Examination of Witnesses(Questions 60-79)|
WEDNESDAY 22 MAY 2002
60. The conclusion you have signed up to says,
"This suggests that to be successful a competitor must submit
a bid that is sufficiently less risky or sufficiently more generous
to good causes to outweigh the risks involved in a hand-over."
I take it you accept that?
(Mr Harris) I accept that that view was expressed
in the Report.
61. That is not good enough and it never is
for this Committee. You have signed up to this Report. It is an
agreed report. Are you now telling us you disagree?
(Mr Harris) I am not seeking to disagree with the
62. It is not just a matter of accepting that
that is what the Report says; it is an agreed conclusion that
you have come to with the C&AG and the Department and the
(Mr Harris) Yes.
63. How could a challenger ever dislodge an
incumbent, given that the People's Lottery offered to give all
the profits to good causes and still lost?
(Mr Harris) They key thing is the judgment about which
bid will produce the best possible return for good causes.
64. That can only be on the robustness of the
total projected money raised. Is that correct?
(Mr Harris) Yes.
65. Have Camelot's projections been proven correct?
(Mr Harris) No.
66. Let us go to page 30 and National Lottery
ticket sales. Would you run us through that and show how far out
from that projection Camelot's actual sales are? Could you interpret
the figure for us?
(Mr Harris) If you continue the line from the first
licence, that will give you a sense of where Camelot's present
67. At the time of writing this Report, is it
not right to say that they were about ten million or 25% down
on what they had projected? Is that the difference between £41.379
million and £31.949 million?
(Mr Harris) I am sorry?
68. It is the difference between £41.379
and £31.949 million£10 million. Approximately
25% of the projection?
(Mr Harris) Assuming their line continues like that
for the licensed period, yes.
69. Let me ask you this, then: if The People's
Lottery had achieved the lesser figure here, the lesser ticket
sales, how much more money would have gone to good causes? It
is not a statistic we have here in the Report but perhaps it is
one you could prepare and do for this Committee. If the ticket
sales had been on the projection that The People's Lottery had
given, and they would give all the profit to good causes, how
much more would have gone to good causes? Would you provide a
note to this Committee of that? ". . . The People's Lottery
considered the retail data to be of little use to its bid . .
.", incomplete, unrepresentative and inconsistent (paragraph
(Mr Harris) Yes.
70. Now, your job was to ensure a level playing
field between the bidders, and you failed to do that?
(Mr Harris) Our job was to ensure a level playing
field between the bidders as far as we could. This information
was not held by us under the terms of the first licence; it was
held by Camelot. We sought to negotiate with Camelot that they
would make this information available. For reasons set out in
the report, they were only prepared to make certain of it availableinformation
on independent retailersand for reasons of the Data Protection
Act, that information had to be agreed with the individual retailers
before we could make it available. We sought to do so. It is exactly
as set out in the reportthat not all the information that
The People's Lottery would have wished to receive was made available.
We have in the second licence made provisions for transfer of
intellectual property around retailer details and made sure that
the agreements with retailers enable us to make that information
available next time round. We did the best we could to make information
available, but I quite accept it was not all the information that
The People's Lottery would have wished to receive.
71. Paragraph 2.24 says, "Under the terms
of the first licence, Camelot was obliged to provide the Commission
with management information, such as sales by region and type
of retailer. . .".
(Mr Harris) Yes. That is right.
72. That was something they were obliged to
do. Now you are saying for all sorts of reasons Camelot declined
to do it.
(Mr Harris) No. I am saying they were obliged to make
certain information availablesales by region and type of
retailerand that information was made available and it
was made available to The People's Lottery, so they knew the number
of terminals by type in regions and the number of terminals by
type of retailer. What they did not know was where all those terminals
actually wereon which street, in which retailer; they did
not have details of all the individual retailers and that is what
they were seeking to know. We did not have under the first licence
the ability to require that as management information and make
73. Thank you. I refer you to paragraphs 3.13
and 3.14, and I apologise to you if I am going over some of the
ground that Mr Williams went over but he does it with such finesse
that I can sometimes just not follow him quickly enough! As I
understand it, in August 2000 the Commission rejected Camelot's
bid. That was on August 23.
(Mr Harris) That is correct, yes.
74. At that stage you rejected that bid on the
grounds of propriety basically, is that correct?
(Mr Harris) Yes.
