Discriminatory burden?
86 The Court must first enquire whether the law or measure imposes a burden and, if so, whether that burden discriminates against interstate trade, commerce or intercourse (either on its face or in practice).
87 Sportsbet identified two sorts of burdens in this case. First, the prohibition imposed by s 2.5.19B and second, the Turnover Condition. It makes separate attacks on both the legislation and the condition, though the considerations in relation to each overlap.
88 The High Court in the joint judgment in Betfair HC said at [118] in relation to s 27D of the Betting Control Act 1954 (WA) that:
This provision applies to the conduct of Betfair in publishing or otherwise making available a WA race field. This burdens interstate trade and commerce, both directly and indirectly. It does so directly because it denies to Betfair use of an element in Betfair's trading operations. It does so indirectly by denying to Betfair's registered players receipt and consideration of the information respecting the latest WA race fields by access to Betfair's website or by communication with its telephone operators.
89 Section 2.5.19B prohibits the use or publication of race fields information, unless approval is granted, or an exemption otherwise applies. Race fields information is an essential tool of the business. Without access to race fields information, a bookmaker cannot conduct its business. The qualified prohibition by s 2.5.19B denies access to Sportsbet of an essential element in its trading operations, unless approval or exemption relieves it of that burden. Similarly, the Turnover Condition, represents a significant cost on an essential activity of the business of a wagerer, the use and publication of race fields information. That burdens trade and commerce indirectly.
90 A burden alone is not enough. The burden must be of a discriminatory character. The concept of discrimination necessarily embraces factual discrimination as well as discrimination in the legal operation of a law. In Cole v Whitfield, the High Court said (at 399) that "[a] law will discriminate against interstate trade or commerce if the law on its face subjects that trade or commerce to a disability or disadvantage or if the factual operation of the law produces such a result".
91 Sportsbet referred to the decision of Betfair HC, particularly the observations of Heydon J, where his Honour referred to three forms of discrimination (at [138]-[140]):
The first is that s 27D(1) applies to out-of-State wagering operators but not to in-State waging operators, namely RWWA and Western Australian bookmakers. In relation to RWWA, that is the direct effect of the exemption in s 27C(3). In relation to Western Australian bookmakers, that is the direct effect of the exemption in s 27C(4) until 6 August 2007. After that date, the practical effect of treating the fact that those bookmakers contribute to the local racing industry through the payment of a betting levy as a matter that can be taken into account in the process of granting approval is that they are more likely to gain approval.
The second form of discrimination arises from the need which the prohibition in s 27D(1) creates to obtain approval under s 27D(2). That approval can be withheld as a matter of discretion, whether by reference to the "fit and proper person criterion" or as part of the Minister's residual discretion. Discrimination also arises from the announced intention to treat "betting to lose" as integral to the assessment of a wagering operator as a fit and proper person. The intended practical effect is to prevent or inhibit out-of-State wagering operators, and particularly the first plaintiff, from offering or accepting bets on Western Australian races.
The third form of discrimination arises from the imposition, as a condition of approval, of the requirement for a wagering operator to enter into a commercial arrangement with RWWA. The effect is to require an out-of-State wagering operator to enter into a commercial arrangement with a particular in-State wagering operator which is a substantial competitor, if the out-of-State wagering operator is to offer to accept bets on a Western Australian race. Whether or not such commercial arrangement should be entered into, and if so on what terms, are matters left for the legally unreviewable judgment of RWWA.
92 Sportsbet contends that each of those forms of discrimination are present in this legislative regime. The first and second discriminatory effects relate to Sportsbet's attack on the legislation, the third goes to the Turnover Condition. It says generally that the race fields scheme operates to restrict competition in the national wagering market contrary to the interests of national unity and the interests of consumers across the country.
93 First, is the legislation discriminatory? Sportsbet contends that the prohibition contained in s 2.5.19B is a "selective prohibition" that only applies to interstate WSPs and does not apply to Victorian registered WSPs, as defined in these proceedings as Tabcorp and registered bookmakers.
94 An analysis of the effect and operation of the prohibition must not be undertaken in isolation. The provision must be read as a whole. There are four exemptions to the prohibition conveyed in s 2.5.19B(2):
first, the licensee under Ch 4 of the GRA (whose role is currently performed by Tabcorp) and
secondly, the wagering operator under s 4.3.15(1) of the GRA: s 2.5.19B(2)(a) and (b) (whose role is currently performed by a Tabcorp subsidiary);
thirdly, a registered bookmaker, being defined in s 1.3 as the holder of a current certificate of registration as a registered bookmaker under Part 5A of Chapter 4: s 2.5.19B(2)(c); and
fourthly, a publication approval under s 2.5.19D: s 2.5.19B(2)(d).
