Subsidy control lessons from the New Lottery case

A Competition Appeal Tribunal judgment handed down on 26 February 2026 offers important guidance on the scope of the UK's subsidy control regime and the procedural discipline required when challenging public decisions.

Background

This case concerned an application for review under section 70 of the Subsidy Control Act 2022 ('the SCA') of a decision of the Gambling Commission dated 19 July 2023 ('the Decision'), brought by The New Lottery Company Limited, Northern & Shell PLC and The Health Lottery Elm Limited (collectively 'the Applicants').

The Applicants alleged that the Decision constituted the grant of a subsidy to Camelot UK Lotteries Limited ('Camelot'), which at the time was operating the National Lottery under the Third National Lottery Licence ('3NL'), and/or the Allwyn entities that subsequently acquired Camelot. The Decision followed a marketing investment proposal submitted by Camelot, and granted Camelot the use of £70.21m for the marketing and promotion of the National Lottery, taken from funds that would otherwise have been paid into the National Lottery Distribution Fund ('NLDF'), the fund that channels National Lottery revenues to good causes.

The mechanism behind the Decision had originally been introduced in 2012 to address a misalignment of incentives: marketing costs had risen to the point where Camelot had no commercial reason to increase its marketing spend to the level the Gambling Commission considered necessary to maximise revenues for good causes. A licence condition was therefore inserted permitting Camelot to submit annual marketing investment proposals (known as Licensee Notices of Investment Opportunity ('LNIOs')) whereby additional revenues from the National Lottery could be retained by Camelot and invested in marketing rather than paid into the NLDF. 

For 2023/24, Camelot initially proposed a total incremental marketing investment of £89.6m, projecting a net increased return to good causes of £43.7m. Following internal review and expert consultant reviews of the proposal by economic experts European Economics ('EE') and negotiation, the Gambling Commission reduced the approved investment to £70.21m, with Camelot's updated projections showing a net increased return to good causes of £43.4m.

The Applicants sought declarations that the £70.21m retention constituted a subsidy that did not comply with the subsidy control principles in the SCA, and a recovery order requiring the Gambling Commission to recover that sum from Camelot and Allwyn.

The Tribunal's key rulings

(a) Did the decision constitute a subsidy under the SCA?

Under section 2(1) of the SCA, a "subsidy" requires financial assistance given from public resources by a public authority that confers an economic advantage on an enterprise, is specific to that enterprise, and has or is capable of having an effect on competition or investment. The Tribunal concluded that the Decision did not confer a subsidy, because it was consistent with normal market conditions assessed under the Commercial Market Operator ('CMO') principle.

(b) The CMO principle

Could the CMOP apply?

The Applicants argued that because the National Lottery operates as a statutory monopoly, there was no private market against which to measure the Decision, and the CMO principle therefore could not apply.

The Tribunal rejected this argument. Even where there is no actual market comparator, the CMO principle remains applicable. The decisive question is whether the State intervention can be "assimilated to or is comparable to" that of a private operator. If so, the correct approach is to assess what normal market conditions would be, on the basis of the objective and verifiable evidence available. 

In this case, the Tribunal found that the Decision had a clear commercial character: the licence condition governing the investment was framed in commercial terms, referring expressly to "investment" and "jointly financing the proposed investment", and involved a detailed evaluation of the likely return on investment. The arrangement was closely analogous to joint marketing investments seen in franchisor/franchisee or supplier/distributor relationships, where parties adjust their commercial arrangements to align incentives and share gains. The Decision could therefore readily be compared with normal market conditions under the CMO principle even though no private market was available as a comparator.

Application of CMOP

The Tribunal confirmed that the standard to be applied when looking at the CMOP principle is whether it is clear that the relevant transaction would not have been entered into, on the terms the Gambling Commission in fact entered into it, by any rational market operator, recognising that there is a wide spectrum of reasonable commercial reactions, and therefore a significant margin of judgment for the public authority. Essentially, the Tribunal once again confirmed the general position put forward in the Sky Blue case decided by the Court of Appeal under the old EU State Aid Regime.

