NSW Turnover Fee Sparks Challenge from Betfair (Update 1)

Adds comment from Sportsbet

Betfair on Friday initiated proceedings at the Federal Court of Australia challenging the validity of decisions by Harness Racing New South Wales and Racing New South Wales to impose a 1.5 percent fee on all wagering bodies in Australia wishing to take bets on New South Wales thoroughbred and harness racing.

From Sept. 1, a new law -- passed in June 2008 -- requires all Australian wagering operators wishing to participate in harness and thoroughbred racing secure approval from the New South Wales government and charges them up to 1.5 percent of the turnover from races -- not total revenue.

Betfair is challenging the law under Section 92 of the Australian Constitution, which guarantees free trade among the states. The company successfully instigated a Section 92 challenge earlier this year in Australia's High Court against Western Australia for its ban on betting exchanges.

Betfair's High Court victory paved the way for Sportsbet, an online bookmaker in the Northern Territory, to challenge in federal court an online gambling advertising ban in New South Wales.

Nick Tyshing, spokesperson for Sportsbet, told IGamingNews via e-mail on Tuesday that Sportsbet would be lodging a formal complaint against Racing New South Wales within the next few days for its turnover fee .

In early September 2008, Bill and Tom Waterhouse, owners of a private bookmaking company in New South Wales, filed a Supreme Court suit against the New South Wales race-fields law, challenging not the validity of the law, but seeking clarification.

The Waterhouse men -- grandfather and grandson, respectively -- argued that the law did not apply to their business because they only took bets over the phone, thus they could not really "publish" race-field data.

The Supreme Court on Sept. 29 agreed with the Waterhouses' argument and decreed the law should not apply to telephone betting operators.

However, Kevin Greene, the minister for Gaming and Racing in New South Wales, told The Daily Telegraph the next day that Racing New South Wales had asked that the government close the "loophole" granting the telephone betting operators exemption from the law.

Mr. Greene said the state's government would modify the law to ensure that all wagering bodies, including the Waterhouse family's, would be subject to the same fees.

On Friday, Andrew Twaits, Beftair's director of corporate and business affairs in Australia, said in a prepared statement that while Betfair is happy to pay a fee to the New South Wales racing industry, the amount is "highly discriminatory."

"The fee equates to around 60 percent of our gross revenue but less than 10 percent of TAB’s revenue," Mr. Twaits said. "Both RNSW (Racing New South Wales) and HRNSW (Harness Racing New South Wales) are fully aware that it's impossible for us to compete on those terms. They’ve left us with no option but to challenge the validity of their decisions."

Mr. Twaits suggests that the only fair basis for charging a fee is to implement a gross revenue model whereby every operator pays at the same rate -- similar to the fees imposed by Greyhound Racing New South Wales.

"As we see it, punters have a limited amount of money to spend on wagering," Mr. Twaits told IGN by telephone Monday. "It shouldn’t matter to the racing industry point of view where that spend goes or to which operators as long as all of those operators pay the same percentage of that customer spend. Turnover is an irrelevant metric and it's fundamentally discriminatory."

Mr. Twaits, who is soon to become chief executive of Betfair Australia, explained why the case is weighty with regard to the future of the wagering industry in Australia.

"If we have to pay this 1.5 percent, or if it ends up being 2 percent or even 1 percent, we just cannot operate a business on racing," he said. "It just doesn't work. So, it's a very important case from our point of view. If we lose it, Australia will be left with totes and nothing else. There won't be bookmakers -- there won't be betting exchanges because they just cannot operate under a turnover-based model."

Meanwhile, the government of Queensland on Monday announced that it would develop race-fields legislation to protect the future of its racing industry.

Andrew Fraser, the state's treasurer and racing minister, said the government will introduce a bill into Parliament before the end of the year that will amend the Racing Act to allow the Queensland racing control bodies -- Queensland Racing Ltd., Queensland Harness Racing Limited and Greyhounds Queensland Ltd. -- to charge wagering operators a turnover-based fee for using Queensland racing product.

The fee will be determined by the racing bodies, not the government, Mr. Fraser said.

The legislation will be made retroactive to Sept. 1, 2008, in line with the New South Wales legislation, he added.