AusTOTE v. ARB - The Dispute Is Heating Up

The Australian Racing Board is contemplating legal action against a company that has launched a new TAB based in Norfolk Island, and the rising dispute has spawned a war of words in the Australian press.

"We don't want something for nothing. We want to pay our way."

- Mike King
AusTOTE

AusTOTE this month began offering Internet gambling from the island, an Australian territory with more autonomy than the country's states and other territories, but the ARB wants to block the service. The ARB's Andrew Harding said in an article published Wednesday in the Sydney Morning Herald that the board is considering a lawsuit based on an infringement of copyright and intellectual property rights. Harding did not specify what rights are being infringed.

AusTOTE responded quickly by issuing a statement in response to Harding's comments. In it, AusTOTE Chief Executive Mike King said his company reached out to the ARB, but the ARB did not respond.

King said the board did not reply to an introductory letter, dated April 6, from King and his staff asking for the board's assistance in establishing a suitable scheme that benefits all parties. In the letter, he said, AusTOTE made it clear that the company was committed to financially supporting the Australian racing industry. But despite AusTOTE's expressed desire to operate above the board, the company received no support from the establishment.

"We don't want something for nothing," King said. "We want to pay our way. We are an Australian entity, not some parasite from overseas. AusTOTE is properly licensed by an Australian government, pays tax to an Australian government and simply wants to enter the Australian market place and compete."

Harding's comments came out in the press after King received a letter from the ARB's legal team. King said the letter is outrageous not only because it threatens legal action, including injunctions against preventing AusTOTE from operating, but seeks what King called "commercially sensitive information" and claims that the ARB should play a role in determining exactly when AusTOTE might start accepting bets.

AusTOTE has agreed to work with the industry, but King said the idea of the ARB controlling when the service can or will be launched is outlandish. He said plans are in place for AusTOTE to go live with a full launch April 28, and a portion of the proceeds will be set aside to pay back the racing industry once the ARB "gets its act together."

The last six months have seen a bevy of M&A-related activity among Australia's TABs, and with only one licensed TAB in each Australian state/territory, licenses to operate a TAB are hard to come by and highly coveted.

King feels it is hypocritical of the ARB, which is in place to benefit the racing industry in Australia, to threaten legal action against AusTOTE instead of reaching a compromise that would bring in more racing revenue.

King is hopeful the ARB can implement a national product fee framework that is suitable to both operators and the racing industry. But until such a plan is in place, King said, AusTOTE's operations will not be stopped.

The country's racing industry backs the ARB. Tabcorp corporate affairs spokesman Bruce Tobin echoed Harding's sentiments and feels that AusTOTE should be penalized for not paying back the industry from which it is profiting.

"People who should be worried are the racing industry and state government, who will get nothing out of it," Tobin said.

Parallels can be drawn, King said, between the AusTOTE situation and the ongoing struggle between bookmakers based in the Northern Territory and the ARB over revenue sharing. NT operators enjoy a low tax rate in a territory with very little live racing. They offer bets on races taking place in other states and territories, and those states and territories want a piece of that action.

Harding said that while talks continue between the commercial bookmakers in the Northern Territory, the issue is far from being resolved.

"They (corporate bookmakers) made a token offer and a list of demands that would have seen racing in a worse position than it is now," he said. "It has to be resolved. We will take all means of legal recourse available."

A compromise on that front, King said, could provide a roadmap for a similar compromise with Norfolk Island.

"The Northern Territory bookmakers have been operating for some years and AusTOTE has yet to commence," King said. "A solution for the ARB dilemma in respect of the corporate bookmaker position might present an answer to the question of an industry contribution by AusTOTE."

AusTOTE is licensed and regulated by the Norfolk Island Gaming Authority. Locating the service in Norfolk Island enabled King, a former government official there, to obtain a license to operate a TAB, making AusTOTE the first new TAB in Australia in decades.

The company is hoping to carve out a niche for itself by only offering betting options on horse racing and will offer only a 2 percent to 5 percent commission on bets. (Its chief competitor, Tabcorp, operates on a 14.25 percent commission.)

King said AusTOTE will also allow bettors to lay horses, an option previously only available at betting exchanges.

The company has a sports betting license, but King said it would wait for sometime to offer general sports betting.

ARB representatives did not immediately respond to IGN's efforts to contact them.