Gambling Commission facing subsidy control appeal over grant of £70m to promote National Lottery

A notice of an appeal under section 70 of the 2022 Act published by the Competition Appeal Tribunal (CAT) reveals that the appellants are Northern & Shell, the New Lottery Company, which was established by Northern & Shell to compete for the fourth National Lottery licence, and the Health Lottery ELM, which provides external lottery management services and is wholly owned by Northern & Shell.

Camelot operated the National Lottery until 1 February 2024. However, the fourth licence was awarded under a concession contract to Allwyn Entertainment in September 2022 and subsequently took effect on 1 February 2024.

In February 2023, Camelot was acquired by the Allwyn group. “Accordingly, Camelot and Allwyn have, since Camelot’s acquisition by the Allwyn group, been persons under common control within the meaning of section 8 of the Act, and thereby constituted together an “enterprise” under section 7(1)(b) of the Act,” the notice said.

The notice of appeal states that the National Lottery “operates in a competitive sector, as it competes with what Camelot refers to as ‘synthetic lotteries’ which include both ‘shadow lotteries’ – which are unregulated lotteries operating from outside the UK jurisdiction and generally involve betting on the outcome of regulated lotteries in the UK – and ‘society lotteries’ licensed under the provisions of the Gambling Act 2005, which includes the Health Lottery operated by Northern & Shell".

The notice also states that the National Lottery operates within the gambling market more broadly.

The subsidy challenged is the grant to Camelot by the Gambling Commission of approximately £70m from the National Lottery Distribution Fund (“NLDF”) to contribute to marketing spend promoting the business and the National Lottery.

The notice of appeal notes that the NLDF is a fund established pursuant to section 21 of the National Lottery etc. Act 1993 under the control and management of the Secretary of State. “It serves, broadly, to collect the proceeds of the National Lottery not paid out as prizes for the purposes of paying these out to ‘good causes’ in accordance with the apportionment set out in section 22 of the Act. The distribution of, or payments from, the funds in the NLDF is governed by the rules in Part II of the 1993 Act.”

The appellants argue that the decision to grant the NLDF funds had the effect of granting to Camelot (and thereby Allwyn, as both Camelot’s owner and the subsequent operator of the National Lottery) financial assistance which conferred an economic advantage, “on the grounds that the subsidy provided Camelot with resources to market and promote the National Lottery, thereby improving the National Lottery’s competitive position in the relevant markets, to the ultimate benefit of Camelot and Allwyn, as both Camelot’s owner, forming a single enterprise with Camelot for the purposes of the Act, and the operator of the Fourth Licence”.

The appellants submit that, in taking the decision, the Gambling Commission erred in law by:

1. failing to recognise or appreciate that the contributions under the decision from the NLDF constituted a “subsidy” within the meaning of the Act; and, therefore
2. failing to consider the application to those arrangements of the subsidy control principles under the Act.

Further or alternatively, the appellants submit that:

1. the subsidy would not in any event have met the conditions of the subsidy control principles set out in Schedule 1 to the Act; and
2. the Gambling Commission had no statutory power to grant Camelot (or any other enterprise) sums from the NLDF.

By way of relief, the appellants seek declarations, a quashing order, a recovery order, and costs.

A spokesperson for the Gambling Commission said it would not comment on ongoing legal proceedings.