Lottery sale in jeopardy over charity's €1.5bn claim
Rehab says prize-fund cap breaches competition law, plans to sue State
THE Government is facing a €1.5bn claim for compensation that could jeopardise its plans for the sale of the National Lottery operating licencel.
Lawyers for the Rehab Group informed the offices of ministers Brendan Howlin and Alan Shatter and Attorney-General Maire Whelan last Thursday of the charity's intention to pursue the State for the multi-million euro losses it claims to have suffered as a result of the National Lottery's dominant market position.
Rehab contends the manner in which the National Lottery is being operated is in direct contravention of European competition law.
Lawyers for the group claim that the State has "limited and distorted" competition for potential rivals of the National Lottery through its imposition of a weekly €20,000 prize fund cap on lotteries operated by charities while National Lottery continues to enjoy the advantage of being able to offer its players unlimited winnings.
Leading UK economic consultants Oxera estimate that Rehab has suffered losses in revenue of €600m due to the limitations of the €20,000 weekly cap since the introduction of the Charitable Lotteries Scheme in 1997.
That scheme had been intended to compensate charities such as Rehab for the financial losses the then government acknowledged they would suffer arising from their inability to match the prizes being offered by the National Lottery. Quite apart from the approximate €600m in revenues it believes it has already foregone since 1997, Rehab intends to seek up to €900m more in compensation from the State, having estimated that to be the future loss it will suffer from the sale of a 20-year operating licence for the National Lottery.
The arrival of Rehab's Letter of Claim at the offices of Mr Howlin and Mr Shatter and of the AG came less than 24 hours before the expiry of the deadline for prospective bidders to express their interest in buying the lottery licence.
Public Expenditure Minister Brendan Howlin has expressed his intention of bringing in up to €300m from the deal, with most of that set aside for the building of the National Children's Hospital.
While the Sunday Independent understands that the Cabinet had already discussed the matter of a separate judicial review which has already been brought by Rehab in relation to the decision by Justice Minister Alan Shatter to phase out the Charitable Lotteries Scheme by 2016, the charity's decision to initiate a case for such massive compensation will come as a major shock.
A source close to the Rehab Group said the final decision to "press the red button" and take on the State had been arrived at reluctantly. "The board felt this legal action was the only option left."
The Sunday Independent understands the Government has until this Thursday to provide its initial response.
Commenting on the immediate implications of the legal action which is being directed on Rehab's behalf by Dublin law firm A&L Goodbody, a source said: "This case could derail the sale of the lottery licence altogether. This case challenges the very law that gives the National Lottery its monopoly and allows it alone to offer unlimited prize money.
"If they lose that advantage, it's open to any competitor to take them on."
A spokeswoman for the Department of Public Expenditure and Reform said: "Mindful of the attendant legalities, we won't be commenting on this issue."