Consultation on society lottery reform - responses
Consultation on society lottery reform - responses - April 2020
Consultation questions and summary of responses
We put forward proposals to increase lottery limits contained within Licence Condition 11 of the LCCP in line with government’s intended changes. We also consulted on new requirements about information that should be provided to consumers to help them to make better informed decisions about their gambling.
Consultation question 5
Do you agree with the proposed changes to the wording of licence condition 11?
The majority of respondents agreed with the proposed changes to licence condition 11. This included responses from society lottery licensees, external lottery managers, charities, trade bodies and other non-gambling related organisations.
Some respondents, whilst welcoming the increase in proceeds limits, felt that the increases did not go far enough. Other respondents disagreed with the proposed increases to the proceeds limits, raising concerns that this could negatively impact on the total funds available to the National Lottery good causes.
Several respondents suggested a review of the lottery market to measure any impact if changes are implemented.
A small number of respondents disagreed with the proposed changes. Some commented that as lotteries are a form of gambling, they represent potential risks to young people and vulnerable adults as well as their families and communities. This included responses from members of the public and a religious organisation.
We will proceed with amending licence condition 11 to reflect the changes the Government has now legislated for in the Gambling Act 2005 (Variation of monetary limits) order 2020.
As the revised annual limits will take effect part way through the year, they will be applied on a pro-rata basis when the changes take effect. This means that lottery operators will not have to wait until January 2021 to generate proceeds above the existing £10 million aggregate proceeds limits.
We acknowledge that whilst most respondents agreed with our proposals, some sought higher limits, and some thought they should remain unchanged. Although the Commission can impose conditions that are more onerous than those set out by Government, we will not do so. This is because of both the level of support for the proposed changes and the lack of evidence related to negative impact. There is not a strong case to vary from the revised legislative limits and our own stated position. Equally, we are unable to put higher limits in place without further Government intervention.
The Commission currently collects and monitors data related to the lottery market and player behaviours. We will use this to provide a baseline to measure the impact of the changes to the limits both on the broader sector and consumers.
In terms of player protection, we know that lotteries are considered to be low risk products. However, we also know that some society lottery players will be either problem or at-risk gamblers and we are seeking to protect consumers generally. We do not consider that these minor amendments to the limits will make lottery products high risk. However, we do expect operators to continue to act in line with social responsibility requirements. This will include assessing any changes they make in response to the new limits and taking the necessary steps to protect consumers.
Consultation question 6
Do you think that concerns regarding transparency can be addressed with the new social responsibility code 4.3.3 and associated guidance?
Consultation question 7
Do you agree with the proposed wording of the new social responsibility code 4.3.3?
Most of the responses we received to questions 6 and 7 shared similar themes. We have combined the summary of responses and ‘Our position’ to both questions to avoid repetition. A lot of the comments received also related to the detail of the guidance, rather than the code itself. We have included those points in the summary of responses to question 8.
Although many respondents felt that concerns regarding transparency could be addressed through the introduction of a new SR code and guidance, the majority did not agree with the proposed wording of that code.
Most agreed that providing consumers with information about the areas proposed would be helpful but were concerned with the detail around our expectations of how they could achieve that.
The wider lottery sector felt that whilst the proposed code could be effective for single cause lotteries it should go further to address branded lotteries. This included the suggestion that a full breakdown of expenses to show marketing spend should be required and that more information regarding the likelihood of winning, such as retrospective data should be included.
Some respondents from the society lottery sector and other areas commented that the code could be clearer. They felt that the requirements went too far – in terms of the level of detail required. And that specifying that information had to be available prior to the draw contradicted the rationale, – as (most) societies will not know how much they will make in advance of the draw or specific details of how and where those funds will be spent.
Respondents thought that including an explicit reference to the need for information to be transparent would better reflect the outcome we’re seeking. They suggested we remove the reference to ‘sufficient’ information in the proposed code and replace it with ‘clear, transparent and easily accessible information’.
