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Part 4
Interactive Gambling and Broadcasting Amendment (Online Transactions and Other Measures Bill 2011
This part of the report deals with the Interactive Gambling and Broadcasting Amendment (Online Transactions and Other Measures) Bill 2011. The provisions of the bill on financial protections for Australians who participate in interactive gambling are related to Parts 1 and 2 of the report and the remaining provisions of the bill are related to Part 3 (i.e. the provision of certain bet types; inducements to gamble; broadcasting of gambling advertising; and offences in relation to match-fixing).
Chapter 15
Interactive Gambling and Broadcasting Amendment (Online Transactions and
Other Measures) Bill 2011: Introduction and IGA amendments
Background
15.1
The Interactive Gambling and Broadcasting Amendment (Online Transactions
and Other Measures) Bill 2011 (the bill) was introduced in the Senate on 20
June 2011 by Senator Xenophon and referred to the committee through the
committee's resolution of appointment. 16 submissions were received on the
bill.[1]
Purpose of the bill
15.2
The bill covers a number of issues. It aims to prohibit certain bet
types being offered by gambling operators; provide financial protections to
Australians who participate in prohibited interactive gambling; place
restrictions on gambling advertising during sports and G-rated television programs
and on inducements to gamble; and create a criminal offence for match-fixing
activity. Apart from the financial protections measure, the other issues have
been introduced and covered in previous chapters. However, the committee comes
to specific conclusions on the provisions of the bill in these chapters.
15.3
The bill comprises four schedules consisting of amendments to the Interactive
Gambling Act 2001 (IGA), the Broadcasting Services Act 1992
(Broadcasting Act) and the Criminal Code Act 1995 (Criminal Code):
- Schedule 1—amendments to the IGA relating to online transactions;
- Schedule 2—amendments to the IGA relating to inducements to
gamble;
- Schedule 3—amendments to the Broadcasting Act relating to
broadcasting about gambling; and
- Schedule 4—amendments to the Criminal Code about obtaining a financial
advantage by deception in relation to a code of sport.
15.4
Clause 3 of the bill also prohibits gambling operators from offering
specific types of betting services.
15.5
The issues raised by the bill will be dealt with over two chapters.
After covering general concerns, the rest of this chapter will focus on the
provisions in the bill relating to amendments to the Interactive Gambling
Act 2001. The following chapter will focus on the bill's prohibition of
certain bet types, restrictions on gambling advertising and the creation of
match-fixing offences.
General concerns
15.6
Some submitters provided general comments on the bill as a whole. Betfair
did not support the overall intent of the bill, stating that:
...it does not provide effective protections around problem
gambling, offshore wagering operators and gambling related cheating and
corruption in sport and fails to address many of the complex issues that are
presently being considered by a number of committees and inquiries.[2]
...It is important for the Committee and the Federal
Government to take advice and canvass views from all stakeholders in the
gambling industry rather than pre-emptively introduce legislation. The Draft
Bill appears to be largely at-odds with a majority of the submissions made to
the Committee – including those submissions made by sports governing bodies and
responsible gambling advocacy groups.[3]
15.7
Betfair's view was that the bill would be ineffective in addressing
problem gambling, stating that its elements:
- adopt a broad-sweeping prohibition approach that is likely to
encounter similar enforcement issues to the current IGA provisions and mean
that Australia will be forced to remain reliant on overseas regulatory support
to be successful, particularly in the online sector;
- do not address the key issues associated with problem gambling
and will do little to reduce the prevalence of problem gambling in Australia;
- are discriminatory against corporations and place certain
Australian wagering operators at a competitive disadvantage;
- have been introduced prematurely given the current work being
done by a number of committees and inquiries; and
- are not grounded in a Constitutional Head of Power raising
significant concern over the Federal Parliament’s constitutional ability to
enact such legislation.[4]
15.8
The Tasmanian Inter-Church Gambling Taskforce noted several issues in
the bill that require further clarification, particularly given that many of
the definitions are not contained in the primary legislation but left to be
prescribed by regulations:
...the ultimate effects of this Bill would very much depend
on the associated regulations. These would need to be carefully drafted to
avoid unintended consequences. How, for example, would betting on a losing
outcome be distinguished from betting on a winning outcome in team or
one-on-one sporting contests where for one side to win the other must
inevitably lose? And could a sporting team that uses a confidential report that
one of its players will be unfit to bring in another player it believes will
maximise its chances of winning, thereby gaining a financial advantage in the
form of winning payments, fall foul of the Act if it is so amended?[5]
Schedule 1—Ability to suspend or cancel online gambling transactions
15.9
In an attempt to reduce losses resulting from interactive and online
gambling, the bill establishes provisions to allow consumers to cancel regulated
financial transactions to international gambling websites provided the
transactions have not been completed.
