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Joint Select Committee on Gambling Reform
19/08/2011
Interactive and online gambling and gambling advertising

ALLEN, Ms Jenny, Senior Investigator, Australian Communications and Media Authority

CAMPTON, Ms Ann, Assistant Secretary, Broadcasting and Switchover Policy Branch, Department of Broadband, Communications and the Digital Economy

MCNEILL, Ms Jennifer, Acting General Manager, Content, Consumer and Citizen Division, Australian Communications and Media Authority

PRESS, Ms Elizabeth, Manager, Broadcasting Standards Section, Australian Communications and Media Authority

WINDEYER, Mr Richard, First Assistant Secretary, Digital Economy Strategy Division, Department of Broadband, Communications and the Digital Economy

[14:13]

CHAIR: Welcome. Before we begin, I remind committee members that an officer of a department of the Commonwealth shall not be asked to give opinions on matters of policy. I now invite you to make a brief opening statement before the committee proceeds to questions.

Mr Windeyer : I have a couple of brief comments to make. Obviously, we in the department are in the capacity of administering the Interactive Gambling Act, which, as you know, creates an offence of providing certain types of interactive gambling services to customers in Australia and also rules around advertising of such services. The point I really want to make in my opening statement is that there are different roles played by different players in the space. We in the department are responsible for conducting preliminary assessments around allegations of advertising of prohibited online gambling services and then potentially referring those through to other agencies, in particular the Australian Federal Police. The AFP has a role in assessing referrals both from the ACMA and the department in relation to allegations of offences under the act and then the ACMA has a role in considering complaints about prohibited internet gambling content, and I will let the ACMA speak in a moment about their particular role in this space.

The other thing to note is that this is a territory in which there have been some relatively recent developments with the announcement, following the COAG Select Council on Gambling Reform meeting in May, about the intention to undertake a review of the Interactive Gambling Act. That review will be a chance to consider international regulatory approaches to online gambling and their potential applicability in the Australian context and also the extent to which there are options to improve or look at harm minimisation measures with respect to online gambling services. We are expecting the review terms of reference to be announced shortly. It could be as soon as this afternoon. They have not been released yet but we understand they might be released while we are in this room.

Senator XENOPHON: Is it a happy coincidence?

Mr Windeyer : It is in fact, yes. We will be able to make sure you get a copy of those and the URL where they will be available on the website. The other thing that we have been involved in since that COAG council meeting is this. There was an announcement to look at steps to reduce and control the promotion of live odds during sports coverage. That is something that we in the department are working on. We are about to commence a process of widespread consultation with potentially affected or interested industry parties on how best to take that forward. That is probably all I want to say in terms of a snapshot of where things are at from our perspective. I will hand over to the ACMA.

Ms McNeill : Chair, I thought it might be helpful if I give a brief outline of the Australian Communications and Media Authority's role in this gambling space. Stop me if you wish, if you do not need me to continue.

CHAIR: Please proceed.

Ms McNeill : In general terms, the Australian Communications and Media Authority has two main roles to play in this gambling space. The first is the role that it is given under the Interactive Gambling Act whereby the authority receives complaints about prohibited internet gambling content. It also has a role registering industry codes of practice dealing with interactive gambling matters. It also has a role investigating particular advertising of prohibited gambling services in a broadcasting context. So that is the suite of responsibilities that it has under the Interactive Gambling Act itself. Sitting slightly separate from that is a role that it has in the coregulatory broadcasting space where the Commercial Television Industry Code of Practice contains rules that the commercial television industry members have agreed to abide by. That restricts the sort of advertising and the timing of advertising that can be run in commercial television programs. So they are the two key areas in which the Australian Communications and Media Authority has a role to play. I am happy to expand on either one of them or proceed straight to questions.

CHAIR: Before I pass to Senator Xenophon, who I know has a number of question, could I clarify what you said there. How do you then relate to the authorities within the states and territories, such as the Tasmanian Gaming Commission, in my case. They have a role with the Tasmanian based online gambling organisations and you do too. What is the division of responsibility?

Ms McNeill : We take complaints about particular problematic content and we deal with those complaints. If they look like they are Australian hosted sites we do not proceed with the investigation under the legislation; we refer those to law enforcement authorities. If they are overseas hosted sites we investigate them, form a view on whether they are prohibited under the legislation and we then notify them to law enforcement authorities and we include the problematic URL in our family-friendly filter lists that we make available to the providers of family-friendly filters.

Mr Windeyer : One of the points to keep in mind is that in a sense by definition the state based authorities are in the business of regulating providers offering services that they can offer in Australia. The Commonwealth authorities are by and large in the business of looking at and investigating complaints about providers who are offering services that are not able to be licensed and offered in Australia. So, to some extent we are looking at different bits of the environment.

Senator XENOPHON: I have just gone online to www.casino.com. On the web page and in Google it says that it is the UK. You click on it and you get a young woman holding a couple of casino chips, with an Australian flag in the background. It says, '$250 Welcome Bonus. Download Now.' In the body of their home page it has, 'Recent Australian winners.' It refers to 'James Short in Brisbane, Tara Ramsey in Sydney and Julian Bishop in Perth.' Another heading says, 'Australian Online Casino. Come on down to Australia's number 1 online casino, which offers loads of really cool game choices (over 100 in fact) … .' That is not a registered site here in Australia, is it?

Mr Windeyer : You—

Senator XENOPHON: It is prohibited under the Interactive Gambling Act to be offering online blackjack, online roulette and online slots.

Mr Windeyer : It sounds like that is the case. I do not know whether the ACMA has looked at that site in particular. But from what you have said it sounds like that is the case.

Senator XENOPHON: What do you do in circumstances where it represents itself to have some strong Australian connection. It refers to Australian winners and the Australian flag is in the background.

CHAIR: What site is that.

Senator XENOPHON: www.casino.com. One of the providers is Onasac, in terms of the credit card transactions, based in Gibraltar. How are consumers protected? What action can you take for something that is clearly targeted to Australians who go online?

Ms McNeill : Perhaps I can endeavour to deal with it. The legislation does not prevent Australians from accessing online gambling services.

Senator XENOPHON: Sure.

Ms McNeill : From what you have described that sounds like a site that is hosted overseas and that may or may not be targeting Australian consumers or others. In that sort of situation, if it was an overseas hosted site and the ACMA investigated it and formed a view it would be referred to the family-friendly filters and referred to Australian law enforcement authorities to pursue.