75. What I am confused about is that, on 25
July 2000, the Commission had decided that it would "take
no further steps towards a finding that GTech is not a fit and
proper person to manage part of the business of running the National
Lottery, given that the substance of the Commission's concerns
will be met if the undertakings by GTech and Camelot are discharged".
Now it may seem a very obvious question but why, when you decided
to reject Camelot's bid for the second licence because of concerns
about propriety, were you happy and had been happy since 25 Julyindeed,
since 23 June and some would say even since 12 April (paragraphs
3.13, 3.11 and 3.06)to allow them to continue to run the
Lottery? What I do not understand is how simultaneously you say
"They are not fit and proper persons to be allowed to bid
for the second tranche, and we can take that decision", but
at the same time you say, "But actually we are quite happy
for them to go on running the Lottery as it stands"?
(Mr Harris) There were two separate tests that the
Commission had to consider, both of which are laid down in the
legislation, one of which was a test whether the Commission had
sufficient evidence to find that GTech was not a fit and proper
organisation to be involved in the management and running of the
Lottery and, as a result of the GTech investigation and the concealment,
the Commission came to a provisional view in June that it was
minded to find GTech not fit and proper. GTech then, and Camelot
as well, took a range of actions including removing all the individuals,
or all the individuals who had been involved left the company,
and the company gave a whole range of commitments and undertakings,
and the Commission having considered this very carefully in July
came to a view that it did not have sufficient evidence to find
GTech not fit and proper at that stage, because of all the changes
that had been made. Nonetheless, the Commission was of the view
that this was a provisional finding because a lot of the commitments
had not yet been put in place and could not be put in place for
a period of time, and the Commission was very concerned that GTech,
for reasons set out in the Report, had now come very close twice
to being found not fit and proper. It therefore could not be satisfied
that GTech, looking forward and playing the role it was playing
within the Camelot bid, was likely to meet the other testto
accept a bid the Commission has to be satisfied that the bidder
is likely to operate the Lottery with all due propriety. Granting
a seven year licence, given the uncertainty about how GTech would
behave in future, would not ensure the Lottery was run with all
76. I have given you a lot of rope there even
though I am pressed for time, but what you have told me is that
the interim decision on 25 July was that you did not yet have
enough to pin on Camelot but by August you did, because in August
you took the decision not to allow them to bid. What I cannot
understand is how you can, in August, exclude them from the bid
on the grounds that they are not fit and proper, and yet in August
be quite happy to let them continue running the Lottery, presumably
on the grounds that they are fit and proper. If you knew that
they were not fit and proper to bid in the second round, you must
have known that they were not fit and proper to be operating the
thing in the first place. What you have told me is that you had
two irreconcilable facts, and you decided to call them a paradox
instead of a contradiction.
(Mr Harris) No. We had a single situation whereby
we had two different statutory tests to apply; one was whether
or not we had sufficient evidence to determine that they were
not fit and proper to be involved in the Lottery, and the Commission
considered that and concluded that, having taken full advice it
77. That was in July.
(Mr Harris) That was in July.
78. And let us be absolutely clear: you did
not say that you did not have enough at the time. You said that
you would take no further steps towards a finding. You were not
going to pursue the matter, yet within one month you had enough
information and you took a decision that they were not fit and
proper, so why did you let them go on running the Lottery?
(Mr Harris) What we also said in July was that we
were going to continue to review very closely the way GTech were
managed by Camelot and to ensure that all the commitments that
they had given were progressively put into place, and that we
believed that that could not be done until November of that year.
When we came in August to make a decision about whether or not
the Camelot bid was likely to secure that the Lottery was run
with all due propriety over a coming seven year period, the period
of the licence, the Commission concluded that it could not come
to that view given the recent track record of GTech, and although
GTech, as you say, was just the right side of the fence, if it
went wrong one more time or failed to meet the commitments that
it had given but not yet fully demonstrated, then the Commission
would probably have had to revoke the licence.
Mr Gardiner: Mr Harris, I understand
how in July you can be of one view, how in August you can be of
a different view, and how in December you can be of yet a different
view again. What I do not understand is how in August you can
hold two contradictory views, and it appears to me that you did.
No further questions.
79. Mr Harris, I would like to continue with
Mr Gardiner's line of questioning because he has hit on something
I find very puzzling, and I have not found your answers at all
satisfactory, to be honest. Could you just repeat for my benefit
why you originally decided that you could not accept either bid?
(Mr Harris) We decided in the case of the Camelot
bid that, with GTech in the position it was in, we could not be
satisfied that the Lottery would be run with all duesorry.
2 Ev 20 Back