OAR 177-040-0017: Additional Video Lottery Retailer Application Requirements and Lottery Authority to Prevent and Resolve Concentrations

(1) General: It is the policy of the Oregon State Lottery to place Video Lottery game terminals in retail businesses which are viable businesses on their own without benefit of selling Video Lottery. At any point in the application process, the director or director's designee may require additional documentation and explanation about the applicant's business operation plans such as, but not limited to, length of experience in the type of business, prior ownership and/or management of businesses in general, sales and profitability projections, and location suitability, as deemed necessary to evaluate the viability of the business. (2) Exceptions: (a) When the contract for a retailer premises is terminated due to sale of business, change of ownership, or 100% stock buyout, the resulting contract application for the same retailer premises is exempt from the interest form, waitlist, and open and operating requirements of this rule so long as the data line is not removed from the retailer premises. (b) A Video Lottery retailer contract applicant who meets the requirements for the alternative disclosure process authorized by OAR 177-040-0001(4)(a)(B) is exempt from the interest form, waitlist, and open and operating requirements of this rule. (3) Interest Form Required. On July 5, 2023, the Lottery shall establish a Video Lottery Retailer Contract Application Waitlist. The waitlist shall be comprised of persons described in section (5) of this rule and any other interested applicant who has submitted an interest form to the Lottery at https://www.oregonlottery.org/vlform/ and who meet the requirements of this rule. Interested applicants will be ordered on the waitlist based on the date their interest from was received by the Lottery. The Lottery may remove an interested applicant from the waitlist if the Lottery determines the person does not meet the requirements in this section or if the applicant withdraws from the process or is otherwise determined by the Lottery to be uninterested or ineligible. (a) An interested applicant must provide all information requested by the Lottery on the interest form so the Lottery can verify the potential applicant meets Lottery retailer contract requirements such as, but not limited to, business registration, OLCC licensure, and willingness to pay a nonrefundable network service installation fee if selected to start the application process. (b) Unless an exception is approved, an interested applicant must attest that the establishment where Video Lottery terminals will be placed if approved for a Video Lottery retailer contract has been open to the public and operating continuously for nine months as described in section (4) of this rule. Current Video Lottery retailers who may qualify for an exception under subsection (4)(b) of this rule must provide all requested information regarding their current Video Lottery retailer locations. (4) Requirement to be open to the public and operating continuously for at least nine months. Unless an exception is approved under subsection (b) of this section, the establishment where Video Lottery terminals will be placed if approved for a Video Lottery retailer contract must have been open to the public and operating continuously for at least nine months. Lottery may require any documentation or explanation from the applicant that Lottery deems necessary to determine whether the applicant’s business has been open to the public and operating continuously for the required period. (a) For the purpose of this rule, “operating continuously” means a business is open to the public and makes available for sale all products or services the applicant sells. For purposes of this definition, opening for brief periods of time and/or offering limited products and/or services will be considered an attempt to circumvent the intent of this section and will not be considered as operating continuously. (A) Interruptions: The continuous period of operation shall not be considered interrupted if any suspension of operations was for two days or less. The intent of this subsection is that there will not be a significant interruption of the business during the continuous period of operation so that the Lottery may reasonably rely on sales information and business history which remains relevant to the application. The Director may find that the continuous period of operation was not interrupted when the suspension of operation is for an aggregate of more than two business days upon a showing by the applicant that the sales information and business history remains relevant. (B) Purchase: If the substantial assets of a business or premises were purchased by the person applying for a Video Lottery retailer contract prior to the date the application process is initiated, the period of operations under the prior owner shall be considered in determining the period of operations, provided that the new business is being operated as the same or similar type of business and the primary business of the prior owner was the offering of meals or alcoholic beverages for on-premise consumption. The intent of this rule section is to prevent evasion of the rule’s requirement by means of superficial transactions such as the mere purchase of a business trade name rather than a bona fide acquisition of the substantial operating assets. (C) Move: If a business moves to a different location prior to the date the application process is initiated, the period of operations at the old location shall be considered if: (i) The new location is in essentially the same community as the old location and serves essentially the same customer base; and (ii) The business conducted at the new premises is a continuation of the business conducted at the old premises rather than the establishment of an additional location. (iii) The burden of proof for establishing subsections (A) and (B) of this subsection