STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6002

October 26, 1981

LOTTERIES:

Authority of Commissioner of State Lottery to sell jar ticket games

PRINTING:

Observance of competitive bidding and other requirements in the printing of jar tickets

The Legislature has not conferred authority upon the Commissioner of State Lottery to sell jar ticket games to bingo operators, millionaire party operators, or other persons.

Assuming the Legislature does authorize the Commissioner of State Lottery to sell such jar ticket games, the printing of the jar tickets must comply with the competitive bidding and other requirements of 1937 PA 153 and 1948 1st Ex Sess PA 51, Sec. 8.

Honorable Michael J. O'Brien

State Senator

The Capitol

Lansing, Michigan

You have requested my opinion on the question whether the Commissioner of State Lottery (hereafter Commissioner) may enter into a contract for the printing of jar tickets without going through the competitive bidding process. Implicit in your inquiry is the threshold question of the statutory power of the Commissioner to sell the contemplated jar ticket games.

As used herein:

A brief description of the jar ticket game and its modern counterpart will aid analysis of these questions.

The original jar game was a game of chance. Typically, contestants would pay for the right to draw tickets from a jar. The ticket would exist in two attached portions, each bearing an identical identifying number. The drawn ticket would then be separated. The person would keep one part and the other part would be placed in a common receptacle of some type. Later the prize winners would be determined by drawing from the common receptacle. Persons holding tickets with numbers that matched the numbers on drawn tickets would win various prizes.

The modern ticket varies somewhat in that no drawing or subsequent chance event is necessary. It is possible to tell from the ticket itself whether the ticket is a prize winner, and if so, the amount of the prize.

Jar tickets, jarco, and break open tickets differ as to their particular characteristics, but are functionally the same, and substantially identical to the instant lottery tickets currently in use.

Each ticket has certain unique, particularized information printed upon it. This would usually be in the form of numbers, pictures, slot machine characters, playing card deck characters, or the like. The presence and/or arrangement of this information on the ticket would determine whether the ticket is a prize winner, and if so, the amount of the prize as shown in prize structure information set forth on the ticket itself.

For example, the ticket would have printed upon it five rows, each having four numbers. The prize schedule would indicate, with regard to a single row: the presence of a 7 anywhere would be a prize of $.50; two 7's anywhere would be a prize of $5.00; two 7's consecutively would be a prize of $20.00; and all 7's would be a prize of $100.00.

The particular prize-relevant information is then covered with security material. In the so-called break open tickets, this is a paper flap that is glued over the material. Under other versions, the flap is secured with string, or a latex covering similar to the instant lottery ticket covering is added.

The Bureau proposes to use a break open form of ticket that would be modeled after that used by the state lottery in the State of Massachusetts. The face of the ticket would have material identifying the ticket as a product of the state lottery, would describe the winning combinations and amounts, would contain a facsimile of the state seal, and serial numbers and other validation information.

The reverse side of the ticket would contain the covered prize information, along with validation information and the statement that the ticket is to be sold only on premises licensed by the Bureau.

The Bureau would purchase tickets organized in boxes of 1,824 tickets per box. Each ticket would sell for $.50. If the Massachusetts' model were followed, there would be two $100.00 winners, two $50.00 winners, two $20.00 winners, twenty $5.00 winners, and two hundred $.50 winners in each box.

The state would charge the operator of the particular game $182.40, or 20 percent of the face value of the tickets in the box. If each ticket were sold, the operator would receive $912.00 for the sale of the tickets and would pay out $540.00 in total prizes, netting $189.60 for its operation ($912.00 less $182.40 paid to the state for the box of tickets and less $540.00 paid to prize winners).

The winning tickets would be randomly located in the box and the manufacturer would be restricted from disclosing either the location of prize winning tickets or the process of randomization. Additionally, the methodology of randomization itself would be changed so that study of one or several boxes would not necessarily reveal the randomization of other boxes.

The Commissioner would authorize persons or entities licensed under the Bingo Act, supra, to conduct bingo and/or millionaire parties to vend jar tickets at the same premises. Also under consideration is the possibility of authorizing sales on premises by veterans, fraternal or similar organizations which might not hold licenses to conduct bingo and/or millionaire parties under the Bingo Act, supra. The game would be entirely under the control of the person or organization purchasing the game. It should be noted that the Commissioner has not promulgated any rules for the operation of such games.

As distinguished from jar ticket games, the Lottery Act, supra, establishes a state lottery and authorizes its operation by the Bureau under the direction of the Commissioner who is mandated to produce the maximum amount of net revenues for the state consonant with the general welfare of the people.

The Lottery Act, supra, does not specify the particular type of lottery game or games to be operated. The Lottery Act, supra, Sec. 11(2), indicates that rules promulgated by the Commissioner may include the type of lottery to be conducted.

The rules promulgated, Administrative Code, 1979, R 432.1-R 432.22, do not specify particular games, but provide that the details of the various games and drawings shall be set forth in directives, or amendments thereto, issued by the Commissioner, Rule 20(1), who shall make every attempt to keep the public informed of drawing procedures and changes in procedures.

