|
|||
|
|||
|
 |
|
|
Category |
Interactive Gaming $ |
All Gambling $ |
|---|---|---|
|
Gambling expenditure |
5 387 000 |
13 341 554 000 |
|
Per capita expenditure |
0.38 |
931.64 |
|
Gambling turnover |
105 663 000 |
113 863 290 000 |
|
Per capita turnover |
7.38 |
7 951.07 |
Notes: 'expenditure' is the net amount lost; 'turnover' is the amount wagered. Interactive gaming is defined as wagering on Internet casino sites: it excludes wagering in the form of sports betting and lotteries via the Internet.
The Northern Territory was the only State/Territory to report expenditure and turnover for interactive gaming in 1999-2000. Interactive gaming turnover increased from $2.59 million in 1998-99 to $105.66 million in 1999-00; interactive gaming expenditure increased from $0.14 million to $5.39 million. So it is currently a tiny proportion of total gambling, but is growing very rapidly.
The Australian Casino Association has welcomed the fact that the legislation will not prevent the Australian Internet gambling industry from operating in overseas markets, but has criticised the ban on Australian players as it will force them to use less regulated overseas sites.(11)
The head of the Internet Industry Association, Peter Coroneos, has called the legislation illogical and counterproductive, as it would result in the 'world's best practice protections' being exported, but not being available to Australians.(12)
Professor Jan McMillen of the Australian Institute of Gambling Research has described the Bill as 'morally indefensible', because it implies Australians should be protected from Internet gambling but allows Australians to profit from the harm caused overseas.(13)
Racing groups and the commercial television industry have expressed concerns that the Bill will inadvertently prohibit non-Internet TAB and lottery punting, as well as interactive game shows and TV competitions.(14) The Australian Racing Board has argued that Internet wagering has allowed the TABs to service customers at lower cost and had directly benefited the racing industry, which derives 70 per cent of its revenue from TAB payments.(15)
The Northern Territory Racing and Gaming Minister, Tim Baldwin, has called on the Government to abandon the proposed ban and adopt the regulatory model released by the States and Territories.(16)
Some commentators have argued that the prohibition is logically inconsistent: a bet placed over the phone is regarded as acceptable, but if the same wager is made using a keypad over the Internet, then it will be illegal.(17)
The following are the major overseas developments reported in the last four months:(18)
The central provision in the Bill is clause 15 which creates the offence of providing an 'Australian-based interactive gambling service'where the service has an 'Australian-customer link'. A gambling service has an Australian-customer link if, and only if, any or all of the customers of the service are physically present in Australia (clause 8). A penalty of $1.1 million for bodies corporate and $220 000 for natural persons applies for each day of contravention (subclause 15(2)).(19)
What gambling services are captured?
In order to understand the nature of the offence created by clause 15 reference must be made to a number of defined terms in Part 1 of the Bill. The term 'Australian-based interactive gambling service' is defined in clause 5. It includes a 'gambling service'(20) where the service:
The last element is designed to ensure that the prohibition only applies where the gambling service: is provided in the course of carrying on a business in Australia; has its central management and control in Australia; is provided through an agent in Australia; or is provided to customers using an Internet carriage service, and any or all of the content is hosted in Australia (clause 7).
Subclause 5(3) limits the ambit of Australian-based interactive gambling services by specifying a number of 'excluded services '. This term currently includes a telephone betting service, contracts such as futures and options contracts covered by the Corporations Law and services which are exempted by Ministerial determination under clause 10.
Wagering
A wagering service provided over the Internet to allow betting on horse racing or sporting events is clearly within the ambit of the prohibition in clause 15. Many submissions were made to the Senate Environment, Communication, Information Technology and the Arts Legislation Committee (the Senate Committee) which sought to distinguish online gaming from online wagering and arguing that the latter activity should be excluded from the Bill.
The Netbets Report defined online gaming as where the 'gambling event is based on a computer program and the outcome is determined by a random number generator. These activities contain no element of skill and include games such as black-jack, poker, lotteries and electronic gaming machines.'(21) In contrast, in a wager the gambling event takes place on a race track or sports field and the Internet is just a mechanism for placing the wager.
Proponents of the view that wagering should be exempt from the prohibition state that the nature of the activity, involving analysis and skill, is less likely to cause problems than gaming. Further, they argue that on the ground of technological neutrality, Internet wagering should not be treated differently from telephone betting. The economic value of the racing industry to the community was also highlighted in submissions. In contrast, proponents of a uniform approach stated that while gaming machines were primarily responsible for creating problem gamblers, wagering on racing was also significant.
Similar arguments were made during the debate about the Moratorium Act. In order to secure the passage of that legislation through the Senate, the Government had to agree to exempt online wagering from the moratorium.(22) The Government has indicated some willingness to bargain on this issue in relation to this Bill. The Minister has committed the Government to 'having a good look' at amendments that would exempt wagering.(23)
Lotteries
The Senate Committee also heard a number of submissions from operators that lotteries should be exempted from the Bill. Submissions argued that lotteries were not as addictive as other games of chance and do not contribute significantly to problem gambling in Australia. The Senate Committee accepted these submissions noting that 'many Australians would not necessarily even consider lotteries as falling within the definition of gambling'.(24)
If this recommendation were accepted by the Parliament it would represent a significant change from the Moratorium Act which prohibited the introduction of new online lotteries during its period of operation.