15.10
A regulated transaction is defined in the bill as follows:
regulated transaction means a financial
transaction effected using a regulated payment system, and includes but is not
limited to:
(a) extending
credit, or proceeds of credit, to or on behalf of a person, including through
the use of credit card;
(b) an electronic fund
transfer from or on behalf of a person;
(c) a transaction of
a kind prescribed by the regulations for the purpose of this definition.[6]
15.11
Theoretically, this would enable individuals to cancel 'incomplete'
financial transactions made to interactive gambling service providers by credit,
EFTPOS or another form of transaction via telecommunications services,
including the internet and phone. It is not clear whether payments via
financial intermediaries like PayPal would also be considered 'regulated
transactions', although the regulations could in theory apply to such payments.
15.12
The bill also amends the IGA to provide protections for financial
providers so they would not be liable for suspended or cancelled payments to
international online gambling operators resulting from the above amendments.[7]
15.13
In the Second Reading Speech, Senator Xenophon predicted that the
ability for gamblers to cancel transactions in this manner would 'most likely
lead [overseas] sites to ban Australian gamblers, because they know if they
lose they won't pay up'.[8]
Issues raised with the committee
15.14
Submitters put forward different views on this provision, some of whom
supported the amendments as a worthwhile step to limit problem gambling and
enhance consumer protection. Others rejected the idea, arguing that there were
serious practical impediments to such a measure and that it could even have the
perverse effect of encouraging more reckless gambling behaviour.
15.15
The Responsible Gambling Advocacy Centre stated that such legislation
would help problem gamblers:
Giving the consumer the option to prevent future transactions
from particular websites could also prove instrumental in preventing problem
gamblers from spending excessive amounts of time and/or money on interactive
online gambling websites.[9]
15.16
The Social Issues Executive, Anglican Diocese of Sydney, also strongly
supported the proposed amendments, stating that allowing the cancellation of
gambling transactions would provide a major disincentive for overseas gambling
providers to offer services to Australians:
We applaud the proposed amendments to the Interactive
Gambling Act 2001 providing that customers may request a financial
transaction provider to suspend or cancel an interactive gambling payment. We
note with approval the further amendment that financial transaction providers
will not be held liable for such cancellations. These measures may surprise
uninformed observers, and attract complaint from ideologues committed to
complete freedom of the market. Even so, we urge our political representatives
not to resile from them. We note that they are completely consonant with the
intention of the Interactive Gambling Act 2001 to prohibit online gaming
services in Australia. Cessation of payment, and protection for financial
service providers, is the most effective means to provide a disincentive to
illicit gambling providers. In addition, it will provide a welcome ‘circuit
breaker’ for problem gamblers.[10]
Financial transaction controls in
the United States
15.17
As covered in greater detail in chapter five, section 5363 of the United
States' Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) makes
it a crime for a financial transaction provider to 'knowingly accept' credit,
electronic fund transfers, cheques, or other forms of financing as payment in
connection with the participation of another person in unlawful internet
gambling.[11]
15.18
However, in the US, the laws around financial transaction controls make
the financial institutions liable if they process transactions that are
outlawed under the UIGEA. This is not what is proposed in the amendment before
the committee.
