For Australia 2016 was a year of increased political and regulatory pressure from an igaming perspective. Jamie Nettleton and Nicola Austin of Addisons Lawyers discuss what's in store for the year ahead.
The re-election and greater political power of anti-gambling campaigners such as senators Nick Xenophon and Andrew Wilkie have resulted in gambling reform being at the top of the Australian political agenda, which will continue to lead to greater pressure for the tightening of legal restrictions on gambling in Australia.
The impact of the Interactive Gambling Amendment Bill
On 10 November, 2016, the Interactive Gambling Amendment Bill 2016 was introduced into the Australian Federal Parliament by MP Alan Tudge, the federal minister for Human Services.
The Bill seeks to amend the Interactive Gambling Act (IGA) 2001 and is the long-awaited legislative response to the Review of Illegal Offshore Wagering conducted by Barry O’Farrell in late 2015, the recommendations of which were largely supported by the Federal Government in its response.
The Bill proposes to:
- enhance the existing prohibitions on the supply of online gambling services (including online wagering and gaming such as online casinos and poker) to persons present in Australia without a licence under the laws of an Australian state or territory;
- clarify that the contentious ‘click-to-call’ in-play betting services which had been introduced in 2015 by the onshore licensed corporate bookmakers are prohibited under the IGA, with confirmation that the use of a recorded or synthetic voice in a communication will cause that communication not to amount to a ‘voice call’; and
provide greater enforcement powers including:
- a civil penalty regime, complemented by civil enforcement tools, which will allow the Australian Communications and Media Authority (ACMA) to be responsible for the entire civil enforcement process under the IGA. These provisions may be enforced by the ACMA against third party suppliers including affiliates or agents;
- notification powers, which will allow the ACMA to provide information relating to illegal services to Australia’s border protection agency and those international gambling regulators which license operators providing those services.
Offshore online gambling operators are on notice of the proposed reforms and operators have indicated that they may exit the Australian market if the Bill is passed in its present form.
There has also been concern expressed by onshore bookmakers and Xenophon that the legislative regime proposed by the Bill would, in effect, still allow for in-play betting on sports taking place inside licensed venues on electronic devices.
According to various parties, this would present the same consumer protection concerns which underpin the in-play/click-to-call prohibition.
The Amendment Bill was not debated in either house of the Australian Parliament as scheduled before it adjourned for the 2016 summer holiday period.
With Parliament now adjourned for 2016, it is likely that the debate will take place in Federal Parliament after it resumes in the week commencing 7 February, 2017.
On the basis that the Bill is passed during the February Parliamentary sitting period, we expect the Amendment Bill to enter into force towards the end of the first quarter of 2017.
The immediate effect of the introduction of the Amendment Bill is likely to result in the services of certain leading operators ceasing to be supplied to the Australian market. However, we anticipate:
- those services will leave a vacuum, leading to less regulated alternative services being accessed;
- operators will look to enter the Australian market; and
- increased barriers to entry will be introduced for those operators, as well as those operators already licensed remaining in the Australian online gambling market.
SA’s unpopular place of consumption tax looms large
In July 2016, the treasurer of South Australia (SA) announced the introduction of a “place of consumption” tax (PoC tax), which will come into force on 1 July, 2017.
The PoC tax will require payment of a tax of 15% of the “net state wagering revenue” of betting operators derived from customers located in SA once “net state wagering revenue” in any year exceeds $150,000.
This is the first time that a tax of this nature has been considered in Australia and differs from the traditional taxation structures, which generally apply to the point of supply of a betting product, rather than the point of consumption or the place where the relevant betting takes place (e.g. product fees).
The PoC tax is intended to capture interstate and offshore operators.
The operators likely to be most affected are those licensed in other Australian states or territories (and which are perceived to benefit from lower tax rates) by applying the tax at the place of consumption, rather than supply.
While retail betting monopolist Tatts is supportive of the PoC tax as a measure to level the playing field in terms of taxes paid by Tatts versus online bookmakers, online bookmakers such as Sportsbet have been very vocal in their opposition.
