Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Joint Select Committee on Gambling Reform
11/08/2011
Interactive and online gambling and gambling advertising

BLANKSBY, Mr Josh, Director, Legal and Corporate Affairs, Betfair Pty Ltd

TWAITS, Mr Andrew, Chief Executive Officer, Betfair Pty Ltd

CHAIR: I welcome representatives from Betfair. I note that that you have provided submissions to both inquiries. Thank you for that work. It will assist the committee. We have an hour set aside to hear from you. As the inquiries cover similar areas, questions may cover both inquiries. However, we will make sure that we leave sufficient time for any particular questions on the bill. I invite you now to make a brief opening statement before the committee proceeds to questions.

Mr Twaits : I will start by giving an indication to the committee about what a betting exchange actually is. Betfair was not the first betting exchange in the world. It started in the UK in June of 2000. It was probably the second or third betting exchange to commence. The best way that I can think of to explain it is that it is like an Ebay for wagering. We provide a platform similar to the stock exchange and punters come onto the platform and effectively bet against each other. A bit like the stock exchange, it does not have to be a one for one match with a bet. So whenever someone is backing something to win, they can only do that if someone is backing that horse or runner not to win. The exchange operates on win and place betting with a few derivations of that on horse riding. Most of the range of markets that you see are traditional bookmaker offerings.

We make our money in the exchange side of the business by charging a commission on a punter's profits on a particular market. To give you an example, a customer may have five or 10 bets on a particular horse race, some backing, some laying. We look at the results at the end of the race. If they have made a profit, we charge a commission of generally between two and five per cent. There are some other charges that we levy on consumers in different circumstances. But as a rule that is how we make our money.

In terms of who Betfair is, we have been licensed in Tasmania since February 2006. We are a 50-50 joint venture between Betfair in the UK, which is now a listed entity on the London Stock Exchange, and Crown Ltd, which is listed on the Australian Stock Exchange. The original joint venture was entered into with PBL, but when the demerger happened a number of years ago their interest in Betfair's Australasian operations was passed to Crown.

In terms of the market, it is fair to say that Betfair's entry into the Australian marketplace has been shrouded in a degree of controversy, I would say predominantly driven by fears about the impact that our entry would have on the TAB operations and revenue flowing to the racing industry. Without putting words in the mouth of the racing industry, I think that most of those fears have been allayed. We have now been in operation in Australia for over five years and we are making contributions right around the country to the racing industry and to the sports industry, and we initiated those contributions. We are seeing that consumer preferences are changing. We have seen that in the five-and-a-half years that we have been in operation here in Australia. There has definitely been an increase in the willingness of consumers to transact on line. And that is not just a phenomenon in wagering; you are seeing that in retail and other forms of purchasing products and services. We are also seeing a shift in the younger customer demographic to interest in betting in sports rather than racing. We have pointed that out as being a real risk to the racing industry. In terms of the key issues that we have dealt with and which are still on the table, and many of which are outlined in the terms of reference for both of these inquiries, the first that I would mention is harm minimisation. Broadly, you will see in our submission that our approach to harm minimisation is centred around the identity of the customer and providing the customer with the ability to set loss and deposit limits. Those can be set either by day, by week or by month. There is a seven-day cooling-off period if any of those restrictions are to be relaxed in any way. There is a self-exclusion provision on the website which can be activated online or by telephone. The first time a customer activates that exclusion they are out for six months. If they then come on stream again and they activate self-exclusion for a second time, they are out for life and there is no way of opening up a new account with Betfair. We also have a legislated requirement to provide third-party exclusion. For instance, an interested person can apply to the Tasmanian Gaming Commission for a Betfair customer to be excluded. We get notified of that but we do not have a seat at the table during any hearing; that is a decision that is made by the Tasmanian Gaming Commission. I can come back and elaborate on this in questioning.

The next issue which has got a lot of coverage, and which I know is subject particularly to Senator Xenophon's bill, relates to integrity management. There has been a lot said about betting on losing outcomes. As I indicated before, you can only do that if someone else is prepared to match your bet. We were the instigating party in a High Court challenge against the Western Australian government in 2008 which resulted in a unanimous decision in our favour. The High Court found that regulation can deal with the integrity issues surrounding betting exchanges. In effect, the issues are no different to the integrity issues you see with bookmakers or with TABs.