Senator XENOPHON: I do not have any compunction saying that I have had a complaint from a constituent about casino.com. I am still waiting for a response three weeks after I wrote to the Gibraltar gambling regulator. I sent them an email and I am still waiting to hear from them. What role do you have in contacting regulators. I have heard from ACMA, I should say. Your office has been quite prompt in getting back to my office. But, when there is a complaint, what role do you have in trying to extract information or action from either the regulator or the company involved, wherever they may be.

Ms Press : In respect of casino.com and the method of investigation for complaints made under the Interactive Gambling Act that the ACMA has responsibility for, the chain of communication would go as follows. The ACMA delegate would make the finding about whether the site contained prohibited content. It would then refer the matter to the AFP, because that is what the act requires. From there, the AFP would then make notifications to overseas law enforcement agencies—for instance, the law enforcement agency responsible for matters dealing with Gibraltar—and then it would be up to that overseas law enforcement agency to communicate with a licensing authority. As such, the act does not provide us with a direct regulatory contact relationship with overseas regulators.

Senator XENOPHON: Is that circuitous way of doing things—and that is certainly not a criticism of ACMA; you are working within the confines of the current legislation—in your view, difficult? Does it make the issue of enforcement more problematic or less direct?

Ms McNeill : From our perspective, under the act, we would see that the follow-through on the investigation of a service which is prohibited would then reside with the law enforcement authority, so it is difficult to say. You are almost asking me to venture an opinion on the appropriateness of that construct.

Senator XENOPHON: Perhaps I should ask it another way so it does not impinge on policy issues which it is not appropriate to ask you about. Maybe I should ask the department this. Is it within the purview of the current review of the Interactive Gambling Act to look at the whole issue of enforcement and whether the mechanisms of enforcement and the pathway to enforcement ought to be reviewed?

Mr Windeyer : Yes is the short answer. I think the example you give is one of the challenges associated with enforcing the this particular act in this space. The challenge is partly related to the jurisdictional difficulties when you are operating in the online environment and, as such, that is one of the review will need to have a good look at—just how the enforcement arrangements do work and whether there are ways that that could be improved.

Senator XENOPHON: Just scrolling down on the home page, it has another heading, 'Online Casino Australia'. then it says, 'Casino.com Australia is giving you a fair crack of the whip by catering especially to you. Enjoy endless hours of fun and excitement with other Australian Casino.com players in real-time multiplayer tables' et cetera. Having that so clearly directed to Australian consumers, what triggers does that create in terms of breaches of the act? Is it prima facie a breach by virtue of it being targeted to Australian consumers? It is specifically targeted to Australian consumers; does that make a difference, in your view, in the way the act would apply to such a site?

Ms Press : The act does not discriminate in terms of making special offences of gambling content whether the site is targeted at Australians or not. It is just a gambling site containing prohibited content. In this current circumstance, the facts of the investigation conducted into casino.com were that the site is not an Australian site; it is hosted in Singapore—

Senator XENOPHON: Not Gibraltar?

Ms Press : but is it licensed through a licencing entity that is in Gibraltar.

Senator XENOPHON: So you would have to go to both Singapore and Gibraltar to try and get some action on this?

Ms Press : Yes.

Mr Windeyer : I think for the purposes of the act there needs to be a link between Australian customers using a site and the site containing prohibited content. The fact that the site makes a particular song and dance about Australia—having the Australian flag and referencing Australia—I do not think makes a difference therefore.

Ms McNeill : The question is one of accessibility under section 16, subsection 1.

Senator XENOPHON: Sure. But in terms of representation and being an aggravating factor with respect to any offence the act does not distinguish between someone going online to a site that does not purport to have anything to do with Australia—it could be geared towards customers in Gibraltar or Spain or Europe or wherever—but this is something that seems to be home-grown and it gives a consumer a sense that they are dealing with an Australian company. I think that is unambiguous. In other words, it pulls back a bit from the 'buyer beware' approach. You do not see that in a policy sense? Are particular representations being considered in the review or could they be considered in the review?

Mr Windeyer : At this point, I do not know how that particular issue gets considered in the review. The general issue that the review needs to look at is the more general point about, in a sense, the ability to offer services globally in the online environment, irrespective of where you are located or the customer is located. Also, there is then the question of how and what is the right way of regulating that and dealing with that, including what is the right way of enforcing it. The point is that just because there is, apparently, a particularly strong link to Australia or a reference to Australia that will not make a great deal of difference in how easy it is to enforce upon the overseas based providers. So I think the review will be looking more at how you deal with the overseas and jurisdictional challenges rather than at the Australian specific component of an overseas site.

Senator XENOPHON: If we just go to the review, because I just find it curious that on the 27 May the minister announced a review of the Interactive Gambling Act and, as of today, there are no terms of reference available on the website.

Senator CROSSIN: There are now.

Mr Windeyer : There are now.

Senator XENOPHON: Thank you, Senator Crossin.

Mr Windeyer : Thank you.

Senator CROSSIN: Thank you.

Senator XENOPHON: There were not a few minutes ago, but there are now. Perhaps you could send—

Senator CROSSIN: Only about two minutes ago, they might have got up there.

Mr CHAMPION: You question has been made redundant.

Senator XENOPHON: No, no, no. On the contrary, my colleagues.

Senator CROSSIN: Should I forward these to you?

Senator XENOPHON: On the contrary, whatever the opposite of 'redundant' is, it is.

Senator CROSSIN: That was my question as well. I was going to ask if there were terms of references.

Mr CHAMPION: It becomes pertinent.

Senator XENOPHON: It becomes more pertinent. Why did it take 10 weeks to get these terms of references up? And why today, of all days?

Mr Windeyer : Senator, we went through an exercise and, in a sense, it was the exercise of getting ministers and government to sign off on these things. It took us some time developing the terms of reference. There was the need to consult and get some clearances from other agencies, other ministers and approval to release them. And we only just received the authority to be able to make them public and, as I foreshadowed and apparently now is the case, the minister has now released them.

Senator XENOPHON: I might ask Senator Crossin for the link to that at some stage.

Senator CROSSIN: I will send it to you right now, because I have got a lot of questions I want to ask about it.