It has been suggested that the PoC Tax is a “money grabbing” exercise by the SA government, which did not engage in industry consultation, and that the PoC tax will ultimately prompt Australian-licensed bookmakers to discontinue offering services to SA customers.
This will cause offshore bookmakers to be potentially more price-competitive than Australian licensed bookmakers.
In August, the leading online bookmakers launched a media campaign called “Stop the punters tax”, warning that the PoC tax will impact every South Australian who places a bet, via worse odds, fewer promotions and ultimately less money in punters’ pockets.
As the year has progressed, there have been suggestions that other Australian states and territories will follow suit. However, it is expected that this will be delayed pending the introduction of the PoC tax to determine if it is effective and whether legal proceedings are brought contesting the validity of the PoC tax.
The implications of an Australia-wide PoC tax would be considerable and may result in many smaller bookmakers ceasing to be able to afford the high price of operating in the Australian market. Some of these barriers are outlined below.
Farewell Norfolk Island Gaming Authority
Until this year, Norfolk Island was a self-governing external territory of Australia with an independent licensing regime (administered by the Norfolk Island Gaming Authority (NIGA)). It was favoured by many gambling operators seeking to enter the Australian market.
On 30 July, 2016, the right to self-govern was removed from Norfolk Island, causing much uncertainty for NIGA licensees concerning the continued validity of their licences.
These concerns were realised when, on 5 November, 2016, the federal minister for Local Government and Territories, Fiona Nash, announced the dissolution of the NIGA and with it, the expiry of all licences issued by the NIGA on 31 March, 2017.
This announcement followed the long-awaited independent report into the performance of the NIGA conducted by Centium Group, which it commissioned in February 2016.
Since the announcement, many NI licensees have applied to the Northern Territory Racing Commission (NTRC) for a licence. To date, Ladbrokes and TopBetta have been granted licences by the NTRC and we are aware of a further two NIGA licensees which are in the process of applying to the NTRC for sports betting licences.
While other states and territories have their own licensing regimes, these regimes are not tried and tested in the same way as the Northern Territory’s and it will be interesting to see how many NI licensees relocate to the Northern Territory.
For most existing Norfolk Island online gambling licensees, these limitations make obtaining a licence in those other jurisdictions uncertain and undesirable.
Other headwinds on the horizon
It remains to be seen how the political and regulatory developments of 2016 will affect the activities of gambling operators in Australia in the year ahead. In addition to the ramifications of the proposed Amendment Bill and SA PoC tax, we expect that the following events will affect the Australian gambling industry in the coming year:
- The proposed $11.3 billion merger of monopolist totalisator and lottery operators, Tatts Group and Tabcorp. Australia’s competition regulator, the Australian Competition and Consumer Commission, has commenced enquiries into the proposed merger to determine the overall impact on competition in the gambling market. Although this had been expected to be completed in the first half of 2017, the emergence of a Macquarie Bank-led consortium with an offer for Tatts Group has suggested that there may be many more obstacles that may arise, delaying any proposed completion of the merger between Tatts Group and Tabcorp.
- Representatives of Crown Resorts will face court in China in relation to as-yet-undisclosed “gambling crimes” associated with the promotion of gambling activities and recruitment of Chinese nationals to gamble in Crown’s Australian based casinos.
- Australian gaming machine manufacturer Aristocrat Technologies is the subject of a claim in the Federal Court in a landmark legal action relating to claims of misleading and deceptive conduct arising from features of slot machine design.
Whatever the outcome of these issues, it can be expected that 2017 will see greater clarity in online gambling regulation in Australia and further changes to the Australian gambling market as a whole, which are likely to be in place for some time.
Jamie Nettleton is a partner at Addisons, a vice-president of the International Masters of Gaming Law and a senior fellow of Melbourne University, lecturing in gambling law.
Nicola Austin is a solicitor at Addisons and assists local and international businesses in navigating the legal and regulatory restraints to conducting a gambling business in Australia.