Enforcement policy in relation to the National Lottery
Stage three of reaching decisions
Based on the assessment undertaken at stages one and two and all the circumstances of the case the decision maker will then consider what sanction is appropriate.
As a general principle, the earlier that disclosure of all relevant facts and appropriate admissions are made during the investigation process, the more credit will be given to the operator for making such a disclosure. The amount of credit to be given will be decided on a case by case basis.
The options for the decision maker are:
- no further action
- notification of licence breach without the imposition of a financial penalty
- undertakings (may be used in combination with sanctions)
- requirement for an independent review (although this is not necessarily a matter which requires a prior investigation)
- imposing new or amended licence conditions
- court injunction/ interdict or court order
- financial penalty
- licence revocation.
No further action
Decision makers should first decide whether it is appropriate to take any action at all. Deciding that there should be no further action may be appropriate if the decision maker considers that there are no matters of concern, or where further formal action would not be a proportionate response to the established facts as there is no ongoing risk to the statutory objectives. In the latter case it may be appropriate to give the operator some advice as to their future conduct.
Notification of licence breach without the imposition of a financial penalty
This is the first sanction that should be considered if it is deemed that no further action is inappropriate. The notification approach allows us to formally record the licence breach without going on to take further action. This outcome may be appropriate where:
- there is no risk to the statutory objectives but a licensing requirement is breached
- the breach is not considered serious in light of the factors set out at Stage One
- there is no loss or limited loss on returns to good causes (likely to be less than £1,000).
If the decision maker is of the view that the above options withn the No further action section and the Notification of licence breach without the imposition of a financial penalty section of this policy are inappropriate they may wish to consider any of the following sanctions as set out in the following paragraphs up to and including the Court injuction/ interdict or court order section of this policy. It is important to note that the following sanctions are not ranked in order of seriousness (nor does the decision maker need to address each one when reaching their decision as to sanction) but they represent the possible options available depending on the exact circumstances of the case.
Undertakings are a set of actions which the operator commits to implement. These will include an explanation of the events which gave rise to the undertaking, the actions to be taken and the timeline for achieving these. We may also consider these alongside sanctions. Although the intention is for these to be proposed by the operator there is no reason precluding the initiative being taken by us.
The operator cannot be required to enter into an undertaking and there is no requirement for us to accept any offer made.
We will only accept an undertaking where it is an appropriate enforcement response and if implemented will achieve an effective outcome. Previous use should not be taken as a basis for our future acceptance of an undertaking. The success or otherwise of earlier agreements will be a key factor in determining suitability.
Our usual approach will be to publish the details of any undertakings, however we recognise that there might be good reasons for departing from that approach in particular cases.
An undertaking may be considered appropriate where either:
- one of the statutory objectives is jeopardised, along with one or more licensing requirement
- one of the statutory objectives is jeopardised and there is public concern, however, no specific breach of any licence condition
- the overall statutory objectives are not jeopardised but a licensing requirement is breached
- the breach of licence and/or effect on statutory objectives can be rectified by way of undertaking
- there is no loss or limited loss on returns to good causes (likely to be less than £1,000).
Requirement for an independent review
A requirement for an independent review may be considered appropriate in any of the following circumstances:
- if achieving one of the overall statutory duties is jeopardised, along with one or more licensing requirement
- if achieving the overall statutory duty is not jeopardised but a licensing requirement is breached
- if we believe that an independent review would better help us to understand where problems have arisen with the operator for the purposes of improving regulatory oversight.
Imposing new or amended licence conditions
Amending conditions of a licence or imposing additional conditions is a flexible means of dealing with a concern. A finding of breach is not required to impose a new or amended licence condition. The licence continues with the additional or amended conditions that have been considered necessary to minimise the risk to the statutory objectives in the future.
We will seek to ensure that players will not be seriously disadvantaged or affected by any new or amended conditions, either directly or indirectly, and that the conditions will protect players and the general public during the period they are in force.
The imposition of new or amended licence condition(s) may be considered appropriate in the following circumstances:
- if one of the statutory objectives is jeopardised, along with one or more licensing requirement
- if one of the statutory objectives is jeopardised and there is public concern, however, no specific breach of any licence condition
- the licensee has demonstrated understanding and insight of the issues or concerns which gave rise to the review
- the risk of repetition is considered to be low
- the matter is capable of correction
- appropriate, realistic and practicable conditions can be formulated
- there is no significant risk of repetition if the additional licence conditions are complied with.
In seeking to impose new or amended conditions to the licence the decision maker will need to ensure that, in the absence of the operator’s consent, the operator has been given a reasonable opportunity to make written representations about the variation.6 The decision maker shall serve a notice on the operator informing them of the variation, and state the variation shall take effect at the end of such period as may be specified in the notice7. Any written representations made by the operator will be taken in to consideration when making the final decision as to whether or not to make the variation.