They also commented that many societies are already transparent. This is because someone purchasing a ticket knows that the funds received will have to be spent to meet the aims and objectives of that society.
Some respondents thought that the requirements appeared disproportionate to the level of risk compared to other gambling sectors, and they felt the proposals were a result of political and other pressures, rather than being driven by consumer need. There were also comments that the proposals for society lotteries would go beyond what is expected for the broader gambling sector.
We will proceed with adding a new SR code (4.3.3) but will amend the proposed wording to make the outcome required clearer. The words ‘sufficient information’ will be replaced with ‘clear, transparent and easily accessible information’ as suggested by respondents. We have removed the reference to ‘where’ related to proceeds use. We have also replaced the word ‘or’ with ‘and’. This clarifies the need to provide information on the likelihood of winning a prize as well as how prizes are allocated. This is linked to changes we have made following responses received about the guidance.
Whilst we acknowledge that there is a degree of transparency due to the nature of society lotteries and their affiliation with good causes, we remain of the view that more could be done. We consider that these requirements represent modest changes and can be achieved using information already held by society lottery licensees.
As we stated in our consultation document, we want consumers to be empowered to make informed choices about gambling and for the wider public to have a well-informed view of how lotteries contribute to society. Providing basic information to consumers about how lottery proceeds are used and about prizes, is in our view consistent with that approach.
We do not consider the addition of this code is disproportionate in comparison to requirements for other gambling sectors. Other licensees are already required to make information available to consumers. For example,odds of winning a prize, spin rates, house return, number of players, prize pool etc.
We are aware from the responses that the proposed drafting of both the code and guidance created uncertainty about the requirements. This may have led to the view that more granular information was required than we had intended. Therefore, alongside changes to the wording of the Code, we have clarified the guidance to address concerns about the level of detail required and provide examples of how licensees can provide information prior to the purchase of a ticket.
We remain of the view that the level of information we will require strikes an appropriate balance between the needs of a consumer and being proportionate on a sector wide basis to address the concerns around transparency. We do not consider it would be proportionate to require a full breakdown of expenses as part of a general social responsibility code. We have existing powers that enable us to request that (and other) information of individual operators should regulatory concerns arise.
Consultation question 8
Do you have any comments on the proposed guidance?
It was broadly felt that guidance in support of the new code could be helpful to explain what the Commission’s expectations are. However, there was uncertainty regarding the status of the guidance and the proposed wording. There were concerns that it was unclear what is mandatory or best practice and whether meeting the guidance would fulfil the requirements of the proposed SR code.
Whilst welcoming the flexibility that guidance could provide, some respondents suggested that the proposed guidance could result in different interpretations. They thought that this could lead to confusion for consumers rather than transparency.
Respondents in the wider lottery market felt that although flexibility was appropriate for smaller lotteries, it was not for larger lotteries. Instead they suggested more specific requirements would be appropriate. They also suggested that our expectations would be clearer if the guidance described the outcomes we expect to achieve through the provision of the different types of information.
Many licence holders felt that the guidance went too far in terms of the level of detail they thought it required both prior to and after purchasing tickets. They suggested that the level of detail envisaged was akin to an FOI request and would therefore introduce disproportionate cost and administrative burdens.
Concerns were also raised about their ability to provide the type of information they considered was proposed. For example, they felt most lotteries would be unable to provide information on the likelihood of winning prior to the draw. This is due to the nature of most society lotteries, where odds are determined by the number of entrants. Likewise, they commented that in most cases the proportion returned to the good cause would not be accurate if provided in advance of the draw, because they would not know ticket sales at that point. Some responses suggest that having a proceeds breakdown available after a draw would not help consumers to make an informed choice. And that it could be confusing in terms of not reflecting future proportions.