We were the first operator in Australia to enter into information-sharing agreements with all of the major professional sports in Australia. We now have them in place with all of the racing industry bodies as well. We are also strong advocates of providing the sports with a power of veto over the markets that we offer. The racing bodies also have that power of veto over the markets we offer.

Funding of the racing industry is another important issue that we have had to grapple with. I do not think that is part of the terms of reference for this inquiry but it is an issue and I am happy to address any questions along those lines over the course of the next hour.

The other issue that we have dealt with in our 5½ years here is the important question of anti-money-laundering and counterterrorism financing. We have had a relationship with AUSTRAC since before we were licensed here, when we were taking bets from Australians, and that relationship is now formalised under the AML legislation. We have regular dialogue, as I believe most betting agencies now do, with AUSTRAC in relation to our compliance obligations and sharing information where they believe that we have got information that can assist their inquiries on various matters.

More recently, and I am expecting this might come up today, there has been some public focus on advertising and the increasing prevalence of advertising by wagering operators. By way of background, it is worth noting that until about October 2008 there were state based restrictions on interstate operators advertising outside their jurisdiction. Given the state based TAB monopolies, that effectively meant that if you were licensed in Tasmania, like we are, or in the Northern Territory, like most of the corporate bookmakers are, you could not advertise at all in mainland Australia. Those restrictions were lifted in October 2008, not because of our High Court proceeding in WA but because we took action against the Victorian and New South Wales state governments under section 92 of the Constitution. They rolled over and lifted the restrictions.

We have participated in discussions with regulators, with sports, with racing bodies and we will do so with broadcasters about what is an appropriate model. There is no doubt there has been a significant increase in advertising since 2008. I think it is worth noting that the lifting of those restrictions came at a time when the GFC hit, and a number of companies who were traditionally sponsoring racing and sporting industries pulled right back on their spend. I think that is one of the reasons we and our competitors were able to get opportunities to advertise in and around sporting events. There are still some restrictions around advertising on TAB dominated race tracks and on their racing TV network, but otherwise we are in effect able to take advantage of the same opportunities as any other regulated industry. That is all I wanted to say by way of opening statement. I am happy to answer any questions that the committee has.

Mr CIOBO: I am interested in exploring a principle we were discussing earlier to do with sports integrity. As a committee we discussed a traditional model, where the bet is actually placed between the operator and the person placing the bet—so there is a certain element of commercial risk—versus an exchange arrangement that Betfair has, effectively between two customers, in which you act as a facilitator. My question goes to integrity. I can understand the commercial risk, which I would think probably means that there is a certain amount of in-built need for there to be integrity in the system to prevent information symmetry, insider knowledge and so on and so forth from taking place, which is not immediately apparent to me under the exchange model that you operate. Would you care to make some comments around that?

Mr Twaits : There are two comments to make. Firstly, it is important to recognise that bookmakers generally try to balance their book and build in a margin, so they will have an interest in preserving integrity whichever way the match goes. They will take bets on both outcomes in, say, a head to head and multiple outcomes in a horse race. I do not think it is right to say that they automatically have an interest that is aligned with preventing match fixing. Having said that, I do not make any suggestions that they are involved in it one way or the other. It is just important to note that because of their model it does not mean that they are automatically—

Mr CIOBO: When you say 'their model', do you mean because they are effectively 'reinsuring'—I will use that term because I am not sure what the correct term is—by offsetting some of that risk to others?

Mr Twaits : It can happen that way. Sometimes if they get the bet—

Mr CIOBO: Is that the standard model? What is the most typical?

Mr Twaits : Every bookmaker operates in a different way. Some of them lay off their bets to in effect reinsure, if you want to put it that way. If others get the right number of bets coming in at the right time at the right prices, they will keep them all and, if they have built a margin into their prices—

Mr CIOBO: Effectively finance out of cashflow, then.

Mr Twaits : Yes, exactly.

Mr CIOBO: It comes down to being an issue, though, where if you are odds-on favourite you are going to have a heavy supply of bets coming in on one side only.

Mr Twaits : Typically, on the favourite, yes.

Mr CIOBO: At the end of the day, the way in which you get your margin, as I understand it, is that you obviously pay a lower odd than the actual chance of it occurring.

