FEDERAL COURT OF AUSTRALIA

Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896

FEDERAL COURT OF AUSTRALIA

Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896

CORRIGENDUM

1.    On page 1 of the Reasons for Judgment, line 4, delete the word “accepts”.

Associate:

Dated:    12 September 2012

THE COURT ORDERS THAT:

1.    The parties do provide draft orders to give effect to the reasons for decision, and do make such written submissions as to costs as they consider appropriate in accordance with the reasons for decision.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    Sportsbet Pty Ltd (Sportsbet) is Australia’s largest corporate bookmaker. It is a wagering service provider in the Northern Territory, holding a licence issued under the Racing and Betting Act 1983 (NT) to conduct the business of a sports bookmaker in the Northern Territory. Its business includes accepting accepts bets over the telephone and internet on the outcome of harness racing events or contingencies in Victoria, and elsewhere throughout Australia. Harness Racing Victoria (HRV) is the relevant “controlling body” of harness racing in Victoria established pursuant to s 39(1) of the Racing Act 1958 (Vic) (the Racing Act).

2    Since 2005, the Gambling Regulation Act 2003 (Vic) (the GRA) has prohibited wagering service providers (WSPs) from publishing or using race fields information, i.e. the names of the runners and related information for harness races conducted in Victoria. The GRA exempts from that prohibition “registered bookmakers” defined under the GRA and Tabcorp Holdings Limited (Tabcorp), in its capacity as the holder of the exclusive wagering and gaming licence under Pt 3 of Ch 4 of the GRA.

3    The GRA also establishes a scheme whereby HRV as the controlling body under the GRA, is authorised to grant approvals to WSPs to use race fields information. Without that approval, WSPs are prohibited from using race fields information to engage in wagering operations. It is impossible for a WSP, without access to that information, to conduct and provide betting services to punters on Victorian harness racing.

4    HRV is authorised to impose a fee as a condition of the race fields information approval. Sportsbet was granted an interim approval by HRV from November 2005. Sportsbet then applied to HRV for subsequent approvals, but did so under protest. Sportsbet was granted a series of approvals on a short term basis. At that time it was not required to pay a fee as a condition of approvals. On 19 December 2008, a further approval was granted for the period of 1 January 2009 to 30 June 2009 on the condition that Sportsbet pay 1.5% on assessable turnover derived from Victorian harness racing (the Turnover Condition). On 11 March 2009, HRV purported to revoke Sportsbet’s then current approval under s 2.5.19D of the GRA as Sportsbet had refused to pay the fee pursuant to the Turnover Condition.

5    Sportsbet in this proceeding challenges the validity of the race fields approval scheme. Section 49 of the Northern Territory (Self Government) Act 1978 (Cth) (the Self Government Act), the Territory equivalent of s 92 of the Constitution, provides that:

“trade, commerce and intercourse between the Territory and the States, whether by means of internal carriages or ocean navigation, shall be absolutely free.”

6    The central issues for determination in this proceeding are whether s 92, or more accurately its equivalent in s 49 of the Self Government Act invalidate:

(a)    the provisions under ss 2.5.19B and 2.5.19D of the GRA that Sportsbet and other WSPs are prohibited from using race fields information unless approval from HRV has been sought and granted; and

(b)    the Turnover Condition imposed by HRV on Sportsbet and other WSPs who are not otherwise exempt from that prohibition in return for the grant of race fields information approval to use Victorian harness race fields information.

7    Sportsbet contends that the prohibition on the use and publication of race fields information without approval, and the Turnover Condition, impose discriminatory burdens by prohibiting Sportsbet from using an essential element of its trade, namely race fields information. Relief from that prohibition occurs only by grant of the approval, requiring compliance with the Turnover Condition. It says that neither the prohibition, nor the Turnover Condition, is imposed on in-state wagering operators, including Tabcorp as the exclusive licensee and wagering operator and registered bookmakers under the GRA. It asserts that they amount to unlawful discrimination in favour of in-state operators and against out-of-state operators. To the extent that Tabcorp and registered bookmakers in Victoria make payments to HRV, Sportsbet contends that those payments are of different amounts, of a different nature, and are in return for valuable rights. By comparison, Sportsbet contends that the scheme that it is subject to does not confer any valuable rights, but merely overcomes the statutory prohibition. The improper protectionist purpose to which the legislative scheme and the approval process is said to be directed is the avoidance of revenue leakage in pursuit of protecting Tabcorp and advancing the interests of the joint venture existing between Tabcorp and the Victorian racing industry, by impairing the competitive advantage enjoyed by Sportsbet. Sportsbet contends that this is the principal purpose of the GRA, rather than that it is directed to ensuring that all WSPs make a contribution to the racing industry from which they derive their income. For those reasons, it submits that the relevant provisions of the GRA and the Turnover Condition should be invalidated.

8    The respondents to this proceeding contend that the exemption enjoyed by Tabcorp and registered bookmakers in Victoria from the requirement to obtain race fields information approval was incorporated into the Victorian race fields scheme with a recognition that those WSPs already fulfil the criteria for obtaining race fields information approval by paying amounts equivalent to (or higher than) the Turnover Condition as a contribution to the relevant section of the Victorian racing industry, and by subjecting them to the requisite level of supervision and scrutiny.

9    Furthermore, the respondents HRV and Victoria, and Tabcorp as intervener in these proceedings, contend that the provisions and the Turnover Condition have dual purposes and an effect which is legitimate and not protectionist. Those purposes are:

First, to ensure that all WSPs make an economic contribution to the Victorian racing industry and the conduct of the races on which they facilitate wagering. In Sportsbet’s case, this contribution is said to be equal to that of registered bookmakers in Victoria and less than that of Tabcorp. In doing so, the provisions operate to ameliorate a market distortion, where otherwise market participants such as Sportsbet use race fields information to conduct their business and make profits without making a contribution to the racing industry which generates those profits. In this way, Sportsbet was referred to as a “free rider”.

Secondly, to strengthen the capacity of controlling racing bodies, such as HRV, to effectively monitor and regulate WSPs, wherever located, who seek to offer wagering services on Victorian harness racing so as to preserve the integrity of the industry and protect it from the hazards of fraudulent practices or irresponsible operators.

10    Viewed in this context, they say that the provisions are not discriminatory, and do not confer any competitive advantage on Tabcorp or registered bookmakers nor do they confer a competitive disadvantage on Sportsbet.

11    Before considering the legislation, and the arguments agitated by the parties, it is necessary to understand the ‘common milieu’ in which the wagering trade occurs and to put the legislation, in its historical and present forms, within that context.

THE WAGERING MARKET: SERVICES, OPERATORS, COMPETITION AND REGULATION

12    Sportsbet is licensed under the Racing and Betting Act 1989 (NT) to operate seven days a week from a racecourse office in the Northern Territory. It has held that licence since 23 August 1999. It participates in an Australian wide wagering market and an international wagering market, and in particular a national market for wagering services via internet and telephone betting: Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 480 per Gleeson CJ, Gummow, Kirby, Crennan and Kiefel JJ (Heydon J delivered a separate concurring judgment) (Betfair HC). Within that market, Sportsbet competes with Tabcorp and other interstate totalisators, and also Victorian and other interstate WSPs.

13    Traditionally, wagering on racing events was limited to on-course betting. Wagers were placed with on-course bookmakers. This required a physical presence on the race course to offer those services. In recent years, the introduction of new technologies has changed the method of placing bets, as telephone and internet betting has become more available and more popular amongst punters. This includes betting via mobile phones.

14    In racing there are two betting “systems” operating, the totalisator (or pari-mutuel) system (s 1.3 of the GRA), traditionally operated by “TABs” and fixed odds betting, traditionally operated by a bookmaker. The nature of pari-mutuel betting and its comparison with fixed odds betting was addressed in Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 at [15] (Betfair FC) (see also Racing New South Wales v Sportsbet (2010) 189 FCR 449 at [15]-[17] (Racing New South Wales v Sportsbet). Sportsbet offers fixed price betting on thoroughbred and harness races in Victoria and elsewhere in Australia. Sportsbet also offers a number of fixed price products, which are intended to compete with totalisator betting. These competing services are known as “tote matching”, which allows a fixed price bookmaker to set their book by reference to the published odds of the totalisator. There are a number of bookmakers both in and outside Victoria that take bets on a fixed price basis on Victorian harness races. Tabcorp accepts bets through its various retail outlets and over the telephone and internet and offers fixed price odds on various contingencies including Victorian harness racing. It does so online and at its many retail outlets.

15    Gambling in Australia has been, and continues to be, the subject of substantial regulation and scrutiny. Wagering and betting was historically banned within Victoria, as it was elsewhere. In 1958, wagering and betting continued to be banned in Victoria, under the Police Offences Act 1958 (Vic) (the Police Offences Act) although limited exemptions appeared in the Racing Act providing for on-course wagering with registered bookmakers.