Mr Windeyer : I can give you where I understand the terms of reference can be found, which would be on our website: dbcde.gov.au/igareview.

Senator XENOPHON: I will have questions, Chair, but can I just ask another specific question because I think we do have ample time for all members. Submission 31 of the Victorian InterChurch Gambling Taskforce gives an example where an Australian marketing team of an internet gaming and casino provider sent letters to Australian citizens at their home addresses offering up to $3,500 in free credits to induce them to gamble at their site. I think you are familiar with that particular complaint?

Mr Windeyer : I do not know that I am familiar with the—

Senator XENOPHON: Or ACMA is? There was a complaint made to ACMA.

Ms Press : The ACMA does receive complaints on this basis and also, because we are engaged in the process of investigation, we often get marketed directly. We have to make aliases and give addresses for the investigation process to use online sites. In the circumstances of promotional material like that, we look at the content of that material and if it amounts to promotional or advertising matter under the IGA we refer it to DBCDE. Otherwise, if it presents an online gambling service as well, we will conduct an investigation into that url.

Senator XENOPHON: But in relation to the complaint to ACMA, the conclusion was to the Victorian InterChurch Gambling Taskforce that, although the website provides links to other sites that offer internet gambling services, the access to games were not provided directly by the site itself. ACMA states that it was not possible to deposit money on the website and therefore the website has only gambling services defined under section 4 of the IGA and as such are not prohibited internet gambling services defined under section 6 of the IGA. And therefore the unsolicited letter does not constitute a prohibited internet gambling service advertisement under part 7A of the IGA. Some of us might find that a particularly narrow construct. Is the review looking at that sort of issue that has arisen as a result of the Victorian InterChurch Gambling Taskforce submission?

Mr Windeyer : I think the review is looking at a pretty broad suite of aspects of the act to the extent it will look at the questions around the provision of prohibited services as well as the advertising of prohibited services and how best those should be treated in the future. As you would appreciate, the terms of reference are not going to, in a sense, specify instance by instance the sorts of things considered, but the review is intended to cover the act and, broadly, what it does.

Senator XENOPHON: I have more questions, but I am happy to defer to some of my colleagues at this stage.

CHAIR: We have got plenty of time.

Senator XENOPHON: I am just trying to find the terms of reference. I am not as technically competent—

Senator CROSSIN: I will send them to you. Have you got your emails yet?

Senator XENOPHON: No, I cannot access them on this one. I will work it out.

CHAIR: Senator Crossin, would you like to ask questions now or a little later?

Senator CROSSIN: Yes, I am happy to ask questions now.

Ms McNeill : Chair, before moving on I might just add an observation in respect of Senator Xenophon's question about the relevance of an overseas hosted gambling site being targeted at Australian consumers. There is at least one instance which is expressly contemplated as relevant in the Interactive Gambling Act. That is in connection with a potential defence available under section 15, which sets out the offence of providing an interactive gambling service to customers in Australia. Subsection 3, in short, indicates that it is a defence if the person who is providing the service could not with reasonable diligence have ascertained that the service had an Australian customer link. Clearly, that would not be a potential defence available in that situation. Otherwise, my understanding is that factors like that might have been regarded as aggravating factors or relevant factors at a sentencing stage, if the matter had been prosecuted.

Senator XENOPHON: So in the way they market themselves that could be an aggravating factor?

Ms McNeill : There have been no prosecutions to date, so there is not a body of jurisprudence to which I can refer you but, based on my understanding of how these things work in other spheres, that would be a relevant matter for a judge to consider.

Senator XENOPHON: But can I just say that, on casino.com—and I have no hesitation in saying that I would warn all Australians not to have anything to do with that site—my constituent has had a pretty traumatic experience in terms of unauthorised transactions, lack of redress and has notched up some enormous losses in a very quick period. So there is an investigation process by the Federal Police, and I guess that will have to take its course.

CHAIR: I am just alarmed with all the references to these poker sites. Everyone seems to be sitting up here with iPads busily doing something.

Senator XENOPHON: Looking up the terms of the review, Mr Chair.

Senator CROSSIN: That is right. That is what I have been—

CHAIR: Senator Crossin.

Senator CROSSIN: The minister's press release has come through as we have been speaking. In terms of the review, are there terms of reference? Yes, there are. The department is conducting the review?

Mr Windeyer : That is correct.

Senator CROSSIN: Is it submission based? Tell me how you are going to conduct it?

Mr Windeyer : We would expect to release a discussion paper that industry and others can respond to in the near future, call for submissions in response to issues raised in the discussion paper and anything else people feel they would like to make submissions on. Then, following receipt and consideration of those submissions, we may well look to undertake some targeted consultation with particular interest groups and people with some expertise in this space. So, in the first instance, I think there will be a submission based process, but we would expect to follow that with some targeted consultation of particular people.

Senator CROSSIN: What sort of stakeholders are you thinking of?

Mr Windeyer : Given the sorts of things covered by the act there are a pretty broad range of stakeholders. To some extent, they would be a similar range of people as have made submissions to this committee, so obviously people who are involved in existing permitted online gambling activities, organisations that are concerned about gambling activity, organisations that have expressed views in the past about this space—

Senator CROSSIN: Industry—casinos like Lasseters?

Mr Windeyer : Yes, that is right. Providers of gambling type services. We would expect organisations such as some of the sporting organisations et cetera to be interested, given the sports wagering component. The other group, obviously, would be states and territories which have a domestic regulatory responsibility in the gambling space.

Senator CROSSIN: You have heard evidence today that quite a few of the people who have appeared this morning, including the AFP in fact, have indicated and certainly the other witnesses we have heard have indicated that the act is 10 years old and actually needs a substantial review. I have put the position to a number of witnesses today as to whether they thought that we should lift the prohibition in this country and actually allow, under very strict conditions, people to be registered here as businesses and then put some conditions around it—I cannot see anything in the terms of reference that might suggest that—and if we allowed online gambling businesses to be registered in this country, we could encourage people to think about what sort of regulatory procedures we would need to control that. Point to me where that—

Mr Windeyer : That question is certainly envisaged as being a question that will likely get explored in the review. I suppose there are two parts of the terms of reference that relate to it: one is the fact that the terms of reference explicitly look to investigation of international regulatory approaches in this space and, as you would know, different countries have taken different approaches. Some are in the 'prohibit' territory and some are in the 'permit domestically provision of these services but regulate them heavily' territory. Secondly, the terms of reference explicitly go to the question of what might be appropriate harm minimisation and requirements around these services, be they the existing permitted services or other services, if there were sense in going in that direction.

