Gambling - Australian Productivity Commission Final Report on Gambling (June 2010) - What does this mean for the gaming machine sector?
By Jamie Nettleton, Partner
28 June 2010
Introduction
On Wednesday (23 June 2010), the Productivity Commission (Commission) released its Final Report on Gambling. The Report represents a significant milestone in Australian gambling regulation and follows on the Commission's Draft Report published in October 2009.
The Commission was requested by the Commonwealth Government to report on various matters relating to the gambling industry, including:
- the social impact of the gambling industries;
- the implications of new technologies (such as the Internet), including the effect on traditional government controls on the gambling industries; and
- the impact that the introduction of harm minimisation measures at gambling venues has had on the prevalence of problem gambling and on those at risk.
This review represents the second inquiry conducted by the Commission, the first being in 1999. The 2010 report makes a number of recommendations concerning Australia's gambling industries, including several specific to electronic gaming machines (or EGMs). This FocusPaper covers only the more significant of the matters relating to EGMs raised in the Report.
Public Concern
Widespread public concern exists about the relationship between problem gambling and EGMs. The impetus for the Commission's Inquiry was driven largely by concerns about problem gambling, particularly with respect to EGMs.
Unsurprisingly, a large proportion of the Report deals with EGMs and changes that can be made to their design so as to help prevent problem gambling. The Commission justifies this focus because EGMs:
- account for three quarters of the instances of severe problem gambling;
- are not properly understood, even by recreational gamblers;
- have specific characteristics that can, and do, cause difficulties for some gamblers; and
- are widely accessible throughout all Australian States and Territories (with the exception of Western Australia).
In addition, the Commission considered that there was no reliable indication of a significant decline in the rate of problem gambling among regular EGM players (despite the probability that there had been a decline in problem gambling prevalence as a whole).
The Commission's Findings
The Commission found that gamblers playing EGMs face much greater risks than people who use other gambling services. This was because features of EGMs make it difficult for genuinely informed choices to be made by gamblers.
The Commission found that the amount of money that can be bet on a single spin is too high. Since recreational gamblers typically bet at quite low levels, the Commission considered that they would not be adversely affected by a decrease in the bet limits. The Commission also considered that the limits on the maximum amount of money that could be inserted into an EGM are too high (given the low amounts bet by most gamblers per spin).
From the perspective of EGM manufacturers, the Commission considered that manufacturers receive insufficient guidance from regulators about whether particular features are likely to obtain regulatory approval. Further, the Commission considers that the current regulatory environment has limited effectiveness in minimising harm. This occurs due to confusing, overlapping and inconsistent regulations. Burdens have been imposed unnecessarily on venues and suppliers.
Finally, the Commission considers that shutdowns for gaming machines in most jurisdictions are too short and occur at times that make them ineffective as a harm minimisation measure.
The Commission's Recommendations
The Commission has been very prescriptive in setting out a means by which its recommendations could be implemented. While the Commission aims for its recommendations to be implemented by 2016, it recognises the need for a phased implementation.
The Commission sets out the following timeline in the Report:
- 2010
- Cash/credit input limits to be implemented in Queensland with this feature to be built into all new machines for activation by 2016.
- The development of standards and design features should commence. In particular, standards needed for:
- dynamic notice of actual cost of play;
- internal bank for wins over $300;
- dynamic warnings of potentially harmful play;
- capability to operate at a $1 bet limit; and
- partial pre-commitment,
- Each jurisdiction should decide which communications protocol they will use for:
- pre-commitment; and
- remotely changing parameters on EGMs.
- The design of a prototype of a full pre-commitment system for future trial should commence. The Commission recommends that the system:
- provides a means by which players could voluntarily set personally-defined pre-commitment limits and, at a minimum, a spending limit, without subsequently being able to revoke these in a set period;
- allow players to see their transaction history;
- encourage gamblers to play within safe spending and time limits, by specifying default limits;
- include the option for gamblers to set no limit on their spending as one of the system options, but with periodic checking that this remains their preference;
- allow occasional gamblers to stake small amounts outside the system;
- include measures to avoid identity fraud;
- ensure players' privacy;
- be simple for gamblers to understand and use;
- present few obstacles to future innovation in the presentation and design of the system; and
- apply to all gaming machines in all venues in a jurisdiction, with an exemption until 2018 for venues with less than 10 machines that also face significant implementation costs relative to the venue.
should be fast tracked.
- 2011
- New EGMs should have the capability:
- to display dynamic notice of cost of play based on the manner in which the EGM is being used (which must be activated immediately); and
- hold winnings over $300 in an "internal bank" so that they cannot be used by the customer to place further bets (which need not be activated immediately).
