Race field fees: How to avoid a slow (funding) death

Published in: Latest Intelligence Regulations should not be so burdensome that they choke the control body’s ability to raise sufficient fees to meet the genuine short, medium and long-term needs of the industry. They should also recognise that in the current funding environment, racing and gambling are co-dependent, with the result that racing needs a vibrant and financially viable Australian wagering and betting industry
 

By Bill Brown*

When asked for a comment recently on the setting of race fields fees in Australia, I expressed my concern that some of the money collected might not be invested productively.
I meant no disrespect to the various racing controlling bodies in Australia. My intention was to raise the prospect that the money might, for one reason or another, get diverted to such a degree that the industry is forced to do one of two things:
To either go back, cap in hand, to the government for financial assistance, or to “tax” licensed Australian betting operators out of the market.
Without going into too much detail about the history of race fields fees, race controlling bodies in Australia were given the power to raise funds directly from betting and wagering operators by imposing a fee for use of racing product.
This has largely resulted in operators being relieved of wagering and betting taxes imposed by State and Territory governments.
The race field fees were also introduced to deal with the “free rider” problem attributed to operators licensed in the Northern Territory and elsewhere. Without the imposition of race field fees, those NT operators had no legal obligation to pay for use of the states’ race fields information. The NT operators were said to be contributing nothing of significance to the racing industries in Australia. While not directly linked to the “free rider” issue, there were also issues of integrity floating in and out of the debate.
As this was going on, the rise of offshore operators accelerated in parallel. The Federal government’s attempt at regulating the availability of offshore online gambling and betting was proving to be ineffective. Then and now, Australian punters continue to bet more and more on these largely unregulated offshore sites.
Can or should governments do anything to regulate the way in which each control body spends the fees raised? Some background on the race fields legislation first.
The key states here are Victoria, New South Wales and Queensland. The relevant laws and the resultant schemes are similar in structure, with some differences in execution.
The relevant control body is invested with the power to issue race field approvals to operators. The approval is to use and publish race fields on races conducted in the particular state. Without approval, the operator commits an offence in the state and can be fined.
In each state, the control body is only constrained in what it must consider in determining whether or not to grant an approval if regulations prescribed by the government are in place. In Victoria, some regulations have been put into place to regulate the control body exercising its powers, however no matters have been prescribed in relation to race fields. The situation is similar in NSW and Queensland, however both those states require the control body to take into account whether the operator is licensed in Australia, is fit and proper, and whether granting of the application will undermine integrity of racing in the state.
In Queensland, there is a very interesting difference, which indicates a deliberate intention regarding how the fee is to be set. Under one provision of the Queensland law, a fee charged by a control body must reflect the reasonable cost to that body of providing the service for which the fee is charged. However, this reasonable cost test does not apply to constrain a control body in setting the amount of the fee for using race information. Accordingly, it can be inferred that a race information fee in Queensland is not a matter of cost recovery. Further, it could be inferred that the control body is not bound by any measure of reasonableness in setting that fee. Otherwise, a Queensland control body is not constrained in setting the fee.
If the worst were to occur, what means could be employed to ensure that the race fields fees raised by control bodies across Australia were re-directed to productive uses? The most obvious is the power to make regulations to impose controls over how a body pursues its objectives. Regulations can usually be implemented at the administrative level, as opposed to statutory changes which must pass via parliament.
In Queensland, regulations may prescribe a condition to which approval of a control body is subject. This regulation making power could be used by the Queensland government to impose a condition on a Queensland control body regarding the manner in which it sets and spends race field fees.
A similar regulation making power exists in the NSW legislation, establishing the NSW control bodies. However the independence of NSW control bodies from government (other than in selection of members) appears to be a key feature. As well, the set prescribed fees for “premium race meetings” in NSW provides little (if any) room for any other fee levels to be set for those meetings.
In Victoria, the relevant law provides that the control body must, for the purpose of determining an application, consider any matters prescribed in the regulations.
Aside from the regulation making power, it appears that Queensland has reserved some power for the relevant minister to intervene. The minister can give a direction to a control body on a range of matters, including one to ensure that its actions are accountable and its decision-making processes are transparent. As well, the minister may direct the body to review an existing policy, or to make a new policy about a matter. Victoria and NSW have chosen not to reserve this type of power to their relevant minister.
So if we assume the power is there, what might the relevant department consider? Conceptually, the regulations should not be so burdensome that they choke the control body’s ability to raise sufficient fees to meet the genuine short, medium and long-term needs of the industry. They should also recognise that in the current funding environment, racing and gambling are co-dependent, with the result that racing needs a vibrant and financially viable Australian wagering and betting industry.
Some things departments could require a control body to consider in setting and spending of race fields fees are:
1. Giving due recognition to the differences between returns to operators based on the betting model adopted (ie, betting exchange v fixed odds v tote) and differentiating the fee as between those models;
2. Balancing the financial interests of the industry and of operators via a fee which does not materially adversely impact potential financial returns to Australian licensed operators;
3. Recognising that offshore “free riding” operators exist and putting in place mechanisms to minimise revenue leakage to them or, at least, put law-abiding Australian-licensed operators at an advantage to them;
4. Having clear, transparent and publicly available financial forecasts and business plans that justify the fee against actual industry needs;
5. Requiring regular independent review and audit against those business plans and forecasts.
Governments have shown faith in control bodies across Australia and these are suggestions to use regulation making powers to prop up that faith. Let’s hope the faith shown is well founded and we don’t have to go back to old days of taxes or levies on Australian licensed operators. That would be a great pity and would only hurt the good guys.
 

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