Senator CROSSIN: When I read these nine dot points, to me it seems to indicate that it is about how we make the current system more effective or more regulatory or more, I suppose, restrictive, based on any outcomes we might have vis a vis social issues et cetera. There is nothing here, unless I am wrong here. The terms of reference do not seem to question whether our current system is adequate, whether the total system is adequate—that is, if you are a citizen of this country and you want to online gamble, you have to go offshore to do that. I am questioning that whole premise of that, as to whether or not we should allow Australian citizens to access Australian companies that are registered here in Australia that offer online services here in Australia but around which we, as a federal government, put some very severe restrictions. Do your terms of reference allow for that flexibility, because I am not sure that I can see that in there?

Mr Windeyer : In our view, the answer is yes they do and we would see that as a question which is clearly live at the moment. A number of people have raised it. It was obviously an issue raised by the Productivity Commission, so we would see that as being something that is live for consideration under the review. We have consciously tried to get terms of reference that have not attempted to suggest an answer one way or the other but that have tried to ask the question about the fundamental adequacy of the existing provisions.

Senator CROSSIN: Well, the terms of reference do mention the adequacy of the existing provisions of the act.

Mr Windeyer : That is right, and then they go on to talk about with respect to the changes in technology and the ability to enforce.

Senator CROSSIN: Yes, but that seems to indicate to me: do we better regulate what is currently happening, rather than totally change what is currently happening?

Mr Windeyer : From our perspective, all I could say at this point is: the question about what is the right approach to take in this space seems to me to logically head in two directions. There will be arguments and suggestions about whether we could do more to tighten the current arrangements and make the arrangements more effective or, alternatively, take a different approach, which would be an approach taken by some other jurisdictions, which is to say, if there is an argument that is being put by some that would suggest the ability to enforce the jurisdictional problems, the inherent challenges of the online environment mean that perhaps a rethink of this approach is reasonable. I think we would like the terms of reference to be able to canvass both of those arguments. We do not want to predetermine which of those is the way to go. But certainly from our perspective we would see adequacy of the provisions with reference to changes in technology as well as the reference to international regulatory models meaning we are open to hearing and considering the arguments on both sides, including that suggestion that maybe another path to go down is to consider strict regulation in the Australian context of online services, rather than leaving Australian consumers having to go offshore into potentially unregulated or uncertain environments to gamble.

Senator CROSSIN: So how you make a submission, how you get involved, will be put on the website in due course, will it?

Mr Windeyer : We will end up putting out a discussion paper which will, in a sense, probably tease out some of the points you have made and try and canvass some of the sorts of things that we think would be useful, helpful input. It will obviously be open to people to put other things on the table.

Senator CROSSIN: So, when the website talks about including an issues paper, that is the discussion paper?

Mr Windeyer : That is right.

Senator CROSSIN: I want to ask ACMA about complaints. Do you only investigate complaints from consumers in regard to internet gambling content?

Ms Press : The system under the IGA requires complainants to satisfy a number of things when they are making a complaint. They need to be an Australian resident, their complaint needs to be in writing and the complaint must deal with alleged prohibited internet gambling content.

Senator CROSSIN: The AFP have put in their submission that they have only had, I think, 15 referrals. Is that about right? The AFP have only referred 15 or so to you?

Ms Allen : We distinguish between referrals and notifications. The investigations that we do pertain to overseas hosted sites, and they are only notifications to the AFP. Whereas we cannot investigate Australian hosted sites; we refer them to the AFP.

Senator CROSSIN: How many Australian hosted sites would there be? It is prohibited isn't it?

Mr Windeyer : I think the suggestion is that, if there is an allegation about, potentially, an Australian hosted site, that is referred—

Senator CROSSIN: I see.

Ms Press : So a number of complaints have been about Australian hosted sites, where 15 referrals of those sites have been made to the AFP.

Senator CROSSIN: How are you able to investigate overseas hosted content? Do you do that through an MOU with other countries? Do you use similar bodies in other countries who will assist you? I think one of the problems that was highlighted to us this morning was that you can investigate but have very little influence because that website is controlled by that country's laws. Just walk me through how you actually investigate overseas hosted content. And what do you do to fix it up or sort it out, given that it is an overseas host?

Ms Press : With the structure of the current Interactive Gambling Act the ACMA is charged with investigating overseas content on the basis that that content is providing access to Australian complainants. In terms of our role, we do a content assessment from Australia; we make determinations about whether Australian residents can access sites and whether the sites amount to prohibited internet gambling content. In terms of an enforcement—

Senator CROSSIN: Can I just stop you there to clarify what you are saying. Do you have the capacity to then block that site into this country?

Ms Press : On the enforcement pathway following a finding by the ACMA that there is prohibited content available to Australian residents, the first arm is to notify the AFP and they will notify overseas enforcement agencies. The second arm is for us to advise the Family Friendly Filters. Australian residents who utilise those filters will then have those services blocked.

Senator CROSSIN: So you are not talking about complaints by individuals. You are saying you have no power to actually change the content of that site because it is in another country. You only have the power to block that site for Australian residents. Is that right?

Ms Press : The two available options to the ACMA once prohibited content is found are those two options.

Senator CROSSIN: That is your only role in this area?

Ms Press : Yes.

CHAIR: I have a follow-up question on Senator Crossin's line of questioning. Is ACMA the organisation that refers complaints to the AFP?

Ms Press : In some cases we do. Obviously complainants may, if they believe there has been a criminal offence committed, make their own referral to the AFP. The department makes referrals to the AFP on the matters that they look into under the Interactive Gambling Act.

CHAIR: I best not mention the exact numbers because the AFP evidence this morning was given in camera. It seems that they have attempted to take action against a very, very small proportion of the total number of overseas gaming sites that can be viewed in Australia. Why would that be? Why would they go after a handful and not the other 2,000?