The Tribunal then turned to the question of whether the Decision itself did, in fact, satisfy the CMOP. The Applicants raised the following arguments suggesting that the CMOP assessment undertaken was actually irrational:

• First, they contended that the Decision conferred additional indirect benefits on Camelot and Allwyn (such as enhanced brand value and staff retention benefits extending beyond the end of 3NL) that a rational private investor would have sought to price or extract. The Tribunal rejected this. There was no evidence of how a private investor would approach these issues before the Tribunal. It was equally possible that a rational private investor might have taken the same approach as the Gambling Commission, or have been even more generous to Camelot. The Applicants' submissions amounted to speculation, falling considerably short of the hurdle set by the case law.

• Second, the Applicants argued that a rational private investor would have demanded further refinement of Camelot's econometric modelling before committing to the investment. The Tribunal rejected this too. EE itself had not recommended demanding remedial action from Camelot, reasoning that any further work was unlikely to make a material difference given that 3NL was coming to an end. The Gambling Commission was entitled to accept that advice.

The Tribunal therefore concluded that the Decision was consistent with normal market conditions and did not constitute a subsidy.

(d) Procedural guidance on delay

Although the substantive application was dismissed, the Tribunal used the opportunity to address important questions about timing of challenges. The statutory timetable under section 71 of the SCA requires challenges to be brought within one month of the relevant "transparency date". However, the SCA gives no express guidance on time limits where a public authority has not treated its decision as a subsidy and has therefore made no entry on the public subsidy database.

The Tribunal held that challenges to decisions where the public authority has not treated the assistance as a subsidy should be subject, by analogy, to the expectation that proceedings should normally be issued within one month of the date on which the applicant was or should have been aware of the decision, unless within that period a request is made for pre-action information. Where information is requested, proceedings should normally follow within one month of that information being provided.

In this case, the Applicants waited over two months after becoming aware of the Decision before contacting the Gambling Commission. The Tribunal concluded that the Applicants had not acted sufficiently promptly and would have been “out of time” in any event.

Practical tips for public authorities and challengers

1. The CMO principle applies even without a private market

Public authorities should not assume that the absence of a directly comparable private market renders the CMO principle irrelevant. What matters is whether the State's intervention is economically comparable to that of a private operator. Authorities should assess and document whether their decisions are analogous to those a rational commercial party would make; the mechanism or policy objectives behind the decision are not determinative.

2. Structure commercial decisions to reflect market discipline

The Tribunal was persuaded that the Decision had a genuine commercial character because it involved negotiation, independent expert input, a downward modification of Camelot's initial proposal, and a requirement for Camelot to contribute its own resources. Where relevant, authorities approving commercial proposals should mirror this discipline: obtain independent advice, require risk-sharing by the beneficiary, and document the basis on which the investment was judged rational.

3. Expert evidence must be genuinely engaged with

The Gambling Commission's decision withstood scrutiny in large part because it had obtained and properly engaged with independent economic and marketing advice, and had reduced the investment level to reflect the risks identified. Where independent advisers raise reservations, those reservations must be meaningfully reflected in the final decision. At the same time, authorities may rely on modelling assessed as "defensible" by their own experts without being required to demand further work, particularly where advisers confirm that additional refinement is unlikely to alter conclusions.

5. Act quickly - the one-month rule applies to “no subsidy” decisions

Any party wishing to challenge a decision as an unlawful subsidy must act with urgency, even where the authority has not entered the decision on the public subsidy database. The Tribunal's clear message is that proceedings should normally be issued within one month of the challenger becoming aware of the decision, with that period extended only where a pre-action information request is made promptly within the same window. 

Conclusion

The New Lottery case illustrates both the technical complexity of subsidy control challenges and the procedural discipline required to bring them successfully. If you have questions about how the subsidy control regime applies to your organisation's decisions or proposed transactions, our subsidy control team would be happy to assist.