Mr Twaits : If you can balance your book, that is right. That is the way it works for a bookmaker.

Mr CIOBO: That makes sense to me. In an exchange model, though, such as the one you operate, how does one achieve the same outcome?

Mr Twaits : I think this is where our interests are aligned with both bookmakers and TABs. We have a strong economic interest in ensuring that the integrity of racing and sporting events is absolutely above reproach. The High Court case I mentioned in Western Australia eventuated because they sought to ban betting exchanges under the guise of integrity issues. We engaged late in the day—at the request of the court, I believe—Henry Ergas, an economist, to provide a report to the court on our behalf in relation to the economic interest that we have in preserving the integrity of racing and sporting events, and I would be more than happy to table that to the committee so that you can read it. In a nutshell, it makes the point very strongly that we do have a direct interest in ensuring that there is a strong sense of integrity around the results of racing and sporting events. If I could just finish on the case that you may know about where there were some suggestions around match fixing in tennis involving Nikolay Davydenko, just the suggestion of underperformance—and there was no finding of underperformance—had the effect that betting markets with us and with our competitors noticeably dropped off for a period of time afterwards, which is absolutely not in our interests.

Mr CIOBO: I think it would be great if you would be willing to provide the committee with a copy of that document from Henry Ergas. Secondly, just to clarify the record, essentially it is a commercial proposition that the whole business is at stake because, if people do not have confidence or faith that there is not insider information flowing out, then why would they take the risk. Is that what you are saying?

Mr Twaits : Sorry, you might have to rephrase the question.

Mr CIOBO: You are saying that the commercial desire for integrity that you speak of is generally built on the principle that you do not have a business if people do not have faith in the market. That is basically what you are saying.

Mr Twaits : That is right, yes.

Mr CIOBO: With respect to problem gambling, is it possible for you to determine who might potentially be a problem gambler based on the bets and the wagering that take place through your exchange, or is that not possible?

Mr Twaits : There are some pointers, and we do have telephone betting. It is a small component of the business, but we do have a telephone betting operation and a help desk where real people are talking to customers from time to time. As you would know, there are a number of pointers towards what defines a problem gambler. It is just not possible, I think, in any environment for an operator to know with certainty whether someone's betting behaviour indicates that they have a problem. As I say, though, there definitely can be pointers. All of what we call—even though we are an online operator—our 'customer-facing staff' have undergone mandatory first-level problem gambling training as a condition of their individual gaming licences in Tasmania.

Mr CIOBO: So you train your staff to keep an eye out, basically.

Mr Twaits : That is right.

Mr CIOBO: With respect to the operation of the exchange, what potential do you see—or are you already realising some of that potential—in terms of Australia effectively being an accredited, trustworthy exchange that perhaps offshore countries or people might choose to use?

Mr Twaits : In terms of trying to operate an exchange and offering exchange products to Australian customers?

Mr CIOBO: No, in terms of offering a betting exchange for people outside Australia.

Mr Twaits : I am sorry; I do not quite follow the question.

Mr CIOBO: For example, if we assume that there is a market in China, what potential is there that you either see existing or are already realising in terms of capturing some of that market?

Mr Twaits : I apologise. The joint venture between Crown and Betfair UK makes its money through Australian and New Zealand customers transacting with Betfair globally. Our interest as a licensed entity in Tasmania means that we regulate all Australian and New Zealand racing and sporting events and other markets that we offer for customers worldwide. There are significant restrictions around the jurisdictions that any member of the Betfair group globally can provide products and services to. For instance, we cannot do it in the US and large parts of Asia, and we never have.

Mr CIOBO: But that is a commercial arrangement.

Mr Twaits : It is a regulatory issue. I am just giving you some background into how the structure works. If you just look at Betfair in a global sense, there are markets internationally that we just cannot touch because of regulation around any offshore operator.

Mr CIOBO: But that is what I am going to. I am asking you what potential there is. You are saying you cannot go there now, but I am assuming that you have looked at the potential that might be there. I am trying to ascertain whether or not we have the ability, if that regulation were lifted, and what potential you can see globally.

Mr Twaits : I think the potential is significant at any time. The reason we have gone to so much effort and expense to become licensed in Australia is that we think that ultimately customers will gravitate towards well-regulated, creditable businesses.

