Two weeks after the Central Administrative Court awarded Loxley GTECH Technology close to 1 billion baht in its dispute against the Government Lottery Office (GLO), the IT firm's proposed appeal to the Supreme Court reopens a two-decade old debate: should the state favour 200,000 low-income ticket sellers over the rights of 22 million lottery ticket buyers to access a state product at a reasonable price?
Loxley vows to appeal the Administrative Court's latest ruling to the Supreme Court in the 20-year-old online lottery saga. The court ordered the GLO to pay close to 1 billion baht plus 7.5% interest (since 2005) in damages to Loxley GTECH after the GLO breached its contractual duties by cancelling the plan to implement an online lottery system.
Loxley GTECH, a joint venture between the Thai trading conglomerate Loxley Plc and American gaming system provider IGT Global Solutions, is seeking 5 billion baht in compensation and the termination of the contract. The company is hoping the Supreme Court will force the GLO to fulfil the contract in regards to four of the five games for which it has built systems.
The company invested close to 2 billion baht developing the system, said Pises Dissawat, president and chief executive of Loxley GTECH Technology. Under the terms of the agreement, the company's revenue for the project would equal 75 satang per transaction, excluding value-added tax.
The administrative court, Loxley and the GLO agree that the game, called 2D3D, also known as a numbers or policy racket, is illegal under the Government Lottery Act of 1974.
The game, in which players pick a two- or three-digit number and then divide the price among all the people who picked that same number, is illegal for technical reasons (since it is hard to ensure enough revenue will be directed to the government), and is similar to that promoted in underground lotteries.
It's also one of the games most likely to be subject to ticket overpricing. The government sets the price of tickets at 80 baht, but popular numbers can easily sell for 100 baht or more. An online lottery system was first floated in 1996 as a way to solve overpricing, with that proposal reappearing in 2005.
While the court agreed with the GLO that the game is illegal, it also said the contract was not void. Among the factors the court took into account in reaching the narrow decision was that the GLO did not have the authority to enter into the original contract, and that Loxley GTECH did not know the game was illegal when it signed the contract.
If the Supreme Court decides to take the case, the contractual status of the remaining four games the company built systems for will be at stake.
"The court did not touch the subject of the four remaining games, but we believe it implied that the contract was still valid for those games," Mr Pises said.
He declined to comment on whether the GLO had expressed its desire to "cancel" the contract at any time since 2005. He also declined to comment on what the effects of the current litigation would be on the company's business with state enterprises, which constituted 70% of revenue last year.
This is not the first time Loxley and the GLO have locked horns over an online lottery system. In fact, the contract currently being litigated was entered into on the same year that a civil court awarded Loxley 2.5 billion baht in damages over a previous online lottery contract with the GLO.
The company was awarded a 10-year concession to operate 5,000 ticket-dispensing machines in 1996. In 2000, an arbitration procedure ruled in favour of Jaco Co (a Loxley-GTECH joint venture) after the GLO attempted to back out of the agreement. In 2005, the Civil Court confirmed the arbitration and ordered the GLO to pay 2.5 billion baht -- the largest breach-of-contract compensation in the country to date.
In that case, the court found that the contract had been reviewed by the government's legal experts before receiving approval and that the office only pulled out once public criticism came to light. At the time, the GLO claimed that it had conducted a series of studies that the online lottery system would not solve the rampant overpricing problem, which led it to cancel the contract.
A DELICATE CALCULUS
Most buyers would benefit from an online lottery system, but ticket sellers, who are overwhelmingly impoverished, would lose their livelihood, said GLO spokesman Thanawat Pholvichai, as reported by local media outlet Khaosod English.
"At this moment we are not ready for it," Mr Thanawat said. "We are opening the possibility for it, but the current board has no policy about this."
The online lottery system pits the interests of close to 200,000 lottery ticket sellers against those of nearly 22 million lottery ticket buyers.
According to data collected by the Bangkok Post, using an online system to effectively cap ticket prices at 80 baht would transfer 10-30 billion baht a year from the pockets of sellers and other intermediaries to those of consumers.
By agreeing to an online lottery system, the state would be agreeing to put more than 200,000 people out of work, transferring the profits of the operation to an already well-funded company. The state would also artificially cap the prices of the most desirable numbers, potentially reducing total revenue. As every seller knows, some numbers are nearly worthless in the market (particularly those with 0), while others can fetch stratospheric prices.
On the other hand, by delaying the implementation of the online system, the state would in some sense be responsible for overpricing and for the growth of underground lotteries. A cheap online lottery could hinder the growth of underground lotteries by pricing them out. It could also attract more people to play the game, especially those that were formerly alienated by the inconvenience of acquiring a well-priced ticket.
Other methods to curb prices have been explored over the years. One such way is to increase penalties for violators, which is exactly what a recently proposed amendment to the Government Lottery Act of 1974 will do. Under the amendments, approved by the cabinet on April 17, transgressors will be liable for one month in jail and/or a 10,000-baht fine, up from 2,000 under the original law.
But while stricter laws could play a role in curbing illegal lotteries, enforcing them will prove expensive and challenging. Most importantly, as in the case of illicit narcotics or prostitution, making the practice illegal will not eradicate the behaviour, but instead push it underground where more injurious customer practices prevail.
While alternative methods to curb prices have already been explored, options to mitigate the effects of the online lottery on sellers have not yet been discussed in depth.
First, the online system can be rolled out over several years, gradually raising the number of tickets allocated to the scheme, helping sellers secure alternative revenue streams.
Second, a larger part of the lottery's revenue can be dedicated to training sellers for employment in other sectors. Under the recently proposed amendment, only 1% of the lottery's revenue goes to a social development fund, part of which is used to compensate sellers for unsold tickets.