The Lottery Act, supra, does not define what a lottery is. It is, therefore, appropriate to refer to common law definitions of that term, which remain unchanged by the Act.

At common law the term 'lottery' was understood to mean a game involving the elements of consideration, prize and chance. Sproat-Temple Theater Corp v Colonial Theatrical Enterprise, Inc, 276 Mich 127, 129; 267 NW 602 (1936).

The jar ticket game is inherently a lottery, having all three of the common law elements. The consideration is represented by the price paid for the ticket by the ultimate purchaser. The prize is the award made to holders of winning tickets as provided on the face of the tickets themselves. The element of chance is provided by the random location of winning tickets within the box and the random method by which the tickets are selected from the box by the purchaser.

It is to be noted, however, that the jar ticket game is fundamentally different from other lotteries utilized in Michigan up to this time because the Bureau would be merely acting as a wholesaler of the game and the agent would have control over the entire operation of the game thereafter. In contrast, the three lottery games currently in use are distributed throughout the state and are not within the control of a particular agent.

The agent selling a particular box of jar tickets would know when certain prizes have been won. Assume, for example, that all but 200 of the tickets in a particular box have been sold and no $100.00 winning tickets have been presented for prize payment. The operator is then in a position where selling the remaining tickets would generate only $100.00 in revenue and would expose the operator to a minimum prize liability of $200.00. It would, thus, be in the operator's interest to discontinue sales from that box. Only the vigilance and protest of the purchasers may prevent that from happening, and it is foreseeable that in many instances the circumstances under which sales from the box occur would be such that surveillance by the purchasers would not be possible or effective.

Of course, the reverse situation may also operate to the detriment of the game operator. For example, if the first two tickets sold were $100.00 winners, there would thereafter be very low sales interest in the remainder of the tickets in the box. However, future purchasers may not know what prizes have already been paid and the operator would not be compelled to make any disclosure of previous prize payments.

Although it is conceivable that, in fact, the purchasers and operator would have equal levels of knowledge concerning sales of prize winning tickets, and particularly the large prize tickets, such does not necessarily follow from the structure of the game. The operator necessarily knows the status of prize payments at a particular point in time, whereas the purchasers do not necessarily have the same level of information.

Although the Legislature has the authority to authorize lotteries of this type under Const 1963, art 4, Sec. 41, as amended, its intention to authorize a game where the status of the vendor of the tickets and the purchasers is so unequal should be clearly expressed. We find nothing in the Lottery Act, supra, evidencing that intention.

Moreover, the Legislature has manifested its clear intent in the Lottery Act, supra, Sec. 9 that the Commissioner shall 'initiate, establish and operate a state lottery.' (Emphasis added.) This language is plain and not subject to construction. Dussia v Monroe County Employees Retirement System, 386 Mich 244; 191 NW2d 307 (1971). Thus, the Legislature has mandated that the Commissioner shall operate a state-wide lottery through employees of the Bureau of Lottery and licensed agents. Further, in the Lottery Act, supra, Sec. 33, the Legislature has specified that unclaimed prize money for the prize on a winning ticket shall be retained by the Commissioner for the person entitled thereto for one year after the drawing in which the prize was won, and if not claimed, the prize money shall be deposited in the state general fund. Once the Commissioner sold the proposed jar ticket game to an operator, the continued control over the operation of the game as a state lottery would close. No prize winner would be in a position to claim his or her prize from the Bureau of Lottery. A review of these provisions negates any intent on the part of the Legislature in enacting the Lottery Act, supra, to empower the Commissioner to sell the local games you have described for operation by a local licensed or unlicensed person or organization.

Further, Administrative Code 1979, R 432.113 prohibits bingo operators from offering jar tickets, and Administrative Code 1979, R 432.307 prohibits millionaire party operators from offering jarco tickets, break open tickets or other illegal lottery tickets, but state lottery tickets may be sold. Thus, the present rules of the Commissioner expressly bar the use of such operators in conducting such local games. If the Legislature were to authorize the Commissioner to conduct such games through such licensed operators, Administrative Code 1979, R 432.113 and R 432.207 would, perforce, have to be appropriately amended.

If the Lottery Act, supra, is hereafter amended, ⁽¹⁾ it will be necessary to consider the legality of contemplated purchasing procedures. Because there is an interest in implementing this new game and appropriate legislation may reasonably be expected, it would be useful to address the question whether jar tickets may be purchased on a sole-source basis, or whether several companies must be given the opportunity to submit competitive bids for such business in order that preparatory procedures may take place.

Although utilization of competitive bidding is a highly preferred method of accomplishing acquisitions where public funds are to be expended and tends to enhance public confidence in the integrity of the acquisition process, there is no comprehensive statutory bidding procedure. OAG, 1947-1948, No 717, p 613 (March 8, 1948) [('t)here is no statute or rule which requires the State to advertise for competitive bids. . . .' (Emphasis added.)]; 1 OAG, 1957, No 2952, p 238-239 (May 8, 1957); OAG 1979-1980, No 5696, p 726 (April 21, 1980), 72 CJS Supp, Public Contracts, Secs. 7, 8, pp 181, 182.