Mr CIOBO: It is competitive advantage.

Mr Twaits : Exactly. So I think a strong regulatory environment in Australia, whilst it inevitably comes with a bit of pain at the operator level while you get used to certain things, ultimately means that it enables us to provide a better product to the consumer.

Senator XENOPHON: Thank you, Mr Twaits, for your submission and your opening statement. You have said that harm minimisation is set around the identity of the customer. That is pretty integral to the whole thing, isn't it?

Mr Twaits : It is, yes.

Senator XENOPHON: It is just that someone in this room went online a few minutes ago—it was not me—and opened up a Betfair account even though he put in the wrong birthday and the wrong street address.

Mr Twaits : When you say 'opened a Betfair account', what did he actually do?

Senator XENOPHON: He opened up an account under his name.

Mr Twaits : Do you mean he registered for an account?

Senator XENOPHON: Yes, he registered for an account. Can that person actually start betting, even though he has the wrong address and the wrong birthday?

Mr Twaits : Until the account is verified there are restrictions on the amount that that person can deposit. They cannot withdraw any money.

Senator XENOPHON: How much can they bet at this stage?

Mr Twaits : They can deposit up to $500 in a month for up to three months.

Senator XENOPHON: So you have three months to verify.

Mr Twaits : Yes, unless it is done electronically, which generally takes a couple of hours.

Mr Banksby : Electronic verification would commence straight away and would be washed against a number of databases we have access to. It could be verified in a short time. If the person is not able to electronically verify it, they will be informed that they have not been able to be matched and they will be required to physically verify their account.

Senator XENOPHON: But there is a hiatus—a 90-day period, essentially—which applies to other sports betting agencies.

Mr Banksby : Ninety days is the maximum. Obviously we attempt to verify our customers quickly.

Senator XENOPHON: Because time is short, I just want to get through a number of issues with you. Sportsbet gave evidence this morning and in the course of the evidence it became apparent that they have a position whereby third parties who introduce people to Sportsbet get a commission, which is not disclosed to the person who is being introduced. Do you have a similar arrangement in your business?

Mr Twaits : To the extent that third parties actively introduce customers to Betfair, we have what is called a refer-and-earn scheme. The introduced customer will know they are being introduced, because they have to obtain an ID number from the introducer, who then gets a disclosed $50 credit in their account.

Senator XENOPHON: So there is some transparency there so that the person who is being introduced knows how much the person who has referred them is getting.

Mr Twaits : Yes, and there is a trailing revenue share there, which is disclosed on the website as well.

Senator XENOPHON: Sportsbet advised the committee that it spends $3½ to $4 million a year on those sorts of commissions. How much would you spend on that each year?

Mr Twaits : I would be happy to let the committee know. I do not know off the top of my head, but it would be nothing like that amount.

Senator XENOPHON: Would it be under $1 million?

Mr Twaits : Definitely.

Senator XENOPHON: Sportsbet disclosed in their evidence that the more someone spent—the more someone lost—the greater the commission to the third party who introduced that person. Is that the arrangement you have with the trailing commissions?

Mr Twaits : As I indicated at the outset, we make our money off customers making a profit. We charge the profitable customers. Of course, that means they are winning off other customers, but that is how we charge our customers.

Senator XENOPHON: By implication, they have made it by somebody else losing.

Mr Twaits : Exactly.

Senator XENOPHON: So you do not have any issue with there being absolute transparency about the amount of the trailing commissions back to the person who introduced someone.

Mr Twaits : Under the refer-and-earn scheme? Absolutely not.

Senator XENOPHON: So if someone was introduced to Betfair, they can find out how much money has been given to the third party who gets the refer-and-earn commissions. Is that right?

Mr Twaits : We do not have a report that tells them in dollar terms, but the formula is there, so it is available for anyone.

Senator XENOPHON: So they could work it out.

Mr Twaits : They could work it out very easily, yes.

Senator XENOPHON: Is that something that is on your website?

Mr Twaits : Yes, it is in the refer-and-earn section of the website.

Senator XENOPHON: What arrangements do you have in terms of commercial agreements with various sporting codes?