95 Sportsbet says that the exemption provided to Tabcorp as the holder of the wagering licence is discriminatory because there can only be one holder of that licence. It is not to the point that no person but Tabcorp can obtain the same licence as Tabcorp. The position held by Tabcorp, as demonstrated by the complex commercial arrangements referred to above, is sui generis. A comparison between a WSP and the statutorily appointed exclusive licensee is not a comparison between persons who are relevantly equal. Discrimination cannot be founded by pointing to a difference between persons who are not equals. Discrimination can only arise between persons who are not equals if the law dismissed their differences, treating them as equals or if the different treatment assigned did not support their relevant difference.
96 The issue remains whether, when considered with the exemptions in s 2.5.19B(2), the practical effect of the prohibition appears on its face to be discriminatory against interstate traders, compared with the position of intrastate traders under that legislation.
97 Section 2.5.19B(1) must be read together with all of the exceptions in s 2.5.19B(2). The ability to attract the exemptions set out in s 2.5.19B(2)(a) to (d) encompasses both in-state and out-of-state WSPs. Subsection (2)(a) and (b) refers to Tabcorp and its subsidiary. Subsection (2)(c) and (d) are available to any WSP whether its business is located in Victoria or not. On its face, s 2.5.19B is therefore not discriminatory. Registration under Ch 4, Pt 5A of the GRA is not dependent on the domicile of the applicant (or whether the applicant in fact conducts its business on-course in Victoria). Therefore, in theory that status can be acquired by an interstate bookmaker. In practice too, as the Court was told, a number of interstate WSPs have become registered bookmakers in Victoria. Sportsbet has to date declined to become a registered bookmaker within the meaning of s 1.3 of the GRA, to take advantage of the exemption conferred by s 2.5.19B(2)(c).
98 Part 5A of Ch 4 of the GRA sets out the way in which individuals and corporations may become registered. Applications are made to the VCGR, which is charged with either granting or refusing the applications: ss 4.5A.2 and 4.5A.4 of the GRA. In determining whether to grant or refuse an application, the VCGR must have regard to a number of considerations: s 4.5A.4.
99 Sportsbet says that registration under the GRA, as read with the Racing Act, operates to authorise the business of a bookmaker in Victoria, and that the GRA, in providing a means for registration, should not be read as contemplating permission to a person to conduct that business as a bookmaker who resides outside of Victoria. It says that would be at odds with the purpose of those provisions as the registration of bookmakers throughout the country has never proceeded on the basis that States and Territories register bookmakers outside their borders, and the only purpose to which registration under the GRA is to serve an interstate bookmaker is relaxation of a prohibition. They say then that "registered bookmaker" should be read down to mean "Victorian bookmaker". Insofar as Sportsbet seek the Court to read into the expression "registered bookmaker" in s 2.5.19B(2)(c) as having a geographical limitation, this is rejected as to do so would render the provision unconstitutional and be contrary to s 15A of the Acts Interpretation Act 1901 (Cth) which requires legislation to be read and construed as consistent with the Constitution.
100 The race fields scheme is unlike that in the case Sportsbet Systems Pty Ltd v New South Wales (2003) 201 ALR 706, where the legislation struck down conditioned authorisation to conduct business as a bookmaker upon a company being incorporated in New South Wales and not being involved in licensed bookmaking in any other jurisdiction. There the provision required interstate traders to become intrastate traders. By contrast, obtaining the exemption requires registration, but not residency, in Victoria. On registration, Sportsbet would be susceptible to an analogous financial contribution pursuant to the Racing Act which provides a mechanism for a prescribed fee payment: 91B(3).
101 Whether in theory or in practice, interstate WSPs such as Sportsbet, would or would not be likely to become registered to obtain the exemption, or whether this was or was not contemplated by the Racing Act, are not issues requiring determination.
102 In any event, a person not otherwise exempt from the prohibition may obtain publication and use approval under s 2.5.19B(2)(d) which operates in tandem with s 2.5.19. This is not a case where the prospect of obtaining approval or authorisation is "illusory", as was considered by the joint judgment in Betfair HC at [118]. At [119], the joint judgment said:
The provision for authorisation may be put to one side so far as concerns Betfair. Given the stated legislative purpose of prohibition of betting through and the establishment and operating of betting exchanges, a matter to which the Minister is bound to have regard when considering an application under s 27D, the prospect of Betfair obtaining approval must be illusory. The evidence of the refusal of the application which Betfair made bears this out.
103 The passage above demonstrates, on those facts, that the discriminatory character of the race fields scheme was informed by the likelihood of approval being obtained or refused. Had the possibility of authorisation been real in Betfair HC, the legislation may not have offended s 92. On its face, and in practice, the exemptions in either of s 2.4.19B(2)(c) and (d) are available to Sportsbet.
104 Sportsbet contends that even if the prohibition, as read with the exemption, is not discriminatory, the requirement to register and submit to and become part of the Victorian industry to obtain the relief at s 2.15.B(2)(c) is itself discriminatory.
105 The decision of Cross v Barnes Towing and Salvage (Qld) Pty Ltd (2005) 65 NSWLR 331 was referred to. The legislation in that case required a licence in order to tow vehicles in New South Wales. The Court of Appeal held that the legislation did not impose a discriminatory burden on a Queensland tow truck business. Spigelman J (with whom Handley JA and Beazley JA agreed with respect to that issue) observed at [54]-[57] that:
The matters relied upon by the defendants do not, in my opinion, rise higher than establishing the proposition that a licensing regime imposes burdens on participants in the regulated industry. All participants are subject to the same burdens. There is no discrimination either in form or, on the evidence in this case, in substance. Nor, in my opinion, is there a basis for concluding that the burden is of a protectionist kind if, which I doubt, such could exist in the absence of discrimination.
The element of different treatment in this case is that a person with only an interstate license may not pick up in New South Wales. However, nothing in the structure or operation of the licensing scheme suggests that the requirement to obtain a license is discriminatory, let alone, protectionist.
Unlike Castlemaine Tooheys (at 472), in my opinion, there is no basis for a conclusion that the operation of the scheme "would be discriminatory and protectionist in effect". A license is available and, on the evidence, readily so. The legislative scheme provides appeal rights to an independent Tribunal from a refusal to grant a license or certificate under the Act. The appeal lies on the merits. It is not limited to judicial review.
Authorities under pre-Cole v Whitfield, s 92, jurisprudence must be treated with care. The existence of widely expressed standards, such as those considered in Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127, are not sufficient to establish a discriminatory burden of a protectionist kind. Where, as here, a merits review is available and there is no apparent discriminatory result in effect, the contemporary test for s 92 is not satisfied. (Emphasis Added)
106 Sportsbet seeks to distinguish that case for a number of reasons including that it pre-dated Betfair HC. In Betfair HC, the High Court emphasised that s 92 had to be read consistently with modern trade and commerce, where significant movement across states and instantaneous commercial communication have produced a "new economy" (see Betfair HC in the joint judgment at [15], [18] and [90]). Sportsbet also contends that the issues were different as there existed a real and material concern about the behaviour in the tow truck industry which warranted regulation. In those circumstances, the licence provided a right to conduct business in New South Wales. Conversely, for Sportsbet, registration pursuant to the GRA, would permit it to conduct its business in Victoria; however given its Northern Territory licence, it says that it will not do so and should not need to do so. Therefore, the "rights" by registration are of no real value. That was the submission propounded by Victoria, namely that Sportsbet would not be required to conduct its business from Victoria, and therefore no discriminatory burden was imposed.
107 In my judgment, the availability of registration to Sportsbet (if it is available) does not resolve the present proceeding adversely to it. That is simply because Sportsbet is not required by the GRA or by the Racing Act to be so registered. Even if registration is available to an interstate based WSP, it may choose not to submit to the processes of registration and to the fiscal obligations that would flow as a consequence (that is, the obligations discussed above applicable to a Victorian based registered bookmaker). Those obligations impose the equivalent of the Turnover Condition, in addition to whatever registration or licence fee is imposed by the Northern Territory unless the registered bookmaker then operates from a Victorian race course. In that event, the levy of 1% imposed under the Racing Act would be payable on betting turnover, and the royalty fee of 0.5% imposed also on betting turnover would be imposed. By the device of the subsidy, Victorian registered bookmakers who operate at HRV conducted meetings from a Victorian racecourse are exempted from the royalty fee.
108 However, for the immediate purpose of determining the validity or otherwise of s 2.5.19B(2) of the GRA Act, the fourth exemption process - a publication approval under s 2.5.19D - remains available to Sportsbet and to other interstate WSPs. It is an option which, on its face, imposes a burden on Sportsbet. Sportsbet is required to go through the process of applying for, and obtaining, a publication approval to enable it to use HRV race fields information. There is no evidence which suggest that that process itself is particularly onerous. There is evidence that the process is imposed for two-fold and legitimate purposes: to ensure that the WSP makes a contribution to the operation of the HRV racing program, and to ensure that the WSP operations are not of such a character as to pervert, or potentially to pervert, the integrity of the race meetings conducted by HRV.
109 In my judgment, Sportsbet has not shown that s 2.5.19B operates in a way which is discriminatory in a relevant sense to its operations as an interstate WSP. Indeed, although s 2.5.19B(2)(d) and s 2.5.19D contemplate that the grant of a publication approval may be given subject to conditions, including the payment of a sum fixed by reference to betting turnover on races conducted by HRV, s 2.5.19B does not prescribe or direct the amount of a turnover related payment by HRV. It may be nominal. It does not prescribe or direct such a payment as would necessarily operate in a discriminating way, so as to infringe s 92 or more accurately s 49 of the Self-Government Act.
110 In the light of the regulatory and factual matrix of the race fields scheme, all participants in the wagering market place are burdened by an obligation not to use face fields information, except in certain circumstances. The situation of interstate and intrastate WSPs is the same: to use race fields information they must obtain what is in effect a licence, whether it be in the form of registration as a bookmaker in Victoria, or a more specific permit being the approval under s 2.5.19D. Either of those forms of licence are available, and readily so, so far as the terms of the GRA provide. The practical operation of the legislation, contained in s 2.5.19B does not itself exhibit features of a discriminatory law, even though in practice it is likely that only interstate WSPs will need to seek a publication approval under s 2.5.19B(2)(d).
111 It is a significantly more difficult question to determine whether the Turnover Condition is discriminatory.
112 Evidence from Mr Anderson, the Chief Executive of HRV, attested that the incremental cost to HRV in providing race fields information to totalisators, registered bookmakers and corporate bookmakers is negligible irrespective of the number of entities the race fields information is distributed to. It follows then that any fee said to be for access to race fields information paid by WSPs is a proxy for HRV to obtain an economic contribution to the industry.
113 In assessing the s 92 enquiry the relevant comparator in the proceeding is between fees paid by Tabcorp for race fields, and contributions made by WSPs, registered, and non-registered, towards the Victorian Racing industry, whatever the source for those obligations might be. In Racing New South Wales v Sportsbet, the Full Court (Keane CJ, Lander and Buchanan JJ) said at [96] that "if all wagering operators are now subject to the same burdens, whatever their State of origin, the fact that the burdens had previously been borne only by intrastate trade is immaterial". (Emphasis added.) That view was upheld in Sportsbet HC.
114 The legislation examined in that case was the Racing Administration Act 1998 (NSW). It required all WSPs to obtain approval to use race fields information. The WSPs were subject to various integrity and probity conditions and required to pay fees, set by the controlling bodies of 1.5% of assessable turnover for thoroughbred and harness race fields and the lesser of 10% of assessable revenue (on the one hand) and 1.5% of assessable turnover (on the other hand) for greyhound race fields. The in-state TAB could seek compensation under a pre-existing contractual arrangement for an amount equivalent to the race field fees that it was required to pay. That turnover regime was upheld in Sportsbet HC, and in the slightly different context of a betting exchange operator in Betfair Pty Ltd v Racing New South Wales (2012) 286 ALR 221; [2912] HCA 12.
115 In this proceeding, there are three types of participants in the wagering market: Tabcorp as holder of the wagering licence, and registered and non-registered WSPs. Payments are made by each of those participants to HRV as contributions to the racing industry, and those burdens arise from different, but contemporaneous, regulatory provisions. The contributions made by Tabcorp and by registered WSPs have been referred to above. The High Court in Sportsbet HC at 24 quoted with apparent approval what the Full Court said in Racing New South Wales v Sportsbet Pty Ltd at [12] that the Court must assess the "objective effect of the imposition of the fee" relative to the positions of interstate and intrastate traders in the following terms:
…whether the imposition of the fee by RNSW and HRNSW as a condition of Sportsbet's approval is contrary to s 49 of the Act does not depend upon the subjective intentions or motives of those responsible for the adoption of the measure; the operation of s 49 depends upon the effect of the measure, not on whether those responsible for its adoption and implementation were correct in their understanding of the operation of s 92 of the Constitution. The crucial issue in this case concerns the objective effect of the imposition of the fee upon interstate trade relative to intrastate trade. (Emphasis Added.)
116 Sportsbet contends that the Turnover Condition, in its legal or practical operation, imposes a discriminatory burden or disadvantage that is not imposed on intrastate trade or commerce, or it is otherwise disproportionate. The challenge at this point is not to the levying of a fee but that the the Turnover Condition operates unequally as between interstate WSPs and local WSPs. That was acknowledged by Mr Tyshing in his evidence.
117 Sportsbet refers to the Productivity Commission Inquiry Report of 26 February 2010, seeking to rely upon it for its evidentiary value, to establish constitutional facts relevant in this proceeding. More specifically, Sportsbet contends that it is of assistance to the Court because it described the background facts such as the historical changes in the national wagering market, and it encapsulated issues such as the differential effects between various models used to calculate and impose fees, and the impact those fees have on the wagering market. From this (it says), it is reasonable to infer that a central concern of Sportsbet, namely that the race fields scheme subject subjected them to a fee model based upon assessable turnover, rather than a revenue based model, is impermissible. Submissions were made as to the Report's admissibility. I have considered that document, but have not placed any reliance upon it. It is a Report of a body expressing opinions, and setting out some facts, which may or may not have been contested were they directly pleaded before the Court. To the extent that the Report referred to differences that exist between fee models and their respective impact on the wagering players and market, that does not directly bear upon the issues before me. As I would in any event accord that Report, and its contents, no weight in the particular circumstances of this matter, where there is extensive direct evidence, I need not formally rule upon its admissibility.
118 The effect of s 2.5.19D does not discriminate unlawfully so as to favour intrastate traders, because it operates irrespective of the place in which a WSP carries on a business.
119 However, the practical effect of the Turnover Condition must be evaluated by reference to what intrastate WSPs are required, by legislation and executive measures, to make in the form of a contribution to the conduct of harness racing in Victoria. The contribution of Victorian registered bookmakers is an aggregate of 1.5% of wagering turnover, comprising the 1% levy and the 0.5% royalty fee. While the burdens imposed by the Turnover Condition, and the payments made by registered bookmakers have formally different names and structures, all are apparently directed at the same objective - a requirement to make a contribution to the Victorian harness industry.
120 Prima facie, those payments, made by WSPs and registered bookmakers, are the same. In this way, the practical effect of the Turnover Condition is said to be competitively neutral within that broader regulatory context.
121 At one level, argument on this aspect of the dispute proceeded by reference to the views of economists called to give evidence. HRV called Dr Smith. Sportsbet called Dr Williams. They are both well qualified economists.
122 Dr Smith's evidence concluded that, within the context of the market for the supply of betting or wagering services in respect of Victorian harness races to persons in Victoria and elsewhere, the imposition of the 1.5% levy on out-of-state WSPs is neutral in its impact on competition between Sportsbet and registered bookmakers. She said there was no evidence to suggest that Sportsbet, or any other out-of-state WSP is deprived of any competitive advantage in operating its business from the Northern Territory or elsewhere. Those conclusions flowed from a number of propositions, but were essentially based upon the premise that race fields information exhibits qualities of a public good, that is a non-excludable and non-rivalrous good, and to the extent that a firm avoids paying for their use, it is a free rider, which may be free riding on the contributions made by competitor firms for that business input. She suggested that, to correct that market distortion or failure, regulatory intervention or mandatory financial contributions are appropriate measures, and this rationalising then, in her view, legitimised the race fields scheme. Dr Williams conceded that race fields scheme exhibited qualities of a public good, but considered that it was not a helpful analysis of the marketplace, as there was no evidence that would establish that harness face fields information would be underprovided in the absence of the legislation that is in issue. Dr Williams postulated that "it is still worth [race organisers'] while to produce and disseminate such information". This was for reasons including that race organisers benefit from the fact that WSPs use this information and their activities in turn to confer benefits upon race organisers - e.g. by generating interest in the races being organised.
123 The evidence of the economists was received without objection. The utility of their evidence is confined to the issue of whether regulatory intervention in the market, in the form of the current race fields arrangements was a necessary or a justified measure. That does not directly inform or resolve the discriminatory burden enquiry. The crucial issue concerns the objective effect of the imposition of the fee upon interstate trade (or trade between the Northern Territory and the States) relative to intrastate trade.
124 I have already referred to the contributions made by race field approved WSPs, registered bookmakers and Tabcorp who make payments to HRV which exceed that of bookmakers, wherever located. I accept, that prima facie, and limiting my views to a comparison of intra-state WSPs and inter-state WSPs (as distinct from Tabcorp) the effect of the Turnover Condition is apparently that payments them for the purpose of making a contribution to the Victorian racing industry are equal. I will return to these observations shortly.
125 The difference between Tabcorp on one hand and Sportsbet on the other, under the race fields scheme is "nothing more than a recognition of entitlements which are not conferred under the scheme and which Sportsbet does not enjoy for the non-discriminatory reason that it has not ever paid for them": Racing New South Wales v Sportsbet Pty Ltd at [110]. The three commercial arrangements entered into between Tabcorp and the Victorian racing industry which conferred substantial rights and obligations upon Tabcorp. Within that setting, the Turnover Condition payable by non-registered bookmakers, did not exhibit the features of a discriminatory law as identified by Gaudron and McHugh JJ in Castlemaine Tooheys at 478:
A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant or by reference to a distinction which is in fact irrelevant to the object to be attained; a law is discriminatory if although it operates by reference to a relevant distinction, the different treatment thereby assigned is not appropriate and adapted to the difference or difference which support that distinction. A law is also discriminatory if, although there is a relevant difference, it proceeds as though there is no difference, or in other words, if it treats equally things that are unequal - unless, perhaps, there is no practical basis for differentiation.
In Sportsbet HC at [27] that view was affirmed.
126 Tabcorp is subject to real liabilities arising from those commercial arrangements entered into with the racing industry in 1994. Amongst other rights paid for, it obtains a right to be supplied with and use race fields. Sportsbet argues that the consideration provided to Tabcorp involves benefits which go far beyond that of the use of race fields. On that basis, it says that the contributions made by Tabcorp are in exchange for valuable and significant rights, which is to be contrasted to Sportsbet's position, as it does not receive any valuable rights in return for payment of the Turnover Condition, only relief from a prohibition. The problem with this comparison is that it only goes to emphasise and differentiate the Turnover Condition from the different burdens borne by Tabcorp for the purposes of contribution to the racing industry, particularly borne pursuant to the terms of the PSA. There is no demonstrated discrimination against Sportsbet vis-a-vis Tabcorp in the manner so contended. The entitlements which Tabcorp enjoys are not because it is an intrastate trader, but because, since the execution of agreements, in 1999 it has been obliged to make substantive contributions to the Victorian racing industry in return for rights correlative to those contributions. I find that Tabcorp's position in the wagering market and a comparison of the contributions it makes does not further inform the character of the Turnover Condition to assist me in the enquiry as to whether it imposes a relevant discriminatory burden on trade from the Northern Territory with other States.
127 My observations above with respect to interstate WSPs vis-a-vis registered Victorian WSPs have not yet taken into consideration the 0.5% subsidy that is available to registered WSPs who obtain a club bookmakers licence, permitting them to conduct their business on-course.
128 The evidence disclosed that the 0.5% subsidy is provided because "it is important to encourage bookmakers to attend race meetings in order to provide a service to on-course patrons", and that bookmakers fielding at a race meeting provide a service because their presence "adds to the atmosphere of race meetings". It is contended that the 0.5% subsidy available to registered bookmakers is not a sham, as Sportsbet put it, but it recognises that bookmakers fielding at race meetings provide real value to the Victorian harness racing industry.
129 Dr Smith, the economist called by HRV, suggested that the subsidy provided to on-course bookmakers does not amount to price discrimination because it reflects payment for services rendered that are not provided by other types of WSPs. Dr Williams said that this is inconsistent with standard definitions of price discrimination; the fact that there is some benefit conferred by the presence of track-side bookmakers does not obviate the fact that the system involves price discrimination.
130 I proceed with some caution in utilising the evidence provided by each expert with regard to "price discrimination" in addressing the existence or otherwise of discrimination within the s 92 or s 109 enquiry. The presence or absence of price discrimination is not determinative of that question. Price discrimination in a market place is capable of correcting market deficiencies, as well as being a source of them.
131 Dr Williams preferred the analogy of discrimination in international trade to free trade between the states. He referred to the principle of "national treatment" which means that a jurisdiction treats, under its law, goods and services that are alike and that enter or are provided in its territory, in the same way regardless of their origin. He analogises that principle to the principle of free trade afforded in s 92. He suggested that the subsidy available to registered bookmakers is in violation of national treatment, and ultimately of s 92. He said in his report that:
[A] form of discrimination in violation of national treatment is the subsidy that is offered by HRV to bookmakers that "attend race-meetings an provide a service to on-course patrons." The arrangement is not predicated on a distinction between Victorian and non-Victorian bookmakers, in the sense that attendance at on-course events is the criterion. However, because attendance at races is predicated on registration in Victoria as a bookmaker, it does de facto discriminate between "domestic" (read Victorian) and "foreign" (non-Victorian) bookmakers.
132 In the Sportsbet/Eureka case, the impugned provisions prohibited the conduct of betting in Victoria through a "betbox". An exception to the prohibition was provided to registered bookmakers under the GRA. Gordon J considered that that exception favoured Victorian bookmakers, as the relief was only obtained by bookmakers with a presence on the racecourse in Victoria (at [100]):
Sportsbet sought to conduct betting in Victoria through its "betbox" - a machine prohibited by s 2.5.2 of the GRA. In theory, Sportsbet could seek registration as a "registered bookmaker". Part 5A of Ch 4 of the GRA sets out the way in which individuals and corporations may do so. Applications are to be made to the VCGR, which is charged with either granting or refusing the applications: see ss 4.5A.2 and 4.5A.4 of the GRA. If granted, Sportsbet could rely on the exception for "registered bookmakers" in s 2.5.1 of the GRA…which provides that a betting house or place of betting may operate for the purpose of paying or receiving money in settlement of bets lawfully made under the Racing Act or the GRA by or on behalf of a registered bookmaker…. Such lawfully made bets are bets made with a registered bookmaker who is present at a racecourse at the time the bet is made: s 4 of the Racing Act. However, that exception favours Victorian bookmakers, by requiring registered bookmakers to be present at a racecourse in Victoria: ... (Emphasis added.)
133 The subsidy, equal to one third of the total amount of the royalty and levy payable by the approved bookmaker (0.5%) is only available to a WSP if:
(a) the WSP is a registered bookmaker in Victoria;
(b) the requested bookmaker holds a club bookmaker's licence; and
(c) the WSP carries on the business of bookmaking on a race course.
(See s 91 of the Racing Act.)
134 Following Gordon J's reasoning, the requirement that the WSP must be present at a race course in Victoria to obtain the subsidy suggests prima facie that only Victorian registered bookmakers are favoured by the subsidy. Since all registered bookmakers taking bets on Victorian harness racing take advantage of the subsidy, in practice, the contributions made by Territory and interstate WSPs compared to intrastate WSPs is 1.5% on Assessable Turnover compared to 1% on Betting Turnover respectively. In practice, at least in relation to HRV, the subsidy operates to remove that apparent competitive neutrality between contributions made by registered and non-registered WSPs.
135 Those circumstances do not necessarily lead to a finding that the Turnover Condition is discriminatory in a protectionist sense. The availability of the subsidy to on-course bookmakers providing a service to patrons at the racetrack acknowledges a difference in the conduct of business of different WSPs, and operates to provide incentive to what the racing industry considers valuable to the maintenance of a prosperous racing industry. Evidence was provided to suggest that there is real value to harness racing in having bookmakers attend on-course, particularly in the modern internet age, where bookmakers are increasingly reluctant to take bets at the race track. The availability of on-course betting services adds to the atmosphere - is part of the experience of attending the race meeting - and is convenient for attendees. However, the subsidy is not necessarily confined to bets placed on course by registered WSPs in Victoria; they have the benefit of that subsidy provided they attend HRV race meetings on course, and carry on the business of bookmaking on the concourse, and it applies to all bets taken by them, whether taken from punters attending that race meeting or not.
136 There is an additional factor to consider. Sportsbet is licensed to operate as a WSP under the Racing and Betting Act 1983 (NT). It pays a licence fee under that legislation. The evidence shows that a significant factor in whether that license is granted and maintained is whether the processes of its operations, including the records it maintains, ensure the probity and integrity of the Australian racing industry. There was some exploration by HRV of the adequacy of the integrity systems imposed under the Racing and Betting Act 1983 (NT). Racing Victoria itself imposes integrity systems on registered WSPs in Victoria. The evidence indicates that the enquiries on behalf of HRV about the integrity systems in the Northern Territory failed to expose any inadequacies in those systems. I find that, from the point of view of HRV, it was satisfied with those systems. There is no need for, or benefit to, HRV or (to the extent its inquiries were on behalf of the Victorian racing industry) Victoria Racing by HRV securing an economic contribution from Sportsbet as a licensed WSP in the Northern Territory to secure or better secure the integrity of race meetings conducted by HRV.
137 There is a further related question briefly referred to above as to whether Sportsbet is eligible to become a registered WSP in Victoria under the GRA. As I have concluded that the terms of the GRA itself, and in particular s 2.5.19B or s 2.5.19D, do not infringe s 49 of the Self Government Act, at one level it is not necessary to determine that question. For the purposes of deciding if s 2.5.19B or s 2.5.19D of the GRA infringe s 49 of the Self Government Act, whether Sportsbet is or is not entitled to be registered as a WSP under the GRA does not affect the answer to that question. The question is whether those provisions infringe s 49 by their application to Sportsbet as a WSP licensed to conduct its WSP business under the Racing and Betting Act 1983 (NT), insofar as that business involves wagering on harness races in Victoria conducted by HRV.
138 HRV made the same submission, however, in relation to whether the Turnover Condition which it imposed was itself discriminatory in contravention of s 49 of the Self Government Act. It was the common theme of both HRV and Tabcorp as intervenor that s 2.5.19B and s 2.5.19D were introduced as part of a national approach to ensuring that all WSPs make an economic contribution to the conduct and regulation of races on which they rely for their wagering activities and that they are appropriately scrutinised. The recent litigation in relation to race fields information under somewhat different statutory regimes serves to point to that proposition. As Tabcorp said in its written submission, those sections enable the imposition of a fee as a condition of the use of HRV race fields information, which is an input into the trading activities of WSPs, whether operating intrastate in or from Victoria only or operating interstate. In that common context, the submission that Sportsbet was entitled to, and could, become a registered WSP under s 1.3 of the GRA (and so take advantage of the exemption conferred by s 2.5.19B(2)(c) is not an answer to Sportsbet's case.
139 Moreover, I do not accept the proposition that Sportsbet, by doing so, could avoid any financial contribution to the Victorian racing industry.
140 As noted, s 91B of the Racing Act and Rule 3 of the Harness Racing Victorian Bookmaker's Licence Levy Rules operate to impose a 1% betting turnover fee on Victorian registered WSPs and there is a further 0.5% royalty fee imposed on them for the right to use harness race fields information, offset (from the time of its introduction) by all Victorian WSPs who conduct business on HRV race meetings operating on a racecourse under s 91 of the Racing Act.
141 Registration of a WSP under s 1.3 of the GRA would not, in my view, entitle that registered entity to conduct its business outside Victoria, but including Victorian race meetings conducted by the HRV, for no fee. If that is the effect of such registration, it would so subvert the evident intention of the GRA as to require a more careful analysis of the terms of the GRA itself. In that regard, I accept the submissions on behalf of Sportsbet the definition of "bookmaker" in s 1.3 of the GRA means a person who carries on business as a WSP in Victoria. That effects what Mr Anderson assumed to be the case, so that Ch 4 Pt 5A of the GRA would be enlivened as a condition of registration.
142 That conclusion accords with a careful consideration of the existing restrictions on wagering: they are reflected in the offences in relation to betting in Div 1 (betting houses and places of betting), Div 2 (betting in public places), Div 4 (the conduct of a totalisator), Div 4A (betting exchanges), Div 5 (advertising about betting) all in Pt 5 of the GRA and in Pt 6 (possession of instruments of betting). They all regulate betting, wagering and associated activity undertaken in Victoria), other than in relation to the publication of race fields information in Div 5A.
