VLTs generate 30 per cent of Loto-Quebec's profits but the corporation wants to reduce the number of machines in poorer areas. CREDIT: CHERYL HNATIUK , GAZETTE

How sweet it must be to be in business and see your chief competitor, after taking over a market from you and expanding the demand for your service, hand that market back to you.

And how much sweeter it must be when you're the underworld and your competitor is the government, which has legitimized and popularized your illegal business by running it legally and openly for years.

That's what happened to the underworld this week when Loto-Quebec announced its intention of pulling legal video-lottery terminals out of some of their most lucrative locations.

These are the bars and brasseries in the province's four largest cities and poor areas elsewhere, where the machines prey on those whose judgment is clouded by ignorance, foolishness, alcohol or desperation.

Over the next three years, the government's gambling corporation will remove its VLTs from 1,142 establishments that currently have up to four machines each.

The bars and brasseries in question are located in Montreal, Quebec City, Longueuil and Laval, and in areas where the average household income is less than $50,000, and there are more than two VLTs for every 1,000 people.

Paradoxically, Loto-Quebec, which is seriously conflicted about its own business, is removing the machines not because they're not profitable, but because they are. It hopes to combat pathological gambling, especially among poor people, by distancing temptation.

About 70 per cent of the 2,500 machines to be taken out will be moved to five "salons" to be run by Loto-Quebec on the outskirts of Montreal, Quebec City, Trois-Rivieres and Sherbrooke, and at Mont-Tremblant, presumably out of the reach of poor people. The remainder will be taken out of service.

We'll call Loto-Quebec's withdrawal from poor neighbourhoods and villages the "Norris effect," in honour of Alex Norris, the former Gazette investigative reporter whose series of articles a few years ago drew attention to the corporation's strategy of concentrating VLTs in poor areas.

But the withdrawal will create a vacuum. The number of "sites" with VLTs will be reduced by at least 31 per cent. That is, Loto-Quebec will abandon at least 31 per cent of the market it has created since it muscled into the VLT racket 10 years ago and pushed out the underworld.

"The setting up of a network of VLTs by Loto-Quebec has had the effect of causing the disappearance of tens of thousands of illegal machines," the corporation says in its 2004-07 development plan, in which it announced its withdrawal.

So it's only logical, then, that if the network is reduced, the illegal machines will reappear, just as the underworld once met the demand for liquor created by Prohibition in the United States in the 1920s.

What Prohibition should have taught governments is that once they get into the vice business, there's no turning back. And the underworld doesn't share Loto-Quebec's newly found scruples about exploiting the poor.

The corporation's plan notes in neighbouring Ontario, which doesn't allow electronic gambling machines outside of casinos and off-track betting parlours, police estimate there are more than 20,000 illegal ones.

And what a lucrative market it is. VLTs generate 30 per cent of Loto-Quebec's revenues (they brought in $1.1 billion last year) and half its profits. And its revenues and profits from the machines continue to grow, while those from lotteries and casinos have tailed off. That growth is in spite of a reduction of the number of machines and sites in the past five years, and the replacement of the machines two years ago with new models that don't allow excessive play (an unlikely feature of illegal VLTs).

What's more, VLT players are good customers. The corporation's plan says that among Quebecers who gamble legally, those who play the machines wager more in a year (and hence lose more) and are more susceptible to become pathological gamblers. This allows Loto-Quebec to rationalize pulling its VLTs out of poor areas while leaving its lottery machines and scratchers.

That might not be consistent. But then, neither is it consistent for government to be both profiting from vice for financial reasons while trying to discourage it for social ones, whether the vice is tobacco or gambling.

dmacpher@thegazette.canwest.com

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