Assessment of the effects of competition on the National Lottery: Technical paper

Abstract

Following consultation by DCMS ("Review of Lottery licensing and regulation"), in July 2003, the department published the "National Lottery Licensing and Regulation Decision Document". This aimed at ensuring that the National Lottery raises as much money as possible for good causes without weakening necessary protections; ensuring effective competition for its operation and maintaining public confidence in, and support for, the National Lottery. It proposed ending the requirement that the National Lottery Commission (NLC) may only issue just one operator licence. Instead, it proposed that the NLC should be empowered-after consulting on its licensing plans- to offer a number of new-style operating licences covering different aspects of the delivery and marketing of the Lottery. The NLC would have the ability to offer licences of different lengths. Technical Paper No 6 provides an assessment of the effects of competition on the National Lottery. The conclusions reached, are as follows. It is important to try to preserve the benefits presumed to result from the natural monopoly deriving from the demand characteristics of the lottery jackpot. This is especially true in the UK, where they may be an, albeit slight, enhancement of the effect from its association with "good causes". It is important to try at the same time to deliver the benefits from competition where these do not endanger the natural monopoly effects described. The multiple licence model could generate competition in the form of bids to supply differentiated "clusters", each comprising closely related products. The NLC could ensure, through its choice of which clusters to license, that there was little danger of cannibalisation, but could, at the same time, allow the potential for innovative products to meet more completely the diverse tastes of consumers, and so maximise returns to "good causes".

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