Interactive Gambling (Moratorium) Bill 2000
Introduction
1.1
On 17 August 2000, the Senate referred the
Interactive Gambling (Moratorium) Bill 2000 (the Bill) to the Senate
Environment, Communications, Information Technology and the Arts Legislation
Committee. The Committee was required to report to the Senate by
4 September 2000.
The Committee’s Inquiry
1.2
The Committee invited submissions from numerous
industry, government and welfare groups in Australia who are affected by
interactive gambling. It received 30 submissions and held a public
hearing on 25 August 2000, where it heard evidence from 23 witnesses.
The Bill
1.3
It is important to note from the outset that the
Committee has been requested to examine the Bill, which applies a 12-month
moratorium, and not a ban, on interactive gambling service providers (IGSPs) in
Australia. Some of the evidence received by the Committee focussed on the
consequences of banning interactive gambling. While this is relevant to an
informed debate on gambling on the Internet, it is not the focus of the Bill
and therefore the Committee’s Inquiry.
1.4
The Bill imposes a 12-month moratorium on the
development of the interactive gambling industry in Australia by creating a new
criminal offence, the provision of an ‘interactive gambling service’. The new
offence prohibits a person from providing an interactive gambling service
unless the person was already providing the service when the moratorium
commenced on 19 May 2000. The offence ceases to have effect at midnight on 18
May 2001.
1.5
From the Explanatory Memorandum, it is clear
that the main objective of the Bill is to limit the expansion of interactive
gambling in Australia over the next 12 months. This will assist to minimise
the level of problem gambling on the Internet, therefore providing the
Government with some breathing space to consider in more detail the feasibility
and consequences of banning interactive gambling.
Overview of the main
issues
1.6
In the evidence to the Committee a number of
recurring issues emerged about the consequences of the proposed moratorium. In
the main, it was suggested that it is too broad in its application.
Consequently, the evidence contained numerous calls to amend the Bill so that
specified interactive gambling activities are excluded from the moratorium.
Several witnesses and submissions also argued that the moratorium should not be
imposed at all. The major issues are listed below:
- The impact of the moratorium on the level of problem gambling in
Australia.
- The impact of the moratorium on IGSPs in Australia.
- The inclusion of interactive wagering and lotteries in the
moratorium.
- The application of the moratorium to interactive gambling
operations that are not wholly based in Australia.
- The scope for IGSPs to offer services to residents in overseas
countries where interactive gambling is legal.
- Consultation and the commencement date of the moratorium.
- Claims for compensation by IGSPs and State and Territory
governments.
- Unintended consequences of the Bill.
The impact of the
moratorium on the level of problem gambling in Australia
Summary of the evidence
1.7
Several witnesses and submissions advised that
the moratorium would force Australian-based Internet gamblers to access
unscrupulous overseas-based sites, which are inadequately regulated and provide
few player protections.[1]
It was argued that, by limiting the range of services provided by domestic
IGSPs, the Bill was discouraging Australians from gambling in a safe and
regulated interactive environment.
1.8
The evidence also suggested that State and Territory
governments were not adequately addressing problem gambling both on the
Internet and in land-based venues, and that their competitive instincts
undermined a national regulatory model that embodies a range of
harm-minimisation measures.
Discussion of the evidence
Impact on
the level of problem gambling on the Internet
1.9
In its submission, Lasseters Online stated that
the number of overseas-based IGSPs is constantly increasing and may therefore
lead to increased levels of problem gambling:
The claim that by restricting the number of potential providers
in Australia consumers will have a fixed choice of Australian-based providers
ignores the more than 1000 international IGSPs that they will continue to be
able to access. The number of these international IGSPs is growing by around
20 per week.[2]
1.10
In its submission, WWWagering & Gaming
Consultants suggests that, if Australians choose to gamble with overseas-based
sites, they face significant risks:
The proposed moratorium will worsen the current plight of Australians
who utilise the Internet to gamble – all 2,300 of them. Australians will not
be able to register with Australian providers offering enforced harm
minimisation and proof of age (identity) safeguards. Australians will only be
able to deal with less scrupulous providers – the inevitable result being
unthinkable enticements and encouragement to gamble far worse than any
experienced, even in poker machine and lotto venues in Australia.[3]
1.11
In its submission, the Australian Institute for
Gambling Research stated that the moratorium could lead to a loss of revenue
that could be used to fund problem gambling programs.[4] Speaking for the Institute, Professor Jan McMillen advised the
Committee that the moratorium would do little to curb problem gambling on the Internet:
Australians, in the nature
of this moratorium, are going to continue to gamble through Internet service
providers both within Australia and offshore. If the primary objective of the
legislation is to restrict the market so that we can look at the issue of
problem gambling and prevent the expansion of the increase of problem gambling,
I think that is going to fail, simply, as I said, because people are going to
bet with existing Australian licensees, and some of them do not have effective
consumer protection programs in place. There is no requirement in this bill for
that to occur. They are also going to bet offshore. Other people have made that
submission to you, and people will move offshore.[5]
1.12
The Explanatory Memorandum to the Bill concedes
that the moratorium will not restrict Australian gamblers’ current ability to
access offshore sites.[6]
However, this alone will not lead to an increase in problem gambling on
overseas-based sites:
By freezing the interactive gambling industry to 19 May 2000
levels, the moratorium may lessen the growth of problem gambling that could
have occurred had the industry continued to grow. However, given the
moratorium will not prevent the expansion of the offshore industry or the
availability of traditional gambling products, it is not possible to gauge
whether this will directly affect demand.
The moratorium will mean that Australian gamblers will have
access to a local interactive gambling industry that is fixed for 12 months at
19 May 2000 levels. This could result in the uptake of interactive gambling
services plateauing at current levels for 12 months. If this happens, it is
reasonable to anticipate a similar plateauing of problem gambling generated by
interactive gambling.[7]
1.13
It is likely that the expansion of the offshore
industry in reputable jurisdictions will be limited over the next 12 months.