Unintended Consequences
Gambling operators have also submitted that the Bill will capture activities that were not within the Government's contemplation. This broad scope of the Bill arises largely from the fact that the definition of Australian-based interactive gambling service captures services offered through any 'listed carriage service'.(25)
The term 'listed carriage service' is defined in section 16 of the Telecommunications Act 1997. Generally speaking, it includes a carriage service between two points in Australia or a point inside Australia and a point outside Australia. A carriage service is a means for carrying communications by means of guided or unguided electromagnetic energy.(26) The Senate Committee heard evidence that wide area networks used by operators such as the NSW TAB to support on-course agencies and linked poker machine jackpots would be caught even though the customer does not place any bets on-line.
NOIE told the Senate Committee that it was not the intention of the legislation to address those matters and that amendments were being drafted to deal with these issues. Subsequently, the Government sought legal advice on the Commonwealth's capacity to ban linked jackpot poker machines. The Prime Minister then stated that the amendments to remove the 'unintended consequences' were on hold while the Government considered this advice.(27) Recent comments by the Minister for Communications, Information Technology and the Arts, however indicate that the Government will not be seeking to use this Bill to prohibit linked poker machine jackpots and will leave regulation of poker machine gambling to the States. The Minister stated:
'we have always taken the view, as do they [the States], that we have a direct responsibility in relation to telecommunications which applies to interactive services. They have a direct responsibility for poker machines, and they ought to address that responsibility.'(28)
The Defence of Reasonable Diligence
Subclause 15(3) provides gambling operators with a defence where they can bring evidence suggesting a reasonable possibility(29) that they did not know or could not with reasonable diligence have ascertained that the service had Australian customers. The burden of contradicting this evidence then shifts to prosecution.(30)
The Explanatory Memorandum indicates that reasonable diligence may require the use of 'geolocation software programs' to determine the country from which a person is accessing the Internet and block web pages from view.
In determining whether the use of geolocation software programs or other monitoring systems constituted reasonable diligence, regard would need to be had amongst other things, to the technical and commercial feasibility of using such programs or systems.(31)
Submissions to the Senate Committee argued that this reasonable diligence defence was vague and uncertain. Gambling operators questioned the reliability of the geo-location software promoted in the Explanatory Memorandum and two operators indicated that they would go offshore rather than take the risk.
The Senate Committee recommended that the due diligence requirement should be clarified either in the Bill or through regulations. The Committee also saw merit in an approach where the requirements of due diligence were set out in a relevant industry code.(32)
The second element of the regulatory framework is a complaints scheme. The framework is similar to that imposed by the Broadcasting Services Amendment (Online Services) Act 1999 for dealing with violent or sexually explicit Internet content.
Part 3 bestows investigatory functions on the Australian Broadcasting Authority (ABA). Clause 16 provides that a complaint may be made to the ABA if a person believes that end-users in Australia can access prohibited Internet gambling content(33) using an Internet carriage service. Clause 23 protects complainants from civil liability that may arise from making a complaint or statements to the ABA provided that they acted in good faith.
Clause 17 enables complaints to be made by a person who believes that an Internet service provider (ISP) has contravened an industry code or online provider rules (see below). An Australian resident, a body corporate carrying on activities in Australia or the Commonwealth, a State or a Territory, may make a complaint (clause 19).
Division 2 governs ABA investigations. Under clause 20, the ABA must not investigate a complaint if it relates to Internet content hosted in Australia. Instead it may refer the complaint to the Australian Federal Police or the police force of a State or Territory. If the ABA decides to do so the complainant must be notified.
The ABA's role in regulating online content need not be passive. Clause 21 provides that the ABA may investigate whether there have been breaches of the regulatory framework on its own initiative. Clause 22 gives the ABA broad power to conduct investigations as it sees fit.
Content hosted Overseas
Division 3 deals with the action the ABA is required to take against prohibited content that is hosted outside Australia. Under clause 24, if the ABA is satisfied that Internet content hosted outside Australia is prohibited Internet gambling content, the ABA must:
ISPs will not be obliged to comply with a standard access-prevention notice if they are employing a 'recognised alternative access-prevention arrangement' that has been declared by the ABA. Examples of such arrangements could include an arrangement that:
An arrangement may only be declared if the ABA is satisfied that it is likely to provide a reasonably effective means of preventing access by end-users to prohibited Internet content.
Clause 27 is an anti-avoidance provision. The
ABA may issue a 'special
access- prevention notice' where it is satisfied that material is
substantially similar to content which is subject to a standard access-prevention
notice. This provision is designed to accommodate the possibility that
Internet content may be modified in a minor way in an attempt to defeat
the regulatory regime.