Mr Twaits : I can split those into two categories. The first is that we make product fee payments to the racing industry right around Australia and to the major, and now not-so-major, sports in Australia. We pay them a share of our gross revenue—apart from a few racing jurisdictions where a turnover model is in place, and we are disputing that model. The second type of arrangement we have with sporting organisations could be broadly categorised as sponsorship arrangements in the traditional sense, which are no different to those in any other industry.

Senator XENOPHON: There is a debate, as you have acknowledged, about kids being exposed to gambling advertising. Do you have any protocols in place for that?

Mr Twaits : I do not think I raised the issue of kids being exposed to advertising—

Senator XENOPHON: No, no, no. But the issue of advertising, sorry. I think you raise the broader issue of advertising. Specifically, do you have any protocols to say that you do not provide sponsorship in cases where there would be a high level of exposure to children?

Mr Twaits : We do. We do not, for instance, sponsor junior sport or activities where juniors are the predominant attendees or participants. We are bound by codes in place in Tasmania where we cannot target juniors. Our advertising, I think—it is very important to me—is not framed in a way that should appeal to under 18s.

Senator XENOPHON: In terms of self-exclusion, you have mechanisms where people can self-exclude.

Mr Twaits : Yes.

Senator XENOPHON: You have got—what?—about 200,000 customers in Australia?

Mr Twaits : Registered, roughly, yes.

Senator XENOPHON: Sportsbet gave evidence this morning that there were, I think, about 900 customers that self-excluded and 1,600 that they acted to exclude of their several hundred thousand customers in Australia. What figures do you have in terms of self-exclusions?

Mr Blanksby : Self-exclusion accounts for about 2½ thousand and approximately 12,000 have utilised the deposit loss limits and self-exclusion.

Senator XENOPHON: That means 12,000 that cannot play anymore?

Mr Blanksby : No, 2½ thousand have self-excluded. The difference between that and the 12,000 is people who have placed certain limits on either their deposits or their losses.

Senator XENOPHON: Do have the power to exclude people that you have concerns about?

Mr Blanksby : Yes, we do.

Mr Twaits : Yes.

Senator XENOPHON: Say a family member contacts you and says, 'I've got concerns that my husband/wife/son/daughter/parent is going overboard with Betfair,' what mechanisms do you have in place to deal with that? Obviously there are privacy issues, but how do you deal with a complaint such as that from a third party?

Mr Blanksby : It is actually dealt with under legislation in Tasmania. We refer that third party to the Tasmanian Gaming Commission and they are required to go through a process with that commission to put up the reasons.

Senator XENOPHON: Even if they are in Melbourne or Sydney or Adelaide?

Mr Blanksby : Yes.

Senator XENOPHON: So the Tasmanian Gaming Commission has jurisdiction to deal with interstate—

Mr Twaits : Or overseas.

Senator XENOPHON: Or overseas?

Mr Blanksby : Yes, anything to do with our business.

Senator XENOPHON: How many of those third-party complaints are you aware of?

Mr Blanksby : I am not sure.

Senator XENOPHON: So that would be an issue to put to the Tasmanian Gaming Commission?

Mr Blanksby : Correct. It falls under their legislation so we just refer to them.

Senator XENOPHON: You have talked about micro betting and exotic betting, and you have said that Betfair does not offer that—

Mr Twaits : No.

Senator XENOPHON: in certain circumstances. There are certain types of micro betting that you do not offer?

Mr Twaits : Yes. I guess the key point is that ask the sports and racing industry whether we can offer certain markets and if they say no, we don't offer it. Or, we might choose for commercial reasons not to offer it—certain markets.

Senator XENOPHON: How do you assess risks, though? I do acknowledge that where there have been irregularities Betfair has been very upfront in terms of going to regulators and saying, 'Here is a suspicious transaction.' I want to acknowledge that on the record. But isn't there an inherent problem that when you have these sorts of micro betting or betting on a horse that runs last or whatever, that there is that potential for an irregularity on the part of those participating in the event?

Mr Twaits : We have never offered a market on a horse coming last, but I take your point that it is a horse not winning a race.

Senator XENOPHON: Yes.

