Game not yet over for Lottoland Down Under

The Australian government may be planning to ban the operator but its latest public spat shows the company isn’t giving up without a fight, writes Joanne Christie

Lottoland is often described as having a disruptive business strategy, but Down Under things have taken a decidedly nasty turn and it’s starting to look like a strategy of divide and conquer might be the company’s best bet going forward.

When Lottoland put out a press release on Tuesday calling for a rethink on the Australian government’s plan to ban secondary lotteries on the grounds that one of its main critics, the Australian Lottery and Newsagents Association (ALNA), had overstated its membership and was facing financial ruin, it was bound to draw a reaction.

Lottoland accused the ALNA of misleading the government into thinking it had 4,000 members when by Lottoland’s calculations it had only 707.

The secondary lottery giant came up with its figures by accessing the company’s financial accounts lodged with the Australian Securities & Investments Commission, taking the stated revenues from membership subscriptions (AU$619,793), and dividing it by the ALNA’s advertised yearly membership price of $876.

In a punchy response later that day, the ALNA accused Lottoland of defamation and said: “The Australian Lottery and Newsagents Association is solvent and represents approximately 2,000 member small businesses. Any rumours to the contrary are unequivocally false and salacious.”

Separately, an ALNA spokesperson pointed out to iGB that: “ASIC documents are and always have been available for anyone to view online. There is no secret or ‘previously unpublished’ information that Lottoland have ‘uncovered’. ALNA are completely transparent and if anyone were to view the reports they would see the truth.”

On this front, the ALNA has a point – it appears Lottoland decided to access reports anyone could access, found something juicy in there and issued a press release. It may have overstated the “unpublished” nature of the documents, but that doesn’t mean they don’t still raise serious questions.

Lottoland’s release drew attention to the ALNA’s independent auditor’s report, which stated: “There is significant uncertainty as to whether the group will continue as a going concern and therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in the financial report. Our opinion is not modified in respect of this matter.”

The ANLA took issue with this and said: “The last line of the extract that has been included in Lottoland’s misleading media release, states that ‘the auditors opinion has not been modified in respect of this matter’.

“For those who may not understand accounting terms, the auditors are actually stating that the ANF (trading as ALNA) is solvent and is trading within the confines of the law. Any suggestion to the contrary by deliberately misrepresenting ANF financial information is unethical and defamatory. The correct information is publicly available through ASIC.”

It isn’t clear what the ALNA is getting at here as while it’s true that the auditor has stated the accounts present a “true and fair view of the group’s financial position” and therefore there has been no need to modify its opinion, significant concerns have been raised about the ALNA’s future viability in the report.

In fact, the auditor has inserted an emphasis of matter paragraph to raise readers’ attention to the “group’s deficiency of capital of $420,620 as at 30 June 2017” and “the need for the group to successfully improve its financial position, performance and cash flows as well as receiving continuing support from its creditors”.

The ALNA’s argument is that the year in question was a difficult one and should not be taken in isolation.

On the membership front, the ALNA said it has never claimed to have 4,000 members, but rather that in government communications it has referred to 4,000 small businesses operating as lottery retailers that are impacted by Lottoland, not specifically that these are members.

It said: “As the only authorised national body it is not uncommon for us to refer to industry statistics.”

It is adamant it represents 2,000 small businesses, and explains the discrepancy in the figures by saying that the membership price used by Lottoland was the highest and there are many different prices, that 400 members come via an affiliate agreement and are not recorded in the membership revenues and that members only pay for one location and some of its members have 58 locations.

Given the enormous gap between 700 and 2,000, we asked if the ALNA could provide a further breakdown of the various membership prices and numbers and explain where those 400 members were recorded in revenues.

In response it said only: “Re membership numbers, this is explained in ALNA’s statement, including the fact that there are a number of different membership categories. ALNA unequivocally represents over 2,000 small business members.”

Tit for Tat(ts)
Curiously, however, the ALNA told iGB it takes issue with Lottoland’s release claiming it was part of Tatts’ Lottoland’s Gotta Go campaign, despite having previously seemed happy to be associated with it. Its position is now: “The campaign he refers to was run by Tatts independent of ALNA. ALNA has been campaigning on this issue for years and has done so with no funding from any other business. ALNA and Tatts are two separate entities.”

Nobody — including Lottoland — is claiming the ALNA funded the campaign. In fact Tatts disclosed in its recent financial results it had spent AU$5m on the publicity drive.

However, it seems rather disingenuous for the ALNA to suggest, as it has to iGB, that it was merely the case that the “ALNA’s concerns were echoed in that campaign”.  

Indeed, on the front page of the ALNA’s website is an announcement about the campaign, which describes its efforts to lobby Tatts to take action and its feedback to the monopoly operator about the campaign prior to launch, some points of which it says were actioned, while others were not.

It further reassured agents: “ALNA has sought and obtained legal protection for you from Tatts Group to participate as per the campaign instructions (indemnity). This means if you follow the campaign instructions including the use of: In store point of sale, Social media collateral and Letters to politicians. If Lottoland tries to take any action against you; you are indemnified by Tatts Group against any action and cost.”

Perhaps the desire to create some distance between it and Tatts is down to the recent division between the country’s newsagent associations. Although the ALNA has been firmly opposed to Lottoland, the Newsagents Association of NSW and ACT (NANA) recently said it was considering entering into a partnership with the firm.

And rather than applauding the government’s announcement it planned to ban secondary lotteries, NANA has questioned it, claiming the move would simply cement Tatts’ monopoly position in Australia – Tatts runs the state lotteries, including selling tickets online, in all states of the country apart from Western Australia.

In a letter to communications minister Mitch Fifield, NANA CEO Ian Booth requested a meeting, “to raise our concerns about the proposed ban of online lottery betting products under the Interactive Gambling Amendment (Lottery Betting) Bill 2018”.

The letter, dated 12 April, said: “Despite what you may have been advised by other organisations who claim to represent the interests of newsagents, there is not uniformity of opinion amongst newsagents and similar businesses on the issue of support for the proposed amendments contained in the Interactive Gambling Amendment (Lottery Betting) Bill 2018.”

Lottoland has also this week written to four state ministers calling for sanctions or suspensions to Tatts’ licences over what it described as “inappropriate conduct” in the campaign, which is argued puts Tatts in breach of its licence conditions.

In the letter it has also raised concerns over the involvement of the ALNA in the campaign, pointing to its links to the Alliance of Australian Retailers (AAR), a retailers’ alliance that was widely exposed as a front group financed by large tobacco companies after campaigning against plain packaging when it was introduced in Australia.

Asked about its involvement with AAR, the ALNA spokesperson says: “ALNA also plays an education role in informing its members and relevant stakeholders on matters relating to impacts on their business, such as changes in regulation and correct procedures. For this reason, ALNA has a representative on the board of the Alliance of Australian Retailers (AAR).

“AAR is a peak industry body representing small business retailers who sell tobacco products, which includes many ALNA members. It is standard practice for peak industry bodies to have other associations and industry bodies on their board, and you will find this commonplace across multiple industries.”

When the proposed legislation to ban lottery betting in Australia goes up for debate in parliament – likely to be this month or next – it should make for some very interesting discussion. In any case, the outcome is not the foregone conclusion it seemed when the bill was first announced in late March.

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