16    In 1958, the Victorian Government appointed a Royal Commissioner to enquire into whether off-course wagering should be permitted. This led to the enactment of the Racing (Totalizator Extension) Act 1960 (Vic) which introduced a single licensed totalisator system, and established the state-owned Totalizator Agency Board (the TAB) and introduced a further exemption from prosecution under the Police Offences Act for bets accepted by the TAB’s offices and agencies. By virtue of that enactment, TAB was the exclusive provider of legal betting facilities other than those provided by on-course registered bookmakers. Following the expansion of TAB’s exclusive activities between 1961 and 1993, a prospectus was issued on 30 June 1994, for the privatisation of the TAB. For that purpose, Tabcorp was incorporated, and shares in that company were held by Victoria. Tabcorp was granted the sole wagering licence under the Gaming and Betting Act 1994 (Vic) (GM Act) issued pursuant to s 12(1)(a), and was required to pay a one-off licence fee (for the wagering licence and concurrent gaming licence) of approximately $597.1M for a term of 18 years, set to expire in 2012. That Act was repealed by s 12.1.1(b) of the GRA with effect from 1 July 2004. From that date, Tabcorp was deemed to be the holder of the wagering licence under Pt 3 of Ch 4 of the GRA: s 12.2.1 and cl 4.2.1 of Sch 7 of the GRA.

17    Following its privatisation and float, Tabcorp was permitted to carry on, under its wagering licence, the business that had until then been carried on by TAB.

18    As a precondition to the grant of its wagering licence, and gaming licence, Tabcorp was also required to enter into commercial arrangements with the Victorian racing industry, including three relevant agreements. First, the Unincorporated Joint Venture Agreement (JVA) was entered into between Tabcorp and the racing industry to conduct wagering activities. The shares in the JVA were held 75% to Tabcorp and 25% by the racing industry, of which in Victoria, HRV is an essential element. Secondly, the Racing Program Agreement (RPA) provided that the racing industry would make available an annual racing program to Tabcorp in return for a fee. Thirdly, pursuant to the Product Supply Agreement (PSA) the racing industry agreed to provide race fields information to Tabcorp in return for a fee. Tabcorp as intervener in these proceedings contends that, implicit from the terms of the PSA, the fee is not payable simply for the supply of race fields information, but supply for the use of that information. The fee payable is provided in clause 8.1 of the PSA, which is a composite fee of 18.8% of the “Net Wagering Revenue” (as defined in the PSA), which comprises the gross amount of all bets accepted by Tabcorp on pari-mutuel racing (including both Victorian and other racing but not limited to harness racing) less other adjustments.

19    These arrangements secured funding for the Victorian racing industry in return for Tabcorp being granted the necessary inputs that it required to run its wagering operations, including the racing program and race fields information about those races. Through these arrangements, the Victorian racing industry received the vast majority of its funding. It is within that context that Tabcorp is otherwise exempt from paying for race fields information: s 2.15.19B(2)(b) of the GRA.

20    Traditionally, licensed WSPs in Australia accepted bets on racing throughout the country but only paid product fees and taxes to the States or Territories where they were licensed. This arrangement was referred to as the “Gentlemen’s Agreement” and permitted WSPs in any particular State to utilise race fields information from other States without payment of a fee, so long as they made an economic contribution to racing in the State or Territory in which they were licensed. The utility of the Gentlemen’s Agreement diminished as a consequence of increasing internet and telephone betting and the increasing presence of “corporate bookmakers”. The demise of the Gentlemen’s Agreement was discussed by Perram J in the first instance decision of Sportsbet Pty Ltd v New South Wales [2010] FCA 604 at [27]. Its end was heralded by the introduction of legislation across the country empowering controlling bodies to impose conditions on race fields information approval in the form of fees on turnover. The fact that, prior to the break down of the Gentleman’s Agreement, interstate traders did not pay any contributions to a racing industry other than its local industry is an irrelevant consideration in determining the character of the Turnover Condition for s 92 purposes: Racing New South Wales v Sportsbet.

21    In 2005, when the Victorian race fields scheme was first implemented, the traditional method of funding the racing industry through in-state WSPs alone (including Tabcorp) apparently had become insufficient as a result of the increasing prominence of corporate bookmakers. The Minister’s Second Reading Speech indicates that the legislation was introduced with the purpose of protecting the racing industry and government revenue (Second Reading Speech for Racing and Gambling Acts (Amendment) Bill at 4704-4705):

The Bill creates a new offence prohibiting the publication of race fields by unauthorised wagering services providers.

This amendment is designed to protect the industry against the current and potential practices of unauthorised wagering operators based interstate or overseas.

Unauthorised wagering service providers generate, or have potential to derive, significant revenue from Victorian racing however unlike authorised operators make no financial contribution to the industry or to state revenue in return.

It has been established that betting turnover in Victorian racing, currently being generated by large corporate bookmakers in the Northern Territory, is resulting in a significant revenue loss to the Victorian racing industry and government.

In addition, the transactions of unauthorised wagering operators are invisible to racing regulators. As a consequence, these transactions undermine the integrity of Victorian and Australian racing.

This new offence adds another brick to the wall of protection for the Victorian racing industry and all its related revenues. The offence is intended to deter interstate and overseas operators from unauthorised use of Victorian racing’s product.

The amendment is also consistent with the legislative approach adopted in other states such as New South Wales which is in the process of prosecuting a corporate Darwin bookmaker for the unauthorised use of NSW race fields.

The offence fills a gap in an existing suite of betting-related offences contained within the Gambling Regulation Act.

It is important to note that the offence has been drafted so as to provide the government with capacity, if so desired, to exempt selected betting operators from its application. Such flexibility is a relevant consideration in the context of the current review being undertaken of Victoria’s electronic gaming machine, wagering and lotteries licences.

Appropriate exceptions to the offence has also been identified to ensure that there are no unintended consequences for industry stakeholders, such as newspapers, who perform a legitimate service function to the industry when reproducing race field information.

In summary, this offence will reinforce measures available to combat illegal betting, it consequential threats to racing integrity and the revenues of both industry and government.

The offence does not in any way inhibit the state from licensing new wagering service providers in the future as its application is only in respect of illegal operators.

22    Corporate bookmakers are described as large businesses, operating from premises 24 hours a day, 7 days a week and which receive bets via telephone or internet. At least in Australia, they are predominately licensed in the Northern Territory. The attraction of registering and so being licensed in the Northern Territory is that it provides a regulatory regime that enables WSPs such as Sportsbet to conduct the business of wagering at a lower cost than many of its competitors that are licensed in other States. One reason for the lower cost is because the regulatory licence fees charged to bookmakers are lower than those imposed by most other States. The main WSPs that are competitors of Sportsbet and which also operate from the Northern Territory include CentreBet, Sportingbet Australia, Betstar, Betchoice, Betezy, and Luxbet. Tabcorp established Luxbet, a Northern Territory subsidiary, in response to Sportsbet and other WSPs offering wagering products and services from that location. As mentioned, WSPs often offer, amongst other things, to match or better the odds of the pari-mutuel WSPs within their respective States through tote matching. This competition has resulted in lower priced wagering products for punters.

23    It is said that the emergence and expansion of corporate bookmakers created regulatory concerns throughout Australia regarding the integrity and probity of WSPs.

24    Within that factual matrix, the Victorian race fields scheme was enacted in the GRA and subsequently effected by the Turnover Condition. Those provisions and terms were as a response to a changing wagering market. The Victorian race fields scheme is but one jurisdictional aspect of a national race fields approval framework, which introduced separate (but similar) legislative schemes across Australia, save in the Northern Territory.

25    Issues similar to those in this proceeding have previously been ventilated in relation to the WA regulatory regime in Betfair HC and in relation to the NSW regulatory regime in Sportsbet Pty Ltd v New South Wales [2010] FCA 604, and on appeal in Racing New South Wales v Sportsbet Pty Ltd: Sportsbet Pty Ltd v State of New South Wales (2012) 286 ALR 404; [2012] HCA 13 (Sportsbet HC). The High Court in Sportsbet HC explained the operation of s 49 of the Self Government Act at [9]-[13].

26    Returning to the GRA, its main purpose was to re-enact and consolidate the law relating to various forms of gambling and to establish the Victorian Commission for Gambling Regulation (VCGR): s 1.1(1). The principal objectives of the GRA include fostering responsible gambling, protection of minors from gambling, ensuring honesty in gambling, and freeing gambling from criminal influence and exploitation: s 1.1(2). The GRA seeks to achieve these objectives by “generally prohibit[ing] gambling and activities relating to gambling unless authorised under this Act…” and then providing approval for the licensed conduct of wagering and other forms of gambling: s 1.1(3).

27    The imposition of conditions on a race fields information approval has gone through three manifestations.

28    First, s 2.5.16A was inserted by the Racing and Gambling Acts (Amendment) Act 2005 (Vic) on 29 November 2005. Section 2.5.16A(1) prohibited a WSP from publishing or otherwise making available (whether in Victoria or elsewhere) a race field without approval of the appropriate controlling body.

29    Section 2.5.16A(2) provided that subsection (1) did not apply to:

(a)    the licensee within the meaning of Chapter 4 of the GRA (Tabcorp); or

(b)    the wagering operator; or

(c)    an approved bookmaker (now referred to in the current legislation as a “registered bookmaker”); or

(d)    a publication that is approved under s 2.5.19.