Mr Windeyer : In some respects it is hard for us to answer for how they approach it. One point to make in reference to that is that their starting point is going to be the number of sites about which they have received referrals from ourselves, the ACMA, or someone else. There is no guarantee that, for example, there have been complaints about all 2,000 sites. Their starting point is the number of complaints that have come through to them. After that, I do not think we are in a position to comment on how the AFP makes judgments about which ones to pursue and which ones not to, other than the fact that they have a prioritisation system, which they could no doubt explain to you. That is theirs to determine and takes into account all the matters they have got before them.

Mr CHAMPION: No-one is out there looking for these sites, are they? We are relying on someone complaining about it in effect. It is a reactive system rather than a proactive system.

Mr Windeyer : That is correct.

CHAIR: I guess that is out of necessity because there are just so many sites. It is almost an impossible task to even find them all, let alone crack down on them all.

Mr Windeyer : That is one of the great problems of dealing with all manner of things on the internet. That is right. They can move quickly and they can spring up relatively quickly.

CHAIR: Does that mean prohibition is an impossible way of dealing with this?

Mr Windeyer : I think that is a difficult question for me to answer because in some respects that is one of the things that is going to have to be teased out in the review. Going to the questions that Senator Crossin was asking, that is one of the factors that we think is probably one of the central questions to be considered in the review. I do not know that I really want to offer a particular view on whether prohibition works. There are arguments on both sides and there are probably people who would refer to the fact that prohibition has been difficult in a number of spaces historically. I do not want to speculate at this point on where that would go. It is one of the questions and one of the propositions that are obviously being debated publicly at the moment, so it is one of the things that the review will have to form a conclusion on.

Mr STEPHEN JONES: Are you aware of any jurisdiction which has been able to successfully prohibit online gaming?

Mr Windeyer : I am aware that there are a number of jurisdictions that have prohibition as their approach to regulating in this space.

Mr STEPHEN JONES: Like ours.

Mr Windeyer : The United States has a similar prohibitory style of approach to this type of service.

Senator XENOPHON: And France.

Mr Windeyer : France has a slightly more complicated model, which allows the licensing of some domestic services and then attempts to block. In a sense, they work both sides: to block the overseas based services but provide for regulation of domestic French provision of the services to French consumers. There will be arguments—and I think you have probably heard arguments from different people—about the success or otherwise of the US system. There are people who suggest it works and that the enforcement mechanisms they have can be made to work, and there are others who will argue that it can be circumvented and is being circumvented. It is difficult to make a definitive call. I suppose it depends on what you think success looks like in this space. But certainly a number of jurisdictions are pursuing the attempted prohibition. Equally, there are quite a number of jurisdictions that seem to be moving in the other direction.

Mr STEPHEN JONES: Can I ask a related question. This is not the only area where authorities have attempted to prohibit or regulate online content. Offensive material, child related, is another area. Do you have any idea of the number of resources that are required to sufficiently police and enforce those attempts to block, limit or regulate that sort of content?

Mr Windeyer : Are you asking about the resources that would be required to block it effectively? I do not think I could—

Mr STEPHEN JONES: I mean police; it is not just blocking. If you are going to have an effective prohibition regime you have to block, enforce, breach—

Mr CHAMPION: And you have to do it quickly.

Mr STEPHEN JONES: Yes, you have to do it quickly. There is an obvious parallel. I am wondering how many resources resource we put into that. As an example, if we decided to go down an aggressive prohibition path, what number of resources would be required to succeed?

Mr Windeyer : We do not have an answer on the number of resources that would be required. It would depend on a whole range of factors, probably. The other thing is, I am not sure that the blocking of offensive content is necessarily, with the way the system works currently under the legislation in place—

Mr STEPHEN JONES: The existing system creates an offence for the individual. They do both, which our legislation apparently does not.

Senator XENOPHON: You are talking about America?

Mr STEPHEN JONES: No, here. I am talking about the offensive content.

Mr Windeyer : The offensive content?

Mr STEPHEN JONES: Yes. It would be an offence for somebody to download child pornography.

Mr Windeyer : That is correct. Under the current online content scheme there is content that the ACMA has a regulatory role with that needs to be taken down or what have you. Of the content that is covered by the National Classification Scheme, some is illegal to access and view and some is in the territory where it should not be made available or distributed. There is a parallel there, but it is probably not a perfect parallel.

Mr STEPHEN JONES: I am not trying to say that. I am trying to get a sense of the effectiveness of prohibition, and the evidence I have heard to date is that there is not a lot of success in that space. There are some areas where the government and society clearly have attempted, and should attempt, to use all stops available to us to prohibit and criminalise. That is a good example of the limit you have to go to if you are trying to effectively stop content.

Mr Windeyer : Yes, taking strong definitive steps about access to content in the internet environment is very difficult. I suppose one of the differences in this space is we have an act which says that providers shall not provide services to Australians. In the offensive contents space, we have regulations that require action to be taken when complaints are made. There is a bit of a difference there. One is attempting to say these shall not be done and how to enforce that. The other is saying parliament has decided that for one reason or another action should be taken, but only when a complaint is actually made. So the resources required for one are not necessarily the same as the resources required for the other. The basic point you make is that trying to enforce this sort of prohibition in the online environment is difficult. That is why there are arguments for and against it. That is why some people are saying the United States system works and others are saying it is not terribly effective at all and there are ways round it.

CHAIR: I will jump in here to contrast the difficulties with prohibition with the high levels of success I gather we are having in Australia in the regulation of online gambling. It sounds like an almost impossible task to regulate offshore online gaming. Where we have allowed things and we have regulations, am I right to say there is a very low level of misconduct in Australia?

Mr STEPHEN JONES: For wagering or gambling?

CHAIR: Gambling, not gaming.

Mr Windeyer : The answer is probably yes, there is a relatively low level. As we said, there have been 15 referrals to the AFP of Australian based provision. Within Australia we seem to have a number of services that are allowed to be offered. Companies are offering those services and only offering the services that they are allowed to offer under the Australian regulation. That seems to be working for those permitted services. Companies are taking steps to make sure they stay within the permitted services under the act. That seems to be working.

CHAIR: I got an early impression, which may well change as we hear more evidence, that regulation seems to be more successful than prohibition. It is a bit of a prima facie case at this stage. The next problem is Australian companies might be behaving themselves and complying with the law, but we still have this increasing amount of problem gambling which is a separate issue. How do we deal with that?