Court injunction/ interdict or court order
This remedy may be appropriate where we seek to compel the operator to do or refrain from specific acts. If the operator failed to comply with an injunction they can face criminal or civil penalties. It is not envisaged that these will be used frequently in the context of enforcement surrounding the National Lottery.
Under section 9 of the Act the court may grant an injunction restraining the contravention (or, in Scotland, an interdict prohibiting the contravention) or make an order requiring the licensee (and any other person who appears to the court to have been party to the contravention) to take such steps as the court may direct to remedy it where the court is satisfied:
- that there is a reasonable likelihood that a person will contravene a condition in a licence granted under section 5 or 6
- that a person has contravened such a condition and there is a reasonable likelihood that the contravention will continue or be repeated
- that a person has contravened such a condition and there are steps that could be taken for remedying the contravention.
Only if the decision maker considers that the sanctions set out above are inappropriate based on their assessment at Stages One and Two will they go on to consider a financial penalty.
If the decision maker is satisfied that the operator has contravened a condition in a licence under section 5 or 6, he may impose a financial penalty. The aims of a financial penalty are twofold, namely to deter persons from contravening conditions in licences under section 5 or 6, and to eliminate any financial gain/ benefit from non-compliance with licence conditions (subject to the former Director General’s directions referred to within this section of the policy).
In certain cases in which we are considering a financial penalty, or a payment in lieu of financial penalty, and in which timely disclosure and admissions have been made by a licensee, we will seek to give a discount to the penal aspect of a financial penalty.
We are required by law to act in accordance with the attached extract from the former Director General of the National Lottery's publication Financial Penalties: Principles and Procedures (contained at Appendix A (PDF)) and sections 10A and 10B of the Act. There are a number of procedural steps which must be taken before we can impose a financial penalty, including the service of a notice on the operator setting out the details of the breach8 and giving the operator the opportunity to make written representations or to notify us of their intention to make oral representations.
A financial penalty may be considered appropriate in the following circumstances where:
- one of the statutory objectives is jeopardised, along with one or more licensing requirement and (one or more of the following factors are present):
- there is a serious impact or potentially serious impact on the National Lottery’s reputation (including for fairness, consumer protection, systems integrity or customer satisfaction)
- there is a significant impact on players involved or for potential players
- there is an significant impact on returns to good causes
- the licensee has derived a financial advantage from the breach
- the licence breach was as a result of deliberate action or negligence
- where the operator was aware or should have been aware of the breach
- the operator has committed similar contraventions in the past
- there was a systematic failure to comply with a licence condition
- the operator did not report the issue to us
- there is a lack of effective remedial action after the breach or failure becomes apparent to the licensee
- a financial penalty is necessary to deter future contraventions or failures and to encourage compliance, on the part of both the licensee and other operators.
Licence revocation is the most serious sanction and should only be considered where it is decided that all other sanctions are inappropriate. We shall revoke the licence where:
- the operator no longer is, or never was, a fit and proper body to run the National Lottery
- in relation to the licence granted under section 6 if we are satisfied that the licensee no longer is, or never was, a fit and proper person to promote lotteries under the licence.
We may revoke a licence granted under section 5 or 6 if:
- if it appears to us that any of the grounds for revocation set out in Part I of Schedule 3 applies9
- if the operator consents.
As a final check, the decision maker will conduct an overall assessment to ensure that the proposed regulatory action is compliant with those priniples within the General principles section of this policy.
6 There are two exceptions where we are not allowed to vary existing conditions in the licence and these are set out at section 8(3) of the Act. These are (a) where the variation would result in a condition requiring the licensee to transfer any property or rights, or (b) in the case of a licence granted under section 5, in relation to a condition that the licence provides may only be varied with the consent of the licensee.
7 Under Section 8(5) of the Act the period specified in the notice shall be a period of at least twenty-one days beginning with the date of the notice.
8 Section 10A(3) and (4) sets out what we are required to include in the notice.
9 Schedule 3 states the following are discretionary grounds for revocation:
1 A condition in the licence has been contravened.
2 Any information given by the operator —
(a) in or in connection with the application for the licence,
(b) in pursuance of a condition in the licence, or
(c) in making representations under section 8(2) or Part II of this Schedule, was false in a material particular.
3(a)A proposal for a voluntary arrangement under Part I of the Insolvency Act 1986 or Part II of the Insolvency (Northern Ireland) Order 1989 has been made in relation to the licensee.
(b)A petition for an administration order to be made in respect of the licensee or for the winding up of the licensee has been presented to the court.
(c)A resolution for the voluntary winding up of the licensee has been passed.
(d)A receiver or manager of the whole or any part of the licensee’s property has been appointed.
Stage two of reaching decisions
Last updated: 6 May 2022
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