30    Secondly, Div 5A of the GRA was introduced by the Gambling Legislation Amendment (Problem Gambling and other Measures) Act 2007 (Vic) and commenced on 4 September 2008, on the repeal of s 2.5.16A of the GRA Act. The restriction on publication of race fields information was re-enacted in s 2.5.19B of Division 5A but in broader terms than in s 2.5.16A. Section 2.15.19B made it an offence for a WSP to use, as well as to publish or otherwise make race fields information available in the course of business, unless the WSP had the approval of the appropriate controlling body and complied with any conditions of that approval. It included a power in s 2.5.19D(4) to impose conditions on the grant of an approval, specifically including a condition that the WSP pay a fee or a series of fees of an amount or amounts and in the manner specified in the approval.

31    Thirdly, s 2.5.19D(4) was amended by Pt 6 of the Justice Legislation Amendment Act 2010 (Vic), which allowed the amount of the fee imposed by a condition to be specified in the approval or calculated in accordance with a formula or formulae specified in the approval. This permitted the fee to be calculated by reference to assessable turnover. This amendment was prompted by the decision in TAB Limited v Racing Victoria Limited; TAB Limited v Greyhound Racing Victoria [2009] VSC 338 where Davies J held that a condition that set a fee by reference to a percentage of turnover was not a condition that satisfied s 2.5.19D(4) as then in force because it did not specify an amount in the approval. Section 2.5.19D(4) is the provision which currently stands.

32    Sportsbet, as of 1 January 2009, is required to pay 1.5% on its assessable turnover on Victorian harness racing to HRV to obtain the use and publication approval. That fee was resolved to be imposed on Sportsbet following a Board meeting of HRV on 19 December 2008. Approval was granted to Sportsbet requiring compliance with the Turnover Condition. As already noted, Sportsbet has refused to pay the fee required by the Turnover Condition, and as a result, on February 2009 HRV resolved to give notice to Sportsbet revoking the approval.

33    Sportsbet in its submissions to the Court flagged these amendments and points to extrinsic materials including correspondence between the racing industry and officials in support of its contentions.

34    First, it says that the context of the legislation and its genesis reveal a purpose of exacting a charge on who it applies to, motivated not by a concern for economic contribution to the relevant section of the racing industry in Australia or Victoria but, given the joint venture partnership between HRV and Tabcorp, to correct revenue leakage caused by interstate entrants like Sportsbet. Secondly, it says that the discretion to grant approval and impose conditions as reposed in HRV gives it the unfettered ability to target interstate WSPs. It submits that HRV is in a conflicted and hybrid position of being both regulator and participant by virtue of its contractual arrangements with Tabcorp in the joint venture and the three agreements referred to above, and that it is impossible to understand the regulatory context without understanding HRV’s commercial imperative to maximise its joint venture revenue.

35    Sportsbet seeks to impugn those provisions of the race fields scheme which operate within a complex scheme for the regulation of the wagering market within Victoria and nationally.

THE LEGISLATION

Gambling Regulation Act 2003 (VIC)

s 2.5.19B of the GRA – Prohibition on Publication and Use of Race fields

36    Sportsbet, as a registered bookmaker in the Northern Territory is a “wagering service provider” under the GRA: see s 2.5.15AA(c) of the GRA. The GRA contains provisions which identify what WSPs can and cannot do.

37    Pursuant to s 2.5.19B of the GRA, it is an offence for a WSP to publish, use or otherwise make available in Victoria or elsewhere race fields information in the course of business, unless a prescribed exception applies. It relevantly provides:

Restrictions on publication and use of race fields

(1)    A wagering service provider must not, in Victoria or elsewhere, publish, use or otherwise make available, a race field in the course of business unless—

(a)    the wagering service provider has obtained the publication and use approval of the appropriate controlling body; and

(b)    the wagering service provider complies with the conditions (if any) to which the approval is subject.

60 penalty units.

(2)    Subsection (1) does not apply to—

(a)    the licensee within the meaning of Chapter 4; or

(b)    the wagering operator; or

(c)    a registered bookmaker; or

(d)    a publication that is approved under section 2.5.19.

38    HRV is the appropriate “controlling body” with respect to Victorian harness racing as defined in s 2.5.19A of the GRA for the purposes of s 2.5.19B.

39    A “race field” is defined in s 1.3 of the GRA:

race field means any information that identifies, or is capable of identifying, the names or numbers of the horses or greyhounds—

(a)    nominated for, or which will otherwise take part in, an intended horse race, harness race or greyhound race to be conducted in Victoria; or

(b)    that have been scratched or withdrawn from an intended horse race, harness race or greyhound race to be conducted in Victoria;

40    Race fields information is compiled by an officer of HRV. That involves processing the nominations, the horses, the acceptances, the field selections and barrier, the draw, the scratchings, the drivers, and other matters, and then the results are entered. Upon the compilation of the race fields information, it is made available on the HRV website, transmitted to third parties, and to the harness racing club that conducts the race meeting. Race fields information is freely and publicly available, promoted by the controlling bodies, and by those bodies that put on the races. Mr Anderson, the Chief Executive of HRV, attested that the incremental cost to HRV in providing race fields information to totalisators, registered bookmakers and WSPs is negligible, irrespective of the number of entities they are distributed to.

41    For the purposes of the exceptions prescribed in s 2.5.19B, a “registered bookmaker” is also defined in s 1.3 as “the person who holds a certificate of registration registered under Part 5A of Chapter 4”. Sportsbet is not a registered bookmaker in Victoria, and on the evidence has not sought registration under Pt 5A of Ch 4 of the GRA.

Section 2.5.19D of the GRA –Power to give a “Publication and Use Approval”

42    Section 2.5.19D(1) of the GRA provides HRV with a discretionary power to grant a “publication and use approval” to a WSP on an application made under s 2.5.19C, which permits WSPs to apply to HRV for that approval. The holder of a publication and use approval is relieved of the prohibition in s 2.5.19B provided the WSP complies with conditions, if any, to which the approval is subject. Section 2.5.19D(4) permits HRV to prescribe conditions upon the grant of the publication and use approval. Section 2.5.19D is in these terms:

2.5.19D     Publication and use approval

(1)    An appropriate controlling body may grant an approval to a wagering service provider to publish, use or otherwise make available in the course of business, in Victoria or elsewhere, a race field if the wagering service provider makes an application for that approval in accordance with section 2.5.19C.

(2)    For the purposes of determining an application for publication and use approval, an appropriate controlling body—

(a)    must consider the prescribed matters (if any);

(b)    may consider any other matters the appropriate controlling body considers to be relevant.

(3)    An appropriate controlling body must—

(a)    determine an application by either granting or refusing publication and use approval in the prescribed time; and

(b)    notify the applicant in writing of its decision to grant or refuse publication and use approval in the prescribed time.

(4)    Publication and use approval may be granted subject to any conditions the appropriate controlling body thinks fit, including a condition that the wagering service provider pay, in the manner specified in the approval, a fee or a series of fees of an amount or amounts—

(a)    specified in the approval; or

(b)    calculated in accordance with a formula or formulae specified in the approval.

(5)    Any fee that is payable as a condition of the approval is a debt due to the appropriate controlling body that granted the approval and may be recovered in any court of competent jurisdiction.

(6)    Publication and use approval—

(a)    takes effect on the day specified by the appropriate controlling body in the approval; and

(b)    remains in force for the period specified by the appropriate controlling body in the approval, unless revoked earlier under subsection (7).

(7)    At any time the appropriate controlling body, by written notice to the wagering service provider, may—

(a)    vary the publication and use approval (including a variation of the conditions to which the approval is subject); or

(b)    revoke the publication and use approval for any reasonable cause stated by the appropriate controlling body in the notice of revocation.

43    Review of a decision made under s 2.5.19D is available in the Victorian Civil and Administrative Tribunal: s 2.5.19E of the GRA. That process of merits review does not extend to reviewing the quantum of the fees set by HRV. In essence, the decision of HRV to impose the Turnover Condition on Sportsbet in its terms is not reviewable.

COMPARISON OF CONTRIBUTIONS made by intrastate and interstate Wsps

44    Whether Sportsbet’s case succeeds depends in part or whether it can demonstrate that the Turnover Condition imposed by the Victorian race fields scheme is discriminatory, and disrupts, adversely to it, the competitive relativities between it, as an interstate trader, and intrastate traders: Betfair HC at [60]. Section 92 and s 49 of the Self Government Act cannot be applied to a legislative provision in isolation from the economic and broader regulatory context in which it operates. It is therefore necessary to compare the contributions made by Tabcorp, registered bookmakers and Sportsbet to the Victorian racing industry, and to HRV as an element of that industry.

Intrastate WSPs

45    Intrastate WSPs, when providing wagering opportunities or services on Victorian harness racing, are required by a combination of legislation and executive measures to make a contribution to the conduct of harness racing in Victoria. It is convenient to consider separately Tabcorp and registered bookmakers, as that is how Sportsbet pleads its case.

