New Lottery Company loses legal challenge against National Lottery marketing fund
Richard Desmond’s company had claimed that the Gambling Commission granted the National Lottery an illegal subsidy.
UK.- The former newspaper and pornography publisher Richard Desmond has had to drop one of his legal challenges lodged after its latest failure to obtain the UK National Lottery licence. The Competition Appeal Tribunal (CAT) has dismissed his company Northern & Shell’s allegations that Camelot Group, subsequently bought by Allwyn UK, was unlawfully granted a £70m marketing subsidy by the Gambling Commission.
Northern & Shell’s New Lottery Company argued that allowing Camelot to keep £70m under the third UK National Lottery licence amounted to unfair treatment and unlawful financial aid that placed its own lottery ventures like the Health Lottery at a disadvantage. The company argued that the funds would otherwise have gone to the National Lottery Distribution Fund (NLDF).
The case, formally titled The New Lottery Company Ltd & Ors v Gambling Commission 2026, was heard by Justices Bacon, Tidswell, and Ridyard. They ruled that the Commission’s approval of Camelot’s 2023 marketing spend did not breach the Subsidy Control Act 2022.
“It is common ground that the burden of establishing that the Decision constituted a subsidy rests upon the Applicants,” the ruled, noting that if the New Lottery Company had won its bid for the fourth National Lottery licence, it would have benefitted from the same mechanism.
Central to the dispute was whether the Gambling Commission’s decision violated the Commercial Market Operator (CMO) principle, the UK’s equivalent of the EU’s market economy operator test. Lawyers for Richard Desmond argued that because the Lottery is a statutory monopoly, no genuine market comparator exists, and therefore the principle should not apply.
The tribunal disagreed. “The absence of an actual market comparator does not preclude the application of the CMO principle,” it ruled. The judges assessed whether the Commission’s actions aligned with those of a rational commercial operator and concluded that the decision, based on econometric analysis, independent expert advice, and a reduction of Camelot’s original £89.6m request, fell within acceptable commercial boundaries.
The ruling states that “the law recognises that there is a wide spectrum of reasonable reactions to commercial circumstances in the private market.”
It also notes that the marketing mechanism under Condition 23 of the Third Licence was designed to boost ticket sales and, in turn, increase contributions to good causes. “Considerable effort was put into establishing that funds which were retained by Camelot and invested in marketing… would in turn generate sufficient additional ticket sales to create a net benefit to the NLDF and thereby a net increase in contributions to good causes,” the tribunal found.
Samantha Ward, Partner at Clifford Chance advising Camelot and Allwyn, said the outcome in what is only the third subsidy control challenge brought under the Subsidy Control Act 2022 provides “important guidance on the application of the ‘commercial market operator principle”.
Desmond’s New Lottery Company is still pursuing a separate High Court case against the Gambling Commission’s decision to award the fourth National Lottery licence to Allwyn, which began running the lottery in February 2024.