Mr Twaits : Look, absolutely. What the High Court was presented with was clear evidence that you can bet on a horse not win through the TAB or through a bookmaker, so it is not new. It is actually a competitive advantage of Betfair that you can bet on an outcome not to occur with a fewer number of mouse clicks, if you like. It definitely raises issues. However, all of the evidence suggests—and the High Court found—that the best way of dealing with those issues is through a regulated approach and through complete transparency as to what is going on. For instance, most stewards around Australia now have live access to every bet that goes through our system before the race. So they can see in real time what is happening if there is a particular trend towards a particular outcome or whatever.

Mr Blanksby : It is also an important point to make that under Tasmanian legislation it is against the law if a participant in the event or in the sport does backs an outcome to lose. We have referred a number of issues to the DPP in Tasmania to look at that. That is actually legislation that is now being looked at across the country.

Senator XENOPHON: I want to go to the issue of credit. The issue of the provision of credit was raised with Sportsbet. You may have seen the case in the media about a gambler who had $80,000 worth of credit. He subsequently lost his home and was bankrupted. I think that is now being resolved. I have disclosed that I am involved in that case pro bono for the person involved. Does Betfair provide credit or inducements to gamble?

Mr Twaits : Not in the sense that bookmakers traditionally provide credit. We are not allowed to provide unsolicited credit, if you like, to customers; however, like the TABs we are able to provide terms of trade to our more sophisticated corporate type customers who are approved by the Gaming Commission. There are about 20 of those customers.

Senator XENOPHON: So apart from those 20 with Gaming Commission approval, you cannot make a commercial decision to say, 'We're going to give you $10,000 in credit'?

Mr Twaits : No.

Senator XENOPHON: Can you give inducements? Can you say, 'Here's $100 to play'? Do you do that?

Mr Twaits : State based legislation now prevents the offering of inducements, or the advertising of inducements in some cases, to open a betting account.

Senator XENOPHON: Do you offer inducements to open a betting account?

Mr Twaits : Not in breach of any state legislation—

Senator XENOPHON: Yes, but do you offer any inducements? If so, give me an example that coincides with state legislation.

Mr Twaits : In the past we would have offered a free cap or $50 in your account if you open an account with Betfair.

Senator XENOPHON: But it does not go beyond that?

Mr Twaits : No.

Senator BILYK: Do you offer free credits?

Mr Blanksby : Like a free bet?

Senator BILYK: Yes.

Mr Blanksby : Certain jurisdictions do not allow it and do not allow the advertising of it, so we ensure that any offerings we make abide by that legislation.

Senator BILYK: But in the jurisdictions where it is allowed, do you do it?

Mr Twaits : We do. Generally up to $50 or $100—$200 maybe—depending on the potential size of the customer.

Mr CIOBO: Do you see any difference between a credit card company offering free frequent flyer points for taking out a new credit card for someone who spends more money on retail shopping than they ought to and you offering credit to somebody taking out a new account?

Mr Twaits : That is something I would need to take notice. I have not turned my mind to that.

Mr CIOBO: Sure.

Senator BILYK: If you do offer free credits, how do you determine that you going to offer them to the customers?

Mr Blanksby : The promotion is usually done on an action of the customer. Usually you want the customer to place a bet with us on a certain event and that will trigger their credit. It is only up to, as Andrew said before, maximums—

Senator BILYK: So why don't you offer free credits to all customers?

Mr Twaits : It costs money to offer those benefits. Our system is quite complex compared to the run of the mill bookmaker or the TAB. Sometimes we have problems educating people on how the back and lay system works, how a lay bet works. Even for experienced punters it is quite hard. The free bets we offer are typically targeted to reactivation or encourage them to experience the full—

Senator BILYK: If someone has not use their account for awhile?

Mr Twaits : Potentially that and sometimes, even if they are quite active, to encourage them to take advantage of a broader range of benefits that we think Betfair has to offer.

Senator XENOPHON: In relation to consumer protection measures, you have got responsible gambling policies on your website. I think it is fairly high up in the scheme of things. Can you give us details? How are they offered? Are they just links to the screen? Do you have any software that can measure if someone is trying to chase their losses or unusual patterns of behaviour that would trigger some inquiry on your part? Do you get a situation where you can ring or email the gambler and say, 'Are you all right or is there an issue here?'

