Title: ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS: Interactive Gambling (Moratorium) Bill 2000: Discussion

Date: 25 August 2000 Committee: ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS

Reference: Interactive Gambling (Moratorium) Bill 2000

Place: Canberra Questioner: CHAIR; Bishop, Sen Mark; Lundy, Sen Kate

Responder: Dr Badger; Mr Dale

Page: 1

Proof: YES

Database: Committees Considering Bills

Source: Senate

CHAIR —I welcome the officers from NOIE. Do you wish to make an opening statement?

Dr Badger —We do not have a specific opening statement to make but being aware of the views of one member of the committee about responding to earlier submissions I have had my colleagues here today to listen to submissions. While we have not had a chance to go through things in detail, Mr Dale might give you just a couple of comments on how he perceives some of the general comments that have been made today. Listening to the discussion I have heard for the last hour and a half or so, I note that there has been a lot of discussion about the substantive issue of the regulation of gambling which is really what the moratorium is allowing the government to examine. We will put that to one side. Mr Dale might like to make a couple of comments.

Mr Dale —My apologies for the state of my voice. I have no control over the Canberra climate and my state of health. I will just note quickly some of the issues that I have heard and that my colleagues have heard raised by witnesses in the course of today's hearing. Obviously, we have not had the opportunity to read submissions in detail yet. I will make a couple of points. If you wish to follow up those in detail I guess we will take it from there.

The question of consultation on this bill has been raised a number of times. I think there may have been some confusion on the part of some witnesses concerning the two very distinct but complementary processes the government now has in train. One is this legislation and the other is the inquiry being conducted by our agency into the feasibility and consequences of a ban on interactive gambling. The consultative process for the inquiry, which is still under way, has been one of inviting submissions, granting a number of extensions and continuing to discuss with all of the interested parties how we can take that discussion forward, and we are looking at ways of perhaps some further public discussion about those issues.

The discussion about consultation on the bill, though, is quite a different issue. I will just note for the moment that it is not normal practice, although it can sometimes occur, for the specific details of draft legislation to be made available to the public or to interested parties in industry. There was certainly consultation with the industry and state governments and a number of user groups in the early stages of the government's consideration of gambling policy generally, including Internet gambling. That was earlier this year but before the process of drafting the bill commenced. Again, some confusion may have arisen about who consulted whom about what. As I say, we can return to that later if you would like to follow that up.

Senator MARK BISHOP —We will.

Mr Dale —A number of witnesses have raised concerns about firms that propose to limit their customer base to non-Australian residents, and that was characterised either as an unintended consequence of the bill or as something positively harmful. I think there are two issues there which I will again note briefly. One is that it was important to draft the definition of an Australian firm as broadly as it is in the bill to ensure that firms did not seek to avoid the provisions of the bill by simply moving servers around and things like that. Secondly, there is a valid public policy point that if the Australian parliament decides that an issue is sufficiently harmful to pass legislation to restrict it domestically, effectively the export of such a harm is arguably very much contrary to good public policy and not guaranteed to win you friends overseas.

A third point concerns the question of exemptions. That was covered in some detail by a number of witnesses this morning, particularly in relation to, firstly, wagering and, secondly, to lotteries. All I will note at the moment is that, as far as we are aware, there are still no unintended consequences of the draft, the inclusion of those forms of gambling is intended, and we can answer questions about that if you like.

The final point that we noted concerned comments about the period of the moratorium, a 12-month period. I think that it is important to remember that the timing of the moratorium, pause or freeze allows not only for the conduct of the inquiry which our agency is currently running but also for implementation of any decisions the government may make following that inquiry. Clearly, should the government pursue a decision to ban interactive gambling, then the implementation of that is not something that would occur without some lead time. So there are a number of other contingencies envisaged by that 12-month period, not simply the conduct of one inquiry. Those are the things that I had noted during the course of witnesses giving evidence today.