15.19
FamilyVoice Australia supported the amendment, noting the US legislation
and stating that the bill 'takes a modest step towards preventing overseas
purveyors of online gambling from preying on Australians'.[12]
15.20
The Australian Racing Board acknowledged the effectiveness of the US
financial transaction controls and argued that similar controls in Australia
would be an effective consumer protection and prevention measure for gamblers. Its
submission supported the amendments and also suggested that the Australian Prudential
Regulatory Authority be empowered 'to require Australian financial institutions
to not facilitate transactions with known unauthorised gambling service
providers'.[13]
15.21
Giving evidence to the committee, Mr Andrew Harding, Chief Executive
Officer of the Australian Racing Board, argued that the US controls had been
'demonstrably effective':
It is not a cost on government; the financial houses are
responsible for complying with the legislation and not facilitating wagering
and gambling that is not permitted. The business of the companies that were
providing illegal gambling to American citizens dried up. There is some level
of it—it is not being suggested that it is going to be 100 per cent
efficacious—but it dropped like a stone in the US. We know the Australian
Bankers' Association think it is inconvenient and they would not embrace the
idea of doing it, but it simply cannot be said that this cannot be done. The US
has done it and is doing it, and it is working.[14]
15.22
At the hearing, Mr Harding was questioned as to why such an approach
should be pursued:
Mr CIOBO: ...What about financial transactions
controls? Even though the bulk of transactions occur with PayPal and, for
example, use front organisations, should we still pursue those even though they
are highly ineffective?
Mr Harding: They will make it inconvenient, and that,
together with criminalising the conduct and criminalising the advertising of
the offering—this basket of measures—is the stick which is the companion to the
carrot of giving the tick of approval to those who elect to do the right thing.
...If I can again look to the US experience, one
arrest sent a powerful message. One Gibraltar based gambling operator being
arrested while travelling through America had a powerful impact within the
gambling industry. It said, 'Sure, with these criminal measures they are not
going to come to Gibraltar and arrest us, but if we ever travel through America
then we have a serious problem.' So I accept that the AFP is not going to
devote enormous resources to try to prosecute people based in Vanuatu, but the
criminalisation of this conduct does have some impact.[15]
15.23
The Australian Racing Board also noted that there was a lack of clarity
in the bill around legal requirements applying to financial transaction
providers:
The bill exempts the financial transaction provider from any
liability in proceedings brought against it by the unpaid gambling operator.
...We note in passing that the clause 15B (2) provides that:
“the customer...may request a financial transaction
provider giving effect to the transaction to suspend or cancel the
transaction.” (our emphasis)
The bill does not make any provision for what a financial
transaction provider should do upon receiving such a request. It is likely that
market forces will influence financial transactions providers to act on such requests.
Even so consideration might be given to going further than the bill does at
present and spelling out the legal requirements that apply to financial
transaction providers where a request is made pursuant to clause 15B.[16]
15.24
Its submission also noted that the bill's provisions should apply not
only to interactive gambling services but also to wagering operators (which are
currently exempt from the IGA).[17]
15.25
Critics of these amendments argued that similar financial control
measures overseas had not been proven to work effectively. Also the ability for
customers to suspend or cancel gambling transactions raised concerns about
'moral hazard' and the risk that such measures may actually encourage gambling,
as the perceived risk of losing money could be decreased. Other criticisms of the
bill's provisions were that the measures were not targeted well enough at
protecting problem gamblers and that such restrictions may adversely affect
Australians making financial transactions who were not even involved in
gambling.
15.26
Betfair argued that the proposed amendments were actually 'contrary to
the promotion of responsible gambling and may even create a new wave of problem
gamblers':
By allowing Australian residents to cancel deposits to an
interactive gambling provider, the Draft Bill is effectively encouraging
Australians to participate in these activities under the mis-apprehension that
there is no risk of suffering losses. This scenario is clearly contrary to the
intention of the Draft Bill which is to reduce the incidence of problem
gambling amongst Australian residents.
We also note that the relevant financial transaction provider
is not compelled under the Draft Bill to cancel or suspend the transaction.
This, in addition to being a significant cause of uncertainty to the practical
operation of the provision, may also cause Australians to gamble more than they
can afford to lose because they believe that the transaction will be cancelled.
In circumstances where the financial transaction provider does not cancel the
transaction, individuals are likely to suffer significant losses as a direct
result of this legislation.[18]
15.27
The Australian Bankers' Association (ABA) also alluded to what was seen
as a heightened risk of 'moral hazard':
...if Australians felt that they were able to cancel a
transaction having entered into it and having actually gambled on a site,
potentially it actually makes it less risky for you: if you win then you take the
money and if you lose then you seek to have the transaction voided.[19]
15.28
iBus Media, an online poker media company, was sceptical that the
amendments would have a positive effect, suggesting that ways to evade the
restrictions would be easily found:
These measures, which target interactive gambling payments,
will have limited effect. It is easy to evade a number of these controls.