Tabcorp

46    Tabcorp’s contributions to the conduct of harness racing in Victoria were achieved by requiring contractual arrangements to be entered into as a condition of the grant of the wagering licence. Tabcorp paid for its right to exclusivity to both wagering and gaming licences through a one-off licence fee amounting to approximately $597.1M. Those contractual arrangements have already been referred to above and include the JVA, the PSA and the RPA, which were contemporaneous documents executed on 25 May 1994.

47    Mr Freeman, the General Manager of Strategy and Finance, Media Division employed by Tabcorp, provided evidence as to the nature and extent of Tabcorp’s payments made pursuant to the commercial arrangements. Under the JVA, PSA, RPA and other arrangements, Tabcorp’s Victorian business is obliged to (and does) make financial contributions to the Victorian racing industry. The principal contributions that Tabcorp’s Victorian business makes to the Victorian racing industry are as follows:

(a)    the payment, under clause 2.3 of the JVA, of a 25% share to Vic Racing of the profits (excluding fractions) derived from the Joint Venture’s operations (including its wagering, gaming, approved betting competitions, Keno and virtual racing activities) (Profit Share Payment);

(b)    the payment, under clause 8.1 of the PSA, of a monthly product fee, calculated as 18.8% of “Net Wagering Revenue” (as defined in the PSA) in respect of its Victorian pari-mutuel wagering operations (not limited to revenue incurred in Victoria or in relation to any particular racing code) less any amounts charged to Tabcorp for race field (or equivalent) fees in other States and Territories (Product Fee Payment);

(c)    the payment, under clause 8.4 of the PSA of an annual marketing fee calculated by reference to “Off-Course Net Wagering Revenue” (as defined in the PSA) in respect of its Victorian pari-mutuel wagering operations (not limited to revenue incurred in Victoria or in relation to any particular racing code), which is a minimum of $2.5 million per annum indexed to account for growth since the 1996/7 financial year (Marketing Fee Payment);

(d)    the payment, under clause 8.1 of the RPA, of an annual program fee, again calculated by reference to “Off-Course Net Wagering Revenue” (as defined in the RPA) in respect of its Victorian pari-mutuel wagering operations (not limited to revenue incurred in Victoria or in relation to any particular racing code), which is a minimum of $50 million per annum indexed to account for growth since the 1996/7 financial year (Program Fee Payment); and

(e)    monthly payments under the Fixed Odds Product Agreement (FOA) attributable to the use of race fields information.

48    It is worth setting out clause 8.1 of the PSA dealing with the Product Fee Payment:

Subject to Clause 8.1(b) and (c), in consideration of the supply of the Racing Product pursuant to this agreement, the Joint Venturers shall pay a fee to Racing Products Victoria in arrears at the end of each Accounting Period equal to:

(i)    18.8% of Net Wagering Revenue in that Accounting Period; minus

(ii)    the total amount of Third Party Charges payable by TABCORP, the Joint Venturers and the Managers in that Accounting Period.

49    That payment of 18.8% of Tabcorp’s Net Wagering Revenue on all pari-mutuel betting on thoroughbred, harness and greyhound racing conducted pursuant to the wagering licence applies wherever that racing takes place. Tabcorp is then permitted to set off amounts paid for interstate race fields fees charged by reference to its pari-mutuel operations only. These are referred to as a “Third Party Charge”. The definition of “Third Party Charge” expressly excludes fees imposed by Victorian racing entities.

50    It was Mr Freeman’s evidence that race fields fees are part of the Product Fee Payment. He said that was evident from the definition of “Racing Product” and “Racing Information” in the PSA:

Racing Product” means Racing information (other than the Racing Program) relating to … harness racing … whether that racing is conducted in Victoria or elsewhere, that is necessary for the conduct of Wagering …

Racing Information” means information relating to … harness racing … including the participants in and results of Races, Race names, starting times of Races, thoroughbred, horse and greyhound names, names of sponsors, prizes, riders, drivers, handicaps, fields and results.

51    The evidence of Mr Freeman and Mr Cutajar who is the Chief Financial Officer of HRV was that Tabcorp pays a significant amount for race fields information. Tabcorp’s Product Fee Payments for 2009/2010 financial year, as referable to Victorian harness racing information, equalled approximately 3.27% of Tabcorp’s Victorian total racing turnover (on both pari-mutuel and fixed odds services) for providing it with access to interstate and Victorian race fields.

52    Tabcorp suggests, contrary to the submission of Sportsbet, that notwithstanding the use of the word “supply” in clause 8.1 of the PSA, the payments made are in essence, in consideration for the use of race fields information. Clause 1.2(g)(ii) defines “supply” (of Racing Product by Racing Products Victoria) as granting to Tabcorp whatever rights are necessary for Tabcorp’s Victorian business to conduct pari-mutuel wagering on races under its Wagering Licence. Clause 7.2 of the PSA requires Tabcorp’s use of the race fields information to be limited to the conduct of wagering. Properly understood, the PSA confers on Tabcorp the right of an essential input for use in its business, being the “race product”.

53    The FOA product fee payment is to be taken into account when calculating Tabcorp’s overall contribution for race fields information. Contrary to Sportsbet’s submission that the FOA product payment is “in exchange for permission from the Joint Venture to access fixed odds bets”, the fee is described as a “product fee” in the context of granting Tabcorp permission to use the racing product within the meaning of the PSA for its fixed odds operations. Mr Freeman gave evidence that the FOA was a commercial arrangement entered into to enable Tabcorp to use race fields information in its fixed odds betting operations, and that the amount payable by Tabcorp under that agreement equated to 1% of its total racing turnover, not just Victorian racing turnover, and that in the year ended 30 June 2010 that amount constituted approximately 2% of Tabcorp’s Victorian racing turnover derived from its fixed odds services on Victoria racing, there being no set-off for interstate race fields fees. It is said that Tabcorp’s overall contribution for race fields information is higher again when one takes into account the FOA product fee.

54    It is Tabcorp’s position, that it pays well in excess of 1.5% of the turnover derived from Victorian racing for the right to use Victorian race fields information. It says that absent the Victorian race fields scheme under challenge in this proceeding, Sportsbet would pay nothing.

Registered Bookmakers under the GRA

55    Chapter 4 Pt 5A of the GRA regulates the registration of bookmakers in Victoria. The definition of “registered bookmaker” is referred to in s 1.3 of the GRA. Section 4.5A.4(2) of the GRA sets out the criteria to be considered by the VCGR in determining whether to grant registration to a bookmaker. Those criteria do not expressly relate to the place of residence of the applicant for registration. Nor is there any requirement that a person registered as a bookmaker conduct its bookmaking activity in Victoria. There is no fee payable for such registration. In addition to being registered by the VCGR, the GRA requires that bookmakers obtain a club bookmaker’s licence from HRV to take bets on the racecourse.

56    The contribution of Victorian registered bookmakers is an aggregate of 1.5% of betting turnover. This comprises:

(a)    a levy of 1% of betting turnover required under s 91B of the Racing Act and Rule 3 of the Harness Racing Victorian Bookmaker’s Licence Levy Rules; and

(b)    a royalty fee of 0.5% of Victorian harness racing turnover.

57    The bookmakers levy was introduced in 2000 by the National Taxation Reform (Further Consequential Provisions) Act 2000 (Vic) (Tax Reform Act) as part of a package of reforms which followed the introduction of the goods and services tax. Section 13 of the Tax Reform Act inserted ss 91B and 91C into the Racing Act, which established the bookmaker’s licence levy and bookmaking development fund respectively.

58    Race fields fees payable by non-registered bookmakers, such as Sportsbet, are calculated as a percentage of “assessable turnover”, which is turnover on bets wagered on Victorian harness races, whereas “betting turnover” which is used to calculate the bookmakers levy of registered bookmakers, captures turnover on all races accepted by the bookmaker, regardless of the code or location of the races on which the bets are taken. Mr Anderson said that, in practice, the amount payable by Victorian registered bookmakers is calculated wholly by reference to betting turnover. It is contended by the respondents, that the calculation based upon betting turnover would lead to a greater payment as compared to interstate WSPs making payments pursuant to the Turnover Condition.

59    Sportsbet submits that registered bookmakers do not pay for the right to use and publish race fields information, but pay a registration fee of 1% on betting turnover, in return for a right to conduct businesses at race courses in Victoria. It says that registered bookmakers are merely supplied with race fields information as an incident of that registration.

60    The imposition of the fee on bookmakers to become registered is sourced in s 91B(1) of the Racing Act, which permits a controlling body to make rules imposing a periodic levy on a bookmaker who is required by the controlling body to hold a club bookmaker’s licence. A levy imposed on a bookmaker made under that section cannot exceed 1% of the bookmaker’s betting turnover for that period: s 91B(3).

61    Sportsbet says that the 1% levy is tied with a legislative scheme which facilitates the registration of WSPs for the purpose of conducting the business of accepting and negotiating bets. It says that is a limited purpose. In comparison, Sportsbet pays a Northern Territory licence fee to conduct its business as a WSP but must also pay to be relieved from a prohibition not applicable to registered bookmakers, and that no valuable rights are received in consideration for the Turnover Condition.

