory limits on the minimum age of play and on the permitted places of sale.

Topic 2a: The Framework and Social Responsibility

SLIDES 5&6 - THE FRAMEWORK AND SOCIAL RESPONSIBILITY

·                    So what does the basic framework in which the Commission must operate offer specifically for social responsibility?

·                    Well, the general duties imposed by the Act - to ensure propriety and protect players - clearly imposes some general responsibility on the Commission in this area.

·                    And the detailed directions and regulations clarify this social responsibility.

·                    Specifically, the SoS's  directions require that:

-         no licences be granted for games that:

-         are likely to encourage excess play (and there is also a direction on 'high prices' specifically)

-         lack adequate safeguards to prevent play by U16s

-         any winner's identity will be confidential, unless the winner consents to publicity

-         players can readily - and for free - find out if they have won.

·                    And the 1994 regulations made it illegal to sell a ticket:

-         to a person under 16 (16 was the existing legal age for lotteries when the Act was introduced)

-         by unattended vending machine (unattended machines would lack controls over under-age or excessive play)

-         in the street or gambling premises.

·                    So that's the basic framework out of the way.  In short, the Commission has a clear duty to protect players. 

·                    Some commentators have argued that this duty is difficult to square with the separate duty to maximise the money for the Good Causes.

·                    But that's not an argument we hold with.  It makes sense for the Lottery to look after its players if it is to retain public support for the long-term and so continue to raise money for Good Causes. 

·                    Raising money and protecting consumers go hand in hand - just as they should do in any enlightened business.

Topic 3:  What the Commission Has Done

·                    Now the critical question.  Within the framework that has been set, what has the National Lottery Commission actually done to promote social responsibility?

·                    In looking after players, we have set ourselves three main priorities:

SLIDE 7: COMMISSION PRIORITIES

-         to ensure all players are treated fairly

-         to ensure as far as possible that playing remains fun and does not become excessive

-         to ensure under-age play is minimised.

Topic 3a - Treating Players Fairly

          SLIDE 8: 'FAIRNESS'

·                    I am sure that everyone has their own view on what should be meant by "being treated fairly".  For us 'fairness' means:

-         the National Lottery must be a true lottery - everyone who plays must have the same chance of winning

-         information about the National Lottery should be readily available - for example, on the odds, how to play, how to claim.  It should be easy for everyone to make an informed choice about whether and what to play.

-         the game results should be readily available - so you can tell if you've won.

-         you should be able to validate your ticket and have any prize paid promptly and securely, without undue fuss

-         if you are lucky enough to win, you should have your identity protected - unless you have considered the options and willingly agreed to publicity.

-         also, if you are a winner, you should have the opportunity to receive free initial advice, on such things as money and taxation

-         if things go wrong, it must be easy to register a complaint.  And that complaint must be properly and quickly dealt with.  A complaint is not something the Lottery operator should be scared of - it's all useful feedback, helping to make the Lottery a better product.  Complaints are handled in the first instance by the operator.  But everyone has the right of appeal to the Commission if they are not satisfied with the operator's response.

-         finally, everyone should be treated courteously - when you but your ticket, when you claim your prize, and when you make an enquiry or complaint.

·                    It would take me more time than I have now to outline all the things we have done as regulator to achieve these goals, but I will highlight three points:

-         various how-to play leaflets with odds information are available at every retailer.  These leaflets are not there just out of the goodness of the operator's heart.  They are there in part because we made it a licence requirement when the Lottery was launched.  And we check that the required information is on display through regular checks on retailers.

-         callers making an enquiry of Camelot's National Lottery Line are charged negligible sums.  A requirement of the licence was that calls should be charged at no more than the cost of a local call, making it easily accessible to all.  We make regular test calls and visits to the Lottery Line to check it is offering the high standard of service required.

-         finally, we have required the operator to prepare and comply with a 'Player Code of Practice', which must meet our approval, setting out all the services and standards players can expect.  This code is available to inspect at every retailer - and copies can be obtained free by calling Camelot's Lottery Line.

Topic 3b: Preventing Excessive Play

·                    The second priority is preventing excessive play.