Mr Windeyer : That is right. A question that comes on that front is whether an attempted prohibition helps with attempts to minimise problem gambling. That is a question to which I do not think we definitively know the answer. Research is probably being done at the moment in that space, but I am not sure that there is definitive research in and around that. At the moment we are working a little bit in the world of anecdote, what we seem to see. The Productivity Commission seem to suggest the number of people gambling online is going up notwithstanding the current regulation. If a certain number of those are problem gamblers then that would be growing as well. We do not have the evidence to confirm that at this point, as far as I am aware.

Senator XENOPHON: The other question could be, in the absence of even the current regulatory framework, if we had liberalised regime, how many more people would take up online gambling and how many more problem gamblers would we have? That is the issue.

Mr Windeyer : That is right. Again, I think we do not have the data on that. The closest the Productivity Commission came to an answer on that was suggesting somewhere around four per cent of Australians gamble online. I think they said that was broadly in line with the UK and the US with similar sorts of numbers. The UK is a world that does not prohibit and the US is a world that does. How much one should conclude from that, I do not know. But I agree absolutely that is the other side of the problem.

Mr STEPHEN JONES: Is there any evidence to suggest that there is a limitation of access for Australians to online gaming?

CHAIR: Or shortage of access.

Mr STEPHEN JONES: Or shortage of access. Just because we do not allow Australian companies to base an online gaming service in Australia is there any evidence to suggest that that is limiting the supply of online gaming services to Australians?

Mr Windeyer : I do not think I have any evidence to that effect. No.

Mr STEPHEN JONES: There is none. I suspect the answer is because there is none.

CHAIR: I would ask though: is there a shortage of advertising and so on.

Senator XENOPHON: Is demand constrained in part by the advertising restrictions pursuant to the Interactive Gambling Act. That is another factor as well.

Mr STEPHEN JONES: That is another issue.

Mr CHAMPION: The point is we do not have any research at all, do we? Previous people have said that there is no research in this area. We do not know who is gambling and who is not.

Mr Windeyer : Accessibility, just because the internet is a global space, is clearly something that is pretty relatively unconstrained, but the advertising point that Senator Xenophon raises is equally relevant in this case.

Mr STEPHEN JONES: It is a valid one. That is my point; it is an area of effective regulation, more effective perhaps than the other.

Mr Windeyer : The advertising model?

CHAIR: I think Senator Xenophon makes a very important point. I think the point is that there are thousands of websites available now and, with liberalising it within Australia, there will be thousands more available. Then, if you were not very careful, all the advertising for all those sites might be in your face and there might be a much higher take-up rate because they were legal and could be advertised. Is that your point?

Senator XENOPHON: The point is that demand is driven by advertising in part.

Mr CHAMPION: Sports betting is a good example.

Senator XENOPHON: Yes, a good example.

Mr CHAMPION: If they were overseas sites and you did not have the advertising in Australia I doubt people would be getting on their phones at AFL games and searching for some international site. What drives betting at sports events is that you see Sportsbet and you see odds and you get on your mobile. You see it all over the place.

CHAIR: If you had an Australian based online wagering site that was allowed to behave the same way, you could create a terrible problem.

Mr CHAMPION: We just do not know.

Mr Windeyer : I think that is right. The point I would make is, as I have said before, these are matters that are definitely to be considered in the context of the review. As the terms of reference envisage in the asking of the question of how best to grapple with the problem you have to consider all aspects and the efficacy of all components of the act, which will include what you do with respect to advertising, because I think that is clearly relevant, and also what you do with the regulatory arrangements. The alternative that prohibition would have to look at and consider are what regulations might you put around it domestically and what sort of harm minimisation measures might be appropriate to include. It is a question which obviously has a number of components to it, all of which are envisaged in the review.

Mr CHAMPION: How many of the complaints are about being lured in, such as the standard complaints about vulnerable people gambling or whatever versus outright shonks like sites which are rigged and are not games of chance, they are only designed to take your money, or are involved in some scam or something like that?

Mr Windeyer : I am not aware from the department's perspective of having seen complaints which go to whether the site is a good or a bad site but more the complaints as they come to us relate to whether it is a site purporting to offer a prohibited service or not.

Mr CHAMPION: It is not so much about the aspect of whether the sites are legitimate.

Mr Windeyer : That is something that has been raised in discussion generally. One of the factors is you do not necessarily as a consumer have any information about what is behind the site. The basis of complaints received go more to the point of are they or are they not in the business of purporting to offer a prohibited service.

Mr CHAMPION: I think there has been some talk internationally about people putting in effect computer programs onto the sites to play them and other people are playing against a computer. It might not be the site person who is operating it.

Mr Windeyer : It might be one of the other competitors; that is correct. There are people who have developed computer programs to—

Mr CHAMPION: Play bridge.

Mr Windeyer : play poker or bridge or chess. Yes, that is possible, but I have not seen complaints and I do not think the department has seen specific complaints about a site because of that sort of activity.

Mr CHAMPION: So there is no consumer protection from that aspect. You are just looking at the act and whether it complies or does not.

Mr Windeyer : On a slightly different point, from the review's perspective I think that is a fair question to ask. I was being specific in terms of the complaints that we have received. More generally, we are expecting to canvass a range of things that are being debated publicly and things that have come forward to this committee. One of the things that has come forward is that consumers are gambling with operators and they may have no reason to be confident that they will be paid their winnings. It is something we are conscious is a live debate in this area at the moment. The only distinction I wanted to make was that it is not something we have specifically had complaints about.

Mr CHAMPION: I suppose that would be a consideration given that a lot of these sites seem to run out of remote jurisdictions or interesting jurisdictions shall we say. Would I be correct in thinking they are all run out Gibraltar or some exotic country somewhere?

Ms Press : The large majority of the sites that the ACMA looks into are in the tax-free islands. They are small jurisdictions with big financial services arms and big company arms. In respect of the ACMA's complaints that we have coming through the Interactive Gambling Act, we see probably less than five per cent of those complaints or inquiries are from people concerned about the validity of a site or people concerned about being able to access money they think they have won. On occasion we do get complaints from Australians about online wagering services and access to funds. In those circumstances we refer them to the licensing authority in the state jurisdiction that the service is based in.

Senator XENOPHON: In terms of the actual review, it says 'Information on how to make a submission to the review, including an issues paper to inform the consultation process, will become available on this page shortly.' What time frame are we looking at for the information on how to make a submission and the issues paper?