62    In terms of the flow of payments made by registered bookmakers, s 46 of the Racing Act requires that all monies received by HRV be paid into the Harness Racing Victoria Fund, to be applied for the benefit of harness racing in Victoria. That characterisation of the fee, as an economic contribution to the racing industry, reflects the nature of the Victorian race fields scheme sought to be impugned. The fee raised by s 2.5.19D of the GRA is a debt owed to HRV (s 2.5.19D(5)) and will fall to be applied pursuant to s 46 of the Racing Act.

63    In respect of the 0.5% royalty fee imposed on registered bookmakers, it was referred to as an “intellectual property licence fee”, which is payable on turnover for Victorian harness racing for a right to use harness race fields information. Prior to 1 January 2009, the royalty fee was not imposed. Sportsbet submits that the 0.5% royalty is a sham since it is “immediately offset” by the 0.5% subsidy available to bookmakers that attend race meetings to provide wagering services to on course patrons. That subsidy was introduced at the same time that the 1.5% Turnover Condition was set by HRV applicable to non-registered WSPs pursuant to s 2.5.19D of the GRA.

64    Section 91 of the Racing Act provides:

(1)    A person must not carry on the business of bookmaking on a racecourse or part of a racecourse or a sports ground unless the person –

(a)    is a registered bookmaker or an approved substitute; and

(b)    in the case of a registered bookmaker, holds a club bookmaker’s licence issued to the bookmaker for that racecourse or part of a racecourse or sports ground if such a licence is required by a controlling body or by any racing club or promoter of sports to enable the bookmaker to carry on the business of bookmaking.

65    In theory, an intrastate WSP who accepts bets on Victorian races via the internet or telephone only, would not receive the 0.5% subsidy. There was evidence that this occurs in thoroughbred racing, and is likely to occur in harness racing, but at present no registered bookmaker who takes bets on harness racing operates without dual registration. Therefore, no registered bookmaker who conducts its business on harness racing in effect pays the 0.5% royalty fee, given the net calculation after taking into account the subsidy.

66    The introduction of the subsidy is said to be introduced to “encourage bookmakers to attend race meetings and provide a service to on-course patrons”. On course bookmakers incur a cost that interstate WSPs do not bear. They also pay a separate fee for the right to “field” and take bets on harness race courses. Those fees are called “fielding fees” and are paid to the relevant harness racing club, pursuant to the Victorian Local Rules. All of this was not disputed by Sportsbet.

Other WSPs – Sportsbet

67    The race fields fee payable by all other WSPs who obtain use and publication approval pursuant to s 2.5.19B(2)(d), and who are not otherwise exempted under the race fields scheme, is 1.5% of assessable turnover, that is the Turnover Condition. Assessable turnover comprises the gross amount of all bets accepted by the bookmaker on Victorian harness racing alone, less cancellations and scratchings, and the amount of bet backs and layoffs on Victorian harness races with Tabcorp or a registered bookmaker with a club bookmakers licence. That payment is made in consideration of the provision of HRV’s permission for Sportsbet to use its copyright in race fields information to conduct its wagering business on Victorian harness racing. Prior to 1 January 2009, the applicable fee was 1% of turnover on Victorian harness racing, comprising the gross amount of all bets accepted by the bookmaker on Victorian harness racing.

68    The Turnover Condition is said to be a convenient proxy to ensure that interstate WSPs make a contribution to the Victorian racing industry. Whether it possesses an infringing quality, as Sportsbet contends, is to be considered later in these reasons.

THE PRINCIPLES

69    Section 92 of the Constitution provides that trade, commerce and intercourse among the States shall be absolutely free. It was held in Cole v Whitfield (1988) 165 CLR 360 at 394 that s 92 imposes a limitation on both legislative and executive power. The interpretation of s 92 of the Constitution applies to s 49 of the Self Government Act (see AMS v AIF (1999) 199 CLR 160 at [36] and Sportsbet HC at [9]-[13]. Broadly, the test is whether the law, if valid and operative, would detract from or impair the freedom that s 49 on its proper construction declares. To the extent that the legislative or executive measure is inconsistent with that freedom, s 109 of the Constitution declares it invalid.

70    The relevant two-step procedure to be applied in determining whether s 92 is contravened is set out in Cole v Whitfield and as more recently reiterated in Betfair HC was explained by Gordon J in Sportsbet Pty Ltd v The State of Victoria [2011] FCA 961 at [74] (the Sportsbet/Eureka case):

1.    [F]irst, an invalidating criterion. This requires the Court to determine whether a law or measure imposes a burden on interstate trade and commerce which is discriminatory in a protectionist sense by reference to three matters:

1.1.    does the law or measure impose a burden; does it prohibit or restrict a trader’s ability to import a product or service or deal with it once it is imported;

1.2.    does the burden discriminate against interstate trade and commerce; is the burden not imposed at all, or to the same extent, on intrastate trade in respect of the same product or service or a substitutable product(s) or service(s); and

1.3.    if the burden does discriminate against interstate trade or commerce, is the discrimination protectionist in character; that is, does the law give the domestic product a market advantage over the imported product or the interstate trade in that product;

2.    [S]econdly, a saving criterion (Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 472 and 479-480). This renders valid if it has a purpose that is not protectionist and any burden it imposes on interstate trade and commerce is appropriate and adapted to achieving that purpose. That criterion may be assessed by reference to three matters:

2.1.    identify a non-protectionist purpose(s);

2.2    considering whether the means adopted by the law are capable of being seen as likely to achieve the identified purpose(s); and

2.3    considering whether there are or are not alternative means to achieve the identified purpose(s) which involve no, or a lesser, burden on interstate trade and commerce than the means adopted.

71    As Gordon J said in the Sportsbet/Eureka case at [75], the first step concerns the effects of a law, and the second step requires a comparison of the effects of a law with its objects to determine whether the effects are proportionate. As her Honour did in that case, I will also consider in sequence the steps referred to above. The first step, therefore, as was the issue in Sportsbet HC, is to determine whether the power of approval, upon conditions as to the payment of a fee, is inconsistent with s 49 by imposing a restraint of a protectionist kind.

APPLICATION OF PRINCIPLES

DO THE IMPUGNED PROVISIONS IMPOSE A DISCRIMINATORY BURDEN ON INTERSTATE TRADE?

Interstate trade or commerce?

72    First, is the question whether Sportsbet is engaged in interstate trade and commerce in relation to bets taken on harness racing in Victoria. Gordon J in the Sportsbet/Eureka case considered the following principles as informing the expression “interstate trade or commerce” in the context of s 92 (at [77]):

The object of s 92 of the Constitution is to eliminate the protection of local industry against interstate competition. A reduction in competition, without more, is not contrary to s 92: Betfair v Western Australia at 451 [11] and 460 [36]; Castlemaine Tooheys Ltd at 471 and Barley Marketing Board v Norman (1990) 171 CLR 182 at 202-203. A State law may contravene s 92 if it protects the domestic industry from competition from traders in another State: Betfair v Western Australia at [11]. That is, the State law reduces competition from interstate traders. Section 92 prevents the use of State boundaries as barriers to protect intrastate traders from competition from interstate traders in the same market.

73    During the hearing of this matter, HRV and Victoria respectively sought leave to amend their defences and to withdraw an admission in response to a notice to admit, by motions of 2 and 3 August 2011 respectively. It was contended that those proposed amendments were of a dual character.

74    First, the proposed amendments were intended, as a matter of fact, to assert that Sportsbet is a Victorian trader, not a Northern Territory trader, and as consequence, any discrimination against Sportsbet is discrimination only against intrastate trade.

75    Secondly, the proposed amendments were intended, as a matter of law, to assert that even if Sportsbet is located in the Northern Territory and a punter is located outside the Northern Territory, taking bets across State or Territory lines does not constitute trade or commerce between the Northern Territory and the States.

76    On 9 August 2011 I delivered reasons on those motions: Sportsbet Pty Ltd v Harness Racing Victoria (No 5) [2011] FCA 954. I gave leave to HRV and Victoria, to withdraw the previously admitted legal conclusion that, on Sportsbet’s operations as they are proven to be, it is engaged in interstate trade or commerce. I did not grant leave to the more significant proposed amendments which involved the withdrawal of the factual admission that Sportsbet’s activities were in interstate trade and commerce and to plead facts to support the factual assertion that Sportsbet should be regarded as a Victorian trader, not a Northern Territory trader. At that stage in the hearing, it would have been inappropriate to allow those proposed amendments in light of the case management principles enunciated in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. In the circumstances, Sportsbet would have sought an adjournment to assemble evidence in response to prove its case, inevitably resulting in a significant period before the hearing could have recommenced and concluded.

77    The amendments sought to be raised to dispute that Sportsbet was engaged in interstate trade and commerce but was only an intrastate trader were in any event future matters ventilated before the Court in the Sportsbet/Eureka case. In that proceeding, Sportsbet challenged the validity of different Victorian legislative provisions on grounds that included that those provisions impermissibly burdened freedom of trade, commerce or intercourse between the Northern Territory and the States, involving circumstances of seizure of a touch screen device called a “betbox” owned by Sportsbet and installed in a Victorian hotel called the Eureka Hotel. Victoria made submissions that the placing of bets with that computer device with Sportsbet did not involve interstate trade or commerce.

