Recap on the Fourth National Lottery Licence Competition
On 20 September 2022, the Gambling Commission formally awarded the Fourth National Lottery Licence (“Licence”) to Allwyn Entertainment UK (“Allwyn”), which will be the second National Lottery Licence holder since its launch in 1994.
As explained in our previous blog, the Fourth National Lottery Licence Competition (“4NLC”) process got off to a bumpy start when delays were announced as a result of the Covid-19 pandemic. In fact, the whole 4NLC process was not as smooth sailing as perhaps expected, with legal appeals being brought against the Gambling Commission criticising how it ran the 4NLC.
Now that Allwyn has been awarded the Licence formally, due to commence in February 2024, we take a look back on the ups and downs of 4NLC process.
4NLC is launched…finally
The 4NLC was announced in November 2018 and, after a three-month delay, was formally launched on 28 August 2020. In the interim period, the Gambling Commission set up an Expert Advisory Group to help inform and design the 4NLC and carried out global market engagement with all interested parties.
The 4NLC was divided into multiple stages:
- Selection questionnaire
- Invitation to apply
- Announcement of preferred applicant
- Transition period
- Expiry of third National Lottery licence and commencement of the fourth National Lottery licence
Delays to stages 1 to 3 were incurred for several reasons; to “provide additional time for applicants to complete the applications and for the Gambling Commission to feedback”, to “contribute to a fair, open and robust competition by providing applicants with sufficient time”, “to provide opportunity for applicants to further refine their proposals”, and due to the impact of Covid-19 restrictions on the preparation of applications.
Such delays resulted in the third National Lottery Licence (held by Camelot UK Lotteries Ltd (“Camelot”)) to be extended by six months to February 2024.
Allwyn takes the Crown
The Gambling Commission received four final applications: Allwyn, Camelot, Sisal SpA, and The New Lottery Company Ltd.
After rumours of Camelot being the Preferred Applicant again, the Gambling Commission announced Allwyn (a Czech group previously known as Sazka Entertainment) as its preferred applicant on 15 March 2022, almost seven months after the intended announcement date of August 2021. Camelot was named as the Reserve Applicant.
The Gambling Commission stated that “the selection of Allwyn as the Preferred Applicant follows a fair, open and robust competition which received four applications at the final stage. This is the highest number of applications since the first National Lottery licence was awarded in 1994”.
A busy Summer for the Courts
Despite the Gambling Commission’s adamance that the 4NLC was fair, open and robust, in April 2022 the Gambling Commission received legal proceedings from Camelot and its technology provider, International Games Technology PLC (“IGT”), challenging the 4NLC process and appealing the Gambling Commission’s decision of appointing Allwyn as the new licensee.
Proceedings were issued in the High Court, with Camelot claiming that the Gambling Commission got the decision “badly wrong” and demanding a “proper explanation” as to why it was not chosen as the Preferred Applicant. Camelot stated that the Gambling Commission “failed to provide a satisfactory response” leaving Camelot “with no choice but to ask the court to establish what happened”.
The proceedings placed an automatic suspension on the Gambling Commission’s ability to formally aware the Licence to Allwyn. The Gambling Commission appealed the suspension on the basis that it would “present potentially severe consequences for the National Lottery and good causes”. Ruling in favour of the Commission, on 29 June 2022, the High Court lifted the automatic suspension, citing public interest as a strong factor in the Court’s decision:
“…maintaining the suspension until resolution of the dispute will cause delay to the Fourth Licence. In turn, this will cause delay to the benefits of the Fourth Licence, giving rise to reduced contributions to the good causes and delayed introduction of the enhanced game portfolio and new technologies. Balanced against the commercial losses that might be suffered by Camelot and IGT, for which damages would be an adequate remedy, in this case, allowing the Commission and Allwyn to proceed with the Fourth Licence is the course that will produce the least risk of injustice if ultimately it proves to be wrong”.
However, the Gambling Commission’s win was short-lived. On 14 July 2022, the Court of Appeal granted permission for Camelot and IGT to appeal the High Court’s decision, putting the automatic suspension on the Licence back in place…but only until September when both Camelot and IGT withdrew their appeals, deciding instead to pursue damages only.
Allwyn officially takes the crown
On 20 September 2022, the Gambling Commission, no longer bound by the suspension, formally awarded the Licence to Allwyn. The parties have now entered into an Enabling Agreement, confirming the official granting of the Licence to Allwyn, and are in a transitional period with Camelot until the Licence takes effect in February 2024.
What key changes can we expect with the fourth licence?
- A fixed 10-year licence.
- Incentive mechanism to ensure Allwyn’s incentives and delivery are better aligned with contributions to good causes.
- Move to an outcomes-based approach, giving Allwyn greater responsibility to fulfil its obligations while retaining the Gambling Commission’s power to intervene if they do not.
- Flexibility for Allwyn to adapt their offerings to reflect changing technology, consumer safety, regulation and consumer preferences.
- A retail charter to ensure Allwyn engages proactively with retailers.
There is no doubt that the 4NLC process was a rollercoaster for all involved. The Gambling Commission may have learned some lessons along the way, and we hope that the next National Lottery Competition will be a more straightforward and less contentious process.