Mr Windeyer : I cannot be definitive, but we hope it will follow very quickly on the back of the terms of reference.

Senator XENOPHON: Within a fortnight?

Mr Windeyer : I would not want to commit myself.

Senator XENOPHON: Within a month?

Mr Windeyer : I would certainly hope so.

Senator XENOPHON: Looking at the terms of reference, is it anticipated that you will call evidence from, say, financial institutions? The Australian Bankers Association have got quite a keen interest in the financial transactions aspect of this. Is that something that is being proposed?

Mr Windeyer : One of the aspects that we will be looking at, in a sense coming under the hook of looking at other regulatory approaches that have been taken in other jurisdictions, is the financial regulatory options. That is something that we will be canvassing.

Senator XENOPHON: You mentioned the French have a more complex system than the approach of the United States. To what extent will you be talking to, getting submission from and getting advice from those other jurisdictions, particularly the US and France?

Mr Windeyer : We are having a look at that at the moment. I suppose we have already had a bit of a look at what people have been doing overseas. As the review goes on, we are likely to talk to the United States, which is often talked about as having a model of financial regulation, and have a look at that. We may well go to other jurisdictions to understand more about the approach they have taken and what they know about its effectiveness or otherwise.

Senator XENOPHON: Will the review be able to qualitatively assess one of the key arguments here that those who are in favour of liberalisation say, 'If you regulate it gives consumers some safeguards, leaving aside the issues of the house always win with gambling.' But then you see what is happening with, say, Betfair in the UK where there is the suggestion that Betfair is looking at going to Gibraltar or another low-cost, low-tax or no tax jurisdiction. They use the regulatory framework, perhaps the Australian regulatory framework, build up their customer base, build up confidence and then they can say, 'See you later,' to us and go somewhere else to a jurisdiction where there is not necessarily any regulation or it is at least lower tax. There is that conundrum, isn't there, because of the portability of this business model? It is not a shopfront.

Mr Windeyer : That is right. Portability of these businesses is certainly a factor. As I say, these are all issues which we are interested in exploring and expecting to receive quite a lot of comment and information on from a variety of stakeholders. To the extent there is research out there we are keen to tap into it to find out both what is known about what is happening in Australia today and what is known from other jurisdictions about their experience. The conclusions and any recommendations made in the review will go to all of those things. I do not know where they are going to come out at this point. Yes, that is absolutely correct.

Senator XENOPHON: You may want to take this on notice and perhaps it is an issue to follow up during estimates in November. What sort of resources will be put to this review? It is a very significant review considering the potential implications to the Australian community, socially and economically. What will the resources be? What will the criteria be to commission additional research as needed, which is referred to in the terms of reference for the review, including that conundrum of building themselves up here under an Australian regulatory regime, if that is what we have, but then they can move offshore? Will there be a qualitative assessment of what would work to minimise and which approaches work? Will you be able to provide those details on notice?

Mr Windeyer : Absolutely on the first couple and on the last couple there may be things that are still being explored, on things like the resources committed and research.

Senator XENOPHON: Will there be public hearings in relation to this?

Mr Windeyer : I do not think at this point we have envisaged public hearings as such. We are certainly open to public submissions. At this point we would be expecting to then go and meet with and have more face-to-face engagement and discussions with key stakeholders. I do not think at this point we have envisaged full public hearings.

Senator XENOPHON: One of the issues that has been raised is about PokerStars which owns a country in Australia, GP Information Services, although it is a subsidiary out of its base on the Isle of Man. The company reported that it believes it is operating within the law as its Sydney office provides customer service only to foreign players. What is your understanding of that?

Mr Windeyer : We are aware of the discussion around GP Information Services. The point I would make is that the simple presence of an organisation in Australia does not necessarily mean it is doing something that is in breach of the act.

Senator XENOPHON: No, it depends what it is doing.

Mr Windeyer : That is right.

Senator XENOPHON: The fact that they are here may lead to further inquiry, wouldn't it?

Mr Windeyer : If we get formal complaints about providers in Australia or people in Australia in the online gambling space we investigate them and refer them as appropriate.

Senator XENOPHON: You are not in a position to say whether GP Information Services is being investigated?

Mr Windeyer : I do not want to go into any particular individual complaints or things.

Senator XENOPHON: Can I ask about a particular company, not necessarily whether there has been a complaint or a process of enforcement or whatever. PokerStars.net offers online poker games supposedly for 'fun'. In other words you do not play for money. But the website actually includes a link to PokerStars.com which does offer gambling for money. If you happen to tune into late-night television, I think from midnight to dawn you see the ads for these businesses. What is the difference between the domain names dot net and dot com on the websites, and are dot net sites treated differently under the IGA?

Ms Press : From an investigation point of view, the ACMA will look at a dot net site and a dot com site—it is not necessarily the URL that is indicative. It is whether the site permits gambling and consideration to be paid by the person participating in the service. If, for example, we were investigating a hypothetical site called casino.net and we could not play with real money, that would not amount to prohibited Internet gambling content under the IGA. If the user was able to provide funds and provide consideration in exchange for winnings or losings, that would fall within the requirements of the act.

Senator XENOPHON: What about the link, the nexus—if you have a TV campaign on let us call it hypotheticalcasino.net and it gives you a link to hypotheticalcasino.com, where you can spend real money, is that something that the act currently covers?

Mr Windeyer : From our perspective, I guess looking at it through the lens of the advertising requirements of the act, it is certainly something that we would take into consideration. We have looked at things like that in the past—

Senator XENOPHON: If you have looked at in the past, is it a breach? It might be late-night TV, but it still gets out there. Advertising gamblingsite.net linked to gamblingsite.com, one you can use so-called play money and the other real money—does that not indicate a loophole in the current legislation, if you are not able to take action?

Mr Windeyer : I think I am right in saying we have formed the view from our perspective that a.net site because of the link might constitute advertising for a prohibited site. We have referred that through to the AFP.

Ms McNeil : The ACMA has had to reflect on an issue substantially identical to this in the context of an investigation it conducted last year into PokerStars.net and PokerStars.com. Perhaps Ms Press can walk you through that.

Ms Press : We may have mentioned this the last time we talked to the committee, where the Nine Network and Network Ten were advertising PokerStars.net—

Senator XENOPHON: And they pulled it.

Ms Press : Yes, they did.