The Committee was advised that a number of overseas governments that have
world-class information technology infrastructures are in the early stages of
considering interactive gambling. Mr Tom Dale, General Manager, Regulatory and
Access Group, National Office for the Information Economy, provided an overview
of regulation in overseas jurisdictions:
The situation in the UK, as
we understand it, is that an inquiry is being conducted under the auspices of
the Home Secretary into a full range of gambling issues—not dissimilar in fact
to the Productivity Commission inquiry here last year—of which Internet
gambling is one part. Although a number of submissions have been made to that
inquiry and some of them have been mentioned in submissions and evidence to
this committee, I think the actual process by the independent government
inquiry is still continuing. My understanding at this stage is that they have
not reached any clear conclusions on Internet gambling as such. But we are
keeping in touch with them and they are very interested in developments here in
Australia.
The US, we have mentioned.
The only other jurisdiction which appears to be actively looking at the issue
is South Africa. There, my advice is, the actual process of consideration
through government and parliament is going fairly slowly. That is the only
information I have. Globally, we do not get a lot of indication that this is an
issue outside those countries, but there is interest in what is happening here.[8]
1.14
Mr Dale also commented on the legality of
interactive gambling in the United States, and informed the Committee of the
level of confusion surrounding this issue:
... there have been a number
of prosecutions [in the United States] in recent months, for what is
technically interstate sports betting being conducted via the Internet. In
fact, there has been one operator sent to jail for that offence. Those were
federal offences prosecuted by the Justice Department. However, the Justice
Department has said publicly that they want further clarification, through
legislation, of their power to act against Internet gambling, and that is the
reason for some of the current legislation. We have not had
any more detail than that from the US government.[9]
Failure of
State and Territory governments to address problem gambling
1.15
Evidence to the Committee suggests that States
and Territories are differing in their approach to addressing problem gambling,
and that there is a need for the Commonwealth Government to take a lead role.
1.16
Professor Jan McMillen, Executive Director,
Australian Institute for Gambling Research, provided the Committee with an
overview of measures that are being taken to address all forms of problem
gambling:
I have been calling for a
national strategy [on problem gambling] for some time. What is lacking, I
think, is a champion at the Commonwealth level to take this through. We found
in other public health areas— for instance, tobacco, alcohol, road trauma and
the AIDS campaign—that you needed a champion at the Commonwealth level, and
that is lacking.
So at this stage we are
working with inconsistent state governments but they are making some effort to
at least share information and discuss the possibility of getting some common
standards and policies in place. But that is
taking a long time—you know what these processes are like—and meanwhile people
are hurting.[10]
1.17
On the specific issue of interactive gambling,
Ms Marilyn Webster, Catholic Nominee, Inter-Church Gambling Taskforce, informed
the Committee that the Taskforce ‘is not satisfied that consumer protection
mechanisms held up in the various states will prevent the capture of new and
vulnerable groups of problem gamblers’.[11]
Similarly, Professor Jan McMillen advised the Committee that the
regulatory standards for interactive gambling are inconsistent:
Some of the best operators,
certainly, have set some benchmarks that I think could even be improved
further; but we also have, as the Netbets report quite rightly identified,
some licensed operators in Australia who do not
meet what I think are even basic, adequate standards. That is my major concern,
I think.[12]
1.18
The Explanatory Memorandum to the Bill indicates
that there is currently significant differences in the approaches of State and
Territory governments to the issue of problem gambling on the Internet:
The Commonwealth cannot rely
on the States and Territories to halt the growth of the interactive gambling
industry. On 19 April 2000, the Commonwealth signalled its concern about the
potential for interactive gambling to exacerbate the negative social impacts of
problem gambling in Australia and called on the States and Territories to join
it in imposing a voluntary moratorium on the introduction of new interactive
gambling services. Only New South Wales and Western Australia indicated support
for this initiative. Since this meeting, a number of jurisdictions have
continued to issue new interactive gambling licences.[13]
1.19
In its inquiry into interactive gambling, the Senate
Select Committee on Information Technologies found that State and Territory
governments were not able to agree on a uniform regulatory model and that this
compromised the effectiveness of harm-minimisation policies.[14] This finding was supported in
evidence to the Committee during its hearing on the Bill. Mr Warren Wilson,
Managing Director, TAB Ltd (NSW), referred to the continuing competitive
instincts of some States and Territories as they vie for market share:
I think that the aggressive
states have been those that have the least to lose—states/territories. That is,
they do not have a tax base, they do not have a population base and, therefore,
they have little to lose by getting out on the front foot and going forward
with these things. I think it is already on the public record that one
particular territory said that they wished to be the Nevada of Australia. I
think that says it all.[15]
1.20
Similarly, when asked about the reasons for the
failure of State and Territory governments to find a consistent position with
respect to the licensing of interactive gambling, Mr Peter Fletcher, Public
Affairs Manager, TAB Ltd (NSW), referred to the competitive nature of different
jurisdictions:
Certainly there has been
some breaking of ranks in terms of consistency on a number of regulatory
issues. Some of the smaller states and territories have taken the view that
they should offer very laissez faire arrangements whereby their licensees can
fully target the more populous states without any recourse to loss of revenues,
particularly to the racing industry in those larger states. Those types of
arrangements and competition between the states have led to
the situation that you allude to.[16]
1.21
In addition, a number of harm-minimisation
measures that could easily be implemented using existing technologies and which
were recommended by the Senate Select Committee in Netbets, have failed
to materialise. For example, the display of betting odds on a virtual poker
machine, clear warnings about the dangers of gambling, enforced (not
self-imposed) time limits to gambling activity, and the uniform availability of
third-party player-exclusions have not yet been fully addressed.[17]
1.22
Evidence to the Committee indicated that
Internet technology allows for the implementation of these types of regulatory
measures and that governments should make them a part of licensing
arrangements:
... look at the strengths of
the Internet. Do not look at the issue as simply access to poker machines 24 hours a day; look
at the extent to which the medium itself can provide [harm-minimisation
policies]. Structure in your licence requirements to stipulate who may access
your service and upon what conditions, and deal with it that way. We think that
way you address the social policy concerns, which we also share, but you do not
do it in a way that has these unintended and adverse impacts on the rest of the
Internet industry.[18]
Conclusion
1.23
The Committee considers that the combination of
the limited uptake of e-commerce (which is usually confined to trusted online
retailers), the absence of reputable IGSPs and the availability of other forms
of gambling, will discourage most Australians from gambling online with
overseas-based IGSPs. By implementing interim controls on the expansion of
Australian-based IGSPs, the Bill effectively limits the most likely source for
increased gambling activity and therefore problem gambling.
