Australia: Productivity Commission Final Report on Gambling (June 2010)

Addisons FocusPapers: What Does This Mean For The Wagering Sector?
Last Updated: 5 July 2010
Article by Ashleigh Fehrenbach and Andrew Dawson


On 23 June 2010, the Productivity Commission ("Commission") released its Final Report on Gambling1. The Report represents a significant milestone in Australian gambling regulation and follows on from the Draft Report the Commission published in October 2009.2

Key Findings and Recommendations

  • If the race fields legislation which has been introduced in most jurisdictions is unsuccessful over the next three years in terms of preventing free-riding by wagering operators or provide a competitively neutral wagering industry, then a national funding model should be established.
  • The national funding model should be based on Commonwealth legislation and include an independent price-setting body. A single product fee based on gross revenue should be paid by wagering operators,
  • There are no compelling arguments for retaining TAB retail exclusivity


The Commission was requested by the Commonwealth Government to report on various matters relating to the gambling industry including:

  • the effects of the existing regulatory structures – including licensing arrangements, entry and advertising restrictions, application of the mutuality principle and differing taxation arrangements governing the gambling industries, including the implications of differing approaches for industry development and consumers;
  • 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 inquiry conducted by the Commission, the first being in 1999. However in contrast with the 1999 report which contained no recommendations, the 2010 report makes a number of recommendations concerning Australia's gambling industries, including several specific to wagering.

Current Regulatory Regime

The current regulatory regime is implemented at the State and Territory level and requires wagering operators to, among other things, pay fees as conditions of various licences and approvals. The fees, particularly those relating to "race fields approvals", have been the focus of numerous disputes, including several court challenges, over the past five years3.

To deal with the dangers of an operator based in one jurisdiction offering bets on bets in another jurisdiction (referred to as "free riding")4, governments have implemented legislation prohibiting the use of race field information from a jurisdiction without an approval from that jurisdiction's racing administrator. All jurisdictions with the exception of the Northern Territory now implement some type of race fields regime5.

There is broad agreement between administrators and operators that some sort of contribution should be made by operators. The dispute has largely been in relation to the basis for this contribution. Some jurisdictions require a contributed based on turnover (the amount bet with the wagering operator), some on gross revenues (turnover less winnings to customers) and some utilise a hybrid system where operators can choose the model they prefer.

As competition between totalisators and corporate bookmakers has intensified, a number of corporate bookmakers have offered "tote-odds" products. Tote-odds products allow customers of bookmakers to place bets with reference to the price of a comparable totalisator bet. Totalisator operators and some racing authorities have sought to prevent corporate bookmakers from offering prices that refer to totalisator prices.

The Commission's Findings

The Commission found "free riding" must be prevented in order to:

  • ensure the long term viability of the racing industry;
  • prevent detrimental effects to the communities where racing plays a key role; and
  • prevent adverse impacts on the consumers of wagering and racing products.

However, while the Commission considered that the race fields legislation addressed the "free riding" problem, the Commission found this solution, particularly in NSW and Queensland, was anti-competitive and has led to undue costs to wagering operators in a market that is now national. Furthermore, the Commission found that, if a product fee is required from wagering operators, gross revenues was a more appropriate basis than turnover for the calculation of that product fee.

The Commission has also found that:

  • the risks of tote-odds betting can be dealt with in better ways than prohibition, for example, by further allowing the co-mingling of totalisator pools;
  • to avoid destructive tax competition, there are grounds for State and Territory government cooperation when taxes on wagering-derived income are set; and
  • offering inducements to new customers through discounted prices is not necessarily harmful. The risks for problem gamblers should be assessed. A consistent approach should be adopted nationally, whether the approach be prohibition or managed liberalisation.

The Commission's Recommendations

The Commission recommends in respect of race fields fees that:

  • The NSW and Queensland government should work with the racing authorities in their states to replace the turnover-based fees in those jurisdictions with product fees which are more competitively neutral and efficient. A failure to do so will impact upon the racing industry in those jurisdictions.
  • The Commission had recommended a "wait and see" approach to race fields legislation because it allows for governments, racing authorities and wagering operators to further model and discuss whether a national approach to price setting is feasible and/or attractive.
  • The Commonwealth Government should assess whether the various race fields legislation regimes are legally sustainable and provide competitive outcomes within three years. If not legally sustainable or providing competitive outcomes, the Commonwealth should work with the State and Territory governments to introduce a national statutory scheme with a single product fee for each code, which would replace the State and Territory schemes.
  • The single product fee, which should be determined on the basis of gross revenue, should replace all other product fees currently paid. However, the fee should not replace other funding channels, for example, race sponsorship.
  • The single product fee should be set and intermittently reviewed by an independent national body with the goal of maximising consumer interests in the long-term.

Additionally, the Commission recommends:

  • the ACCC should be asked to examine and report on any adverse implications for competition associated with the ownership of the SKY racing television channel by Tabcorp;
  • retaining the exclusivity arrangements currently conferred on totalisators, that is, the exclusive right to operate a totalisator;
  • the retail exclusivity enjoyed by totalisators should not be renewed; and
  • the impact of credit betting should be further examined in detail by one of two bodies the Commission has recommended be established: the regulator overseeing the national regulatory regime or the national gambling research body. In the interim, credit betting facilities should not be advertised and credit betting should not be extended to TABs.

Differences from the Draft Report

The differences between the Draft Report and the Final Report are minor:

  • the Commission only recommends the development of a national funding model if the Commonwealth Government assesses in three years time that the various race fields legislation regimes are not legally sustainable and/or do not provide competitive outcomes; and
  • while the Commission refers to the creation of an independent national body to set and review product fees, it does not recommend that the body engage in a public consultation process when setting and/or reviewing product fees.

1. See

2. See and Addisons FocusPaper entitled "Productivity Commission Draft Report on Gambling (October 2009) - What does this mean for the wagering sector?"

3. For further information on changes in the wagering sector, see Addisons FocusPapers entitled: "Race fields fees based on 1.5% of turnover: All bets are off? – NSW Race Fields Legislation – Constitutional Challenge by Betfair and Sportsbet – Round 1" at, "What does the IceTV Decision Mean for the Racing Sector?" at and "Race Fields Legislation - Will the New South Wales Legislation withstand a Constitutional Challenge?" at

4. Traditionally, a wagering operator paid fees to the racing administrator in the jurisdiction in which it was licensed. This meant that a racing administrator in one jurisdiction received fees for bets that used information relating to a race in another jurisdiction. This information, commonly referred to as a "race field", includes the names of horses or greyhounds, their positions, weights and other race-related data. This system, commonly referred to as the "Gentlemen's Agreement", began to break down as the wagering industry was deregulated, totalisators were privatised, new entrants such as corporate bookmakers and betting exchanges appeared and the amounts bet with interstate operators grew. Racing administrators became increasingly concerned that a betting operator in one jurisdiction could "free ride" on the races in another jurisdiction.

5. See Racing Administration Act 1998 (NSW), section 33A; Gambling Regulation Act 2003 (Vic), section 2.5.1B; Racing Act 2002 (Qld), section 113C; Racing Regulation Act 2004 (Tas), section 54A; Authorised Betting Operations Act 2000 (SA), section 62E; Betting Control Act 1954 (WA), section 27D; Racing Act 1999 (ACT), section 61F

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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