{"id":85497,"date":"2026-04-07T13:39:25","date_gmt":"2026-04-07T11:39:25","guid":{"rendered":"https:\/\/www.lexxion.eu\/?post_type=uksci&p=85497"},"modified":"2026-04-07T13:39:25","modified_gmt":"2026-04-07T11:39:25","slug":"commercial-market-operator-principle-lottery-company-v-gambling-commission","status":"publish","type":"uksci","link":"https:\/\/www.lexxion.eu\/en\/uksci\/commercial-market-operator-principle-lottery-company-v-gambling-commission\/","title":{"rendered":"Relying on the Commercial Market Operator principle is less of a lottery: the Competition Appeal Tribunal’s judgment in The New Lottery Company v Gambling Commission"},"content":{"rendered":"

On 26 February 2026, the Competition Appeal Tribunal (CAT) decided The New Lottery Company v Gambling Commission<\/a>. This is the second case in which the CAT has decided a subsidy control case in favour of the public authority, applying the \u2018Commercial Market Operator (or CMO) principle\u2019 set out in Section 3(2) of the Subsidy Control Act 2022<\/a>. The CAT found that that the Gambling Commission\u2019s decision in July 2023 to contribute \u00a370.21 million to Camelot\u2019s marketing activity for the National Lottery was consistent with normal market conditions.<\/p>\n

The case was brought by the New Lottery Company (a vehicle set up by Northern & Shell PLC to compete for the fourth national lottery licence), together with Northern & Shell PLC and The Health Lottery Elm Limited) and the marketing contributions in question occurred towards the end of the third licence period when the licensee was Camelot. The fourth licence was won by Allwyn which subsequently acquired Camelot in February 2023. Separately, the New Lottery Company is challenging the process for awarding the licence to Allwyn and is seeking damages.<\/p>\n

Camelot had submitted a marketing investment proposal backed by detailed analysis recommending that National Lottery revenues be retained as an investment in the marketing of the National Lottery and not contributed to the National Lottery Distribution Fund. The Gambling Commission accepted that \u00a370.21 million be diverted for this purpose. The Appellants argued that this conferred an economic advantage on Camelot, as it \u201cprovided Camelot with resources to market and promote the National Lottery, thereby improving the National Lottery\u2019s competitive position in the relevant markets, to the ultimate benefit of Camelot and Allwyn, as both Camelot\u2019s owner, forming a single enterprise with Camelot for the purposes of the Act, and the operator of the Fourth Licence\u201d.<\/p>\n

The respondents argued that an economic advantage had not been granted because the National Lottery allows licence monies to be committed to the joint financing of unanticipated investments and this was simply a licence modification. The CAT rejected this, finding that the way in which the modification was structured was tantamount to a public authority foregoing revenue, which, as illustrated by the state aid case law, amounted to an economic advantage (and Section 3(2) of the SCA refers to foregoing of revenue that is otherwise due as a subsidy). The CAT said that this should be assessed by comparing how the public authority\u2019s decision changes what it would normally receive in revenue compared to what it would have received, but for the decision.<\/p>\n

However, no subsidy was granted because the CAT found that it could not be said that a rational private investor would not have entered into the transaction, instead concluding that it \u201cfell comfortably within the wide margin of judgement available\u201d to the public authority in determining how a commercial market operator might behave in such circumstances. Citing the Court of Appeal in Sky Blue Sports, a state aid case, the CAT explained that there is a wide range of reasonable reactions to commercial circumstances any of which might be taken by a private investor.<\/p>\n

In this case, the CAT considered the relevance of the fact that since only Camelot could make the investment decision in question, there was no market context in which to assess the application of the CMO principle. However, the CAT concluded that the absence of a market comparator does not preclude the application of the CMO principle: what is key is whether the transaction was consistent with normal market conditions, on the basis of objective and verifiable evidence. Here, it found that the decision by the Gambling Commission “involves an investment which is very similar to one which would occur in many ordinary commercial contexts, and the key features of that type of commercial transaction are readily identifiable.” In other words, the Gambling Commission was foregoing revenues on the expectation of a return in a way that occurs in many commercial context (the CAT cited as analogous situations a decision by a franchisor and franchisee or a supplier and distributor to make a joint investment of a significant sum in the marketing of a consumer-facing product to generate additional profit from the enterprise), and which had been the subject of econometric analysis prepared for Camelot. In such a case, the CMA said that whether the investment decision constituted a CMO-compliant investment would depend on an assessment of the projected return and how it was supported by the quantitative and qualitative evidence assessment. It would also depend on the outcome of negotiations between the parties as to how the parties would share the anticipated gain.<\/p>\n

As mentioned, this is the second case in which the CAT has found that a subsidy was not granted because of the application of the CMO principle. The first, Weis v Greater Manchester Combined Authority (GMCA)<\/a>, concerned the extent to which certain property development loans granted by the GMCA complied with the CMO principle. As in the Lottery case, the CAT drew on established EU state aid caselaw in interpreting the CMO principle and found that public authorities are entitled to a margin of appreciation in determining whether a commercial operator would have acted similarly. The appellant, Mr Weis, had been granted leave to introduce expert evidence to show that the CMO principle did not apply. However, he did not do so, instead focusing on the process resulting in the terms of the loans that were offered to the borrower. The CAT examined this and found that it was a perfectly rational process and not inherently defective, given that it provided for decisions to be made with input from experienced lending officers, and it was only after this multi-stage process had completed that the matter was put to the decision maker. It concluded that a commercial lender would likely regard the loans in question as relatively low risk, as the structure of the loans, covenants, security and low loan to value meant that even in the event of default, the GMCA would likely recover the full amount plus interest.<\/p>\n

In the\u00a0Lottery<\/em>\u00a0case, the CAT rejected an application at a case management conference to introduce expert evidence to demonstrate flaws in econometric analysis prepared for Camelot and accepted by the Gambling Commission in concluding that the CMO principle was satisfied. The CMO principle is to be assessed by reference to the decision\u2011maker\u2019s reasoning process, not by re\u2011running the economic analysis after the fact. This follows from Section 70(5) of the SCA, requiring the CAT to apply the same principles as would be applied in determining judicial review proceedings. The CAT is required consider both whether the decision was outside the range of reasonable decisions open to the decision-maker, and whether there was a demonstrable flaw in the reasoning which led to it.\u00a0 According to the CAT, it is for the Applicants to establish that no rational private market operator would have concluded the negotiations in that way.<\/p>\n

The CAT’s consideration of the CMO principle involved addressing two arguments that were put by the Applicants.\u00a0 First, were the benefits to Camelot and Alwyn rational and second, was the econometric modelling put to the Gambling Commission sufficient?<\/p>\n

The CAT rejected the argument that the Gambling Commission would not have been interested in what were the gains for Camelot\/Allwyn, as a private investor’s primary concern would be its financial returns, saying that in assessing the commerciality of the negotiated outcome achieved by the public authority, it is necessary to take account of the potential gains for both parties and how they would be divide between them. The CAT drew the following conclusions from the evidence:<\/p>\n