1.24
In addition, there is a need for the
Commonwealth Government to take an active role in addressing problem gambling
in Australia and the Bill will provide an opportunity to carry out a timely
analysis on this very important social issue. The Committee notes that most
State and Territory governments will not take a lead role in addressing the
social harm issues raised by interactive gambling, which provides further
impetus for the Government’s proposed intervention.
The impact of the
moratorium on interactive gambling service providers (IGSPs) in Australia
Summary of the evidence
1.25
Some of the evidence to the Committee stated
that a temporary pause on the expansion of interactive gambling in Australia,
would irrevocably set back Australian IGSPs, who must compete with overseas
organisations. Several witnesses submitted that, because the Internet and its
related technologies are changing rapidly and consumer expectations are
increasingly high, any impediment to meeting such consumer expectation is
likely to result in a market loss that may not be recovered into the future.
1.26
However, the Committee was also informed that
Australia’s reputation as a regulator provides Australian IGSPs with a
significant market advantage over their international competitors.
Relevant provisions of the Bill
1.27
The Bill limits the expansion of existing IGSPs
by making it an offence for them to provide an interactive gambling service.
However, there are a number of defences to this offence, and these are listed
in clause 11. Under this provision, it is a defence if the defendant proves
that:
- on a particular day
before 19 May 2000, the defendant provided an interactive gambling service (the
pre-19 May 2000 service); and
- the current service is
the same or substantially the same as the pre-19 May 2000 service; and
- the current service is
provided under the same name as the pre-19 May 2000 service; and
- the pre-19 May 2000 service
had at least one arm’s length paying customer.[19]
1.28
In order to fall within this defence, an
organisation would essentially need to have been operating prior to 19 May
2000, and since that time continued to operate in substantially the same
manner. The Explanatory Memorandum provides guidance on what constitutes
‘substantially the same’ service:
In relation to the kind of services
provided, a number of aspects of an interactive gambling service are so
central to what kind of service the service is, that if a service is different
from a pre-19 May 2000 service in respect of any of those aspects, it is
intended that the service would not be regarded to be the same or substantially
the same as the pre-19 May 2000 service. These central aspects of an interactive
gambling service are:
- the type of betting offered on the service;
- the restrictions, if any, on customers who may access the
service;
- the type of communications service used to provide the service to
customers; and
- the subject matter of the service.
Non-central aspects of an interactive gambling service could
vary in relation to a post-19 May 2000 service and it is intended that the
service would still be regarded be the same or substantially the same as a
pre-19 May 2000 service. The non-central aspects of the service include
aesthetic changes to the service, such as a change to the appearance of a
service or the addition of music to the service, or changes to ancillary
aspects of the interactive gambling service such as billing
procedures or application procedures.[20]
1.29
Consequently, for an IGSP to rely on this
defence, it must not alter its operations beyond the limitations set out by
clause 11. Much of the evidence to the Committee commented on how this
limitation would affect the commercial wellbeing of IGSPs in Australia.
Discussion of the evidence
Operations
shifted offshore
1.30
Mr Peter Coroneos, Executive Director, Internet
Industry Association, advised that the moratorium, regardless of whether there
is a ban in the future, will result in a number of Australian-based
organisations moving overseas:
Undoubtedly the message we
are getting from both member and non-member interactive gambling operators in
Australia is that this moratorium will leave them with no option but to
relocate. So to that extent they are adjusting their business plans.[21]
1.31
The Committee heard evidence that the high level
of regulation in Australia, and the trust that this builds with online
gamblers, may not be enough to keep IGSPs in Australia.
Mr Richard Farmer commented that although Australian regulation helps
to attract customers, in the long term, the reputation of an IGSP would
outweigh its physical location and government regulator.[22]
1.32
The Australian Capital Territory Government
commented in its submission that the Bill will force Australian IGSPs to
progress arrangements offshore.[23]
Sportingbet.com, a United Kingdom based online wagering service with plans to
locate its regional headquarters in Australia, stated in its submission that it
would relocate to another country: ‘Sportingbet is one of many international
organisations that will move to other locations and still offer their services
to a global market (including Australia)’.[24]
Market
losses
1.33
Lasseters Online, which operates Australia’s
first online casino, alluded to the competitive nature of the Internet, and how
the moratorium detracts from its ability to compete effectively:
The moratorium will impede the growth of existing operators such
as Lasseters. The introduction of new services and capabilities is critical
within the information technology industry where rapid advances in technology
can change the Internet and e-commerce dramatically within a one year period.[25]
1.34
Lasseters Online also stated that it will not
benefit from the exclusion of other Australian IGSPs from the online
environment:
The expectation that existing Australian operators will benefit
from a protected position in the market and the absence of new competitors, is
false. The primary competition for existing Australian operators is the more
than 1000 IGSPs. Amongst this market, existing Australian operators will be at
a disadvantage because they will be unable to innovate in line with market
trends.[26]
1.35
Some organisations stated that the moratorium
will impact negatively on industries that are related to their online gambling
operations. For example, ACT TAB Ltd argued that the inclusion of wagering in
the moratorium is ‘totally inappropriate’ and ‘represents a major threat to the
future funding of the racing industry’.[27]
1.36
Similarly, TABCORP Holdings Ltd stated that the
moratorium:
... could immediately stop the development of any new wagering
services by the State TABs in Australia who are presently operating under their
wagering licence issued by their respective State governments. This will
adversely impact all TAB services including TAB agencies, racecourses and phone
betting services.[28]
1.37
In the Explanatory Memorandum to the Bill, the
Government states that, with respect to existing IGSPs, ‘the industry should be
able to generate at least the same amount of revenue as it did as at the date
the moratorium takes effect.’[29]
Lasseters Online responded to this statement, saying that it:
... ignores the essential business objective for growth in revenue
and returns. Companies are obliged to shareholders and to the health of the
business to aim for increased revenue each year rather than ‘the same’.[30]
1.38
Similar comments were made in other submissions
about the need for IGSPs to constantly develop their product in an
international market and the obligation they owe to their Australian
shareholders.[31]
1.39
Mr Andrew Eakins, Director of Finance, The
Federal Group, indicated that the restriction will set back his company by up
to two years:
... we would not be able to
increase our range of games during that period of time. We would be able to
offer only the current games. That restriction would not apply on overseas
sites, obviously, so overseas sites would be able to improve their product
during this period of time. If, subsequently, there was no ban put on Internet
gaming, there was some kind of national regulatory model or whatever, we would
be 12, 18 or 24 months behind what the rest of the industry has done in that
period. Effectively, there is a commercial ban by way of a moratorium.[32]
Conclusion
1.40
The Committee notes that the moratorium could
have an impact on the short-term growth of the interactive gambling industry in
Australia, and that this is a consequence of the desired outcome of providing
the Commonwealth Government with an opportunity to examine the impact of
interactive gambling. The potential negative economic impact, however, is
offset by the need to ensure that Australians are not subject to the
potentially adverse effect of increased gambling opportunities. Further, from
the evidence, it appears that the moratorium alone will not result in large
numbers of Australian IGSPs moving their operations offshore.