is on the applicant. (b) The Assistant Director for Security or designee may waive the requirement that a business be open and operating for nine months prior to application only if the following criteria apply. (A) The applicant currently has active Video Lottery retailer contracts at two or more locations; (B) The applicant has held active Video Lottery retailer contracts at two or more locations for at least two years; (C) The applicant's new location(s) have the same ownership as the locations identified in subsections (a) and (b) of this section; (D) The applicant's new location(s) will have the same business model as other current locations; and (E) Contracting with the applicant for an additional location will not jeopardize the fairness, integrity, security, and honesty of Lottery’s operations, as determined by the Assistant Director for Security or designee. (5) Other Applicants Eligible for Waitlist. Any interest form submitted to the Lottery at https://www.oregonlottery.org/vlform/ by December 30, 2022 at 11:59 p.m., but not otherwise selected to move forward in the Video Lottery retailer contract application process, will be placed at the front of the waitlist. These interested applicants will be ordered on the list based on the date the Lottery received their interest form with those submitted first in time listed before interest forms submitted later in time. (6) Processing the Waitlist. On July 5, 2023, and no less than annually thereafter, the Director shall determine if there is sufficient Video Lottery Terminal inventory to process additional Video Lottery retailer contract applications, and whether such additional contracts will maximize revenue to benefit the public purposes described in Article XV, section 4, of the Oregon Constitution, commensurate with the public good. The Director shall make these determinations no less than annually; apart from that requirement, the frequency of these determinations shall be left to the Director’s discretion. (a) If applications will be processed for a given time period, the Director shall determine the number that will be processed and Lottery shall process applicants from the waitlist in the order received. The number of applications to be processed for a given time period may be subject to adjustment at the Director’s discretion, based on availability of inventory and other relevant considerations. (The order received is based on the date stamp indicating when the interest from was received by the Lottery after being submitted by the applicant at https://www.oregonlottery.org/vlform/.) (b) Notwithstanding subsection (a), the Lottery may prioritize an applicant on the waitlist if the Lottery has reason to believe that approving a contract for that applicant may meet any of the following goals in ORS 461.300: (A) The applicant would best serve the public convenience by improving the availability of Video Lottery games in a particular geographic area. (For example, the Lottery may consider VLTs per capita or other metrics and prioritize applicants from geographic areas that are likely to best support additional Video Lottery retailer locations.) (B) The applicant would promote the sale of tickets or shares because, for example, the applicant or applicant’s business model has demonstrated success in selling Video Lottery games. (c) Unless otherwise determined uninterested or ineligible, any applicant selected from the waitlist shall have the opportunity to complete the full retailer contract application process, including the background check process. Selection to apply does not guarantee the applicant will be approved for a contract and such approval remains subject to Lottery's discretion. (d) In addition to the requirements in section (4) of this rule: (A) Except as provided in paragraph (B) of this subsection, any applicant selected from the waitlist must be currently open and operating to initiate an application. (B) If the business is not open and operating due to a remodel, renovation, or repair, the Lottery may allow the business no more than 90 days to become open and operating to initiate the application process. (7) Managing Video Lottery Retailer Applications to Prevent a Concentration: The Lottery will manage the Video Lottery retailer application process to avoid creating a concentration as defined in OAR 177-045-0000(1): (a) The Lottery will not initiate the application process or consider or process an application when the application would, if approved, create a concentration. (b) When there is an area at risk for a concentration, the Lottery will manage the application process such that no concentration is created. For example, the Lottery will only allow one application to be processed or considered at a time if more than one application would, if approved, create a concentration. In the event that more than one applicant has requested to initiate the application process, the Lottery will use a first come, first serve basis to select among applicants as needed to avoid creating a concentration. (8) Selection Process Where Concentration of Video Lottery Retailers Exists: If there is a location of existing Video Lottery retailers that creates a concentration of Video Lottery retailers, the director must resolve the concentration by selecting retailer locations to either relocate or terminate their retail contract: (a) Except as provided in subsection (b) of this section, the director must select as many retailers as needed to relocate or terminate their retail contract based on last-in, first-out, meaning that the retailer locations with the most recently-approved retail contract will be required to relocate or terminate their retail contract to resolve the concentration. (b) If a retailer location selected under the last-in, first-out standard in subsection (a) of this section is owned by a person who owns other retailer locations in the concentration, the director may consult with the owner when selecting which location must relocate or terminate their retail contract.