Other organisations commented that whilst smaller, more traditional society lotteries may have difficulty in providing the likelihood of winning, larger societies and branded lottery schemes should be expected to deliver more. They suggested that where information cannot be provided in advance, guidance should be extended to require details of the likelihood of winning a prize, at each prize tier, released a month retrospectively. And that this should be combined with a requirement for explanatory content on how prizes are allocated, and winners are determined. They felt that such large-scale operations should be required to publish full details in respect of their proceeds, and how those sums are allocated. Some commented that this should include a clear breakdown of operating costs including detail such as marketing spend.
Several comments were made regarding the existing requirements to publish the annual percentage return to good causes and to provide information to the Commission about the breakdown of lottery proceeds. Respondents from the society lottery sector questioned whether it would be appropriate to use the percentage (%) given in the annual statement to meet the proposed new requirement. And some suggested that the information provided to the Commission should be enough to reassure consumers that lottery proceeds are being dealt with correctly. They questioned whether this requirement was being driven by consumers desire for more detailed information or from competitors.
Respondents suggested that the guidance should be clearer about when the requirements apply. They asked the Commission to clarify if the requirement related to the breakdown of proceeds will only apply to draws taking place following the effective date. And suggested that going forward these requests should be time bound – e.g. only for draws within the previous x number of years.
We also received comments about how the information should be provided. Respondents pointed out that it would be difficult to include all the information required on a ticket or during a player engagement conversation. This is due to the limited space and time available. They also asked whether pointing to information being available or including it within a solicitation statement was adequate.
Some respondents commented that the information should be presented in a manner that is meaningful, visible and timely, in order to engage players from the start. And that it should be promoted through wider marketing and communications to build awareness.
We will proceed with publishing guidance. Lottery licensees will need to take account of this to meet the requirements of the new code. We still consider that this is the best approach as it provides greater flexibility to licensees to deliver the outcomes required in a manner that best suits their business needs.
The guidance outlines the minimum we expect licensees to do to meet the requirements within the SR code. It contains aspects that are mandatory (must do) and those that are a recommendation of good practice (should do). We expect licensees to adopt and evidence that they are achieving those standards of good practice. And while they provide a degree of flexibility, we will expect licensees to be able to explain the reasons for any departures from that standard. Equally, where they can do more to provide information to consumers, we will expect them to consider doing so.
We noted the respondent’s interpretation of the guidance. This appears to have led them to understand that a more granular level of detail is required then we had intended to propose. We think that the changes we have made to the guidance outlined below should address this.
Due to the responses received; we have made changes to:
- ensure consistency in messages both throughout the guidance and with the new code
- make the guidance clearer about what we want to achieve (outcomes) and what we expect of licensees
- add examples to help understanding.
We have also made changes to some of the proposed requirements. We consider that these will address some of the challenges described, whilst ensuring that consumers have the information they need. We remain of the view that information about prizes including an idea of the likelihood of winning them and information about how proceeds are used should be available to consumers prior to purchasing a ticket. Licensees should take reasonable steps to ensure consumers are better informed in these areas.
In drawing up our guidance we have settled on the minimum required information that licensees should provide to consumers in advance of purchase. We do not consider the provision of this information represents a disproportionate burden given the information to be used is routinely collected and retained by licensees.
We understand that due to the nature of some lotteries there will be challenges in providing the exact likelihood of winning. Therefore, we have added that licensees may use data from previous draws to provide information on the likelihood of winning. This can be an estimate based on that data, the average for that type of draw or the actual previous figures. Licensees will also be required to provide information about the prizes available and how they are allocated.
Given their central purpose, lotteries should be transparent around the contributions they make to good causes, what those good causes are and how proceeds are spent. This is basic information that can help consumers make an informed choice about which lotteries to participate in and good causes to support.
We agree that providing information about the breakdown of proceeds after the draw may not be helpful and consider that it would be better to do so ahead of the draw. This should address concerns regarding consumer confusion. And those regarding the administrative burden of being required to provide retrospective data by request.