Indeed, some of the controls which currently exist through credit cards and
other means of payment, for example age verification, limits on the amounts
which may be paid, will be removed as a result of these forms of prohibitions
and may have the effect, inadvertently, of potentially exacerbating any harm
that may result.[20]
15.29
Mr Jamie Nettleton, appearing on behalf of iBus Media, elaborated further
during a public hearing on how such restrictions would be circumvented:
Senator XENOPHON: ...your submission, with respect to
the bill, notes that the financial transaction regulation proposed in the bill
would be reduced by the failure of gambling merchants to code internet gambling
transactions correctly. Could you elaborate on that? And are you in fact
suggesting that this would be deliberate by internet gambling operators?
Mr Nettleton: This is a comment which comes out from
the review of the Interactive Gambling Act that was conducted back in 2004. At
that time, a finding was made by the department that one of the issues which
could be faced in respect of the feasibility of these forms of transactions was
the ability and the suggestion that certain operators code transactions
incorrectly to ensure payments are received. That is much more likely the case
in respect of the rogue operators, and by that I am talking about the ones
which are not regulated in a First World jurisdiction where those sorts of
issues would give rise to concern under the licence under which they operate.
The point to make here is that, in connection with a number of the transactions
which occur over the e-commerce, initially they may not in fact be a gambling
transaction and there is a question mark about whether or not they fall within
the gambling categorisation, so those obviously are a separate issue.[21]
15.30
During the hearing, iBus Media also argued that the experiences in both
the US and Norway to undertake similar controls had been unsuccessful:
Senator XENOPHON: What knowledge do you have of what
has occurred in the US and/or Norway? There are other commentators who believe
that it has, as imperfect as the US regulations are, acted as a fetter to the
larger expansion of online gambling.
Mr Nettleton: ...The position in respect of Norway is
perhaps quite illustrative. It is a country which has specific financial
controls in respect of online gambling. At the time financial controls in
relation to online gambling were introduced, they were resisted strongly by the
financial institutions in Norway, and a lot of that would be a matter of public
record that can be accessed by the committee. What has occurred in practice has
had limited effect, as you will see in one of the submissions, I think, from
the Australian Internet Bookmakers Association. A report has come out from the
regulators in Norway in respect of the amount of wagering. Fifty per cent of
wagering is taking place with offshore operators. And that activity is targeted
by the financial controls which are in place under the law. In other words,
despite the best efforts of the law, it has not had any impact on the practice
of Norwegian customers accessing offshore wagering sites and using means of
payment to settle a transaction.
Senator XENOPHON: Are you basing your views on
empirical data about the growth of online gambling in Norway and the US or on
anecdotal evidence from those involved in the industry there?
Mr Nettleton: The reference I was making has come from
information from the Norwegian regulator. So it is not empirical data which I
have to hand, even though it is in second-hand, it is from the report of the
actual regulator, who obviously conducted their own industry research to come
to that view.[22]
15.31
The ABA summed up its overall objection to the amendment, citing
technological costs and the impracticality to be imposed on banks and financial
institutions:
The ABA believes that it is unclear whether the substantial
technology and payments infrastructure changes and the consequent costs
involved in technology and system changes across the payment system, software
development, operational implementation and administration by banks and
financial institutions would deliver the benefits being sought to address concerns
with interactive gambling. Even if a customer had restrictions placed on their
use of an interactive gambling website, these restrictions would not
necessarily apply uniformly. It should be recognised that it is unreasonable
and impractical for banks and financial institutions to implement restrictions
on electronic transactions made to interactive gambling services.[23]
15.32
Explaining that electronic transactions involve various parties, the ABA
argued that there was simply no practical window of time in which to request a
reversal of a transaction:
The processing of an electronic transaction can involve at
least five parties:
- the customer (cardholder);
- the institution that issues the card to the cardholder (card
issuer);
- the institution that acquires the transaction (acquirer);
- the company that facilitates the processing of data and the
settlement of transactions (card scheme); and
- the company that supplies goods and services (merchant).