Mr Twaits : It is sort of a combination of fraud and harm minimisation measures. We obviously have an interest in both. Often it is difficult to tell without a lot of inquiry and even then it is difficult to conclude. I will give an example. If somebody were a typical $50 punter and their average account balance were $500 or $1,000 and they deposited $70,000 then alarm bells would go off. That is a real example that occurred a few years ago.

Senator XENOPHON: So what did you do then?

Mr Twaits : The account was suspended. We asked the customer where they got the money from. They said that it was from a deceased aunt. We thought, 'Oh well, we've heard that one before.' The account remained suspended until they provided probate evidence, which they did. From memory, I cannot remember how much money was bet, but a large part of it was ultimately withdrawn. That is an example.

Senator XENOPHON: They were not happy with your approach?

Mr Twaits : I think they expected it. They were fairly good-natured about it and got the evidence to us reasonably quickly.

Senator XENOPHON: You mentioned how the Tasmanian Gaming Commission has to be involved if a third party approaches to say that a family member or someone they know has problems. To your knowledge, you do not know how many cases have been excluded. Are you advised of the outcome of an investigation by the Tasmanian Gaming Commissioner to say, 'This person has been excluded'?

Mr Twaits : If they are excluded, we know so that we have the figures—

Mr Blanksby : We have been informed by the commission that there has been one customer. The commission directs us to close that person's account.

Senator XENOPHON: So one customer, over what period?

Mr Blanksby : We have had a licence for 5½ years. We are not aware of how many complaints—that is the commission's decision.

Senator XENOPHON: So you are not sure how the commission deals with these matters?

Mr Blanksby : No, I can assume—

Senator XENOPHON: In terms of patterns of problem gambling emerging, do you have any software that looks at that? You have an unusual transaction of $70,000 deposited. But is there any software that looks at where someone, who is a regular $50-a-week player, suddenly—bang—starts spending $1,000 a week? Does that trigger anything off in your software?

Mr Twaits : Off the top of my head, I cannot tell you what the triggers are, but there are triggers. The $70,000 example I gave is an extreme one. The triggers for our internal transactions tend to look at activities much lower than that. I can come back to the committee with the figures. From a fraud perspective, there is good reason why that number should stay private.

Senator XENOPHON: I understand that.

Mr Blanksby : We are happy to share that in confidence with the committee.

Senator XENOPHON: Alternatively, just a framework of mechanisms without the triggers. Tabcorp is able to take bets from people through their television screens, if they have a telephone betting account with Foxtel. Does Betfair offer this service? And do you expect opportunities to gamble through interactive television to become more widespread?

Mr Twaits : We do not do it at the moment, but we are looking at doing it. I do not think it is going to take off in the short term. That is my view. But it is something that we are looking at.

Senator XENOPHON: I have some more questions but I am happy to defer.

CHAIR: I have a follow-up question about this whole Tasmanian Gaming Commission matter. As we now know, you are regulated by the Gaming Commission. How would you describe your relationship with the Tasmanian Gaming Commission? Is it close, with them looking over your shoulder and keeping a close eye on you, or is it more towards self-regulation with them at arm's length?

Mr Twaits : Absolutely more the former.

CHAIR: They look over your shoulder.

Mr Blanksby : We have a full-time compliance manager, based in Tasmania, who spends her time dealing with the Gaming Commission and their administrative arm, which is the liquor and gaming branch down there. They have complete oversight. They are receiving daily reports. All system changes need to go through an approval process which needs to be tested by an independent tester. The framework in Tasmania is quite broad. They have complete oversight.

CHAIR: Given that the Gaming Commission is subordinate to the Treasurer and the Treasury, which I find rather interesting—that the protection of gamblers is seen as a money matter, a Treasury matter, not a health matter. But that is by the bye. To that end, to what degree is the Gaming Commission interested in your financial affairs versus the way you protect consumers?

Mr Twaits : I do meet with the Gaming Commission, but we do not have much direct contact with the commission itself. As Josh said, our daily communications are through the branch. But I have certainly seen no evidence in my dealings with the TGC of any interest in our commercial activities or favouring them over the protection of the consumer.

CHAIR: In your opinion, they are paying appropriate attention to consumer protection issues?

Mr Twaits : That is their mandate.

Mr Blanksby : They are completely independent from government and that is the way they act.

