Chapter 4 - Operation of the Bill
Introduction
4.1
This chapter examines the operation of proposed
legislation. During the inquiry, three key issues have emerged in relation to
how the bill would achieve its stated objectives:
- the appropriateness of banning a technology rather than an
activity;
- whether the bill would achieve its objective of limiting problem
gambling in Australia; and
- and the definition of ‘reasonable diligence’ in determining
whether companies will be prosecuted under the bill.
4.2
The chapter also whether Australian companies
should be permitted to deliver internet gambling services to people outside Australia, then concludes with a
consideration of several other administrative issues raised by submissions.
Technological inconsistencies
4.3
A criticism made by many submissions is that the
bill focuses on the means of transmission rather than the legality of the act
itself. It is argued that this has illogical results:
An artificial distinction is drawn between accessing gambling
services over the telephone and accessing the same service using other delivery
methods, particularly when a ‘voice call’ includes a call that involves a
recorded or synthetic voice. It is illogical to suggest that making a voice
call to make a bet is legal, while at the same time prohibiting a person from
sending a fax to make the same bet.
If a gambling service can be provided using a telephone, it
should be able to be provided using any Delivery Method. [1]
4.4
It is also argued that this approach runs
contrary to the Government’s wider policy of encouraging e-commerce:
[T]he Government’s own Electronic Transactions Act 1999
was enacted to give standing and effect to transactions that occur online. The
simplified object of the Act is defined as ‘for the purposes of a law of the Commonwealth,
a transaction is not invalid because it took place by means of one or more
electronic communications’. In other words the mode of transaction should not
determine its legal status and an online transaction has the same legal
standing as an offline transaction.[2]
4.5
Jupiters explain that this involves the two
principles of functional equivalence and technology neutrality:
‘functional equivalence means that transactions conducted using
paper documents and transactions conducted using electronic communications
should be treated equally by the law and not given an advantage or disadvantage
against each other’; and
‘technology neutrality means that the law should not
discriminate between different forms of technology - for example, by specifying
technical requirements for the use of electronic communications that are based
upon an understanding of the operation of a particular form of electronic
communication technology’.[3]
Conclusions and recommendations
4.6
The Committee has two findings in relation to
this matter. First, the Committee endorses the concept of technological
neutrality, and the Government’s overall policy of encouraging the adoption of
e-commerce by Australian business and society. However, this principle would
be complied with if the findings and recommendations of Chapter 3 – covering
the exclusion of wagering and lotteries, and the narrowing of the definition to
remove the unintended consequences – were adopted. The effect of the law would
be to allow the use of the internet as a tool for conducting business
transactions.
4.7
This leaves the issue of gaming on the internet,
which would still come within the scope of the bill. For all the reasons
detailed in Chapter 2, the Committee considers that it is appropriate to take
measures to limit the use of the internet for gaming activities, and that the
principle of technological neutrality does imply a blanket acceptance of every
new internet product. There are circumstances in which the Government can and
should take action to limit the emergence of new products that are judged to
cause harm. Similarly, the fact that gaming is acceptable in one context, such
as physical casinos, does not preclude limits to that same activity in other
contexts. Racing motor vehicles provides an analogy: what is legal on the race
track is not legal on public roads.
4.8
The Committee therefore concludes that the
provisions of the bill do not contradict existing Government policies that seek
the acceptance of e-commerce through the principles of technology neutrality.
Effectiveness of the proposed regime
4.9
A criticism made of the bill is that,
notwithstanding the merits of banning internet gambling, the measures provided
for will not in fact achieve the stated objective of the bill. This view is
summarised by Mr Clark of the Northern Territory government:
the bill aims to achieve two things: firstly, it attempts to
draw a symbolic line in the sand, as it were, to start changing the Australian
gambling culture; and, secondly, it would seek to combat problem gambling. The
Northern Territory fully supports both of these objectives. We want to change
a gambling culture that encourages excessive and detrimental gambling. We are
also committed to fighting problem gambling. However, this bill fails to
achieve both of those objectives. Indeed, in respect of fighting problem
gambling – to the extent that this bill would preclude operators using the
Internet technological platform – this bill could actually be described as
worse than useless.[4]
4.10
There are three main elements to this argument.