1.41
In addition, the Committee also notes the
considerable marketing advantage that Australian regulation provides IGSPs,
which is evidenced by the continuing interest of international organisations
wishing to establish operations in Australia. The Bill is not likely to damage
this market advantage, as it indicates a commitment by the Commonwealth to
offer the highest levels of protection to consumers on the Internet.
The inclusion of
interactive wagering and lotteries in the moratorium
Interactive wagering
Summary of
the evidence
1.42
Some of the evidence to the Committee stated
that interactive wagering activities should be excluded from the moratorium.
There were two main arguments in support of this conclusion. First, it was
stated that wagering on the Internet is not an interactive activity and is less
likely than online gaming to result in problem gambling. Second, it was argued
that wagering on the Internet is very similar to telephone betting, which is
not illegal. The Committee also heard evidence, however, to the effect that
the moratorium should apply equally to all forms of gambling on the Internet.
Relevant
provisions of the Bill
1.43
Clause 4 of the Bill specifies the types of
gambling services that are covered by the moratorium. These are summarised in
the Explanatory Memorandum:
A Gambling
service is defined in clause 4 to mean:
- a
service for the placing, making, receiving or acceptance of bets; or
- a service
the sole or dominant purpose of which is to introduce individuals who wish to
make or place bets to individuals who are willing to receive or accept those
bets; or
- a
service for the conduct of a lottery; or
- a
service for the supply of lottery tickets; or
- a
service for the conduct of a specified kind of game, or
- a gambling service (within the ordinary meaning of that
expression) that is not covered by any of the above paragraphs.
1.44
This is a broad definition and includes wagering
and lotteries. However, a further qualification to the definition is made in
clause 5, which requires the gambling service to be provided using specified
telecommunications means.
Discussion
of the evidence
-
Wagering on the Internet is not interactive and is less likely to
lead to problem gambling
1.45
A number of witnesses and submissions
highlighted the difference between wagering and gaming, and therefore argued
that a different regulatory regime should apply to each. The principal
difference was that wagering is not repetitive and is dependent on an external
event or outcome. In contrast, gaming is highly repetitive and the activity is
generated by the person, usually at the press of a button or the click of a
mouse.
1.46
In its submission, ACT TAB Ltd stated that wagering
on the Internet is not an interactive gambling activity as the wager is usually
placed ahead of an event, the timing of which is determined by an external
body:
Placing wagers on racing or ‘live’ events is far removed from
Internet gaming and interactive gambling. The events on which wagers are made
are conducted at racecourses throughout the country and run to a time schedule
set by racing clubs. In no way could these events be classified as
‘interactive’.[33]
1.47
A similar point was made by MegaSports (ACT) Pty
Ltd in its submission, which highlighted that unlike ‘mindless button pushing
of virtual poker machines or simple red/black choices of virtual roulette,
wagering requires some degree of skill and analysis.’[34]
1.48
Mr Warren Wilson, Managing Director, TAB Ltd
(NSW), implied that wagering on the Internet will not lead to an ‘unwieldy’
growth in wagering activity and a consequent increase in problem gambling:
... Sky Channel commenced a
home racing service on 5 September 1998 and now, through all of the pay TV operators,
the home racing channel is available in about 1.3 million homes—nearly one in
four homes throughout the country, and yet it is still only single digit growth
that is probably below or around inflationary growth in the country. So the
point is that, even with these new technologies or new distribution mechanisms,
we have not seen any outrageous or unwieldy sort of growth in the business. My
point is that the technology will not—as some of the doomsayers suggest—create
rampant growth in wagering. It just will not happen.[35]
-
Wagering should be included
with other gambling forms
1.49
In contrast to the above arguments, however, the
Committee also heard evidence that the moratorium should apply equally across
all forms of interactive gambling. Mrs Joanne Pafumi, Consultant,
Lasseters Holdings, provided the reasoning for this inclusive approach:
We are also concerned about
some issues raised this morning in regard to the consistent application of the
bill across gambling forms. I refer to the Productivity Commission, which
reported on the source of problems for gamblers in counselling. It found that
gaming machines were the primary source, with 68.9 per cent of problem gamblers
reporting that method. Racing accounted for 15.6 per cent; casino table games, five
per cent; lottery games, 3.7 per cent; bingo, 2.7 per cent; and other kinds,
4.1 per cent. So while the source of problem gambling in society is heavily
skewed towards gaming machines, other forms of gambling must take some
responsibility for problem gambling in society. We believe firmly that if you
are part of the problem, you should be part of the solution. For that reason we
believe that regulation with respect to interactive gambling should be consistent across all forms of gaming.[36]
1.50
Professor Jan McMillen, Executive Director,
Australian Institute for Gambling Research, indicated that wagering activity is
on the rise and that even though ‘sports betting is a small part of the market
it had a growth rate of 42 per cent in the last financial year’.[37] Professor McMillen also
stated that the changes to wagering activities are not being closely regulated
by State and Territory governments and are ‘slipping through the net’.[38]
1.51
The Committee also heard evidence that there
should be no distinction between wagering and gaming on the Internet, and
therefore both should fall under the moratorium. For example, Ms Marilyn
Webster, representing the Inter-Church Gambling Taskforce, advised the
Committee that their organisation does not distinguish between wagering and interactive
gambling.[39]
-
Wagering on the Internet is very similar to telephone betting
1.52
Several submissions to the Committee stated that
there is little distinction between a wagering activity that is conducted on
the Internet, at a racetrack, or over the telephone. Consequently, if it is
legal to place a bet using a telephone, then it should also be legal on the
Internet.