- Simple warnings on EGMs should be implemented using compatible monitoring systems.
- 2012
- the capability for dynamic warnings of potentially harmful play (which need not to be activated);
- the capability to operate at a $1 bet limit (which need not to be activated); and
- consistency with agreed central monitoring protocols.
New EGMs should have:
- 2013
- Partial pre-commitment in jurisdictions with compatible monitoring systems should be implemented with limited exemptions. The Commission recommends that the system:
- allow players to set spending limits in all venues within a jurisdiction;
- allow players to see their transaction history;
- be voluntary;
- offer strict protection of players' privacy;
- not require limits to be set;
- be mandatory for venues that wish to offer loyalty programs;
- provide machine-based warnings when limits are reached (and temporarily prevent money being bet or loyalty bonuses being earned);
- not apply to venues with less than 10 machines that also face significant implementation costs relative to revenue;
- have the capability to be evaluated in real time and for base line data to be collected to assess its impacts; and
- be designed to be compatible with the future introduction of full pre-commitment.
- A trial of a full pre-commitment system should be conducted.
- 2014
- The "internal bank" feature should be activated.
- EGMs which have the capability to display dynamic warnings of potentially harmful play should activate this feature.
- 2016
- Upgraded monitoring systems should be in place in all jurisdictions.
- Full pre-commitment should be operational in all jurisdictions, subject to trial outcomes and with limited exemptions.
- All EGMs should be capable of facilitating pre-commitment and remote adjustment, excepting small venues that are the subject of an exemption.
- With the exception of exempted small venues, all EGMs should:
- provide dynamic notice of actual cost of play;
- provide dynamic warnings of potentially harmful play;
- have an internal bank for wins over $300; and
- operate at a $1 bet limit.
- All jurisdictions should impose cash/credit input limits.
- 2018
All exemptions for small venues should end.
- 2020
The effectiveness of all harm minimisation measures should be checked to see if they should be modified or removed.
In addition to the recommendations set out in this timetable, the Commission also recommends:
- remedies that would encourage venues to better enforce harm minimisation measures. These would include greater powers for the gambling regulators, an ability for members of the public to make complaints to gambling regulators and more severe penalties for non-compliance; and
- increasing the mandatory shut down periods for venues from 2 am to be for a minimum period of 6 hours (where not in place already).
Differences from the Draft Report
- The far more detailed nature of the recommendations and their suggested implementation.
- The Commission is no longer recommending that a statutory cause of action be available to problem gamblers. However, the Commission suggests that, if the alternative remedies it proposes to strengthen harm minimisation measures do not work, then a statutory cause of action should be considered.
Initial Reactions
Government
The Federal Government responded immediately to the release of the Report with a media statement indicating that the Government intends to work with the State and Territory Governments to implement a form of pre-commitment technology for electronic gaming machines and to recommend to the Council of Australian Governments (COAG) that a Select Council on Gambling Reform be created to consider further harm minimisation issues.
This statement was silent in respect of the other recommendations of the Report in relation to EGMs.
Industry
The Gaming Technologies Association (the association representing the largest electronic gaming machine manufacturers) has supported the Government's proposal to form a Select Council on Gambling Reform. The Association otherwise expressed disappointment in the Report's recommendations which, it claimed, "would do little to alleviate the problems of a relatively few players."
Community Groups
Reverend Tim Costello, the head of the World Vision charity in Australia and an influential advocate in support of stricter gambling regulation, has called for the Federal Government to instruct State and Territory Governments to make necessary amendments to their respective gambling laws to implement the recommendations of the Commission. He has stated that, if the States and Territories fail to do so, the Federal Government should draft laws to override State and Territory law.
Senator Nick Xenophon, an independent senator, has attacked the Government for failing to take immediate action. Senator Xenophon has already introduced a private member's bill into the Senate (the Poker Machines (Reduced Losses - Interim Measures) Bill 2009) in response to the Commission's Draft Report that would require, among other things, a $1 bet limit. We anticipate that Senator Xenophon will press for this bill to pass.
Next Steps
We anticipate that there will continue to be strident criticism of the Government's approach to refer the recommendations made by the Productivity Commission to COAG. Relevant comments are likely to be made in the course of the upcoming Federal election, with these comments focusing on the policy approach adopted towards gambling by the major parties.
Finally, we anticipate that Senator Xenophon will continue to press for Federal legislation in this area.
The assistance of Michael Camilleri, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated