APPLICATION OF SECTION 49 OF THE SELF-GOVERNMENT ACT
83 The declarations made by the primary judge, which were the declarations sought by Sportsbet and Eureka, were that the Impugned Provisions are invalid to the extent that they apply to the installation and use in Victoria by Sportsbet and Eureka of the computer device known as a Betbox. The basis for the invalidity is that they offend against s 49 of the Self-Government Act, in that they impose an impermissible burden on trade and commerce between the Northern Territory and Victoria.
84 Those declarations are specifically concerned with activities of Sportsbet and Eureka. In concluding that, by accepting wagers by means of the Betbox, Sportsbet is engaged in interstate trade and commerce, the primary judge regarded several facts and matters as being critical.
85 Firstly, Sportsbet is registered in the Northern Territory and has a registered office and principal place of business in the Northern Territory. However, the following facts make it clear that the real central control and management of Sportsbet's business is in Victoria:
While Sportsbet has a registered office in Darwin, it has much larger offices in Melbourne.
A substantial part of Sportsbet's business is conducted in Melbourne, including its IT, marketing, human relations, finance and administration departments, its bookmakers, the risk management department, real-time client bet monitoring and the fraud department, including anti-money laundering checking.
The management of Sportsbet's business is conducted in Melbourne and there is a far greater concentration of senior and other staff in Melbourne.
Sportsbet's senior managers spend most of their time in Melbourne and are resident in Melbourne.
Sportsbet's Northern Territory licence does not confer any right, and does not purport to confer any right, on Sportsbet to engage in bookmaking activities in Victoria.
By installing the Betbox in the Hotel and its display of logos and advertising, Sportsbet had a physical presence in Victoria and, in substance, betting and wagering transactions occurred within Victoria.
86 Secondly, her Honour had regard to the fact that Sportsbet has a registered licence business that operates from specific premises in the Northern Territory under the Territory Betting Act. Its licence permits Sportsbet a more flexible approach to marketing than other places in Australia. It permits Sportsbet to offer a much wider range of bets to punters than is permitted under Victorian law. It permits Sportsbet to provide credit to punters. Sportsbet cannot do that anywhere else in Australia. One of the conditions of Sportsbet's licence is that Sportsbet take bets from the Fannie Bay racecourse in Darwin.
87 In that regard, it is relevant that there is a developed market throughout Australia for the provision by bookmakers and totalisators, by means of telephone and the Internet, of wagering services on racing and sporting events. Indeed, such a market may be international. Such events may take place in one State or Territory, the punter may be in another State or Territory and the bookmaker or totalisator may be in a third State or Territory. The inhibition to competition presented by geographic separation between rival suppliers and between supplier and customer in such a market is reduced by the existence of the Internet and the ease of its use, together with other means of electronic communication, such as wireless telephones (Betfair v WA at [114]).
88 However, even if the facts and matters relied on by the primary judge might lead to the conclusion that Sportsbet is engaged in trade and commerce in a market that extends to the Northern Territory and other parts of Australia and the world, including Victoria, that is not to the point. The question is whether the installation and use of the Betbox and the transactions that are undertaken by means of the Betbox constitute trade between the Northern Territory and Victoria. It is not sufficient to conclude that Sportsbet is engaged in interstate trade and commerce between Victoria and the Northern Territory. It is necessary to consider whether the Impugned Provisions impose a relevant burden on that trade and commerce.
89 The relevant transactions that Sportsbet says constitute the trade and commerce between Victoria and the Northern Territory that is burdened by the Impugned Provisions occur when a punter places a wager with Sportsbet using the Betbox in the Hotel in Victoria. In those circumstances, the punter is present in the Hotel; so is Sportsbet, by reason of the location of the Betbox in the Hotel. Thus, the relevant transactions occur between Sportsbet, through the Betbox, and the punter, within the Hotel in Victoria. The question is whether those transactions are properly to be characterised as trade and commerce between Victoria and the Northern Territory. That question is not answered by considering the business of Sportsbet or the business of Eureka in broad terms. It is necessary to examine the precise conduct involved.
90 The Betbox, located in Victoria, is the means whereby a customer of Sportsbet places a wager with Sportsbet in Victoria. The fact that the wager is subsequently accepted or rejected in Darwin does not detract from the fact that the Hotel is a place of betting within the meaning of s 2.5.2(1)(a). The Betbox, and the place where it is located within the Hotel, are both places to which punters resort for the purposes of wagering with Sportsbet. The function and purpose of the Betbox at the Hotel is to enable Sportsbet to accept instructions from punters in Victoria for the placing of bets with Sportsbet. By installing the Betbox in the Hotel, Sportsbet has localised a stand or pitch where wagers were to be executed (see Bond v Foran (1934) 52 CLR 364 at 370). That stand or pitch is in Victoria.
91 In so far as Sportsbet engages in trade and commerce in a market that extends beyond the borders of the Northern Territory, it does so by means of the internet and other technology, such as personal computers and mobile telephones. Competition in that regard is fierce. However, s 49 does not afford Sportsbet an immunity to conduct business as it pleases in Victoria simply because there are some aspects of its activities that might fairly be characterised as trade and commerce that go beyond the boundaries of the Northern Territory and might fairly be described as trade and commerce between the Northern Territory and Victoria. The Impugned Provisions do not prevent Sportsbet from doing what it does in the Northern Territory in accordance with its licence. Nor do they prevent Sportsbet from engaging in its business beyond the border of the Northern Territory by means of the internet and other technology, such as personal computers and mobile telephones.
92 Finally, the primary judge had regard to the fact that the significant part of Sportsbet's computer system is located in Darwin and that Sportsbet's customers, including customers in Victoria, interact with Sportsbet through its computers located in the Northern Territory. However, the facts summarised above demonstrate that the computer system and employees in the Northern Territory operate under the control and management of the senior management of Sportsbet located in Victoria. The Impugned Provisions prohibit activities that are distinctly Victorian. The use of the Betbox is essentially Victorian. Any trade and commerce that is affected by the Impugned Provisions, including the installation and use of the Betbox in the Hotel, occurs within Victoria.
93 Accordingly, there are cogent reasons for concluding that the primary judge erred in concluding that the installation and the use of the Betbox in the Hotel, as described above, constitutes trade or commerce between the Northern Territory and Victoria. Having regard to the location in Victoria of the management of Sportsbet, the Betbox, the Hotel and a punter who uses the Betbox in the Hotel for the purpose of making a wager or bet with Sportsbet, there are good grounds for concluding that it is trade and commerce wholly within Victoria. The connection with Sportsbet's computer system in the Northern Territory is no more than incidental to the particular transactions in question. It would follow that the Impugned Provisions impose no burden or restraint on trade and commerce between Victoria and the Northern Territory.
94 However, even if the particular conduct in question constitutes trade and commerce between the Northern Territory and Victoria, the critical question is whether the Impugned Provisions constitute a burden of the relevant kind on that trade and commerce, namely, a discriminatory burden of a protectionist kind. The Impugned Provisions do not have a discriminatory effect in relation to Sportsbet qua interstate trader, because there is no competition between Sportsbet and Tabcorp on equal terms. Sportsbet would have a huge advantage over Tabcorp if it were allowed to operate the Betbox without having to bear all of the obligations undertaken by Tabcorp. The obligations undertaken by Tabcorp are the quia pro quo for all of the rights granted by its licence.
95 Discrimination involves the unequal treatment of equals or the equal treatment of unequals (Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595 at 629-630). However, Sportsbet is treated in precisely the same way as every other person in the world, other than Tabcorp. While Tabcorp and Sportsbet may be competitors, they are not equals. The grant of the wagering licence to Tabcorp was conferred only on the basis that Tabcorp would accept substantial burdens, principally directed to the advancement of the Victorian racing industry. Those burdens do not fall upon Sportsbet or upon anybody else. Tabcorp is sui generis.
96 It is not possible to conclude, simply from the differential treatment afforded to Tabcorp, by reason of its exemption from the Impugned Provisions, that the Impugned Provisions discriminate in favour of intrastate trade. Tabcorp is in a position relevantly different from all other bookmakers, both Victorian and Northern Territory. It is the holder of a licence for which it paid approximately $600 million, being a licence that grants to it the privilege of totalisator exclusivity and offcourse retail exclusivity. As a condition of the grant of that licence and of the privileges that it entails, Tabcorp was required to, and did, enter into arrangements that were satisfactory to the racing industry, being arrangements that substantially fund the racing industry. Tabcorp is subject to special and distinct regulatory requirements by reason of its status as the holder of that licence. The differences between the legislative treatment of Tabcorp, on the one hand, and the legislative treatment of all other entities, on the other, are a reflection of the value of the privileges for which Tabcorp paid substantial consideration.
97 In their terms, the Impugned Provisions treat all bookmakers other than Tabcorp equally, whether they are based in the Northern Territory or Victoria and whether they engage in trade and commerce between the Northern Territory and Victoria or intrastate trade and commerce. Unless registered under the Gambling Act, no person can operate as a bookmaker in Victoria. If registered under the Gambling Act, a person may engage in such business while at a licensed race course in Victoria. There is nothing to preclude bookmakers who wish to engage in trade and commerce between the Northern Territory and Victoria, or who have connections with the Northern Territory, from becoming registered under the Gambling Act. However, even if so registered, no bookmaker other than Tabcorp, whether wholly Victorian or otherwise, can conduct offcourse business by means of a service such as the Betbox. On the other hand, there is no prohibition on Sportsbet receiving bets from persons located in Victoria by means of telephone or personal computer and the internet.
98 If Sportsbet or any other Northern Territory based bookmaker sought to be registered in Victoria, it would be in exactly the same position as all other bookmakers registered in Victoria, other than Tabcorp. The fact that the Impugned Provisions preclude Sportsbet from conducting business in Victoria by means of the Betbox is not of itself sufficient to engage s 49 of the Self-Government Act. Sportsbet must demonstrate discrimination of a protectionist kind, not just an adverse effect on a particular aspect of its business. Section 49 does not protect the particular business model that a trader seeks to employ.
99 If the requirement of the Impugned Provisions that all bookmakers conducting business in Victoria must do so only at particular locations offended s 49, the consequence would be that the State could regulate where and how Victorian bookmakers can conduct their business in Victoria but could not regulate where and how non-Victorian bookmakers can conduct their business in Victoria. Section 92 of the Constitution, in its emanation in s 49 of the Self-Government Act, does not afford Sportsbet an immunity to conduct business as it pleases in a State simply because it has a licence in the Northern Territory and it processes, on its computer system in the Northern Territory, wagering transactions that emanate from Victoria.
100 The Impugned Provisions apply only if a bookmaker seeks to establish a physical presence in Victoria, as Sportsbet seeks to do by means of the Betbox. The question is whether, once a bookmaker has a physical presence in Victoria, the requirement that the bookmaker be present at a racecourse, rather than some other place, is more difficult to meet for Northern Territory bookmakers than it is for Victorian bookmakers. There is no reason to suppose that it is. There is, therefore, no discrimination of a protectionist kind that affects trade and commerce between the Northern Territory and Victoria.
101 Protectionism is the economic policy of restraining trade from foreign competitors in order to shield intrastate trade from the full rigours of that competition. The vice in such a policy is said to be that it discourages specialisation in areas of comparative advantage and fosters inefficiency. Protectionism ordinarily involves giving assistance to a specific inefficient domestic industry to the detriment of a specific more efficient foreign industry. That results in a loss to overall welfare. Motivation to engage in protectionism comes about from a perception that the protected industry will add to the wellbeing of the domestic jurisdiction.
102 However, the Impugned Provisions impose a blanket prohibition. A prohibition that outlaws all trade in a market, both domestic and foreign, is not protectionist. If the prohibition attaches to all, no intrastate trade and no intrastate traders are being protected. The predecessors of the Impugned Provision could not be characterised as protectionist, since they applied to the whole world. There was no exception until the TAB was created. Neither s 92 nor s 49 could possibly be attracted unless an exception to the blanket prohibition was created. However, the mere creation of an exception does not render the prohibition protectionist.
103 The blanket prohibition of offcourse wagering was qualified when the TAB was established and was continued when the operations of the TAB were privatised in 1994 by being transferred to Tabcorp. The privatisation did not simply involve granting a permit to a new private entity to engage in offcourse wagering. The scheme that operated to prevent the use of the Betbox in the Hotel was established in 1994 for a defined and finite term, on specified conditions. The scheme then established included the following elements:
Tabcorp acquired a wagering licence for a finite period, for which it paid a substantial consideration, replacing the TAB as sole provider of offcourse retail wagering services.
In taking on the wagering licence and entering into mandatory related commercial arrangements, Tabcorp became burdened by the obligation to make financial contributions to the Victorian racing industry at a substantially higher effective rate than any other person or entity and was also burdened by the need to operate a totalisator as a core element of its wagering service, involving significant expense not borne by non-totalisator wagering service providers.
104 The removal of one of the benefits afforded to Tabcorp, while retaining the corresponding burdens, would result in market distortion. Sportsbet would have the benefit of the payments made by Tabcorp to the racing industry without bearing the burden of making payments at the level that Tabcorp is obliged to make such payments. Sportsbet would take the benefit of Tabcorp's financial contribution to the racing industry without bearing an equal burden. The retail exclusivity provisions that benefit Tabcorp do not deny market access to persons who are more efficient than Tabcorp. Rather, they prevent a market distortion that would be the consequence of permitting entities to have the benefit of Tabcorp's ongoing payments to the racing industry without requiring such entities to make an equal payment.
105 Sportsbet contends that the Impugned Provisions necessarily target interstate trade because they prevent punters from using the Betbox for communicating from Victoria to the Northern Territory, in circumstances where Tabcorp enjoys the liberty of concluding transactions through the means of its EasyBet terminals, which perform the same function. Sportsbet asserts that the prohibition on using the Betbox as a means of carrying on its business in Victoria demonstrates that the burden falls directly on interstate trade. Sportsbet also points to Tabcorp as being not merely a trader but the single trader that is capable of engaging in the form of communication that is otherwise unlawful. Tabcorp is not subject to the prohibition contained in the Impugned Provisions and can communicate with its Victorian customers by means of EasyBet terminals.
106 However, in so far as the Impugned Provisions prohibit communicating, not only do they prohibit communication from a place in Victoria to the Northern Territory, they prohibit communication from any place in Victoria to any other place in Victoria. The relevant prohibition is not on communicating by means of the Betbox, but on possessing in Victoria an instrument of betting in the form of a Betbox, on opening, keeping or using in Victoria a betting house or place of betting, and on allowing a person to bet on licensed premises in Victoria.
107 Sportsbet's contentions emphasise the real gravamen of its complaint. Its complaint is directed not so much at the Impugned Provisions as at the exemptions granted to Tabcorp by reason of its licence. Sportsbet's true complaint is that an individual trader, namely Tabcorp, is given a preference that is not given to any other trader, whether interstate or intrastate. The real complaint of Sportsbet is that an exception to the long-standing prohibition imposed by the Impugned Provisions was created by the grant of a licence to Tabcorp to engage in offcourse wagering activities. That exception was created more than 50 years ago, in favour of the TAB, Tabcorp's predecessor. Sportsbet says, in effect, that, simply because its manner of doing business involves an element that happens to take place in the Northern Territory, albeit that it could take place in Victoria, it should be exempted from complying with the Impugned Provisions so that it can compete with Tabcorp on a privileged basis. Sportsbet, in effect, seeks to be given a privilege that is not available to any intrastate bookmaker.
108 Thus, whether or not the activities of Sportsbet that are prohibited by the Impugned Provisions could fairly be characterised as trade or commerce between the Northern Territory and Victoria, the prohibitions of the Impugned Provisions do not constitute a discriminatory burden of a protectionist kind. Section 49 is not attracted by any of the Impugned Provisions. In the light of that conclusion, it is not necessary to consider whether any burdens imposed by the Impugned Provisions were appropriate and adapted to achieve legitimate ends.
109 Some months after these reasons were first formulated, the decision in Sportsbet v Harness Racing Victoria and Anor (No 6) [2012] FCA 896 was published, on 21 August 2012. The parties sought and were granted leave to make further brief written submissions in the light of that decision. It was recognised in that decision that the entitlements that Tabcorp enjoys are not because it is an intrastate trader but because of the obligations that it undertook to make substantive contributions to the Victorian racing industry in return for rights correlative to those contributions (at [126]). Tabcorp does not enjoy retail exclusivity because it is an intrastate trader, but rather because of its licence and the obligations imposed on it by the statutory scheme under which the licence is granted. No interstate trader is prohibited from engaging in any conduct by the Impugned Provisions simply by reason of the fact that it is an interstate trader. The reasoning in the decision, if anything, supports the position of Tabcorp and the State of Victoria.