Clause 28 is related to the enforcement provisions
in Part 5. It provides that an ISP must comply with a standard
access-prevention notice (subsection 28(1)) or a special
access-prevention notice (subsection 28(2)) 'as soon as practicable
or in any event by 6 pm on the next business day after the notice has
been given'. These two subsections constitute part of the 'online provider
rules' (clause 54 see below). Breach of these rules renders an
ISP liable to the offence provisions in clause 55 and/or clause
57. Penalties of $5500 for an individual and $27 500 for a corporation
apply for each day of contravention.
ISP Code of Practice
The Bill facilitates the involvement of ISPs to develop codes of practice that address concerns about the accessibility of Internet gambling. If these codes are not developed or are deemed inadequate, the ABA is empowered to develop mandatory standards for the industry. Part 4 of the Bill deals with these matters.
Clause 36 states the Parliament's regulatory policy with respect to industry codes. A single code should be developed by a body representing ISPs that deals with exclusively with 'designated Internet gambling matters'. This term is defined in clause 35 to include the formulation of a designated notification scheme and procedures to be followed by ISPs in dealing with Internet content notified to ISPs by the ABA. The clause also instructs the ABA to make reasonable efforts to ensure that an industry code or industry standard is registered before the commencement of Part 3 of the Bill.(35)
The ABA must register the code if it complies with the checklist of matters contained in clause 38. These matters relate to whether there has been appropriate consultation in the development of the code and whether the code addresses the issues required by the legislation. The ABA may direct an ISP to comply with an industry code under clause 42. Compliance with such a direction is an 'online provider rule'. If an ISP fails to comply with a direction by the ABA to comply with the relevant code, it will be guilty of an offence under clause 55.
The Bill provides for a number of circumstances where the ABA may impose an industry standard, namely where:
Standards made by the ABA are subject to disallowance by either House of Parliament. ISPs must comply with the industry standard (clause 48). Contravention of an applicable standard is a breach of the online provider rules and renders a person guilty of an offence under clause 55.
Part 5 draws together the requirements on ISPs under the Bill, and terms them 'online provider rules'. The purpose of this is to tie them in with the enforcement provisions.
The online provider rules are set-out in clause 54. They require that:
The ABA may, but is not required to, issue a formal warning to a person contravening the online provider rules (clause 58). The ABA has the additional power to apply to the Federal Court seeking an order that an ISP cease operations if it believes that the entity in question is not complying with an online provider rule (Clause 59).
Clause 60 protects ISPs from civil proceedings arising from activities done in compliance with an industry code, an industry standard or ABA notices to take reasonable steps to prevent end-user access to prohibited Internet gambling content.
Part 7 provides for the review of ABA decisions under the Bill by the Administrative Appeals Tribunal or Administrative Review Tribunal, depending on whether the legislation establishing the latter body commences.
A review of the operation of this legislation must be conducted by 1 July 2004 (clause 68).
The Bill prevents Australian Internet gambling operators from providing services to customers in Australia but does not prevent operators from providing the same services to overseas residents. In its current form, it is unlikely to substantially damage the major Internet gambling operators in Australia as they source most of their revenues from overseas(36). Some commentators have questioned the morality of attempting to protect Australians from Internet gambling while allowing Australian firms to profit from problem gamblers in other countries(37). In contrast, the Minister has argued that it is not appropriate for Australia to be a 'world policeman' on Internet gambling and that access to Internet gambling is a matter for governments in each country.(38)
The Bill has also been criticised for failing to do enough to protect Australians from accessing overseas services. The Senate Committee heard that the measures favoured by the Bill to prevent access to overseas sites such as the use of ISP filter technology can be readily circumvented(39). An alternative approach suggested(40) involved the control of financial transactions, for example by prohibiting credit card gambling and preventing banks and other entities from crediting funds to overseas based Internet gaming operators. NOIE reported that such an approach is technically feasible:
It is possible for credit and debit card issuers to develop payments systems that track specific merchant codes in order to identify likely gambling transactions. Once identified, a financial institution can take appropriate action, such as refusing to authorise the charge.(41)
However NOIE rejected the use of financial controls because of practical difficulties including that:
The argument that financial transaction controls on Internet gambling could be evaded and therefore should not be pursued does not appear to be convincing given the weaknesses in ISP filter technology. While financial transactions controls may not prevent Australians from Internet gaming with foreign operators, they may make it considerably more difficult and thereby curb activity.
An alternative approach advocated by the Opposition is that of improved regulation. This view is consistent with that propounded by the Productivity Commission in its report into Australia's gambling industries. The ALP has stated that a total prohibition on Internet gambling is neither feasible nor desirable and that State and Territory co-operation is required to implement a national regulatory framework. It argues that a legal, regulated industry is the best harm minimisation policy.
'Where a body corporate is convicted of an offence against a law of the Commonwealth, the court may, if the contrary intention does not appear and the court thinks fit, impose a pecuniary penalty not exceeding an amount equal to 5 times the amount of the maximum pecuniary penalty that could be imposed by the court on a natural person convicted of the same offence.'
Kim Jackson and Mark Tapley
19 June 2001
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.
ISSN 1328-8091
© Commonwealth of Australia 2000
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 2000.