We will require licensees to provide the following ahead of the draw:
- the percentage or amount of the proceeds spent on:
- prizes (including prizes rolled over)
- expenses related to promoting and running the lottery
- the amount applied directly to the purposes of the society or purposes for - which the local authority has power to incur expenditure (whichever is relevant) – i.e. the good cause
- the total proceeds from all tickets sold.
The revised guidance provides options around what licensees can do to provide this information, which should address some of the challenges raised during the consultation. This includes providing annual figures and using data from previous draws to clearly provide estimated or average figures. We have also clarified the guidance regarding grants.
We do not plan to require additional information in relation to expenses. Licensees must collect and retain such information under existing licence requirements. The Commission can use this information to ensure licensees operate lotteries in accordance with the requirements of the Gambling Act 2005.
The Commission agrees that it must be clear when these requirements apply. We have revised the guidance to confirm that it only applies to draws taking place and printed documentation produced after the effective date.
We have also amended the guidance to make it clearer how licensees can make this information available. This includes within the solicitation statement and via their websites. We expect licensees to take all reasonable steps to ensure that the information is understandable, easily accessible and presented through the most appropriate means of reaching the consumer.
By using guidance we have tried to avoid an overly prescriptive approach, which constrains individual licensees or places an unnecessary burden on smaller licensees. The required outcome is that lotteries are offered in a clear and transparent manner to their players. Where licensees fail to meet the minimum expectations, we will consider what additional specific requirements may need to be applied to their licence.
Consultation question 9
How long a lead-in time would you need to implement the information requirements set out in the proposed guidance?
Consultation question 10
Are you able to provide an estimate of the costs that might be incurred by your lottery through implementing the information requirements?
There were wide ranging estimates as to the time that would be needed to implement the new code and guidance. Many respondents said it was difficult to calculate how much time would be required as it depended on whether all the proposals in the guidance were implemented. Some of the concerns around being able to implement the grants information requirement, or detailing good cause information for example, were based on a misunderstanding of what the proposed requirements were.
Some External Lottery Managers (ELMs) said the requirements could be implemented within the three months notice period. They said that many of the societies they represented were already compliant, so it would be simply a matter of the ELM updating their own training material for canvassers.
Society lottery licensees generally suggested that three months would be an acceptable lead time, but it depended on how much of the proposed code and guidance was implemented. If requirements included the sharing of information on grants and tracking exactly where good cause money is spent, then they said a much longer lead time would be required. Few suggested an actual figure, although one suggested at least six months would be needed, and that licensees should be allowed to integrate the changes as part of their normal marketing materials review and update cycle.
A non-gambling organisation commented that those who run scratchcard lotteries and annual raffles will be disadvantaged as the introduction of the measures may cause problems due to tickets for these types of lotteries being printed well in advance and also have a long shelf-life. They suggested a number of options, ranging from allowing six months for them to become compliant with the new requirements, to the first lottery launched after the first anniversary of the adoption of the new requirements.
With regards to estimated costs, again the estimates were wide ranging, as it depended on whether all the proposals in the guidance were implemented. Estimates ranged from a few hundred pounds to in excess of £50,000 (without additional staffing and ongoing long-term costs of information requests) to refresh all the marketing material, updating websites and updating systems.
Several respondents focussed on the long-term additional costs of responding to requests for lottery proceeds information. In particular, if societies were required to provide details of how precisely the good cause element of the proceeds of each lottery were spent, this could result in considerable resource time, which would need to be accounted for by the society.
In line with the comments for previous questions, we have amended the guidance to make it clearer what licensees are expected to provide upfront, what information they can signpost consumers to, and what data to include in the breakdown of proceeds. This provides more precise detail on what our expectations are as a minimum. Where licensees can reasonably do more, we expect them to do so.
We have also made it clear that the new guidance applies to all lottery draws that take place from 29 July 2020. We do not expect marketing materials or tickets to be amended retrospectively for lotteries where tickets are already available for purchase, although where licensees are reasonably able to amend marketing and advertising material or distribute additional information, then we expect them to do so.Next section
Final wording of amended licence condition 11
Last updated: 13 April 2021
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