Senator XENOPHON: Did they pull it voluntarily or under threat of prosecution?

Ms Press : It coincided with our investigation.

Senator XENOPHON: Another happy coincidence?

Ms Press : The ultimate finding of the authority was that that promotion through the dot net site was a clear attempt to promote an interactive gambling service.

Senator XENOPHON: But there has not been an attempt to prosecute the holding company, PokerStars. Are you able to say whether there has been any enforcement action under the act against PokerStars.net or PokerStars.com?

Ms Press : Through the regular pathways the ACMA engages in, that matter was then communicated back to the department and also to the AFP for an advertising offence.

Mr Windeyer : So any follow-up activity from the AFP's perspective, or what they do with it, is obviously in their court—

Senator XENOPHON: But you have not been advised one way or the other?

Mr Windeyer : Can I take that on notice? We might well have been.

Senator XENOPHON: That, to me, is a seminal issue surrounding the effectiveness of the current act. In my view the committee ought to look at the effectiveness of the act for people trying to circumvent the advertising ban. I do have a few more questions, but I am happy to defer to other members if there is not enough time.

CHAIR: No, we have time. I was wondering if you were going to cover gambling and the secret commissions? You are across it better than me, I think.

Senator XENOPHON: I have already disclosed that I am acting pro bono as solicitor for a gentleman who lost a lot of money with Sportsbet. I have to acknowledge publicly that Sportsbet, once the issue was raised with them, have been particularly good in trying to resolve the matter. It does raise the seminal problematic issue of secret commissions, and that was disclosed at the hearing last week in Melbourne. Under the current legislation, is there any prohibition on third parties getting commissions for introducing players to a site? I think in the case of Sportsbet the commission increases with the amount that the player who was introduced loses. Is that covered under the current legislation? Is it something that will be contemplated for the review?

Mr Windeyer : It is not covered by the current legislation. It is not something that we particularly had in mind as the terms of reference were being crafted. It may well be something that could be raised in the context of the review. Having said that, I would make one other observation about the extent to which it goes to the behaviour of people or companies offering 'permitted services' in the Australian context, which at this point are regulated through state and territory arrangements rather than at the Commonwealth level. It is, I suppose, relevant to the Interactive Gambling Act, but it was not something uppermost in our minds we were thinking about the terms of reference.

Senator XENOPHON: Sure. It was not uppermost in my mind until the CEO of Sportsbet quite candidly disclosed what was happening without any coercion. He outlined what they do, and he was quite open about it. Is it something you think would be looked at?

Mr Windeyer : I think it is something that could well be raised in the context of the review, yes.

Senator XENOPHON: Perhaps I could draw your attention to an article in today's Australian, by Patrick Smith. I am not sure whether you have seen it. He refers to this committee as a 'select committee into everything gambling'. Perhaps we should rename the committee, chair! The author makes reference to Bet365:

Bet365 is an overseas bookmaking and gambling operator. It invites Australians to bet on sports and participate on the internet in poker, bingo and casino games.

He goes on to say:

Bet365 wants to be licensed in Australia. So it sent its Australian customers an email this week that read in part: "We're in the process of applying for a sports betting licence in Australia. As part of our preparations for this, we regret to inform you that our Casino, Poker, Games and Bingo sites will no longer be available from week commencing 22nd August.

He then goes on to say that funds in those accounts would be transferred to the customers' sports balance. What role does the ACMA have and what position does the department have in relation to an entity such as Bet365 being able to apply for a licence when, quite clearly, it has been flouting the rules for a number of years? Is there a current 'good character' or probity test in licensing arrangements as there is throughout Australia for, say, poker machine and casino licences?

Mr Windeyer : I am sorry, but I do not know the answer to that question. I am just not familiar enough with the various state and territory licensing arrangements.

Senator XENOPHON: So it is not a federal issue, is that right? There is no overarching Commonwealth legislation that would look at that.

Mr Windeyer : It is not covered by the Interactive Gambling Act, no. And I am not aware of anything else.

Senator XENOPHON: So at this stage it would be on a state-by-state basis, is that right? Or territory by territory.

Mr Windeyer : That is correct.

Senator XENOPHON: Since we have time, I have a few more questions. In their submission the AFP mentions that they met with ACMA and the department on 2 June where it was agreed to develop a stringent regulatory regime with a view to deterring those engaging in this unregulated industry. Is this work part of the current review of the IGA being undertaken by the department or is it different work? In any case, does this not infer an inadequacy with the current regulatory arrangements?

Mr Windeyer : It is not explicitly part of the review. That is work being undertaken separately and it is work that recognises the difficulties we all face with enforcement of the existing act and the need to work together as best we can to make it as effective as possible. Issues of enforcement will definitely be covered in the review, but this was work that was initiated outside the context of the review.

Senator XENOPHON: Does it infer an inadequacy with the current regulatory arrangements?

Mr Windeyer : I think it draws attention to the fact that we are all struggling to work out how to most effectively regulate or enforce the current regulations that are in place.

Senator XENOPHON: Free TV Australia in its submission says it sought clarification from ACMA, the department or both as to whether broadcast of overseas events featuring prominent signage and other advertisements for interactive gambling services are legal. As I understand it, earlier information provided to the committee on accidental or incidental advertising appeared to be clear in that, provided the broadcaster or the publisher does not receive any benefit, it is permitted. Why is there still confusion about this issue? Is greater clarification in the act required? Is that one of the issues that will be raised in this inquiry?

Mr Windeyer : That is absolutely something that could be considered in the context of the inquiry. It would seem clear to some, based on a reading of the act and the explanatory memorandum, what the system is but, on the other hand, if there are stakeholders who feel there is a lack of clarity then that is a legitimate thing to be canvassed in the context of the review. I do not know whether ACMA has anything further to add. It is absolutely something that could be considered in the context of the review if there is a concern about the clarity as currently drafted.

Senator XENOPHON: Chair, I think you and everyone else here will be pleased to know that I do not have any further questions.

CHAIR: There are no further questions from the committee. Would any of the witnesses like to say anything in wrapping up?

Mr Windeyer : No, thank you. We have taken a couple of things on notice, which we will come back to the committee on.

CHAIR: I thank the department and the authority for their help with this. This has been a very helpful session, as was the last one. I thank all witnesses for their evidence and all observers for their interest in the committee's work.

Committee adjourned at 15:32