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Retailers Still Divided On New N.C. Lottery

SHALLOTTE, N.C. -- Merchants who participate in the recently approved state lottery will earn 7 percent on tickets they sell, but less than merchants who sell tickets in South Carolina.

Along with 7 percent of the price of the ticket, South Carolina merchants also receive 1 percent of every winning ticket sold in their stores, according to Ted Neff, vice president of Worsley Companies Inc., the operator of Scotchman convenience stores in Brunswick County, N.C.

Neff, who serves as second vice president of the N.C. Association of Convenience Stores, told the Brunswick Beacon that the association eventually supported the lottery, particularly because of how the funds will be used.

The lottery, signed into law last week by Gov. Easley, is supposed to help fund school construction across the state.

"We supported it as long as we got the 7 percent, and that the funds weren't going to replace other state funding for schools," said Neff.

Neff, who has worked with lottery issues in South Carolina and Florida, told the newspaper that it's relatively simple for merchants to become lottery agents. For scratch-off tickets, all that merchants will be required to have is a separate bank account that allows the commission that oversees the lottery the ability to withdraw funds.

For computerized games such as Lotto, Pick 3 and others, the merchant will need a separate bank account and a dedicated phone line. Hardware, such as computer equipment, tickets and paper, will be provided by whichever company is selected by the state's lottery commission to help run the lottery. That company will also provide signs and other displays, Neff said.

"It's easiest to start with the scratch-off tickets," said Neff, which will likely be available to merchants in the next six to eight months. "You buy a box of tickets for $279 and sell them for $300."

Scratch-off tickets require buyers to scratch off surface areas of a ticket to reveal how much money, if any, they have won. Prizes in other scratch-off lottery games range from a dollar or two into the thousands. Neff said lottery agents typically pay winners up to $500 on the spot.

Those who win more will likely have to travel to cities designated by the lottery commission to collect their winnings.

More complicated are the Lotto games, which aren't likely to be available for about a year. Those games require players to pick designated amount of numbers on a computerized ticket. Some games are called Pick 3, which are usually played on a daily basis with the winning number revealed in the evening.

Other games, such as Pick 6, are played on a twice-weekly basis.

Powerball, a lottery game played twice weekly, combines lottery players from across the country and typically have payouts in the tens of millions of dollars and higher.

Powerball, Neff said, is not in North Carolina's plans for now. "It might evolve into that," he added.

The 7 percent profit reaped by merchants won't make them rich, Neff said, but the game is viewed by many as part of customer service and a way to drive additional traffic into their stores.

Still, it can have drawbacks for merchants in terms of lower profit margins from some buyers and additional labor costs.

"If a store is selling a sandwich with a 30 percent profit margin, a customer might decide to buy tickets with that money and cut the profit to 7 percent," Neff said. "If stores decide to get into games like Pick 6 or Powerball, it would also likely have to increase its manpower."

Neff said the lottery does give North Carolina merchants close to state lines a chance to compete with other states such as Virginia, Tennessee and South Carolina.

"We were at a disadvantage," he said. "In Brunswick County, all kinds of people were going to Little River (S.C.) to buy tickets, and I'm sure that's going to hurt those stores significantly."

In other North Carolina news, the Associated Press reported that the state Court of Appeals ruled Tuesday that promotional game pieces packaged with telephone long-distance cards aren't part of an illegal lottery as state agents allege.

The court upheld a lower court judge who ruled against the state Feb. 17, 2004, in a case against Treasured Arts Inc., a South Carolina company that sold the cards at convenience stores in North Carolina.

State lawyers haven't decided about whether to pursue further appeals, a spokeswoman for state Attorney General Roy Cooper said Tuesday.

The cards offered scratch-off game pieces with prizes worth up to $50,000, as well as cars, the court said.

State alcohol agents in 2001 or 2002 threatened the stores' alcohol licenses, saying the card sales were an illegal form of gambling.

But the court said customers had the choice of registering for the giveaway without buying a phone card and noted that the phone cards provide a service.

The case came to the appellate court after the lower court ruling stopped agents from threatening store owners. The state hasn't charged anyone, the opinion said.

The decision also noted that since the promotion began in 1995 until the time of the hearing, Treasured Arts sent free game pieces to 11,664 people and had given prizes to about 8,000 people.

Evidence showed that the 50-cent-a-minute rate for the phone cards was reasonable enough that customers would have bought them even without the possibility of winning a prize, the court said.

"We hold the price paid for and the value received from the prepaid phone cards is sufficiently commensurate to support the determination that the sale of the product is not a mere subterfuge to engage in an illegal lottery scheme, whereby consideration is paid merely to engage in a game of chance," the opinion said.

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