·                    The Lottery was set up with the express idea of raising money for Good Causes and giving people a bit of fun and entertainment to boot.  It was promoted as a "bit of a flutter" and "harmless fun".

·                    Well, that's exactly what the Lottery is to most people - a bit of fun. 

·                    But we'd be deluding ourselves if we didn't acknowledge that the National Lottery was also a gamble.

·                    And, like any form of gambling, it carries risks for a small minority of people - such as risks of thinking that the Lottery is an investment rather than entertainment. 

·                    In those situations there is a risk that the player can lose control of their play and begin to play compulsively and to excess. 

·                    But we have perhaps the most tightly regulated Lottery in the world as far as minimising this risk goes.  Some of the arrangements in place are:

SLIDE 9 - PREVENTING EXCESS

-         All game designs have to be approved by the Commission.  We look for research and other evidence to provide assurance that the game is unlikely to encourage excessive play.  Without such assurance, we will not license a game.  Our motto is a simple one - if in doubt, out!

-         As mentioned earlier, tickets cannot be sold from unattended vending machines.  And retailers are obliged not to sell if they have reason to believe a player is playing excessively.

-         We have approved an advertising code - to ensure that, among other things, advertising does not encourage excess or reckless play.  For example: "advertising should not exaggerate the chance of winning; playing the National Lottery should not be presented as a way out of financial difficulties."  (Ad In America - "your way out"). 

-         And we monitor carefully the impact the Lottery is having.  Evidence continues to suggest that the player base for Lottery games is broad, with individual and household spend at modest levels.

·                    Let me say a little more about our monitoring work.

·                    First, we commission our own regular tracking studies.  In our latest work we found:

-         71% of households had played the draw in 'the last 7 days', spending an average of £2.89 on the Saturday game.

-         92% of the households playing on Saturday spent £5 or less; 98% spent £10 or less

-         participation was high across all groups.  Reassuringly, those households with the lowest incomes spent least, and the better-off spent most. 

-         spend on Instants averaged at £2.64 for those people that played.  Of these 98% spent £5 or less.

·                    These results have been pretty similar throughout the Lottery's life, and indicate that the National Lottery's appeal remains broad and spend modest.

·                    Second, we contribute to appropriate independent research.  In the past year our research efforts have focused on supporting the Gambling Prevalence Study, co-ordinated by GamCare, the national centre for gambling care and education.  This major survey, commissioned from the independent National Centre for Social Research, was the first nationally representative survey of its kind ever to be carried out in Britain. 

-         It concluded that problem gambling among people who play only the National Lottery was negligible

-         It also shed more light on scratchcard play in particular than had previously been possible in our own smaller scale surveys.  Broadly the study found that scratchcards (including non-NL cards) appeal to a broad audience, with typical spends of £1-2 per week.  Very few individuals spent more than £5 per week.

·                    Third, we monitor data from other sources.  One such source is the GamCare helpline.  In 1999, calls citing the National Lottery and scratchcards each amounted to 1% of the total calls, broadly the same level as in earlier years. 

·                    But we are far from complacent about the risks of excessive play, and we recognise the need to remain vigilant.  During the coming year, we will be undertaking a review of our monitoring and research programme to ensure it continues to have an appropriate focus.

Topic 3c: Preventing Under-Age Play

         SLIDE 10 - PREVENTING UNDER-AGE PLAY

·                    Let me turn now to the Commission's third priority for Consumer Protection - that of preventing under-age play.

·                    The sale of Lottery tickets to people under 16 is illegal.

·                    The rationale for this is that young people are less likely to be able to control their gambling, and are therefore more susceptible to gambling problems.

·                    From the outset of the Lottery, we set up arrangements to ensure there were adequate safeguards to prevent under-age play:

-         as mentioned earlier, all game designs have to be approved by the Commission; and unattended vending machines are outlawed

-         the advertising code contains - as well as the general 'excess' rules previously mentioned - some 16 rules especially on under-age play.  For example, no advertising should be likely to appeal primarily to Under 16s (so no ads with Pokemon characters!)

-         it was agreed with Camelot that any retailer prosecuted for an under-age sale would have their terminals removed.

