Productivity Commission Draft Report on Gambling (October 2009) - What does it mean for the online gaming sector?
By Jamie Nettleton, Partner and Andrew Dawson, Special Counsel
21 October 2009
Background
Earlier today (21 October 2009), the Productivity Commission released its Draft Report on Gambling[1]. The Report represents a significant milestone in Australian gambling regulation and precedes a Final Report to be released in February 2010.
The Productivity Commission was requested by the Commonwealth Government to report on various matters relating to the gambling industry including:
- the implications of new technologies (such as the Internet), including the effect on traditional government controls on the gambling industries; and
- the effectiveness and success of harm minimisation measures.
This review represents the second review of the gambling sector conducted by the Productivity Commission, the first being in 1999.
The Productivity Commission has invited comments on the Draft Report. Written submissions should be made by Friday 18 December 2009. The Commission has scheduled a number of public hearings from late November until mid-December at which submissions relating to its Draft Report can be made.
Current Regulatory Regime
The Interactive Gambling Act 2001 (Cth) (IGA) prohibits the provision of online gaming (but not online wagering on races or sports betting) to Australian residents.
The Commission's Draft Findings
The Productivity Commission examined whether the IGA had achieved its objectives which included:
- limiting the development of the online gaming industry and, thereby, minimising the scope for problem gambling amongst Australians; and
- balancing the protection of Australians with a sensible and enforceable regulatory regime.
The Productivity Commission reached the view that, although the IGA has had the desired effect in limiting the development of the online gaming industry, there is considerable (and growing access) by Australians to international sites. The IGA has therefore had limited effectiveness.
This means that Australians participating in online gaming do so using offshore online gaming sites which may not have appropriate harm minimisation processes in place and which may operate with unscrupulous business practices. In other words, there is no means for an Australian wishing to engage in online gaming activity to participate through a service licensed by an Australian jurisdiction having regard to Australian harm minimisation principles.
The Productivity Commission considers that regulated access to online gaming, rather than prohibition, is preferable.
Although the Commission's draft findings apply predominantly to online gaming, they are equally relevant to gaming that can be conducted using other technologies such as mobile phones and broadcasting.
The Commission's Draft Conclusions
Online gaming offers unique benefits and also carries with it risks. However, the risks have often been overstated and, on balance, a regulated online gaming industry would deliver a net benefit to Australia.
The current prohibitions in the IGA:
- have failed to prevent considerable growth in the consumption of online gaming; and
- are likely to discourage recreational gamblers who are likely to benefit the most from online gaming; and
- are the least likely of the policy approaches that can be adopted that will discourage problem gamblers.
Accordingly, the IGA does not represent the best regulatory option for Australia. Rather, liberalisation of online gaming is preferable. This confirms the conclusions reached by the Commission in its 1999 report.
Any regulation in Australia of online gaming should be national. If possible, it should be consistent with regulation in similarly liberalised countries (such as the UK) - this will enable Australian licensed operators to compete internationally.
The Productivity Commission recognises the potential for international operators to set up business in Australia and comply with the standards of the Australian regulatory regime. Those operators would be required to comply with Australian standards before they can offer their services or advertise their services in Australia.
The Commission's Draft Recommendations
The Australian Government should repeal the IGA and take steps to provide for the managed liberalisation of online gaming.
The proposed regime would require online gaming operators to comply with:
- strict probity standards; and
- high standards of harm minimisation including:
- the prominent display of information on account activity and information on problem gambling and links to problem gambling resources;
- the ability of players to pre-commit to a certain level of gambling expenditure;
- the ability of players to self-exclude; and
- the display of automated self warnings arising from potentially harmful patterns of play.
- Australia-wide self-exclusion and pre-commitment options for equivalent online providers;
- the capacity for extending self-exclusion through the payments system or through software solutions selected by problem gamblers; and
- the scope for agreement on international standards on harm minimisation and their enforcement through self-regulatory or other arrangements.
The Australian Government should assess the feasibility and cost effectiveness of:
These draft recommendations are significant. If confirmed by the Productivity Commission in their Final Report, the Government will be faced with the challenge of whether to overturn the longstanding prohibitionist policy in the IGA.