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Emily D. Swoboda

Ontario Update: Second Proposed Ad Ban Could Be Looser than First

25 October 2006

Ontario MP Gerry Phillips wants to outlaw advertising for Internet gambling services, and he's picked up the campaign where a fellow MP left off in June.

Phillips, Ontario's minister of government services, on Thursday introduced a bill to ban gambling Web sites from advertising in the province.

The omnibus bill contains amendments as well as new enactments for a number of different areas, all of which fall under the general prescript of consumer legislation. Phillips aims to amend the Consumer Protection Act of 2002 to criminalize in Ontario the advertisement of Internet gambling businesses.

Offshore sites that take real-money bets from Canadians are already illegal under the Criminal Code because the provinces have exclusive authority over all forms of gambling.

"The conduct and management and the operation of online gambling in Canada is exclusively reserved for the provincial governments," said gaming lawyer Michael Lipton of the Toronto-based firm Elkind & Lipton LLP. "Only they can do it, subject to a caveat. And currently the British Columbia Lottery Corporation and the Atlantic Lottery Corporation are involved in online gambling. It's done very modestly, but it's being done here."

Backers of the bill point to growing concerns over Internet gambling addiction among teens as the main driver behind the legislation. Quoting a recent survey by the Responsible Gambling Council in Toronto, supporters said addiction levels among people aged 18 to 24 rose 400 percent between 2001 and 2005.

But according to the opponents of the proposed legislation, the main problem is the impact on Canada's horseracing industry and lotteries, the only legal forms electronic gaming in the country.

"In the province of Ontario, we've got a very large horseracing industry, the breeders, the people who run the farms and the racetracks, and it's very reputable business," Phillips said.

David Willmot, chair and CEO of Woodbine Entertainment Group (WEG), Canada's leading horse racing corporation, has been outspoken about his views of Internet gambling in the country.

Wilmot said Internet gambling companies take millions of dollars out of Canada without being regulated or taxed, and he has asked the government to either "throw the field wide open for the domestic gambling industry to participate or enact legislation that will run the foreign-based World Wide Web gambling operations right off the track."

"We'd be happy with either scenario," Wilmot told the Globe and Mail. "The scenario I'm not happy with is status quo. We have laws that make online gambling illegal that are not being enforced because the government can't touch those operators.

Willmot denied speculation that WEG was responsible for getting the bill introduced in Parliament.

"I'm not here just to defend our turf, but there's been a lot said in the media that Woodbine is behind the legislation," Willmot continued. "That's a load of rubbish. Do we support the legislation? Absolutely, because online gambling is illegal. We have laws, but they are not being enforced. So, either you change them or you allow us to compete."

Earlier this year, Jeff Leal (MPP-Peterborough) introduced similar legislation. Leal's bill stated that any advertising--whether it's dot-net or dot-com--for online gaming is prohibited, except for online businesses authorized by appropriate legislation in Canada. Leal's bill never made it further than committee, however, and was ultimately replaced by Phillips' bill.

Lipton said the Phillips bill appears to be less restrictive than its predecessor. The Phillips bill, he said, effectively seeks to accomplish two things. First, it would ban dot-com advertising, and it deals with this in the context of Internet gaming sites.

The amended section reads, "No person shall advertise and Internet site that operates an Internet gaming business contrary to the Criminal Code (Canada)."

"Clearly," Lipton said, "dot-com advertisement is being attacked, and what the government is seeking to do is criminalize it."

Unlike the Leal bill, the Phillips bill does not seek to prohibit dot-net advertising; however, it doesn't necessarily allow it either, as aspirations of dot-net advertisers might be squelched by the second section of the Phillips bill, depending on how it is interpreted. This section focuses on sponsorships with Internet gaming businesses, which could put a financial dent in businesses that sell advertising space for the sites.

The relevant section reads, "No person shall enter into a sponsorship relationship with and Internet gaming business that is operated contrary to the Criminal Code (Canada)."

"So if you go to a hockey game or a baseball game, and you see a billboard on the hockey boards or on the baseball fields that says, '' or ',' one may be able to argue that that's related to an Internet gaming business because is the same as," Lipton said.

These would include media outlets and four Canadian Football League (CFL) clubs: Toronto, Hamilton, Calgary and Edmonton, which have an agreement for on-field advertising of gambling sites. The Toronto Argonauts and the Hamilton Tiger-Cats have promotional deals with online gambling site, while sponsors the CFL.

Argonauts president Keith Pelley told Toronto Star that the provincial government is doing Ontario a disservice by outlawing Internet gambling.

"My feeling is that Internet gambling is no different from playing Pro-Line or playing slots at the racetrack," he said. "If you eliminated Internet gambling sites, a lot of TV and radio stations and sports teams are going to suffer. The Argos would be one of them."

Lipton agrees.

"I think that the bill has some very serious unintended consequences in the sense that it may not allow sponsorship relationships with dot-net businesses because these dot-net businesses are interwoven with dot-com businesses," he said.

The bill has received a first reading; it requires a second and third reading, plus the Royal Assent, to become law. The process could take up to two months, according to a ministry spokesperson.

"What may follow depends upon the extent of the opposition, which is raised in the House, as well as [those] raised in the community at large," Lipton said. "Whether [it] is the community of people who are involved in online gaming, or broadcasters or advertisers or what have you, there certainly is a very strong undercurrent in this province in regard to the draft bill taking the position that it is legislation, which is of no avail and will not serve any purpose. People are vociferously objecting to the bill, including broadcasters, advertisers and [others] in the media.

"The result could give rise to some committee hearings in the sense that the bill could be referred to the Justice Committee to consider and review and perhaps provide an opportunity to members of the public to make oral and written presentations."

Meanwhile, the interested parties are braced for what may come next.

"The CFL is aware of the situation," the CFL's Perry Lefko said. "If it gets to the point where (Internet gambling advertising) is banned, the league will react accordingly."

Click here to view the Consumer Protection Act amendments relevant to Internet gambling.

Ontario Update: Second Proposed Ad Ban Could Be Looser than First is republished from
Emily D. Swoboda
Emily D. Swoboda