Senator MARK BISHOP —Thank you for those comments, Mr Dale. I might start where you started with a degree of consultation, and I would ask you to respond in terms of industry and firm groups and, secondly, relevant state and territory governments. All of the firms, I think, and both of the industry groups here today advised that there had been no consultation with them concerning the policy behind the bill or the drafting of the bill prior to it being tabled in the parliament last week. Can you confirm that?

Mr Dale —There were two different processes of discussion that were pursued—firstly with state and territory governments and secondly with other groups. As far as state and territory governments are concerned—

Senator MARK BISHOP —Perhaps I can ask the questions and you could answer the questions before we go on. My question firstly was with respect to firm and industry groups.

Mr Dale —The drafting of the legislation has not been made available to any of the parties, either industry groups or state or territory governments. As far as industry groups are concerned, as far as I am aware there was never any invitation provided from the government to comment on the proposal which had been announced by the government for the first time at the ministerial council meeting in April and subsequently confirmed on 19 May by way of a joint press release from the two ministers. So there was no proactive invitation that I am aware of to contribute to that comment.

A number of those groups, including a number of the companies and user groups who have given evidence today, sought to have discussions with us about an inquiry and possible legislation. We responded positively when people sought meetings. So a number of the firms have had meetings with us because they asked us. They said, `We want to come to Canberra and talk to NOIE about what might happen here.' And we are in the business of responding positively when people ask us to meet with them. But that is different from consulting on the draft bill.

Senator MARK BISHOP —The question is not about the processes of the gambling council or various press releases back in December, February, April and May. The question I am asking you relates to the bill, and that is what I want to limit the conversation to at this stage. You confirm that there has not been any invitation or consultation to the various firms and industry groups as to input into the bill?

Mr Dale —That is correct.

Senator MARK BISHOP —You also make the point that is not normal practice.

Mr Dale —It is not standard practice, but it can happen.

Senator MARK BISHOP —My recollection of that extensive bill we did prior to breaking in June—the digital TV legislation—was that there had been extensive industry consultation with various firms and industry groups prior to the tabling of that bill in the parliament. That is correct, isn't it?

Dr Badger —Yes, there was. I should point out, though, that that bill is somewhat larger and more complex in terms of the things that it has to put in place. Whereas this is somewhat—

Senator MARK BISHOP —I accept that comment, Dr Badger. But, nonetheless, this bill also has a certain range of wealth creation or wealth reduction consequences for various players in a similar industry. So you have had no consultation. Are you currently—

Dr Badger —I just want to point out that we are responding in terms of discussions that officers of the national office have had. It may well be that there have been discussions between these groups and the minister and the office.

Senator MARK BISHOP —Each of the firms and the industry groups this morning advised us, Dr Badger, that there had not been any consultation or discussions with the minister's office either, so we covered off both ends. I am sure you would be aware if there had been. Someone would have made that information available to you.

Dr Badger —In general terms.

Senator MARK BISHOP —Yes. Now that the legislation has been tabled and we are going through this bill review process, does the government intend to have consultation with various firms and industry groups?

Mr Dale —On this legislation?

Senator MARK BISHOP —Yes.

Mr Dale —I would imagine that the next step would be the government considering the report of this committee.

Senator MARK BISHOP —And that has to be tabled by 4 September, on Monday week?

Mr Dale —I believe that is the framework, yes.

Senator MARK BISHOP —It is also currently the government's intention to process the bill as a matter of urgency through the parliament, is it not?

Mr Dale —I believe that has been indicated publicly, although I am not aware of any specific parliamentary timetable.

Senator MARK BISHOP —No, I am not aware of the timetable either, but the minister has advised the parliament from memory that it is government policy to have this bill discussed in both houses as a matter of urgency.

Mr Dale —I believe that is correct.

Senator MARK BISHOP —So that leads me to the inevitable conclusion that any time for consultation at all is going to be minimal. Is that correct, Mr Dale?

Mr Dale —That seems a sensible conclusion, yes.