...There are around 4.15 billion transactions conducted using a debit or credit card each
year. Obviously, the vast majority of these transactions are unrelated to
online gambling (or being made to an interactive gambling service). Electronic
transactions are authorised by the cardholder and cleared within seconds by the
merchant – therefore, there is no opportunity for a customer to subsequently
suspend or cancel an electronic transaction.[24]
15.33
The ABA's submission also detailed the practical difficulties with the provisions:
There are no processes for a card issuer to suspend/cancel an
electronic transaction after it has been authorised by the cardholder.
Depending on the transaction (debit and credit), it may take between 1 and 3
business days for the transaction to appear on the cardholder’s statement. When
the transaction is transmitted to the cardholder is dependent on when the
merchant settles with their acquirer. However, the authorisation and the
obligations for payment between the parties are generally instantaneous – that
is, a merchant will process the transaction immediately, and therefore there is
no opportunity to void the transaction or intercept an individual transaction.
...If a card issuer “declined authorisation”, based on a flag
to identify a transaction as associated with a certain merchant category code,
the issuer would be at risk of legal action from the merchant (and possibly
other parties for failure to comply with payment obligations and their
individual contractual obligations). Additionally, it is likely that an issuer
would need to direct resources away from core business activities and system
monitoring (i.e. fraud detection) to investigate these declined transactions.[25]
15.34
The ABA also noted that it was unclear how third party payment methods
such as PayPal would be affected:
There are no processes for a third party payment method or “e-wallet” to suspend/cancel a transaction after it has been authorised. There
is no reversal after the transaction has occurred, unless agreed by the
merchant or alternatively guaranteed by a facility which acts as an
intermediary between the transactions (e.g. as part of its service agreement
with users, E-Bay will reverse the transaction in certain circumstances, i.e.
if the goods or services are found to be inauthentic as provided to a buyer by
a E-Bay seller). (We note that it is unclear how (legally and practically)
other transactions/payments might be caught within the proposed legislation,
including international telegraphic transfers, electronic funds transfers
conducted via money remitters (e.g. Western Union), third party payment methods
and “e-wallets” (e.g. BPay, Pay-Pal, Clickandbuy, Neteller, FirePay),
alternative payment currencies (e.g. Google money, Facebook credits, etc), and
cheques).
There are no processes for a direct electronic funds transfer
or direct debit (e.g. ‘BillPay’, ‘Pay Anyone’) transaction to be
suspended/cancelled after it has been authorised. Following authorisation by
the customer of a direct electronic funds transfer, payment is made
instantaneously. If a customer has a BSB and account number it is possible for
a payment to be made to an online gambling service provider. There is no
reversal, unless agreed by the merchant.[26]
15.35
A submission from VISA also noted that this provision of the bill 'rests on several false understandings of how
the payments system works and the role played by transacting consumers within
it'.[27]
15.36
The ABA also raised a number of questions 'left unanswered by the bill':
...around things like what happens if a customer does request
that the bank cancel a transaction but, for whatever reason, the bank does not
act in time to stop that transaction once the process has already started—is
the bank liable there? Notwithstanding the bill declaring that the bank will
not be liable for blocking any of these transactions, we still believe there is
a risk of litigation overseas against Australian banks. Courts overseas,
particularly in the US, are not averse to passing judgment on Australian banks
and then seeking to have those judgments enacted. [28]
...We are not sure, based on the legislation before the
committee, whether the attempt in there to indemnify us from legal action would
necessarily provide us with perfect indemnification around the world.[29]
15.37
However, despite raising practical, technical and legal objections to
the amendment, the ABA did concede that such a system would not be impossible
to design:
If intervention in the banking and payments system was deemed
appropriate, it would be necessary for the Government to: (1) designate (and
clearly define the criteria for designation) certain sites to be restricted
from use by Australian residents (“illegal sites”); (2) maintain a list of
“illegal sites” and provide that list to all financial transaction providers;
(3) monitor, correlate and update data and codes (based on existing codes and
protocols) on “illegal sites” and provide that list to all financial
transaction providers so systems can be set to approve or decline based on
designation and codes; and (4) provide statutory protection for financial
transaction providers from breaches whereby the designation and/or codes lists
provided to financial transaction providers are found to be incomplete,
inaccurate or somehow deficient.[30]
15.38
This alternative model was discussed during the ABA's evidence at the
committee's public hearing.