Migration to overseas sites
4.11
First, it is argued that the bills will in fact
have little effect since Australian gamblers will still be free to access any
of the large number of overseas sites. According to Mr Clark:
There is nothing potential about the access; the access is
achieved now.[5]
... having access to the Internet means you have access to
internet gambling. That is a fact of life. In terms of the notion of access,
access is here – access has been overtaken by the fact of the internet. We now
turn to the other question of exacerbating problem gaming, the so-called
virtual poker machine in every lounge room. It is significant to note that the
bill will not prevent Australians accessing offshore sites – 99.9 per cent of
the sites are offshore sites. So the bill will do nothing to prevent
Australians accessing almost all of the internet gaming sites that are
available now.[6]
4.12
The Federal Group make a similar point:
The industry has already taken off; the horse has bolted. Many
comments have already been made today about the size of the industry. In fact,
in Senator Alston’s own second reading speech the industry was noted as having
increased by some 100 per cent in the last 12 months, to some 1,400 sites
worldwide.[7]
4.13
In this context, it is also relevant to note the
evidence by Lasseters Online, which states that 70 percent of online players
register with four or more gaming operators.[8]
The implication is therefore that all the Australians currently accessing
Australian gaming sites are probably already playing on a number of overseas
sites.
Filtering systems will not be effective
4.14
The second and related aspect to this argument
is that the filtering systems envisaged by the bill will have little real
effect. As Fujitsu note in their submission:
It is readily evident that a simple ban in internet gambling
will be circumvented by existing technology; specifically the anonymous proxy
servers commonly used by hackers.[9]
4.15
The Northern Territory government add that the
filtering provisions are no advance on current practice. Such software is
already available commercially for those who wish to limit access on their
machines, and since 1999 the Northern Territory has required by law that an
internet gaming operator provides access to the same filtering software.[10] MegaSports picked up this
theme:
The optional content filtering provisions in the bill will
strongly appeal to those in the community who oppose gambling. It is right
that they have the freedom of choice to install such filtering technology to
prevent themselves or their children from accessing online gambling products
and services. However, those individuals who wish to gamble online (including
the number who may have a tendency to gamble beyond their means) will be
extremely unlikely to choose to install such filtering technology.[11]
4.16
Electronic Frontiers Australia also point to the
technical difficulties associated with the use of the filtering software:
such techniques are highly inaccurate, their
reliability being estimated at around 70 per cent in the case of France. Quite
simply, the addressing methods used to direct internet data packets are not
structured on a geographical basis, and no improvements in technology are going
to alter this fact. Furthermore, just as attempts at censorship are easily
circumvented, there are anonymising and relay techniques that can readily
defeat attempts to determine location.
It is therefore totally inappropriate to imply
that technological solutions are available to support this legislation.[12]
Forcing Australian gamblers offshore with no
protection
4.17
The third issue, as alluded to by Mr Clark
quoted above, is that the bill may actually be counter-productive. By
prohibiting access to well regulated Australian sites that incorporate best
practice harm minimisation, Australian gamblers will end up on overseas sites
with no protection at all. To quote Mr Clark further:
the bill will not stop Australians accessing almost every
internet gaming site in the world. So it makes no change in access. All it
does is stop Australians accessing the best regulated internet gaming sites in
the world – our own. It is likely to exacerbate problem gambling rather than
reduce it because you are blocking players from accessing the kinds of harm
minimisation features of which I have just spoken.[13]
4.18
The Federal Group makes a similar point,
reflected by many submissions:[14]
As Australian gambling operators will have
access to a world market, excluding Australia, they will be providing the other
citizens of the world leading player protection and harm minimisation measures
whilst Australian residents, who will have access only to non-Australian
operators, will not have anywhere near the same standard of player protection
and harm minimisation measures. As a result of this there is a real likelihood
that the scope for problem gambling in this country will be expanded, not
limited ... .[15]
4.19
At the same time Australia loses the opportunity
to create a properly regulated local industry with appropriate harm
minimisation measures, as well as losing a revenue stream that can be used to
fund harm minimisation measures.[16]
Conclusions and recommendations
4.20
The Committee recognises that there are real
limitations on the capacity of the Australian Commonwealth Government to
prevent Australians accessing gaming sites on the internet. However, it is
important to remember that the bill does not pretend to stop Australians from
such gaming. As NOIE points out:
the Government is not asserting that these measures will
completely eliminate access to overseas gambling sites. What the Government is
endeavouring to do is to limit and to discourage.[17]
4.21
Addressing the effectiveness of the complaints
mechanism, NOIE went on to explain:
In the case of a complaint
about an overseas gambling site that is making gambling services available to
Australians the intention is to provide for either an industry code of practice
or ABA determined standards, which would essentially have the same effect as
the online content regime, and that is to provide for the referral of
complained about gambling sites to filtering software manufacturers and to have
filtering software made available by internet service providers, and others if
necessary, to their customers but on a voluntary basis.[18]
4.22
The Committee also notes that:
A FaCS [Department of Family and Community Services] survey has
found that very few people currently gamble online and if it were banned,
almost all would respect that ban. The survey also identified strong public
support for a ban on gambling.[19]
4.23
The bill is therefore about setting a standard,
and sending a message to Australians about the dangers of problem gambling and
the internet.