·                    During 1997/98 a report commissioned by the Commission (the OFLOT) found that some 7% of the young people sampled had been illegally sold a National Lottery ticket in the week preceding the survey.  This figure did not indicate any improvement from earlier surveys.

·                    In response to the regulator's consequent call for action, Camelot introduced a range of training, education and other initiatives under the 'Project 16' banner.  Particularly welcome was the introduction of a test purchasing initiative in April 1999 - Operation Child - set up to cover some 5,000 retailers each year.  This tests how well retailers are performing when confronted by a young person wanting to buy a Lottery ticket.

·                    The emphasis in Operation Child is on retailer training and education.  But it has a hard edge too - with a "three strikes and out" policy.

·                    We recognise the difficulties retailers may have in judging age and confronting apparent under-16s, but Camelot's retailer panel has itself accepted the scheme is appropriate and fair.  The growth in recent months of effective proof-of-age card schemes - such as Validate and Citizen Card - has helped.

·                    Operation Child, for the first time, has provided a programme with wide national coverage to detect and deter those retailers who fail to safeguard against under-age sales.  The programme complements the Trading Standards operations, whose coverage is for various reasons patchy.

·                    However, in February of this year we published the results of a survey undertaken in 1999 to monitor sales to under-16s.  And it was disappointing to discover that the proportion of illegal under-age sales was similar to the 7% recorded in the 1997 survey. 

·                    Operation Child was, however, a relatively new initiative at the time the survey fieldwork took place, and the survey therefore may not have provided a true reflection of the operation's effectiveness. 

·                    Indeed, more up-to-date management information emerging from the operation at the time of the report's publication suggested that the operation was now beginning to bite.

·                    However the Commission recognises the need to monitor independently the progress of Operation Child and has just undertaken a further tracking study to determine whether the improvements are being made.  The draft report should be ready shortly.

·                    Let nobody be under any illusions.  If our tracking study which is currently in the field suggests the problem is continuing, then there is scope for us to call for tougher action.

Retailers Play a Key Role

·                    Retailers, of course, have a key part to play in ensuring players get a fair deal, that sales to under-16s do not take place, and that players are not encouraged to play excessively.  Retailers are in the front line - the face of the National Lottery. 

·                    Through the Player Code and Camelot's Retailer Agreements we have imposed a number of requirements on retailers to ensure players are properly served, for example:

SLIDE 11 - RETAILERS MUST

-         retailer staff must successfully complete training before they may sell or validate Tickets or pay prizes

-         retailers must provide all the materials you need to play - such as 'how-to-play' leaflets

-         they must provide information on the Games and services as requested by players, or refer them to the National Lottery Line if they are unable to assist

-         they must offer a courteous, friendly and efficient service at all times.

SLIDE 12 - RETAILERS MUST NOT

·                    And they must not:

-         sell or pay prizes to anyone under 16

-         allow any untrained staff to sell Tickets

-         make misleading statements about odds, prizes, or any other aspect of the Lottery

-         'force' tickets on players who do not want to buy

-         sell to anyone who plays excessively.

SLIDE 13 - HOW STANDARDS ARE MAINTAINED

·                    If retailers do not live up to these standards, the operator itself may be in breach of its licence and as such subject to a fine.  To make sure its retailers can live up to these standards, Camelot, among other things:

-         undertakes a major training programme with all new and current retailers, including a Best Lottery Practice on-going programme with incentives for good performance

-         provides a regular stream of up-to-date player information for retailers to display

-         maintains a network of field executives who make regular visits to retailers to explain new games, check on the information on display, and deal with problems

-         has a retailer hotline to take calls from retailers and sort out problems

-         makes occasional unannounced security inspections - including Operation Child mentioned above - to check retailers are fulfilling their requirements. 

SLIDE 14 - MONITORING RETAILERS

·                    We in turn monitor much of this work, and in particular carry out our own programme of retailer visits.  Indeed, our twice yearly programme of retailer visits is perhaps the major block of work within our overall compliance programme.