Senator MARK BISHOP —Perhaps you might explain to us this wagering/gambling distinction. We had a lengthy discussion this morning with firms that have been engaged in wagering for many years. Their position was, firstly, to reject the bill; and, secondly, to seek to amend it to exclude their longstanding legitimate business interests. Can you tell me the difference between the following situations? If I have an account at the local TAB and I ring up and want to put $100 on horse number three in the fifth—and I have got money in my account—that is legal and I can do it every day of the week in every state or territory of Australia under appropriate legislation. If I want to go into my office and bring up ACT TAB or TABCORP, or whatever it is, on the Internet and bet $100 on number three in the fifth in my existing account, this legislation, as I understand it, seeks to prohibit such activity. What is the policy of rationale behind that?

Mr Dale —The legislation prohibits such activity unless it was being provided at 19 May. A number of Australian wagering operators would be able to continue to provide that service, but it is certainly true that, if the bill became law, a number would be unable to provide that service during the moratorium period. As far as the government is concerned, the difference is that, as a matter of principle, gambling is gambling. Gambling includes wagering and lotteries. Therefore, interactive gambling is interactive gambling, and we believe the appropriate policy approach is to look for reasons for exclusion.

You gave the specific example of telephone betting, which, of course, has been in place for some time. The difference is that the intention of the legislation is to preclude the expansion of new forms of gambling by consumers rather than the long-established telephone betting arrangements, or indeed other voice telephony based gambling arrangements. The TAB voice telephony arrangement—without going into the ins and outs of SP bookmaking—is long-established, and the government's concern is with new forms of gambling and access. The fact is that access from your office is also access from your home as far as the Internet is concerned, and that brings us back to the basic principles behind the bill.

Senator MARK BISHOP —Thank you for that lengthy discussion. I do not understand the government: it is not just new forms of gambling, but additional forms of gambling of the type engaged in by established firms. For example, if New South Wales TAB or Tabcorp, for whatever reason, did not allow telephone betting to the state of Western Australia and wanted to offer a new service within the definition provided by the bill, they would not be permitted to do so. I do not understand the rationale behind that. I pick up my telephone, I dial a number and it goes down the line to the receiving station. When I get on my computer, I press a few buttons, it goes down the same line to a receiving station and we do our business. Apart from your explanation, I do not understand the difference between the two.

Mr Dale —It is one of a number of areas in the bill where I guess a line had to be drawn. The existing telecommunications regime makes a number of regulatory distinctions between different forms of carriage service. We are trying to be consistent with that regime, among other things, and I think it sits logically with that approach.

Senator MARK BISHOP —Stop there. If I want to walk down the street to buy a lottery ticket from a kiosk in my local shopping centre and pay $10 for it, I can do that. However, if I just want to buy a lottery ticket over the Internet by pumping in a few numbers and paying my 25c call charge, this bill will not allow that. What is the difference? Why are you restricting my access to products that have been in the marketplace since I was a boy?

Mr Dale —There are a number of reasons. As I said, the bill is based, among other principles, on a concern that existing control mechanisms offline are much harder to enforce. That applies to the purchase of lottery tickets or lotto-type games, and the concern is about expansion through much easier access in the home—

Senator MARK BISHOP —So, without any equivocation, you say that your purpose is to restrict the development of gambling services and gambling products online?

Mr Dale —Yes, for the period of the moratorium. The government has said that on the public record on a number of occasions.

Senator MARK BISHOP —Do you have any evidence to present to us of any illegalities, improper behaviour or abuses going to the online purchasing of lottery tickets and associated products or wagering and associated forms of gambling?

Mr Dale —No. Our advice from the state and territory governments, which we accept, is that the incidence of those sorts of problems to date has been very low. We accept that evidence.

Senator MARK BISHOP —Do you have any contrary evidence from the Australian Federal Police or AUSTRAC or similar Commonwealth government agencies?

Mr Dale —No, we do not.

Senator MARK BISHOP —On page 13 of the EM, in the third paragraph you say: The majority of responses received so far from industry and consumers have generally expressed concern about the Commonwealth's proposal to legislate for a moratorium. I accept that at face value. The question is: how many such responses have you received and have you received any responses from industry or consumer groups that support the moratorium and the bill?