143 Having built the legislative structure of offences, it can be seen both in terms, in context and from the legislative history, that there are two general exceptions - effected by designated categories of persons - outside that structure. They are Tabcorp and registered WSPs. Relevantly, the effect of registration under the GRA is to exclude the registered WSP from committing the offences. The registration is to permit the registered WSP to do in Victoria that which otherwise would be unlawful in Victoria. Section 91 of the Racing Act also focuses on the doing of an act in Victoria: bookmaking on a race course, permitted only to a registered bookmaker who holds a club bookmaker's licence. There is no apparent benefit to an interstate WSP, operating interstate, in registration under the GRA (other than immunity from contravening s 2.5.19B of the GRA). As noted, however, if registration were intended to be available to interstate WSPs, with the consequence asserted by HRV that the registered interstate WSP would not be required to pay any fees but have access to HRV's race fields information, the purpose underlying s 2.5.19B so far as it relates to race fields information would be entirely frustrated. In my view, that construction of s 1.3 of the GRA should not be accepted. I prefer the construction that it refers to bookmakers intending to operate as WSPs in Victoria. That gives the concept of registered bookmakers the meaning it appears to have been given over a lengthy legislative history. It gives effect to the express definition in s 2.5.19A of "wagering service provider" to catch interstate WSPs within its operation, and to the purpose or to one of the main purposes of s 2.5.19B to secure a contribution to the operations of the Victorian racing industry from interstate WSPs rather than to allow them to be "free riders".
144 The difference between Victorian bookmakers on one hand, and Sportsbet (and other WSPs operating outside Victoria but taking bets on races conducted by HTV) on the other, in terms of their contributions to the racing industry when one factors in the subsidy, is said by HRV to be nothing more than a recognition of a benefit conveyed by one WSP in providing on-course services which has value to the racing industry, and which other WSPs do not provide. Therefore, Sportsbet does not enjoy the rights conferred under the racing scheme in the form of the 0.5% rebate for the non-discriminatory reason that it does not provide that valuable service to track side punters.
145 These circumstances do exhibit the features of a discriminatory burden identified by Gaudron and McHugh JJ in Castlemaine Tooheys at 478 where their Honours said:
A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant or by reference to a distinction which is in fact irrelevant to the object to be attained; a law is discriminatory if, although it operates by reference to a relevant distinction, the different treatment thereby assigned is not appropriate and adapted to the difference or differences which support that distinction. A law is also discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference, or, in other words, if it treats equally things that are unequal - unless, perhaps, there is no practical basis for differentiation. (Emphasis Added.)
146 There does exist a practical basis for the differentiation between contributions made by registered bookmakers who service on-course patrons, and those WSPs such as Sportsbet, who do not. However, the character of the Turnover Condition may still be impugned once that consideration is taken into account because the differentiation operates in favour of WSPs in Victoria, in respect of all bets on harness racing taken by them, provided they attend on course harness race meetings and take bets there. The subsidy or differential is not confined to on course bets, or in some other way related directly to the benefits to be secured to the harness racing industry in Victoria by WSPs in Victoria taking bets on course in Victoria, or to the costs of providing that service. There is no evidence precisely identifying the value of that benefit, but I accept it exists.
147 The evidence, nevertheless, is that on course wagering is but a quite small element of the bets taken on races conducted by HRV. The subsidy to Victorian WSPs is, in effect, one third of the total fee payable by WSPs interstate and in the territories under the Turnover Condition. Whilst it is not possible to precisely quantify the respective positions of intrastate WSPs and interstate and Territory WSPs, I am satisfied that the interstate and Territory WSPs have a significant additional burden imposed on them by the Turnover Condition, because they are required to pay an additional 0.5% turnover. That is half as much again as Victorian WSPs are required to pay.
148 Costs are incurred in track-side wagering which Sportsbet does not bear. HRV obtain a benefit from bookmakers operating on-course and the policy behind the 0.5% rebate on the evidence before the Court, is to encourage bookmakers to field on-course. It may be accepted that there are some economic benefits which flow to the racing industry from increased crowds, although the level of on-course wagering with WSPs on the evidence is relatively insignificant.
149 The Turnover Condition, in my view, does discriminate adversely to interstate and Territory WSPs, even though there is an apparent reason for it. Its practical effect is significant. In other words, Sportsbet, and other interstate and territory WSPs, are charged for their use of an essential input (race fields) to the business as a wagerer albeit a different rate for access to that input. That the burdens imposed on all WSPs have different names and structures is not determinative for s 92 purposes. Charging a fee for the right to use race fields information is a convenient proxy to enable HRV to require WSPs to make a contribution to racing industry commensurate to the use by those WSPs of Victorian harness racing contingencies, in their business. But in practice, the fee structure discriminates adversely to interstate and Territory WSPs.