78    The observations of Gordon J at [78], [83] – [87] in the Sportsbet/Eureka case dealt with those allegations. Her Honour concluded that Sportsbet is a Northern Territory trader, engaged in interstate trade and commerce:

Sportsbet is licensed in the Northern Territory. … Sportsbet’s licence authorises it to conduct a “bookmaking business” from premises in the Northern Territory: … Bookmaking is defined in s 4 of the NT Act as the business of receiving or negotiating bets. A person wishing to place a bet with Sportsbet must first register and acknowledge Sportsbet’s terms and conditions. A bet placed with Sportsbet, the Sportsbet’s computer server and Sportsbet’s bookmaking business, are all regulated by Northern Territory law. Sportsbet accepts bets by telephone and over the internet from registered members situated through Australia including Victoria. The contingencies on which registered played bet include races conducted in each State and Territory and sporting events in each State and internationally.

…

… adapting what the High Court said in Betfair v Western Australia at [1], Sportsbet holds a licence under Northern Territory law to operate as a bookmaker. A registered customer of Sportsbet may place bets by use of a computer connected by the internet to a computer server operated by Sportsbet at its Darwin premises. Customers may be located outside the Northern Territory and Sportsbet seeks to attract such customers located in States of the Commonwealth including Victoria. There is an “interstate dimension to the operation” by Sportsbet of its corporate bookmaking business.

A significant part of the respondents’ case was directed at establishing that Sportsbet conducts its business in and out of Victoria because the real commercial seat of the significant activities of the betting business of Sportsbet is Victoria. The respondents identified a number of facts and matters including that:

1.    while Sportsbet has a registered office in Darwin, it has much larger offices in Melbourne;

2.    a substantial part of Sportsbet’s business is conducted in Melbourne including its IT department, marketing, human relations, finance and administration, its bookmakers, the risk management department for real time client bet monitoring and the fraud department including anti-money laundering checking;

3.    the management of Sportsbet’s business is conducted in Melbourne and there is a far greater concentration of senior and other staff in Melbourne;

4.    Sportsbet’s senior management spend most of their time in Melbourne and are resident in Melbourne;

5.    although Sportsbet’s Northern Territory licence explains the physical location of Sportsbet’s servers at the Fannie Bay Racecourse, the licence has no significance for the purposes of the Impugned Provisions because it does not confer any right, and does not purport to confer any right, on Sportsbet to engage in bookmaking in Victoria; and

…

The difficulty with the respondents’ submission is that it ignores some critical facts and matters. First, Sportsbet was registered as a company on 29 June 1999 under the Corporations Law (Cth), as applied to the Northern Territory by the Corporations (Northern Territory) Act. Its registered office was that specified in the registration application: ss 117 and 121. When the Corporations Act 2001 (Cth) (the Corporations Act) commenced, Sportsbet’s registration was taken to have effect under the corresponding provisions of the Corporations Act. Sportsbet’s registered office and principal place of business remained the same: s 1378(3) of the Corporations Act. Moreover, for the purposes of s 119A of the Corporations Act, it was taken to be registered in the Northern Territory: s 1378(4) of the Corporations Act. Those facts might not be determinative but they remain significant.

Secondly, Sportsbet has a registered licensed business which operates from specified premises in Darwin (the Fannie Bay Racecourse) under the NT Act (see [78] above) that:

1.    permits Sportsbet to offer a much wider range of bets to punters than that permitted under Victorian law;

2.    permits Sportsbet to provide credit to punters (contrary to anywhere else in Australia);

3.    permits Sportsbet a more flexible approach to marketing (than other places in Australia);

4.    until recent changes to the Victorian legislation, provided Sportsbet with better access to capital resources because the NT Act did not insist on directors and shareholders of the registered bookmaker themselves being bookmakers;

5.    required, as a condition of the licence, that Sportsbet takes bets from the Fannie Bay Racecourse in Darwin.

Thirdly, a significant part of Sportsbet’s computer system is located in Darwin and Sportsbet’s customers (both national and international) interact with the Sportsbet business through the Darwin office. For all those reasons, Sportsbet is engaged in interstate trade and commerce.

79    In my view, the proposition of law advanced by HRV and Victoria should be rejected. The activities of Sportsbet in taking bets and paying out on bets in and from the Northern Territory to punters outside of the Northern Territory, by telephone or online wagering services, involves interstate trade or commerce. That is clearly so, even though there is evidence that Sportsbet was a business largely managed from, and had had significant staff in, premises located in Victoria, as well as its premises in the Northern Territory. Beyond that, it was not articulated in any detail, why the taking and paying of bets in and from the Northern Territory with punters located outside the Northern Territory did not constitute interstate trade or commerce.

80    In Victoria’s written submissions, reliance was placed upon the High Court decision in Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1, particularly the comments of Dixon CJ (with whom Kitto J agreed) as cited in HC Sleigh Ltd v South Australia (1977) 136 CLR 475 at 506-507 (by Mason J, with whom Barwick CJ and Stephen J agreed) and in Street v Queensland Bar Association (1989) 168 CLR 461 at 439 (by Dawson J). The comments of Dixon CJ are as follows:

The essence of the business from the point of view of the persons engaged in it is the making of contracts involving on the one hand the receipt of money and on the other hand the payment of money on the occurrence of certain contingencies. From the point of view of the statute no doubt it is the character of the contingencies that forms the distinguishing and important feature of the business. But neither the character of the contingencies nor the character of the monetary side of the contract could bring the transaction within the conception of inter-State trade commerce or intercourse. For a company to contract with a man that, in consideration of the latter making payments to it at any given place, the company will in a specified contingency make a payment to him at some other place is not to engage in inter-State commerce. Neither the making of the contract nor the performance of the contract by either side involves any step or dealing which of itself forms part of inter-State commerce even if a State line runs between the two places. If it is found necessary or convenient by either party to communicate with the other across a boundary between two States in the course of making the contract, that is an accidental feature which cannot make it an inter-State contract, although the sending of the communication itself will, of course, form an act of inter-State commerce or intercourse. (Emphasis by Victoria.)

81    On being taken to those same authorities by the respondents in the Sportsbet/Eureka case, Gordon J (at [90]-[91]) made the following observations, which I respectfully adopt:

What brings a business within the protection of s 92 of the Constitution depends in part on the repeated occurrence of these accidental features in the course of its business and in part on the manner in which it conducts its internal affairs. That is to say, the communications between its offices in different States, the transmission of funds and the movements of its directors, servants and agents.

The respondents submitted that these comments in Hospital Provident Fund have “never been disapproved by the High Court” and are binding on this Court. It is inappropriate and dangerous to cherry pick one or two passages from a judgment and submit that the “comments” are binding on this Court. What in fact is the principle that is identified? The analysis in both Hospital Provident Fund at 14-15 and HC Sleigh at 506-507 was fact specific. A critical fact was that “the transmission of funds and the exchange of communications were no more than the incidents of the business”: HC Sleigh at 507. In Hospital Provident Fund the business was the business of insurance. In HC Sleigh the business was a system of refinery exchange. In Street, the business was a barrister’s practice. Those businesses stand in stark contrast to the business of banking: HC Sleigh at 506. Here, the business of wagering conducted by Sportsbet was more akin to the business of banking. It was far removed from the business of insurance, refining petroleum products or conducting a barrister’s practice. Sportsbet’s internal affairs, namely, “communications between its offices in different States, the transmission of funds and the movements of its directors, servants and agents” do not reflect the fundamental nature and aspects of the interstate trade and commerce undertaken by Sportsbet’s wagering business: see [82]-[83] above.

82    Sportsbet conducts its business as a bookmaker and accepts wagers from punters outside of the Northern Territory via two principal means:

(a)    by a telephone call centre located at its licence premises in Darwin which operates 24 hours a day, 7 days a week accessible to a person using a telephone anywhere in Australia; and

(b)    by an internet facility that is accessible to a person using a computer connected to the internet anywhere in Australia by entering www.sportsbet.com.au.

83    A significant part of Sportsbet’s computer system is located in Darwin, its registered trading office is in Darwin, and Sportsbet customers (both national and international) interact with Sportsbet through the Darwin office. The computer systems are located in Darwin. They facilitate betting transactions over the telephone and the internet and comprise software, server infrastructure, hardware and operating systems. As a condition of Sportsbet’s wagering licence, they are the only servers that accept bets. In order to facilitate the placing of wagers, Sportsbet uploads onto its computer servers located in the Northern Territory and displays on its website information about each event on which its customers may place wagers. When a punter makes a bet, wherever he or she is located, it accesses information on that website or on request via the telephone, and that information is maintained by Sportsbet on its computer servers in Darwin. On placing a bet either over the telephone or the internet, those computer servers process, accept and record wagers placed with it. Should the punter win, payment is made on the basis of that stored information. As Gordon J observed, “put another way, both the contract here and its performance contemplates, and by its nature involves, the movement from one place in one State to a place in the Territory of things tangible or intangible” (at [92]).