An alternative model – blacklisted
merchant numbers
15.39
When Mr Steven Munchenberg, Chief Executive Officer of the ABA, spoke to
the committee, an alternative model emerged. Instead of enabling the customer
to reverse an authorised transaction, an alternative approach would involve the
government maintaining and updating a 'blacklist' of merchant numbers and
providing the list to financial institutions to enable them to block
transactions to those numbers. Mr Munchenberg summarised how such a system
would work in practice for direct payments involving financial institutions and
credit card providers:
Mr Munchenberg:...the process is that a customer gets
a credit card from a bank; that bank is referred to as the issuing bank. The
customer goes online and they provide their credit card details. The
merchant—the provider of the online service—then puts that into the payment
system. It goes back to the issuing bank, and then at that point the issuing
bank has the opportunity to decline the transaction, which you can do for all
sorts of reasons—if I have a $5,000 limit on my card and I am trying to make a
$20,000 purchase, it is going to get knocked back at that point. At that point,
as I understand it, the bank will be able to say, 'No, we're not allowed to
transact with that merchant, because the numbers raise a red flag.' So the bank
will then decline that transaction. The merchant then goes back to the customer
and says, 'Your transaction was declined.' That can all happen in a matter of
seconds. So in that situation the Australian customer is blocked from accessing
that site or making payments to that site so long as that site uses a
black-listed merchant number to try to get that authorisation through.
CHAIR: But why wouldn't such legislation be better
directed at the credit card provider rather than the financial institution?
Mr Munchenberg: ...Again, my understanding is that
really the role of Visa and MasterCard is reconciling all of these transactions
between financial institutions, so it is not up to Visa or MasterCard to
approve or not approve a transaction; it is up to the issuing bank.[31]
15.40
Mr Munchenberg also acknowledged that, conceptually, the 'blacklist'
system proposed was not 'necessarily different from an international
anti-terror organisation becoming aware that a terrorist organisation is
funding itself through a certain vehicle', with regulators then alerting
financial institutions to prohibit transactions through that vehicle.[32]
He noted that Australian financial institutions already undertake to block
transactions in relation to terrorism, organised crime and money-laundering
activities.[33]
15.41
However, the ABA did stress that the 'blacklist' system proposed,
despite being an improvement on the approach in the bill, could never be
considered 'failsafe' as merchant identification numbers could be changed:
Mr Munchenberg: If the government were to provide us
with a list of merchant identifiers and said in a regulation to your
legislation—or however it would be done—that payments to these were prohibited
my understanding is that that would be a relatively straightforward thing to
deal with. But they are merchant identification numbers; they are not
necessarily corporate or entity identifiers. An entity may have multiple or
ever-changing ones. That would become an exercise, then, in trying to catch up.
If there were a number of large global players that saw Australia as a
relatively small market on a global scale and who therefore would not go to the
trouble of trying to constantly change their merchant identifications just to
get around the law then it may well have an impact. If an overseas provider of
gambling services, for want of a better term, was determined to target the
Australian market and therefore had an interest in constantly reinventing its
identity in the payments system then they would be able to relatively easily
get around that sort of scheme.
Senator XENOPHON: You could presumably catch up with
them within a 24-hour period. They presumably would not change their merchant
numbers every 24 hours. You would be able to establish—
Mr
Munchenberg: My understanding is that we see the merchant numbers. We
do not have to know or necessarily understand who is behind those numbers. The
whole system works around number identification.[34]
15.42
Mr Munchenberg also emphasised to the committee that such a system could
never perfectly capture all transactions to 'blacklisted' merchant numbers and
would require the cooperation of international third party payment companies in
cases of 'indirect payments'. For example, when customers use financial
intermediaries such as PayPal and Western Union to transfer money, these
companies act as a screen or 'black box' to guard the security of the
purchaser's banking details. Under the 'blacklist' system, banks would not be
able to determine the vendor's details (i.e. the online gambling provider) so in
the case of international third party payment companies, the responsibility for
identifying merchant numbers would have to fall to the financial intermediaries
themselves.[35]
15.43
The ABA summed up its preference for the 'blacklist' model discussed during
the committee's hearing instead of the model proposed in the bill:
I think there is a distinction to be drawn between [customers
requesting reversal of transactions] and what is potentially a relatively
straightforward model where the bank is dealing directly with an overseas
merchant and we have a list of black-listed merchant numbers. On the surface,
at least, that seems a relatively straightforward and manageable proposition.