1.53
In its submission, CentreRacing Ltd stated that
the Bill fails to make a valid distinction between telephone and Internet
wagering:
The process and exposure of a punter placing a bet on a horse
race are the same whether he does so in person, over the telephone (either
speaking or pressing buttons on a handset) or using a standard computer
keyboard. ...
The definitions of ‘standard telephone service’, ‘telephone
betting service’ and ‘voice call’ [in the Bill] all appear to allow for data
input of bets using a telephone handset but apparently not a standard
keyboard. There is no rational basis for such a distinction.[40]
1.54
The Committee notes that several other
submissions supported this point of view.
-
Wagering on the Internet represents a new market
1.55
Professor Jan McMillen, Executive Director,
Australian Institute for Gambling Research, stated that Internet wagering is
likely to attract a new market, and that experience indicates the size of this
market will grow considerably:
I suspect it is a new
market. There probably is migration and that will probably accelerate, but I
also think there is a new market. History has shown that when technology facilitates
the development of a new product and a new mode of delivery in gambling the
market expands. The cake gets bigger; it is just the slices of the cake that
shift. It happened with casinos; it happened with gaming machines; it happened
with online lotteries, and now it is going to happen with this form of gambling
as well. We will end up with more Australians gambling and gambling more.[41]
1.56
Mr Tom Dale,
General Manager, Regulatory and Access Group, National Office for the Information
Economy, explained the Government’s policy behind the application of the
moratorium to a range of gambling activities, despite the similarities between
their access on the Internet and telephone:
It is one of a number of
areas in the bill where I guess a line had to be drawn. The existing
telecommunications regime makes a number of regulatory distinctions between
different forms of carriage service. We are trying to be consistent with that
regime, among other things, and I think it sits logically with that approach.[42]
Lotteries
Summary of
the evidence
1.57
The Committee heard a number of similar
arguments against the inclusion of Internet lotteries in the moratorium.[43] That is, lotteries on the
Internet are no different to those in the terrestrial environment, and they
have minimal impact on the levels of problem gambling.
Discussion
of the evidence
1.58
Mr John Mortimore, General Manager, Tatts.com
Division, Tattersall’s, stated that lotteries may not even be a source of
problem gambling in Australia:
As a former chairman of the
Australian lotto bloc and a long serving member of the industry I can assert
that I have never seen any cogent evidence of the development of problem
gambling behaviour in respect of the purchase of lottery tickets. The community
does not even consider the purchase of lottery tickets to be gambling
behaviour, in any case.[44]
1.59
Mr Peter Coroneos, Executive Director, Internet
Industry Association, expressed concern about the Government’s divergent
approach to existing activities that are conducted on the Internet such as, for
example, the purchase of a lottery ticket:
The banning of the sale of
lottery tickets online seems to us a fairly ludicrous proposition when they are
legally available from the local newsagent. We question why the moratorium
seeks to go so widely in its effect at a time when we are dealing with an
activity which is legal and is responsibly enjoyed by many Australians.[45]
Conclusion
1.60
The Committee recognises that there are a number
of similarities between wagering activity and lotteries on the Internet and
their availability through other mediums such as the telephone and physical
venues. It also notes the differences between wagering and gaming.
1.61
The Committee believes that the Internet will
bring such significant change to wagering activity that a moratorium is
required for the Government to consider its impact. The Internet will increase
the accessibility and appeal of wagering activity. The improved content and
options it provides for gamblers such as placing more bets on more events,
along with the fact that it can be accessed in private and in the workplace,
will lead to increased gambling activity and with it a greater propensity for
problem gambling. [46]
1.62
The Committee endorses the consistent and
uniform approach of the Bill to all forms of interactive gambling services,
including lotteries.
The application of the
moratorium to interactive gambling operations that are not wholly based in
Australia.
Summary of the evidence
1.63
Some of the evidence to the Committee stated
that the extra-territorial application of the Bill is excessive, and that it
should be amended so that it does not apply to IGSPs that have a connection
with Australia, but whose operations are based overseas. The Committee was
also advised however, that this aspect of the Bill is necessary to ensure that
organisations cannot circumvent the moratorium simply by having their Internet
service hosted on an offshore server.
Relevant provisions of the Bill
1.64
Clause 5(1)(c) of the Bill has the effect of
extending the moratorium to IGSPs that may not be based or operating in
Australia. The Explanatory Memorandum provides an example of its application,
and states that a business could come within the terms of the moratorium if it:
... provides an on-line gambling service such as a casino which has
its web-site maintained in an offshore jurisdiction and the company executive
(or principal company executives) are based in Australia.[47]
Discussion of the evidence
1.65
In its submission, eBet Ltd argues that any
moratorium should relate only to the operation of Internet gambling services on
Australian soil or to Australian companies who target or accept customers from
Australia.[48]
It argues that without this amendment, the Bill would unduly impact on eBet’s
overseas operations:
By way of example: If our company were to establish an Internet
betting service for a European racetrack, licensed by a European Government and
accepting only European resident customers, it would seem that we would be in
breach of the law should the Bill pass in its current form.
