Regulator stops Camelot from extending use of terminals

The National Lottery operator Camelot is set to be blocked from supplying new commercial services, such as mobile phone top-ups, through its network of terminals in retail outlets.

In a provisional decision, the National Lottery Commission (NLC) said it was "minded to refuse" the application made by Camelot on the grounds that the extension could breach European Union and competition laws.

As part of Camelot's bid for the third lottery licence in 2007, it announced plans to tie up with a number of potential partners to offer new commercial services as allowed by the regulator. Camelot won the 10-year licence to run the lottery until 2019.

But yesterday the NLC cited "unmatchable advantages" that Camelot would leverage by entering the commercial market for services, including bill payments.

Furthermore, the regulator said the ancilliary activities would generate "relatively small" additional annual revenues of more than £5m for "good causes", compared with the core National Lottery business that delivers about £1.6bn. The commission had invited responses from bodies, including PayPoint, Payzone UK, the National Federation of Retail Newsagents and the Association of Convenience Stores.

Dominic Taylor, the chief executive of PayPoint, the cash and internet payment provider, said: "Today's decision should protect vulnerable people from the increased temptation to gamble."

He added: "It would be entirely wrong if Camelot were to be allowed to exploit its monopoly position, and we are pleased that the National Lottery Commission has accepted the compelling arguments that the proposal would have distorted competition in the bill payments sector." The NLC said it would consider any written representations in relation to its provisional statement by 3 September and then make a final decision.

But a Camelot spokeswoman said: "We firmly believe that the National Lottery Commission's preliminary position is flawed and remain absolutely confident that our proposals do not breach either European or competition law." Camelot said its proposals were focused on five product areas: mobile top-ups, international calling cards, bill payments such as local council tax and utility bills for about 2,500 suppliers, electronic funds transfer and "tap & wave" payments using contactless technology.

The spokeswoman added: "We remain convinced that our detailed and carefully considered plans, based on thorough and robust legal advice, should allow us to offer commercial services through National Lottery retailers."

Camelot said its proposal to offer additional services was supported by the majority of independent retailers, certain multiples, and trade bodies including the National Federation of SubPostmasters. Camelot also cited the "convenience" of consumers having access to such commercial services, given that more than 96 per cent of the UK adult population live or work within two miles of a lottery terminal. Camelot has a network of more than 28,500 retailers.