Move much beyond that and I think we run into all sorts of complexities around
the adequacy of the systems to deliver in a timely way, because do not forget
we are dealing with transactions that fly around the world, almost
instantaneously in some cases, and a mismatch might arise between a customer's
expectations and what the payment system's technology is able to deliver as
well.[36]
15.44
The Tasmanian Inter-Church Gambling Taskforce noted that the proposed
amendments on suspending and cancelling transactions were 'perhaps the most
contentious in the bill' and also put forward an alternative approach, similar
to that outlined by the ABA:
Their aim seems to be to foil any attempt to offer illegal
interactive gambling services to Australians by allowing the gamblers to back
out of uncompleted transactions to pay for their losses. In principle, they
seem to mean that gamblers could collect any winnings but would have an avenue
to avoid full payment of any debts they incur. We believe that a better
approach would be a blanket prohibition on financial transaction providers
making payments to the providers of prohibited online gambling services.
Once a gambling service had been identified as inconsistent
with Australian law its operators would then know that they could not gain
access to gamblers’ funds through Australian financial transaction providers
and would presumably take steps to ensure that Australians did not access that
service.[37]
Committee majority view
15.45
The committee majority believes that the bill's amendment to allow
customers who play on interactive gambling websites to suspend or cancel their
transactions presents a number of impracticalities. These include the fact that
electronic transactions involving multiple parties are conducted in a matter of
seconds, making a request to suspend or cancel them unfeasible. The committee majority
also has concerns about the element of moral hazard inherent in this proposal. Allowing
gamblers to bet large amounts of money on websites, knowing that if they lose they
can request a reversal of the transaction, may well lead to greater risk-taking
and more reckless gambling behaviour.
15.46
Regarding the alternative model proposed during the committee's public
hearing and discussed with the Australian Bankers' Association, the committee majority
does not believe that such a scheme is worth pursuing. Setting up a system to
monitor and block financial transactions to deter people from accessing
overseas-based interactive gambling websites would never be completely effective,
as those customers most determined to circumvent the system would be likely to
do so using other methods. The committee also notes the difficulty in gaining
cooperation from international financial intermediaries such as PayPal to
comply with such a system were it to be introduced under Australian law. As
discussed in chapter seven, given the limited effectiveness of current
enforcement mechanisms to prevent Australians accessing online gambling
websites, the committee believes that a total ban cannot be achieved and
devoting additional resources to keep track of changing merchant identification
numbers on a blacklist would not be worth the expense and effort.
15.47
In summary, the committee majority does not support the introduction of
any form of financial transactions or payment controls.
15.48
Additional comments on this issue have been provided by the Chair and
Senator Xenophon, which follow this report.
Schedule 2—Inducements to gamble
15.49
Schedule 2 of the bill amends the IGA, making it an offence to offer customers
an inducement to gamble.
15.50
The amendments define a game as an 'inducement to gamble' if the game is
a game of chance, or a game of mixed chance and skill, and where the game is
provided with the intention of inducing a customer to gamble.[38]
15.51
A game is considered to be an inducement to gamble if:
- the game is provided by a person who also provides a gambling
service; or
-
the game contains elements encouraging or inviting the customer
to use a gambling service; or
- a feature of the way the game is provided invites a customer to use
a gambling service; or
- any feature of the service for the conduct of the game provides
direct or indirect links to a gambling service.[39]
15.52
The amendment establishes that a game is an inducement to gamble
regardless of whether it is played for money or anything else of value, or
regardless of whether the customer agrees (or agrees to give consideration) to
play the game.[40]
15.53
In practice, this amendment will prohibit gambling service providers
offering customers incentives to gamble, including free games and links to online
gambling websites. This would include websites or phone applications which
offer 'practice' sites where people can participate without winning or losing
money (as discussed in chapter nine).