We ask you to consider how this in any way assists the
Government in its endeavours with respect to protecting Australians that
it perceives as at risk from Internet gambling.[49]
1.66
A similar point was raised by the Northern
Territory Government, which stated that this could drive legitimate Australian
businesses offshore.[50]
1.67
Mr Tom Dale, General Manager, Regulatory and
Access Group, National Office for the Information Economy, said that the
extra-territorial application of the Bill is required to ensure that ‘firms did
not seek to avoid the provisions of the Bill by simply moving servers around
and things like that’.[51]
Conclusion
1.68
The Committee believes that the application of
the moratorium to interactive gambling operations that are not wholly based in
Australia, is necessary to ensure that the moratorium has its desired effect.
Without this restriction, Australian-based IGSPs could, as Mr Tom Dale advised
the Committee (see paragraph 1.67), move their operations offshore and possibly
continue to offer interactive gambling services to Australians. Furthermore,
from the point of view of consistency, it would be severely hypocritical of the
Australian Government to expose overseas consumers to a service, which has been
declared illegal for the period of the moratorium in Australia while its
potential, undesirable social consequences are evaluated.
The scope for IGSPs to
offer services to residents in overseas countries where interactive gambling is
legal
Summary of the evidence
1.69
A number of submissions argued that the moratorium
should not apply in cases where Australian residents are not targeted by
IGSPs. Several organisations - mainly those that provide gaming or wagering on
international sporting events - indicated that they were prepared to target
overseas markets only. This is due to the fact that Australia is a very small
gambling market and that the Internet enables cheap and easy access by overseas
residents.
1.70
Further, some Australian organisations have
developed working relationships and partnerships with overseas bodies, with a
view to assisting them with gambling products for their domestic markets.
Under the moratorium, the Australian-based organisations would be restricted
from assisting to develop new products.
1.71
The Committee also heard, however, that there is
a need for consistency between Australia’s domestic and international policies,
and the Commonwealth Government should only endorse interactive gambling for
international markets once it has done so domestically.
Relevant provisions of the Bill
1.72
Clause 9 of the Bill extends the application of
the moratorium to ‘acts, omissions, matters and things outside Australia’. The
Explanatory Memorandum states that this provision is consistent with the
intention of the Bill, which is to ‘pause the development of the
Australian-based interactive gambling industry, which includes the provision of
services to persons outside Australia.’[52]
Discussion of the evidence
1.73
In its submission, Publishing and Broadcasting
Limited Gaming Management Pty Ltd (PBLG) suggested that the Commonwealth
Government may be intruding on the policies of foreign governments:
If the Government and Parliament want to put Australians’ access
to online gambling services ‘on hold’, PBLG submits that the moratorium should
be targeted at that end. ...
By permitting Australian companies to participate in the
overseas online gaming market, while denying Australians the opportunity to
gamble, the Government’s purpose would be fulfilled without jeopardising a
great e-commerce opportunity for Australia.
In putting this view, PBLG believes that:
·
It is for foreign governments, rather than Australia’s, to
determine foreigners’ access to the Internet.[53]
1.74
Mr Tom Dale, General Manager, Regulatory and
Access Group, National Office for the Information Economy, stated that there is
a sound public policy reason for this restriction:
... there is a valid public
policy point that if the Australian parliament decides that an issue is
sufficiently harmful to pass legislation to restrict it domestically,
effectively the export of such a harm is arguably very much contrary to good public policy and not guaranteed to win you friends
overseas.[54]
Conclusion
1.75
The Committee notes that the Bill does not
prohibit existing Australian IGSPs from continuing to offer their existing
services to overseas markets. It merely limits it to existing levels. It
could be a source of international embarrassment if, without adequate
consultation, the Commonwealth Government endorsed a product the suitability of
which it is now considering as part of its domestic policy. It is possible
that Australia’s reputation as a world-leading technical regulator of gambling
would be compromised if it was not consolidated with an equally sound social
policy. The Committee believes that the sovereign right of the Australian
Government to determine what happens on Australian territory must be
understood.
1.76
The Committee also notes that some Australian
IGSPs have not complied fully with the policies of overseas governments. For
example, Lasseters Online and Canbet Ltd informed the Committee that they
accept bets from United States residents even though the government of that
country has placed severe restrictions on interactive gambling services.
Consultation and
retrospectivity of the moratorium
Consultation
Summary of
the evidence
1.77
A number of witnesses stated that both the
interactive gambling industry and government regulators had minimal opportunity
for input into the drafting of the Bill.
Discussion
of the evidence
1.78
The consultative process for the Bill is
outlined in the Explanatory Memorandum:
On 19 May 2000 the Commonwealth wrote to State and Territory
Ministers outlining the Government's intention to legislate for a moratorium.