·                    Our retailer programme comprises some 700 retailer visits per year, with a 70 point checklist.  Some of the things it looks at include:

-         whether the required player information is available and properly displayed

-         whether retailers know how to react when someone apparently under 16 wants to buy a ticket

-         whether they can handle player questions and complaints 

-         how good the training and other support from the operator has been.

Topic 4:  The Competition for the Next Licence

·                    To finish off, let's turn our view now towards the future, and what can be expected during the next Lottery licence which will provisionally run for 7 years from September 2001. 

·                    The competition for this licence which, as I mentioned earlier, is in the throes of being completed, has provided a valuable opportunity to take stock of the arrangements for consumer protection and to strengthen key safeguards.

·                    When we issued our 'invitation to apply' for the next licence, the main additional requirements as far as consumer protection goes included these:

SLIDE 15 - NEW LICENCE REQUIREMENTS

-         a test purchase programme double the size of the current one - so that it must in future cover at least 10,000 test purchases each year.

-         coherent strategies for preventing excessive or under-age play - so that initiatives are designed to work properly and efficiently together, in a clear framework

-         a requirement to consult players on service provision

·                    We also made it very clear that we had reservations about granting licences for games such as fast-draw keno and video lottery terminals, owing to the inherent dangers of them encouraging excessive participation.

·                    The Commission also recognised that the next licence period will see significant advances in technology.  We therefore required that any proposals involving the use of non-retail channels (eg. Internet, interactive TV and telephones) needed to be accompanied by a full account of the means of, among other things, preventing under-age and excessive play.

·                    Overall, then, the intention with the new licence competition has throughout been to ensure that consumers get an even higher standard of protection than through the current licence

Topic 5:  Social Responsibility and the Internet

·                    I want to finish with a few thoughts on the Internet - and by 'Internet' I also mean interactive TV and mobile telephones. 

·                    The Internet, and Internet gambling especially, are very much a hot topic of the moment.  It is difficult to open a newspaper or magazine without some mention, whether it be on the front page, the business section or even sport.

·                    While the Internet gets a lot of positive coverage, there is also a fair amount of concern expressed.  Some of the most frequently-heard concerns refer to the Internet's lawlessness, the potential for crime, and the impossibility of regulation.

·                    But, on a properly regulated site, it is perfectly possible to ensure that players' interests are safeguarded to just as high a level as is possible on the high street.

·                    Indeed, and this may surprise some people, the new technology channels can actually provide scope to make such controls easier.  And we have already heard earlier in the conference about the safeguards that various gambling businesses are putting in place. 

·                    For example,  Holland Casino is experimenting with an Internet scheme which includes these features:

SLIDE 16 - INTERNET

-         all Internet players must be registered

-         proof of age is required at registration

-         players register a 'maximum loss' per week beyond which they will not be allowed to play

-         the 'maximum loss' is fixed at a low level for all players under 21

-         individual's play patterns are monitored, and on-line advice given as necessary.

·                    And there are lotteries in Scandinavia and Austria who have or are taking tentative steps in a broadly similar direction.

·                    As far as the National Lottery goes, if any future operator offers National Lottery games through the Internet, it will need first to convince the Commission that it can offer the same or better level of safeguards to players than are available through traditional retail channels.

·                    That means there will be strong controls to prevent excessive and under-age National Lottery play - no compromises.

·                    The Internet, then, does not necessarily mean the end of social responsibility - as long as the operators are properly regulated.

Closing Remarks

·                    I hope that this rapid tour of the regulatory framework, the Commission's work, and a glance at the future of Lottery regulation has been of interest.

·                    Thank you for listening.  Perhaps I might leave you with four key points to summarise our approach:

SLIDE 17 - CONCLUSION

-         players come first - that's our duty, and also our commitment

-         we are constantly researching and monitoring the operation of the lottery to make sure players' interests are protected before anything goes wrong

-         if things do go wrong, we will intervene when players or we have justified concerns and take firm action if necessary

-         the commitment to players and social responsibility is for the long-term, whatever future technology may bring.

·                    Now, if you have any questions, I'd be happy to try to answer them - either now, or if you want to corner me during the break.

Nigel Edison

Head of Consumer Protection

National Lottery Commission