84    Contrary to the submissions of Victoria, the conclusion that Sportsbet was engaged in interstate trade and commerce in relation to bets taken or placed with Sportsbet from outside the Northern Territory does not broaden the concept of “interstate” trade in an unorthodox manner. The concept of interstate trade or commerce is to be properly informed according to the particular trade or market place under consideration. The wagering market in Australia was accurately described in the joint judgment of the High Court in Betfair HC at [114]:

The evidence shows that there is a developed market throughout Australia for the provision by means of the telephone and the internet of wagering services on racing and sporting events. Indeed, the evidence shows that such a market may be international. Within the Commonwealth the events may take place in one State, the customer be in another and the licensed bookmaker or TAB be in a third. Before the commencement of the legislation of Western Australia which is under challenge, this market included the services supplied by the betting exchange which Betfair had established under licence in Tasmania. In the other States this remains the case. The inhibition to competition presented by geographic separation between rival suppliers and between supplier and customer is reduced by the omnipresence of the internet and the ease of its use.

85    I am satisfied that the applicant is engaged in interstate trade and commerce in the national market for wagering and betting services.

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.

IS THE DISCRIMINATION OF A PROTECTIONIST KIND?

150    Whether a protectionist character can be discerned as a matter of practical effect depends upon the effect of the law or measure on the competitive relationship between interstate and intrastate trade: Betfair v Racing New South Wales at [60]. In Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 467, the majority said:

Cole v Whitfield established that a law which imposes a burden on interstate trade and commerce but does not give the domestic product or the intrastate trade in that product a competitive or market advantage over the imported product or interstate trade in that product, is not a law which discriminates against interstate trade and commerce on protectionist grounds”

151    In Betfair Pty Ltd v Racing New South Wales, the Full Court at [60] describes the issue as:

Whether or not Betfair’s case could succeed depends on whether Betfair could demonstrate that the fee disrupts, adversely to it, the competitive relativities between it, as an interstate trade, and intrastate traders.

152    The fundamental enquiry is whether the conditional prohibition alongside the Turnover Condition is liable adversely to affect competition in the national wagering market. It is necessary to identify the relevant competitive advantages enjoyed by Sportsbet as a result of its place of residence in the Northern Territory. Sportsbet and other Territory based WSPs are said to enjoy a more flexible regulatory environment, as they can accept bets on a greater range of events, and are able to offer credit to punters. They enjoy regulatory licence fees that are lower then those charged elsewhere, and a greater range of approved sporting events and bet types are permitted in Northern Territory than elsewhere. To that extent, it may be accurate to speak of Sportsbet as a lower-cost operator than its competitors. But at the heart of the matter is the question of whether race fields fees, which apply to all market-supply participants in one capacity or another is protectionist because of its impact upon Sportsbet and other Territory based WSPs. Sportsbet sought to contend that since it is a substantial trader in a national market, and is a major source of competitive pricing, to place a cost burden upon its operations as an out-of-state trader is protectionist, restricting national competition and thereby infringing s 92 and more relevantly being inconsistent with s 109.

153    Reference was made to the High Court decision in Bath v Alston Holdings Pty Ltd (1987) 165 CLR 411. In that case, under the Victorian Business Franchise (Tobacco) Act 1974, licensing fees were imposed in relation to the wholesale and retail sale of tobacco products. The fee for the retail licence included an amount equal to 25% of the value of tobacco sold by the licensee in an earlier period of trading. The retailer’s licence fee did not take into account the value of tobacco that had been purchased by the retailer in Victoria from the holder of a wholesale licence. The challenge to the constitutionality of the scheme was brought by a Victorian retailer which purchased its tobacco product from a wholesaler in Queensland where there was no tobacco fee. The High Court held by a majority that the 25% retail licence fee contravened s 92 of the Constitution in that it burdened the sale of a product imported from another State by denying the product the competitive advantage which it enjoyed in its State of origin. The exclusion of tobacco purchased in Victoria from a licensed wholesaler from the total sales value of tobacco used as the basis of the calculation of the ad valorum licence fee was held to be a discriminatory, with a protectionist effect in favour of instate wholesalers. The High Court said (at 424-7):

In form, the provisions of s 10(1)(c) and (d) select the fact that tobacco was “purchased in Victoria” from a licensed wholesaler as the qualifying condition for exemption from inclusion in the products by reference to which liability to ad valorem tax is calculated. In substance, those provisions protect local wholesalers and the tobacco products they sell from the competition of an out of State wholesaler whose products might be cheaper in some other Australian market place for a variety of possible reasons, e.g, that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler.

Even when the provisions of the Act imposing the liability to pay the retail tobacconist’s licence fee are read in the context of the Act as a whole, they retain their discriminatory and protectionist character. Such a reading reveals the explanation for the exclusion from the basis of calculation of the retailer’s licence fee of tobacco products purchased within Victoria from a licensed wholesaler. That explanation is that the licence fee which the Act requires Victorian wholesalers to pay to the Victorian Government will not have been paid to the Victorian Government by an out of State wholesaler who does not carry on business in Victoria and therefore does not require a licence in that State. The explanation tends, however, to underline, rather than remove, the protectionist character of the discrimination at the retail level effected by the provisions imposing the tax. If wholesalers of tobacco products in another State already pay taxes and bear other costs which are reflected in wholesale prices equal to or higher than those charged by Victorian wholesalers, the practical effects of the discrimination involved in the calculation of the retailer’s licence fee would be likely to be that the out of State wholesalers would be excluded from selling into Victoria and that the products which they would otherwise sell in interstate trade would be effectively excluded from the Victorian market. On the other hand, if out of State wholesalers pay less taxes and other costs than their Victorian counterparts, and in particular if they pay no (or a lower) wholesale licence fee, the effect of the discriminatory tax upon retailers will be to protect the Victorian wholesalers and the Victorian products from the competition of the wholesalers operating in the State with the lower cost structure. Either way, the operation and effect of the provisions of the Act imposing the retail tobacconist’s licence fee are discriminatory against interstate trade in a protectionist sense.

154    The race fields scheme corrected what otherwise was a situation whereby contributions were being made by intrastate bookmakers and no correlative payments were being made by interstate corporate bookmakers in a changed market place to the operation of racing in Victoria, relevantly by HRV. The imposition of the Turnover Condition on interstate traders within the means of the same statutory scheme which has always regulated the conduct and fees payable by Victorian registered traders may produce parity between intra-state and interstate WSPs and does operate at the same functional level of race fields’ use and publication. That is a point of distinction between the present case and Bath v Alston. As it was noted by the High Court (Mason CJ, Brennan, Deane, Gaudron JJ) in Bath v Alston (at 424):

If the tax had been imposed directly on all retail sales of tobacco products in Victoria, it would not have infringed the injunction of s 92. it would have been a tax which applied without differentiation or discrimination to interstate and intrastate products and transaction.

155    In the present matter, the Turnover Condition is to impose on interstate and Territory based WSPs a fee which is not apparently neutral when compared with Victorian based WSPs. It is imposed in fact in a way which operates adversely to interstate and Territory based WSPs. The reason for some distinction, whilst understandable, as a matter of substance is not in my view justified because the different benefits Victorian based WSPs in respect of all wagering on HRV conducted meetings, and in practice all Victorian based WSPs who take wages on HRV conducted meetings. It has no apparent relationship to the volume of betting on-course at such meetings or to the benefits to HRV or its racing in Victoria from on-course fielding by Victorian based WSPs, or to the cost to Victorian based WSPs fielding on-course in Victoria. Those conclusions may be contrasted with those summarised in Betfair Pty Ltd v Racing New South Wales (2012) 261 ALR 221 at [29]; Sportsbet HC at [17].

156    As a matter of fact and degree (Cole v Whitfield at 407-408), I find that the Turnover Condition imposes on Sportsbet and other Territory based WSPs a protectionist burden of a discriminatory character.

157    I do not take into consideration any particular likely adverse effects of the Turnover Condition on Sportsbet as an individual trader. The focus is a wider one: Sportsbet HC at [20]. The relevant question is the effect upon trade, not individual traders.

158    Section 92 operates to protect interstate trade, not individual traders. It is unconcerned with effects peculiar to the business structure of individual traders: Betfair Pty Ltd v Racing New South Wales [2010] FCAFC 133. It is not the relevant inquiry to analyse a regulatory measure which is to affect a series of market participants, and is likely to have a different practical effect on different individual traders, and then to look at the effect on one of those affected interstate traders in contrast to one or more local traders. Moreover, it is not relevant to say that because Sportsbet is a lower margin operator, and happens to conduct interstate trade, that its business decisions as to revenue would be given any weight in the concept that is competitive trade in a national wagering market.

ARE THE PROVISIONS APPROPRIATE AND ADAPTED TO ACHIEVE OBJECTIVES CONSONANT WITH S 92?