The letter invited States and Territories to provide input into the nature and
scope of a legislated moratorium. The Commonwealth also issued several public
statements outlining its approach to the moratorium and this resulted in a
number of queries and correspondence from industry representatives. The
Commonwealth's intention has been to signal in a very broad way its intention
to legislate for a moratorium. The Commonwealth will be in a better position
to consult on the detail of the moratorium once it has developed and introduced
legislation into Parliament.[55]
1.79
Mr Peter Bridge, representing the Australian
Casino Association, advised that it was not consulted with respect to the
drafting of the Bill.[56]
Similarly, Mr John Mortimore, General Manager, Tatts.com Division,
Tattersall’s, told the Committee that, in his capacity as a member of the
recently formed Australian Gaming Council, he was not aware of any
consultations with its member organisations.[57]
1.80
In his evidence to the Committee, Mr Tom Dale,
General Manager, Regulatory and Access Group, National Office for the
Information Economy, stated that there was no industry input into the Bill, and
that this practice has been followed in the past:
I will just note for the
moment that it is not normal practice, although it can sometimes occur, for the
specific details of draft legislation to be made available to the public or to
interested parties in industry. There was certainly consultation with the
industry and state governments and a number of user groups in the early stages
of the government’s consideration of gambling policy generally, including
Internet gambling. That was earlier this year but before the process of
drafting the bill commenced.[58]
Retrospectivity
Summary of
the evidence
1.81
Some of the evidence to Committee stated that
the retrospectivity of the Bill will result in investment losses in the
interactive gambling industry. Several organisations argued that it was unfair
that their activities are legal under State and Territory laws, but will
potentially become illegal under the Bill. In addition, retrospectivity
results in an uncertain investment environment which could damage the wider
Internet industry.
Discussion
of the evidence
1.82
In its submission, the Northern Territory
Government stated that the retrospectivity clauses of the Bill are unfair and
should be amended:
Public comments have been made that the Bill, including the
criminal offence provisions, would have retrospective effect. If so, it is
submitted that this is unfair as the actions that constitute the offence were
not known to existing operators until the release of the Bill. ...
However, it appears a penalty may not be imposed except for
actions occurring after the Date of Assent. If so, the Bill should be recast
to have prospective effect only, and references to the May 2000 date
should be removed.[59]
1.83
Similarly, a confidential submission received by
the Committee stated that the retrospectivity of the Bill raised problems for
business planning:
It is hard to understand the logic and fairness of the
retrospective nature of the Bill. The term ‘gambling service’ was not defined
until the tabling of the Bill before Parliament. How was it envisaged that
Australian companies manage the operation of their commercial activities from
the date Senator Alston made a press release in May 19 this year without
definition?[60]
-
Retrospectivity
and the impact of the moratorium on e-commerce investment in Australia
1.84
A number of witnesses commented that the
uncertainty caused by the moratorium could have a negative impact on foreign
investment in Australia. Mr Keith Cullen, Managing Director, eBet Ltd, stated
that the retrospectivity impacts negatively on the interactive gaming and other
Internet industries:
Telecommunications covers
every single business. There is a certain argument that says governments can
use their powers under telecommunications to impact retrospectively and make
criminal the activities of legitimate operators
that were not operating in a vacuum—this is the important point here, which is
frustrating.[61]
1.85
Mr Paul Appleby, Chief Executive Officer, GoCorp
Ltd, stated in evidence that the moratorium has caused a high level of
uncertainty, and as a result his organisation has examined the prospect of
claiming compensation:
I must say it makes it very
confusing for a business that is trying to move forward, and for the investor
community, to try to have some confidence in investing in the business as it
goes forward. ... This has to cause serious concern not only for the gaming
sector but also for the e-commerce sector in general, the fact that the
government can legislate retrospectively with regard to investments that have
already been made, and been made in good faith under existing legislation. It
is a major concern for our investors.[62]
Conclusion
1.86
Gambling has been a prominent public policy
issue since it became evident that problem gambling in Australia is a major
social problem. Since the release of the Productivity Commission report into
Australia’s gambling industries in November 1999, a number of Government press
releases have been released, with the Prime Minister’s December 1999 statement
clearly foreshadowing future developments:
Internet gambling has the potential to dramatically increase the
number of problem gamblers because it will be accessible to every household 24
hours a day.
I would envisage that this issue will be a major focus of the
proposed Ministerial Council on Gambling and its advisory body. In addition the
Government will be undertaking consultations with relevant industry and
consumer groups and will also take account of the forthcoming report of the
Senate Information Technology Committee’s inquiry into on-line gambling.[63]
1.87
That Senate Committee subsequently released its
report, Netbets: A review of online gambling in Australia, in March 2000
in which it indicated that further significant reforms were required and that
without these a moratorium should be imposed. Consequently, the gambling
community has been aware since March 2000 that the Commonwealth Government was
considering using its powers to possibly impose a moratorium.
1.88
Therefore, the Committee considers that adequate
notice was provided. Further, it would be unduly restrictive on the
Commonwealth Government to expect that comprehensive consultations be carried
out with respect to all Commonwealth legislation.
Claims for compensation
from IGSPs and State and Territory Governments
Summary of the evidence
1.89
Some of the evidence to the Committee stated
that, as several organisations had spent millions of dollars in obtaining
interactive gambling licences, which may subsequently be blocked or frustrated
by the moratorium, a claim for compensation may lay against the Commonwealth.
Discussion of the evidence
1.90
In its submission to the Committee, the
Australian Casino Association stated that a number of its members may seek
compensation as a result of the moratorium:
The retrospective legislation is unfair and a number of our
members could take legal action. Compensation could be sought for the millions
of dollars members have spent developing a legal business with a licence
granted by a State or Territory Government.[64]
1.91
Mr Michael Gard, Senior Adviser, Tasmanian
Government, stated in evidence that the Federal Group, Tasmania’s only
operating IGSP, would have the support of its Government if it claimed
compensation:
[The Federal Group] have
indicated that they had to spend in the order of $14 million developing their
site. They have said publicly that should this ban proceed they will sue. The
Tasmanian government is on record as saying that they will do all they can to support the Federal Hotels’ action to recoup their losses.[65]
1.92
The Explanatory Memorandum to the Bill
considered the issue of investment losses by licensees and the possibility that
this could lead to a claim for compensation. It states that licensees may have
to pursue compensation under the general principles of contract law:
Some recently licensed providers may have made business
decisions and investments based on an ability to generate revenue in the near
future. Given a moratorium will temporarily delay these providers from entering
the market, it is possible the providers will have to carry the cost of any
investment decisions taken before the announcement of the moratorium. Recent
licensees frustrated from operating by the moratorium may claim for restitution
from States and Territories for the costs associated in obtaining a license.