4.24
Overall therefore, the Committee does not
consider that the limitations of the bill mean that it is not worth proceeding
with. As Mrs Phillips, representing the Festival of Light in South Australian
commented:
I believe anything that is attempting to address the problem is
a step forward. I would not reject the legislation simply because it did not
go far enough. ...
I still think the bill is better than nothing. By having no
legislation at all, the impression given to the public is that there is nothing
wrong with this kind of gambling.[20]
4.25
For these reasons, the Committee considers that
the bill will provide a disincentive to Australians seeking to gamble on the
internet, and as such, should be proceeded with. However, the Committee
suggests the Government consider the adoption of two additional measures to
strengthen the effectiveness of the proposed legislation. First, the creation
of an advertising prohibition in Australia of overseas based internet gambling
services; and second, the introduction of legislation similar to the US Wire
Act,[21]
providing for the prosecution of foreign based operators of internet gambling
services being accessed from Australia, should those operators come to
Australia.
Meaning of ‘reasonable diligence’
4.26
Industry submissions have raised concerns in
relation to the obligations imposed by the offence provisions of section 15 of
the bill. Under section 15, it is an offence to provide an Australian-based
interactive service to customers in Australia, however section 15(3)(b)
provides a defence if it can be established that the person ‘could not, with
reasonable diligence, have ascertained that the service had an Australian customer
link’.
4.27
Submissions consider this requirement to be too
onerous and uncertain, particularly in view of the heavy penalties, and argue
for greater clarity by means of guidelines or regulation, to establish what
operator safeguards would amount to ‘reasonable diligence’.[22] According to Jupiters:
It is unacceptable that Australian companies should be subjected
to the uncertainty surrounding the drafting of the reasonable diligence
defence, particularly when the Government has made it clear in the Explanatory
Memorandum that its intention is to allow consideration to be given to the
technical and commercial viability associated with implementing compliance
systems.[23]
4.28
The central problem is that companies are
uncertain of what they will be required to do to meet the ‘reasonable
diligence’ test under the proposed regime. They fear that they will take
various precautions which, while generally effective, may still allow some
Australian customers to slip through, exposing them to prosecution and the high
penalties provided for under the bill. The accuracy and reliability of
geo-location software were described above and in this context, the Committee
notes the example given by Mr Farmer of Canbet:
... we are aware of – and it is very much in our mind – the case
of one Australian company called MegaSports which is owned by a company in
Nevada. They gave an undertaking to the Nevada Gaming Board that they would
not take bets from within the United States, and they put in blocking
protocols. An agent of the Nevada Gaming Board opened an account in Canada,
purported to be a Canadian, quoted a Canadian credit card number and dialled
from Nevada to Canada an internet service provider so it came up at MegaSports
as a Canadian having a bet. The person had identified themselves as a Canadian
with a Canadian address and a Canadian credit card, but it turned out that it
was an American.[24]
4.29
It is this sort of risk that has led both Canbet
and International All Sports to indicate they will leave Australia should the
bill be passed.[25]
It is therefore important to companies that they can be clear about what
measures they are expected to take, to protect them against prosecution.
4.30
One solution is for the bill to provide for the
creation of an industry code, along similar lines to Part 4 of the bill, that
would set out what steps companies must take to comply with ‘reasonable
diligence’. [26] Under this
system, an Australian internet gaming provider that complies with the code will
not be prosecuted even where an Australian gambler succeeds in placing a bet.
This contrast with the application of the ‘reasonable diligence’ test on a case
by case basis.
4.31
The Committee sees considerable merit in this
approach. Alternatively, the due diligence requirements should be set out in
the bill itself or in regulations.
Recommendation 4.1
The Committee recommends
that the Government take measures to clarify the requirements of ‘due
diligence’ for the purposes of section 15, either by amending the Interactive
Gambling Bill 2001 or detailing these requirements in associated regulations.