Issues raised with the committee
15.54
Submitters put forward divergent views on whether inducements to gamble
should be prohibited. Arguments for and against inducements to gamble are also
covered in greater detail in chapters nine and 12. However, it should be noted
that the bill's amendments would apply only to interactive gambling services
regulated under the IGA. Sports betting and wagering services are exempt from
the IGA and are currently regulated by state and territory legislation.
15.55
In a submission to the reference inquiry, Betchoice stated that the term
'inducement' is too broad, covers a range of standard business practices and
may disadvantage gambling operators:
A prohibition on all inducements would, if taken literally,
extend to preventing operators from lowering prices to respond to competitive
pressures or to pass on production savings. It makes no sense in a liberalised
environment, such as wagering, to prevent so broad a range of standard business
practices.[41]
15.56
Betfair argued similarly that the offering of inducements was
commonplace in business and should not be restricted:
Wagering operators, like any other legal business, have the
right to advertise their services responsibly. The offering of inducements is
common place and legitimate for all types of businesses and as such, operators
should be permitted to offer inducements to attract customers – provided such
offerings are responsible.
Gambling related inducements are presently regulated on a
state-by-state basis and Betfair welcomes the proposed nationally consistent
approach. However the draft provision in the Bill is both confusing and limited
in its application. Betfair implores the Committee to reject this provision and
to develop a coherent national framework for the offering of inducements by
wagering operators, which reflects both the wagering operators’ right to
advertise and the importance of promoting gambling in a responsible manner.[42]
15.57
Other submitters, such as the Responsible Gambling Advocacy Centre, the Tasmanian
Inter-Church Gambling Taskforce and FamilyVoice Australia[43]
supported the amendment to the IGA:
An offer of 'free gambling' up to a certain monetary or time
limit often draws the consumer in and prompts them to continue to play beyond
the inducements. Inserting 'inducement to gamble' as a gambling service into
the Act is supported by the Centre.[44]
...We strongly support the inclusion of a measure such as is
incorporated in Schedule 2. Online inducements to gamble, which are accessible
to all including children, should not be permitted. The inclusion of ‘inducement to gamble’ as a gambling service would ensure that a site which
offered such inducements and provided a link to a gambling site could not
escape the prohibition on the grounds that it was not itself a gambling
service.[45]
...Particularly invidious inducements can be found on ‘freeplay’ sites that offer unrestricted access to anyone (including children)
to play EGMs with all the features of the real ones except that ‘credits’ are
used in place of real money. Players may be enticed with free credits to get
started. As well as all the usual appealing features these sites may have the
odds heavily loaded in the player’s favour so that, directly contrary to what
happens when playing with real money, it is virtually impossible to lose. They
may then provide a link to a site where one can play with real money, contrary
to the existing provisions of the Act. Their clear intention is to entice
players into believing that if they can achieve large wins with credits only
then they ought to be playing with real money. We can be confident that once
they did so the odds would be dramatically reversed. It is crucial to ensure
that such deceitful inducements do not become more widespread.[46]
Committee majority view
15.58
As discussed in detail in chapter nine, the committee is particularly
concerned about the practice of prohibited interactive gambling service
providers offering inducements. The committee agrees that inducements to gamble
such as: free games; offering credit; free credit; free money to play; deposit
matching to recruit new customers; and practice sites encourage people to
gamble, to gamble for longer and in some cases, beyond their means. It agrees
that the IGA should be strengthened in order to ensure that along with
advertising, inducements for a prohibited interactive gambling service are
banned.
15.59
The committee majority therefore supports the intent of the amendment to
the Interactive Gambling Act 2001 proposed in the bill to prohibit
inducements to gamble. It notes, however, that there is still some work to do
around clarification of what would be defined as an inducement, which providers
would be targeted and whether there would be any exclusions. The committee majority
recommends that consideration of this amendment be deferred until the
government's review of the IGA has been completed. The amendment could then be
considered along with any amendments proposed by the government arising from
the review.
Recommendation 18
15.60 The committee majority recommends that consideration of the amendment to
the Interactive Gambling Act 2001 (IGA) in relation to inducements be
deferred until the review of the IGA being undertaken by the Department of
Broadband, Communications and the Digital Economy is completed. This would
allow the amendment to be considered along with any further amendments proposed
by the government arising from the review.
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