Mr Dale —In relation to the inquiry we are conducting at the moment, I believe the number of submissions—

Senator MARK BISHOP —This inquiry?

Mr Dale —Yes, this inquiry.

Senator MARK BISHOP —The bill?

Mr Dale —No, I am sorry, not the bill.

Senator MARK BISHOP —Does that sentence I read out to you refer to this bill and today's hearing, or does it refer to the other general gambling industry inquiry that is going on?

Mr Dale —I am sorry, to be quite clear, the statement in the explanatory memorandum refers to the general government position of legislating for a moratorium, not the public inquiry, although a lot of the comments have tended to be common. To answer your question, the number of expressions of interest one way or the other or opinion one way or the other that we have received I could not immediately put a number on, but it has been reasonably steady since early this year when the Commonwealth first announced its intention to investigate this area. I could find out the number of letters and emails and so on.

Senator MARK BISHOP —Okay. Perhaps I will just repeat the question. How many industry or consumer groups have indicated to the government that they support this bill and they support the moratorium provided for in the bill?

Mr Dale —I believe the number would be about five or six. I would have to check the detail of that, but of that order.

Senator MARK BISHOP —I understand. Five or six is a pretty low figure. How many have expressed opposition to the bill and the moratorium?

Mr Dale —Probably of the order of 10 to 20 groups all up—maybe slightly more. I would have to check on that, but that would be roughly the ratio of them.

Senator MARK BISHOP —So roughly a ratio at this stage of four or five to one in opposition?

Mr Dale —That is my best guess at the moment, yes. To make it quite clear, the majority of those have come from industry interests rather than consumer and user groups.

Senator MARK BISHOP —The government of Tasmania issued a number of licences on or about 19 May. Do you have any reason to suggest to us that there were not full and sufficient probity, accounting and those types of checks undertaken by that government in respect of the licensees?

Mr Dale —I have got no reason to suggest that, no.

Senator MARK BISHOP —So you are satisfied that they had gone through appropriate and proper process?

Mr Dale —That is a matter for the Tasmanian regulators, rather than us.

Senator MARK BISHOP —It is, but do you have any reason to suggest they have not?

Mr Dale —I have no reason to believe they have not, no.

Senator MARK BISHOP —Dr Badger, does the department have any reason to suggest not?

Dr Badger —No, we have no information one way or the other.

Senator MARK BISHOP —You have had no complaints drawn to your attention by appropriate Commonwealth agencies?

Dr Badger —Not that I am aware of, no.

Senator LUNDY —What is your understanding of the status of the Kyl bill in the US?

Mr Dale —The Kyl bill was passed by the Senate in the US last year, but has lapsed. A similar bill in the House of Representatives in the US, sponsored by Congressman Goodlatte, was defeated earlier this year. My understanding is that at the moment there are a number of pieces of legislation dealing with Internet gambling which are still active in the Congress, but none of them have progressed in recent months as far as we know.

Senator LUNDY —Are you anticipating any of them progressing in the short term?

Mr Dale —Not before the US election in November, no.

Senator LUNDY —Is Internet gambling illegal in the US at the moment?

Mr Dale —That may sound like a simple question, but our dealings with the Justice Department and a number of officials in the US suggest that it is not completely clear there. However, there have been a number of prosecutions in recent months, for what is technically interstate sports betting being conducted via the Internet. In fact, there has been one operator sent to jail for that offence. Those were federal offences prosecuted by the Justice Department. However, the Justice Department has said publicly that they want further clarification, through legislation, of their power to act against Internet gambling, and that is the reason for some of the current legislation. We have not had any more detail than that from the US government.

Senator LUNDY —Whilst I can appreciate the complexities, what I am trying to ascertain is whether, if I were a company offering an online gambling service in a given state, to operate within that state there would be no legal restriction on me doing that at the moment.