159    The respondents contended that the legislation and the Turnover Condition were said to be measures “appropriate and adapted” to achieving the following two non protectionist purposes. First, to empower appropriate controlling bodies to ensure that person who seek to utilise horse and greyhound races conducted in Victoria for the purposes of offering telephone or internet betting make an economic contribution to the conduct and regulation of those races; and secondly, to empower these bodies to ensure that person who engage in publishing or otherwise make use of Victorian race field information in the course of their business are fit and proper persons to do and also empowering such bodies to provide access to information concerning betting on races in order to investigate irregularities to ensure the integrity of such racing. I need not consider those aspects further in relation to the legislation. I need not consider those aspects further in relation to the legislation. It does not of itself prescribe the Turnover Condition as adopted by HRV.

160    Simply stated, those purposes are a funding objective and an integrity objective.

161    The racing industry in Victoria generates substantial employment and spending. The racing industry in Victoria accounts for direct and indirect employment of 74,400 people. It contributes $2.1 billion in direct spending, with 60% of this in regional Victoria. The industry is one of the State’s ten largest employers.

162    It is hardly contestable that participants in the wagering market must make contributions to the racing industry in which they derive their business and profits for its survival and prosperity.

163    In Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 at [41] the following was observed:

In any event, the objective referred to in the Second Reading would seem to be the protection of the “racing industry” in New South Wales. This may be a legitimate objective notwithstanding that it may have different consequences and effects from the objective of regulating a social evil as discussed above. In Cole v Whitfield, the High Court accepted that the protection of Tasmanian crayfish stocks was a legitimate objective in circumstances where the exploitation of those sticks was non discriminatory. Further material in this case might establish the relevant “racing” industry (whether in relation to horse racing, trotting or greyhound racing) is open to persons from all States and Territories whether as competitors, bookmakers or punters. If this is the case then the “protection” of the “racing” industry might be understood as referring to the appropriate funding of racing venues and events so as to attract appropriate interest, both intra state and interstate. On means of such funding might well be imposing charges and taxes upon bookmakers, totalizators and others who profit from betting on those events. (Emphasis Added.)

164    Sportsbet suggest that the object of the legislation is to protect Tabcorp and registered bookmakers from the threat of revenue leakage posted by out-of-state WSPs. They say that the mischief of the Victorian race fields regime and the Turnover Condition is “the protection of Tabcorp revenue to which HRV was economically tied”. They referred to various extrinsic materials that spoke about the need to prevent or ameliorate the situation called “revenue leakage”.

165    As indicated by the comments in Sportsodd above, measures in pursuit of mitigating revenue leakage is but a label for what otherwise could be characterised as a measure to finance the racing industry by those who profit from it. That is a legitimate objective. Perram J in Sportsbet Pty Ltd v New South Wales [2010] FCA 604 (at [147]) although deciding otherwise, conceded that “at least at a high level of generality, I am prepared to accept that seeking to catch the free riders may be a legitimate object.” It was because of the Gentleman’s Agreement, which would necessarily impoverish the racing industry, that the issue of revenue leakage came into issue. The second reading speech has been cited above. It does not speak of intra-state traders losing their business in competition with interstate traders who have the same or different business models, but do not pay a fee. Rather the concern focused on profits being made by interstate traders from the use of race fields when they were not contributing to the generation of the racing spectacles about which the information was so valuable.

166    The figure of 1.5% of turnover came as part of a recommendation from the wagering subcommittee and then to the HRV Board. Up until the change in legislation in 2008, HRV had been charging 1%. The introduction of the 1.5% Turnover Condition concurrently with the 0.5% royalty fee payable by registered bookmakers (taking the aggregate payment made to 1.5%) suggests that HRV was levelling charges required to be made by wagering operators. However, whilst the imposition of the 1.5% Turnover Condition, in the context of the broader regulatory and factual matrix provides for a regime seeking consistency of contributions by all WSPs, whether they be interstate or Victorian bookmakers, and those contributions are to reflect the particular operations and business of the WSP, it does not do so in fact. The rebate to on-course bookmakers provides the point of distinction in practical terms. It was accepted by Sportsbet, through the evidence of Mr Tyshing, that that there was a need for Sportsbet and its competitors to make contributions to the racing industry for race field information and that Sportsbet “has always stated that [it is] happy to make contributions to the industry”. To that extent, Sportsbet seems to accept the funding objective put forth by the Respondents. It must also be accepted that a turnover based fee, if applied neutrally, is a proper means of achieving that objective: Sportsbet HC; Betfair v Racing New South Wales in the High Court.

167    Whilst, it is clear that ss 2.5.19B and 2.5.19D, alongside the Turnover Condition are likely to achieve the funding objective by ensuring that users of Victorian harness races to conduct their wagering business make an economic contribution to the racing industry, I am of the view that, as a matter of fact and degree and for the reasons given, the Turnover Condition does not operate in an appropriate and neutral way to achieve that objective.

168    It was also proposed by HRV that the conditions of use approval are a way of ensuring the integrity of the racing industry. The key point made by the respondents generally was that racing regulators need to have access to all information about betting activities undertaken on races in Victoria. This includes who is betting, betting trends, and what is generally happening in the betting market. To the extent that there be an impediment or may be an impediment to retrieving that information, measures of registration or licensing address such a problem.

169    The Full Court in Racing New South Wales v Sportsbet at [138] observed:

The race field information scheme established under the RA Act and regulation regulates a trade well understood to require the protection of the community from the hazard of fraudulent practices, and financially irresponsible operators.

Under the race field information scheme, the relevant facility, namely the use of race field information to conduct a wagering operation is obviously intended to be denied to hose who are unable to demonstrate financial responsibility and integrity. This scheme is to adapt the observation of Brennan J in Miller v TCN Channel Nine Pty Ltd at 609:

…quite different form those transport cases where the impugned laws were held not to be regulatory and to be invalid because the discretion was so wide that the carrier was not entitled to the licence which he needed to carry on lawfully his ordinary interstate trade. In those cases the carrier was using facilities, namely the roads which were available to the community generally and which could not be denied to any carrier.

170    While it was submitted by Sportsbet that the ability of HRV to impose integrity measures through the use of race field legislation could be alternatively achieved through co-operative regulation with the Northern Territory Racing Commission, I do not consider that such a measure, which promotes cooperation to achieve integrity, is the same as the integrity objective purpose articulated above, which is to enforce integrity matters.

171    There is no acceptable foundation for considering that licensing of WSPs to operate on races conducted by HRV in Victoria is necessary to preserve the integrity of that business, provided the WSPs are licensed in the Northern Territory (or elsewhere in Australia). Indeed, the evidence is that the licensing regime in the Northern Territory, and the regulatory exchange of information, is satisfactory.

172    It may be accepted that s 92 has no application to a regime in which the prohibition and discretion to grant a relieving approval are components of a scheme designed to regulate the conduct of a trade such as taking of bets on horse races. As Brennan J explained in Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 605, the basis for characterising a law as regulatory is this:

The regulatory character of an impugned law is to be judged by reference chiefly to the interests of the community at large, though the operation of the law upon the activities and transactions into which an individual may enter is a relevant factor. The greater significance of community interests flows from the predominantly public character of s 92, as Mason J pointed out in Permewan Wright [(1975) 134 CLR at p 615]:

It is because the section has this predominant public character that it is to be readily understood as presupposing a society in which conduct is regulated in the interests of the community, rather than a society in which conduct is merely regulated in the interests of those engaged in trade (the North Eastern Dairy Case [(1978) 134 CLR 559 at pp 600-601, 607-608, 615-616,634].

If regulation of an activity is necessary in the public interest and if a law providing for that regulation does not select or authorize a licensing authority to select as the criterion of its application any of the essential qualities connoted by the phrase "trade, commerce, and intercourse among the States", the law does not infringe the guarantee of freedom given by s 92. It is truly regulatory. (Emphasis Added.)

173    The integrity objective is reasonably capable of being achieved by the provisions of the GRA because the application process prescribed by ss 2.5.19B and 2.5.19C of the GRA, and the discretion conferred by s 2.5.19D, permits proper regulatory supervision of a WSP. But, I have concluded in any event that the legislation is not inconsistent with s 209 as enlivened by s 49 of the Self-Government Act.

174    But, for the reasons already given, I do not consider that the Turnover Condition operates in an appropriate and proportionate way to achieve that objective. There was really no cogent evidence to suggest that the differential of 0.5% of Turnover had either that purpose or that effect, quite apart from whether it was an appropriate additional burden on interstate and Territory-based WSPs.

CONCLUSION

175    For the reasons given, I consider:

(a)    the GRA, in particular ss 2.5.19B and 2.5.19C, are valid;

(b)    the Turnover Condition imposed by HRV is invalid as it is inconsistent with s 49 of the Self Government Act.

176    I will give the parties the opportunity to submit draft orders to give effect to these reasons.

177    As to conclusions subject to some other arrangement between the parties, the draft orders should be submitted within 10 days by Sportsbet, together with its written submissions as to costs. The State of Victoria, and HRV, should respond to the extent necessary within a further 10 days. If any orders as to costs are sought against Tabcorp as intervenor, it may also respond within that period. I assume neither the State of Victoria nor HRV will do so. I also assume Tabcorp itself will make no application for costs. If there are consequential matters to be addressed, the parties may approach the Court for a further hearing in relation to them. Otherwise, I will make formal orders, and deal with the issues as to costs, based upon the written submissions.

Associate:

Dated:    21 August 2012