It is significant that the Lottery Act, supra, Sec. 9 requires the Commissioner to solicit bids from financially responsible vendors of data processing equipment and services for the operation of the lottery, and section 18 of the same act, which confers general contracting authority upon the Commissioner, contains no such language. There is, thus, an inference that the Legislature intended to explicitly mandate competitive bidding only with regard to acquisition of data processing equipment and services.

However, it is necessary to consider whether the Printing Act, supra, imposes a competitive bidding requirement, and if so, whether that act applies to acquisition of the jar ticket game.

The Printing Act, supra, Sec. 1, as amended, regulates acquisition of printing

The Printing Act, Sec. 1, supra, regulates the acquisition of 'all printing' for which the state is chargeable or which is paid for with state funds. Therefore, the Printing Act, supra, will apply to the acquisition of jar game lottery tickets if such tickets are 'printed' within the purview of the statute.

The Printing Act, supra, does not expressly define the term 'printing,' and research has revealed no Michigan case interpreting the word in the context of this or any other similar statute. Moreover, the word 'print' may be used to describe a large number of distinctive mechanical processes, and has a wide range of signification. In re Sonora Daily, 108 Cal App 2d 53, 55; 238 P2d 111, 112 (1951); Alpers v United States, 175 F2d 137, 139 (CA 9, 1949).

Where the meaning of a statutory term is not clear and unambiguous, the statute must be construed to give effect to the Legislature's intention in enacting the statute, as determined by the language employed and in light of such legislative history as is available. Miller v State Farm Mutual Automobile Insurance Co, 410 Mich 538, 556; 302 NW2d 537 (1981); Ballinger v Smith, 328 Mich 23; 43 NW2d 49 (1950); Ellis v Boer, 150 Mich 452, 455; 114 NW 239 (1907).

In determining the intended scope of the term 'printing' within the Printing Act, supra, study of its legislative history is instructive. The Printing Act, 1937 PA 153, supra, originated as House Bill 125 (HB 125). 1 HJ 180 (1937). The bill, as introduced, expressly defined 'printing' as 'letter press printing.' 1937 HB 125, Sec. 2. The House Committee on State Affairs reported the bill favorably to the House, with a proposed amendment striking section 2 containing the definition of the term 'printing.' 1 HJ 722 (1937). This amendment was adopted by the House. 1 HJ 723 (1937).

HB 125 was then considered by the House sitting as the Committee of the Whole, which proceeded to amend the bill by adding a section 4 to read:

As so amended, HB 125 was passed by the House. 1 HJ 805 (1937). The effect of this amendment would have been to limit the application of the provisions of the Printing Act, supra, to printing for the use of the state, Const 1908, art 5, Sec. 25; and to the printing of public and local acts, the Michigan Manual, certain compilations of laws and department reports to the Governor, 1899 PA 44; all other publications relating to the activities of the state government, excluding those by the Governor, Supreme Court or ordered by the Legislature, 1919 PA 120; and 'Michigan Reports' and to the printing of Supreme Court Advance Sheets, 1927 PA 385.

The Senate declined to give a limited meaning to the scope of HB 125. HB 125 was amended by the Senate sitting as the Committee of the Whole, to strike section 4 from HB 125, 2 SJ 1345 (1937), and passed HB 125 without further change. 2 SJ 1376 (1937). The House concurred in the Senate amendment. 2 HJ 1675 (1937). Thus, it is abundantly clear that the legislature, by considering a limitation on the operation of the Printing Act, supra, and then rejecting it, evidenced its intent to give the term 'printing' and the statute broad application.

Webster's Third New International Dictionary, defines the verb 'print' as

In order to give effect to the demonstrated legislative intent, this definition must be construed broadly. New processes for reproducing copies of items should be considered 'printing' within the meaning of the Printing Act, supra, if they are in any way analogous to reproduction by impression.

Thus, contracts for the production of lottery tickets, because they are 'printed' within the broad sense used in the statute, must be awarded to competitive bidders according to the provisions of the Printing Act, supra. The use of a latex covering over vital parts of the ticket or the use of a paper seal to create a break open ticket does not alter the fact that the ticket, as a whole, is 'printed' by an inked printing surface or by an analogous process and, thus, is governed by the Printing Act, supra.

Vendors of the jar tickets will also have to conform to other requirements of the Printing Act, supra, relative to conducting the printing process itself within the State of Michigan, and certain requirements pertaining to labor relations and payment of prevailing wages and other conditions of employment.

Because the contract price will, in all probability, exceed $10,000.00, such contract will also have to be approved by the State Administrative Board as is required by 1948 1st Ex Sess PA 51, Sec. 8, as amended; MCLA 18.8; MSA 3.516(8).

It is my opinion, therefore, that legislation will be required before the Commissioner of State Lottery may sell the jar ticket game and if the legislation is enacted, the competitive bidding and other requirements of the Printing Act, supra, and 1948 1st Ex Sess PA 51, Sec. 8, as amended, supra, must be observed.

Frank J. Kelley