Mr Dale —That depends on which state it is in the US, because some allow it and some do not. Some ban all forms of gambling, full stop.

Senator LUNDY —If it was the right state, I could do it.

Mr Dale —You could, but I would not presume to offer you business advice on that sort of thing. It is very complicated.

Senator LUNDY —I get the message, Mr Dale. I have heard many public statements saying that it is illegal in the US and that is why it makes sense for it to be illegal here. That is, in fact, not the case. Your answers have demonstrated that, whilst there are complexities and ongoing considerations, it is not possible to make that blanket statement and be truthful.

With respect to NOIE's involvement in this—I know Senator Bishop asked some questions about the relative priority of this issue—can I clarify how many officers NOIE has who are available to work on policy research and research associated with Internet policy issues, such as yourself.

Mr Dale —Including me, we have working on regulatory policy issues about 10 or 11 officers full-time. We also have within my own group—for the sake of completeness—three or four officers working on access and equity issues relating to online policy. That figure and those resources have remained consistent for some time.

Senator LUNDY —In terms of NOIE's role in developing this particular issue, previously with the online services bill the ABA had a very strong involvement in developing the regulations. Are you working with the ABA in relation to your endeavours through this inquiry?

Mr Dale —We have had no reason to have particular discussions with the ABA on gambling issues to date—or, indeed, with any other federal agency. It is a little different to something based on the existing broadcasting regimes. The short answer to your question is no.

Senator LUNDY —Is it possible for the submissions you have received as part of your ongoing inquiry to be made available to this inquiry, given the similar subject matter? I think that those submissions would help inform this committee's deliberations.

CHAIR —I think that would be a matter for the minister to decide, really, because they are submissions to a government agency and presumably related to the formulation of government policy.

Mr Dale —That is correct, Mr Chair, although I should say that we are able to make a commitment to make those submissions public in any event, with the minister's agreement. We were going to put them on our web site within a week anyway, but I will make sure that the committee has some copies first. To make it clearer, I think as witnesses have said, we did give a number of people a number of extensions of deadline but I think today is it. So we would anticipate having those made available to the world at large within a week or so, and I will certainly ensure that the committee receives copies of them as soon as possible.

Senator LUNDY —Mr Dale, there is actually a bit of an issue of timing here because we are sitting next week and we might very well be required in the houses of parliament to consider this bill. My request is on the basis that that information be actually available for us to use in consideration of the reports arising from today's inquiries. So this is a very specific request, if today is in fact your closing date, to make those submissions immediately available to the committee because the purpose of it—

CHAIR —Well—

Senator LUNDY —I am just requesting it, Chair. I appreciate that you need approvals.

CHAIR —The reporting date for this committee is Monday week, so I do not think the legislation will be coming back until the week after next.

Senator LUNDY —No, but if we get the submissions next Friday that is a bit different from us getting them on Monday when we can actually use the information contained in them to inform our considerations of this particular bill.

Mr Dale —I think all I can say is we will do our best.

CHAIR —Thank you, Mr Dale.

Senator LUNDY —What is your knowledge of any other considerations in other international jurisdictions in relation to online gambling?

Mr Dale —The situation in the UK, as we understand it, is that an inquiry is being conducted under the auspices of the Home Secretary into a full range of gambling issues—not dissimilar in fact to the Productivity Commission inquiry here last year—of which Internet gambling is one part. Although a number of submissions have been made to that inquiry and some of them have been mentioned in submissions and evidence to this committee, I think the actual process by the independent government inquiry is still continuing. My understanding at this stage is that they have not reached any clear conclusions on Internet gambling as such. But we are keeping in touch with them and they are very interested in developments here in Australia.

The US, we have mentioned. The only other jurisdiction which appears to be actively looking at the issue is South Africa. There, my advice is, the actual process of consideration through government and parliament is going fairly slowly. That is the only information I have. Globally, we do not get a lot of indication that this is an issue outside those countries, but there is interest in what is happening here.