Principles of restitution will apply to any contracts frustrated by the
Commonwealth's action to prevent one party to a contract from gaining a
windfall benefit at the expense of the other party.[66]
Conclusion
1.93
It is a consequence of the policy making process
by the Commonwealth Government that there may be some conflict or
inconsistencies between State and Territory policies. This is in fact
contemplated by the Commonwealth Constitution, which provides that in the case
of overlap between different legislatures, the Commonwealth Government’s laws
will prevail.
Unintended consequences
of the Bill
Summary of the evidence
1.94
Evidence to the Committee highlighted at least
two instances in which organisations believed that the Bill would impact
unintentionally on gambling operations.
Discussion of the evidence
1.95
Mr John Mortimore,
General Manager, Tatts.com Division, Tattersall’s, stated that the Bill could
have unintended consequences in so far as it applies to terrestrial lottery activities:
A further problem with the
bill is what I assume to be an unintended consequence of its drafting. We have
been told that the bill is supposed to ban only new gambling services offered
by means of the Internet. However, a quick review by Tattersalls’ legal counsel
indicates that the bill is so drafted that it may also ban new services offered
via Tattersalls’ terrestrial systems for retail lotteries and gaming. Since
Tattersalls is working with the Victorian government and its regulators on
attempting to produce new systems in the future which will complement our
responsible gambling platform and assist in dealing with problem gambling
behaviour, obviously such an impact would be most
unfortunate.[67]
1.96
The Committee notes that this issue was not
addressed in the submission provided by Tattersall’s and that from the evidence
provided by Mr Mortimore, it is not clear how the Bill has an unintended
consequence.
1.97
In contrast to Mr Mortimore’s statement, Mr Tom
Dale, General Manager, Regulatory and Access Group, National Office for the
Information Economy, stated that he is not aware of any unintended
consequences:
A third point concerns the
question of exemptions. That was covered in some detail by a number of
witnesses this morning, particularly in relation to, firstly, wagering and,
secondly, to lotteries. All I will note at the moment is that, as far as we are
aware, there are still no unintended consequences of the draft, the inclusion of those forms of gambling is intended, and we can answer questions about
that if you like.[68]
1.98
In its submission, CentreRacing Ltd stated that
its operations would be affected by the Bill because it had undergone a recent
name change.[69]
This has occurred because the proprietor, Mr Terry Lillis, purchased the
horseracing component of Centrebet Pty Ltd, one of Australia’s first online
wagering services, and has subsequently named it ‘CentreRacing’.
Conclusion
1.99
Clause 5(5) of the Bill allows the Minister for
Communications, Information Technology and the Arts to exclude a service from
the operation of the Bill. The Explanatory Memorandum describes the
circumstances in which a service may be excluded:
This Ministerial determination power has been included in the
Bill to ensure that, if there is a service in a class of services that would
arguably be an interactive gambling service as a result of
subclause 5(1), but the service is not the kind of service that should be
covered by the moratorium, the Minister may determine that each service in the
class of services is exempt and therefore is taken not to be an interactive
gambling service.
The Ministerial determination power is intended to be used only
in extraordinary circumstances to ensure that the moratorium does not apply to
services to which it was never meant to apply. The Ministerial determination
may not specify that a particular provider is taken not to provide an interactive
gambling service. The determination must be a general rule
of application, which relates to each service included in a specified class of
services.[70]
1.100
The Committee considers that this provision
adequately covers any situation in which it is clear that the Bill was not
intended to apply.
RECOMMENDATION
1.101
The Committee reports to the Senate that it has
considered the Interactive Gambling (Moratorium) Bill 2000 and recommends that
the Bill proceed.
__________________
Sen Alan
Eggleston
Chair (LP WA)
Appendix 1 - List of Submissions
- Mr
John Quiggin
- Tasmanian
Government
- World
Wide Wagering & Gaming Consultants Pty Ltd
- Regis
Controls Pty Ltd
- ACTAB
Limited
- Interactive
Entertainment Technology Pty Ltd (IETEC)
- ACT
Legislative Assembly
- Mr
Adam Garrigan
- Publishing
& Broadcasting Limited Gaming Management Pty Ltd (PBLG)
- MegaSports
(ACT) Pty Ltd
- Lasseters
Online
- The
Federal Group
- Australian
Casino Association
- Australian
Institute for Gambling Research (AIGR)
- NT
Departmentof Industries & Business
- GOCORP
Limited
- Mr
Timothy J. Ryan
- International
All Sports Ltd
- MB2
- Centre
Racing
- TATTERSALLS
- eSuccess
- eBet
Limited
- Gamblers
Help Line Inc
- Senator
Grant Chapman
- Two
Way TV Autralia Pty Ltd
- TABCORP
- Sportingbet.com
Australia Pty Ltd
- Confidential
- GGS
Appendix 2 - Witnesses Who Appeared Before the Committeee
Canberra, Friday 25 August 2000
Canbet
Internet Industry Association
Tim Ryan – Licenced Bookmaker
ACT TAB
NSW (TAB)
- Mr Warren Wilson
- Mr Peter Fletcher
Australian Institute for Gambling Research
Inter-Church Gambling Taskforce
Australian Casino Association
- Mr Peter Bridge
- Mr John Farrell
The Federal Group
- Mr John Farrell
- Mr Andrew Eakins
Tattersalls
Ebet Limited
Gocorp
- Mr Paul Appleby
- Mr Gary Garton
Lasseters
- Mr Peter Bridge
- Ms Joanne Pafumi
PBL, ECORP
- Mr Anthony Benscher
- Mr Wayne Jones
ACT Government
Northern Territory Government
Tasmanian Government
NOIE
- Dr Rod Badger
- Mr Tom Dale
Appendix 3 - Documents Tabled at Public Heariangs
Canberra, 25 August 2000
Instructions to Applicant, a document containing
information on how to apply for an Interactive Gambling Licence in the ACT.
Appendix A, Parts 1 & 2 to
Submission No. 2 – Draft – Tasmanian Gaming Commission, Interactive &
Wagering Player Protection Standards, August 2000.
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