Australian services to offshore gamblers
4.32
A further issue that arises in the consideration
of this bill, is whether, if Australian companies are to be prevented from
providing gambling services to Australians, they should be permitted to market
these services to overseas gamblers.
4.33
In the Second Reading Speech, and Explanatory
Memorandum, no justification is given for the approach taken in the bill.
However, many submissions were critical. As Professor McMillen of the Australian
Institute for Gambling Research states:
The bill is based on the principle that interactive gambling is
unacceptable for Australians because of the potential for harm; yet it will
permit Australian operators to provide interactive gambling to international
customers. There is an inherent ethical contradiction in this bill. It is
morally indefensible to imply that Australians should be protected from this
form of gambling yet Australian operators can profit from the harm created in
other countries.[27]
4.34
The World Lottery Association notes that the
bill also runs contrary to the usual approach in relation to lotteries:
Indeed, current members in good standing, including the lottery
companies in Austria, Sweden, Finland, and other European government lotteries,
have restricted their sales only to residents of their respective countries
unless they have an agreement with another country.[28]
4.35
In considering this concern, the Committee notes
that the central purpose of the bill is to address problem gambling in Australia.
As stated by the Explanatory Memorandum:
Australia already has one of the largest per capita gambling
industries in the world. The Productivity Commission fund that, on average,
adult Australians currently spend at least twice as much on legalised gambling
as people in Northern America and Europe – making Australians among the
heaviest gamblers in the world.[29]
4.36
It is therefore neither appropriate nor
necessary for the Australian Government to introduce measures relating to
problem gambling overseas. This point was made by Mr Dale of NOIE:
It is the obverse of the main policy intention, which is clearly
not to expand or control services provided to people outside Australia; it is
to restrict services provided to people in Australia and, in doing that, as it
not necessary to prevent access by residents of other countries the government
has not done that. It is not necessary to achieve the main intention, which
was the potential gambling problems of Australians rather than people in other
countries. As the minister has said publicly, the general principle should be
that initiatives to address or restrict gambling in particular countries are up
to the governments of those countries. In this case we have taken action for
Australian residents only and do not purport to do anything else.[30]
4.37
The Committee therefore considers the provisions
of the bill to be appropriate.
Banning the users
4.38
The bill creates a number of offence provisions
for individuals who provide interactive gambling services. The Committee has
received several recommendations that the bill should extend these penalty
provisions to make it an offence to bet online with an Australian licensed
provider, as well as to provide false or misleading information in order to
place a bet.[31]
4.39
The Committee has not received sufficient
evidence on this matter to form any final conclusions, however, both are
suggestions that merit further consideration by the Government.
Enforcement mechanisms
4.40
Two church groups commented on the need to
strengthen the enforcement mechanisms of the bill by legislating a more
proactive monitoring role for the Australian Broadcasting Authority (ABA),
rather than simply responding to complaints as envisaged by the bill as
drafted. Also, it was suggested that the complaints mechanism must be as user
friendly as possible: incorporating a well-advertised free ABA phone hotline
and complaint forms available via the ABA website.[32]
4.41
The Committee notes that the bill as drafted
provides for the ABA to investigate breaches based on either complaints by
members of the public or on its own initiative.[33] However, the Committee agrees
with the need to ensure the accessibility of the complaints mechanism.
Education campaign
4.42
The final issue relates to community education
programs that address the dangers of problem gambling, both on the internet and
elsewhere. Such programs were recommended in the NOIE report:
consumer advice campaign to complement a ban on interactive
gambling. Such a campaign could inform the community of the potential risks and
dangers of gambling online and be targeted at potential new groups of gamblers
emerging with the increased accessibility of interactive gambling services.[34]
4.43
The Committee notes the concern raised by the
Internet Industry Association that such an education campaign must not become
an internet scare campaign that will harm the overall acceptance and adoption
of e-commerce:
there is a risk that unless this ‘advice’ campaign is carefully
managed, it will do no more than reinforce a message that the Net is inherently
risky. This would be inconsistent with another recent NOIE report, ‘the
Phantom Menace’, which tried to calm consumer fears about using credit cards
online.[35]
4.44
This is a legitimate concern, which the
Committee considers the Government should remain mindful of when preparing the
campaign.
_____________________
Senator Alan Eggleston
Chair
Navigation: Previous Page | Contents | Next Page