State faces €1.5bn compo claim over Lottery dominance

The Rehab Group and Rehab Lotteries have launched two separate legal challenges against the State.

One is seeking a judicial review of Justice Minister Alan Shatter’s decision to phase out the State’s compensation lottery payments over the next three years, and the other seeks compensation for past and future loss of market share and profits due to the National Lottery’s position in the market.

The largest is a €1.5bn compensation claim Rehab lodged last October, arguing that it has suffered massive multimillion-euro losses as a result of the National Lottery’s dominant position in the market.

Rehab claims the way in which the National Lottery was operated contravened European competition law and represented abusive conduct in the marketplace.

The group said competition in the market has been “distorted” by the State because, for rivals to the National Lottery, there is a €20,000 weekly prize limit, while the National Lottery can offer unlimited prizes.

Rehab said this prevented it from operating on a level playing field and led to the National Lottery effectively operating as a monopoly with a 98% market share.

One UK consultancy firm has estimated that, since the Charitable Lotteries Scheme was established in 1997, Rehab has suffered losses of up to €600m as a result of the weekly €20,000 winnings cap.

The Rehab Group is also claiming another €900m in relation to the amount it believes it will lose due to the sale of the 20-year National Lottery licence to Camelot and An Post.

The Charitable Lotteries Scheme was set up in 1997. Other charities were already operating lotteries and the scheme was designed to compensate them for losses incurred.

The State has indicated it will strongly defend its position if the case goes ahead.

In July, the Rehab Group also sought a judicial review on Mr Shatter’s decision to phase out the Charitable Lotteries Scheme over three-year period. A ruling from the High Court is expected in the coming weeks.

Mr Shatter told the Dáil yesterday that he was phasing out the scheme because it was “an inefficient and uneconomic use of the State’s resources”.

He said it encouraged inefficient fundraising and high administration costs and created an incentive to run a charitable organisation at a low profit margin or at a loss.

Mr Shatter believes the scheme had essentially evolved into a mechanism to obtain taxpayers and National Lottery surplus funds.

The Rehab Group alone has received almost €85m from the scheme since 1997, and Mr Shatter indicated it will receive another €2m this year and €1m in 2015.