Senator LUNDY —In terms of NOIE's involvement, where does the pursuance of this particular task you have in conducting this inquiry and in exploring options to banning Internet gambling fit within NOIE's charter as described at the launch by the minister some years ago?

Mr Dale —It is an issue of regulatory policy which the government has asked us to address as a particular priority. It sits as logically as the other issues that we currently have under consideration, which range from domain names to some aspects of privacy to a range of other issues. We know—

Senator LUNDY —Can I just put a finer point on it, Mr Dale. When the online services bill was being considered, NOIE went to some pains to assure us that it was not their charter or their role to actually pursue those regulations, and that it was then the ABA did a lot of the development work. I am just curious that, on the one hand, NOIE actively promotes the opportunities that exist within electronic commerce and the Internet industry in Australia and, on the other hand, you find yourselves tasked by the minister to effectively work out ways to shut it down. I am just wondering how, as an organisation, you are grappling within the government with that contradiction?

Mr Dale —If there is a contradiction, I would have to say we are grappling with it fairly well. In all honesty, the e-commerce promotion role that NOIE has covers a couple of areas, one dealing with industry facilitation type programs, but the other very much in setting an appropriate regulatory framework. The judgment about our work on online gambling being about shutting down e-commerce is how you would characterise it, but—

Senator LUNDY —Shutting down that particular industry.

Mr Dale —The moratorium is about a particular freeze on particular services, not a ban. The ban is an issue which I have said is being considered separately, and I think we would see that inquiry process as a constructive one, not a negative one. As far as the legislation is concerned, we are pursuing the normal role that a unit of the department has in preparing legislation and policy advice in the same way that we did for the online content legislation. The ABA was involved there, as I recall, simply because it was going to be the implementing agency for a particular scheme. This legislation is rather different; there is no administration scheme or federal agency involved—at least not yet.

Senator LUNDY —The Federal Police.

Mr Dale —The police for enforcement of an offence, but no more than that, and I think it is a slightly different issue from the online content regime. But I have to make clear we were involved in that in the same way as any other officials of the department would be in preparing that advice. It keeps us busy.

Senator LUNDY —I would imagine it would. Again going to the point of unintended consequences, the issue of lotteries has come up, as has the distinction between wagering and gaming. Because there are a number of services currently available in the wagering area, you would have heard earlier today, many witnesses drawing that distinction. What research has NOIE done to ascertain the impact on existing industries as a result of both the moratorium and, I presume, in the context of your overarching role, the hypothetical of the moratorium being removed after 12 months and a ban being perpetuated? Have you done that sort of scenario testing so you are able to advise the government of the quantified effects of your activities or their activities?

Mr Dale —It is a little hard to quantify in the proverbial spreadsheet way the impact of legislation like this or, indeed, much legislation, but I can say we have had extensive consultations in the early phase with those industry players and state governments. That was in the process of, I suppose, developing general knowledge of the industry and some possible issues involved with policy impacts. We did then conduct further analyses of our own concerning the drafting of the bill, and I can only say those are internal processes to which we applied what I think were appropriate resources.

Senator LUNDY —You did not consult with anyone in industry we heard today?

Mr Dale —We did not consult on a draft bill, as we have mentioned before. We did not circulate a draft bill to those players, but most—not all; but most—of the industry witnesses who have given evidence today are ones that either I or staff who report to me have had discussions with on and off over the last few months and, as I said, we always responded to their requests.

Senator LUNDY —Did they know, when you were discussing with them, that you were planning a ban by virtue of this moratorium?

Mr Dale —I think whatever statements we made in those meetings would have been linked to announcements on the public record by the relevant ministers. That is where, I think, the correct line of the public record is and I cannot really go beyond that. There were a number of statements publicly from the first ministerial council meeting onwards—as I think you were aware. So any discussions that we had would have been linked back to what was on the public record most recently from the relevant ministers. I think that was the correct way to do it.

CHAIR —Thank you for appearing before us. I thank Hansard and the staff of the committee for their assistance today. I now close this hearing.