CHAIR: I am very pleased to hear that. I was hoping that would be the answer. Just one other quick question. A question came up earlier today about the whole issue of people involved in other forms of gambling and whether or not they move to online gambling. It certainly came up with this committee when we were looking at mandatory precommitment for poker machines. Senator Xenophon asked a very good question: what are the statistics in WA? Do you have any sense of whether you have a disproportionate number of customers in WA where there are no poker machines? Or, off the top of your head, is WA unremarkable?

Mr Twaits : Off the top of my head, there is no real distinction in customers split by geography but, again, we would be very happy to supply the committee with details.

Senator XENOPHON: Just following on from that, one issue that Sportsbet raises is that its profile of promotion is heavier on the eastern seaboard. Do you promote Betfair pretty evenly throughout jurisdictions?

Mr Twaits : No, we do not because the population base is on the eastern seaboard, so we tend to focus on this side of the country for that reason. But we tend to split our marketing budget in a dollar sense based on the number of customers we think we will acquire in each jurisdiction.

Senator XENOPHON: So, proportionately, you would probably spend, per head of population, a similar amount in Perth compared to Melbourne or Sydney?

Mr Twaits : Yes, in that jurisdiction, yes.

CHAIR: Are you aware of any company that is focusing on WA, which might distort the figures?

Mr Twaits : No, not to my knowledge.

CHAIR: In that case, I think the committee would find it very helpful to know what proportion, on a pro rata basis, your customers are from WA and whether WA is remarkable in any way. We are particularly interested in whether there is a high level of take-up or whether it is about the same as the rest of the country on a per capita basis.

Mr Twaits : We are happy to do that.

Senator BILYK: You mentioned exclusion and the role of the Tasmanian Gaming Commission. I am not sure whether you can expand anymore on that for us or whether we need to speak with the Tasmanian Gaming Commission. But you did say you were happy to come back to it and expand on it. I wonder whether there is anything else you have to add with regard to that that may be of help to us.

Mr Twaits : In relation to self-exclusion?

Senator BILYK: Yes.

Mr Twaits : Josh has mentioned the figures in terms of the percentage of customers who have themselves excluded. I am not sure whether there is much I can add.

Mr Blanksby : To give you an idea of the process, obviously our help desk staff are educated in responsible gambling service and so forth. They do try to pick up on the pointers, as we spoke about before. They will actually engage with customers whom they believe do have concerns and they will offer them things like: did you know that we have deposit limits and loss limits? Do you know you can self-exclude for a period of time? They will offer them those types of things and will encourage them towards responsible gambling websites. That is how the parameters work for self-exclusion. For third party exclusion, the Gaming Commission needs to make that decision. We do have people contacting us from the help desk but, because of privacy concerns, we obviously have to be very careful not to disclose too many betting details. But we do take things on board and we say, 'You should put that in writing to the Tasmanian Gaming Commission.' Obviously, the commission then comes to us and requests information about the customer, which we provide under our confidentially arrangements. Then it is up to the commission.

Senator BILYK: So if I am a third party and am concerned about my partner or whoever losing too much money and I ring the help desk, they would suggest that I put it in writing to the Tasmanian Gaming Commission?

Mr Blanksby : Yes, they would definitely explain to you the process and so forth of what to go through.

Senator BILYK: Thank you for clarifying that. You mentioned the 2008 High Court decision. If I am correct, that allowed Betfair to operate and advertise across jurisdictions. Is that correct?

Mr Twaits : No.

Senator BILYK: Can you clarify that for me?

Mr Twaits : The case was strictly in relation to the Western Australian government's attempt to ban us under legislation on integrity grounds. The case was brought under section 92 of the Constitution, which is the section on free trade between the states. The principles were tweaked by the High Court, so it had the effect of making very clear the anticompetitive legislation that existed, in particular in Victoria and New South Wales. So it was a separate set of proceedings that we brought against the Victorian and New South Wales governments which, as I said, they rolled over on pretty quickly and then voluntarily changed the law.

Senator BILYK: Did any of those decisions change the environment of sports betting in general and advertising in Australia?

Mr Twaits : Absolutely, with the lifting of advertising restrictions. It meant that we could advertise on the mainland and the corporate bookmakers in the Northern Territory could advertise throughout the rest of the country as well.

Senator BILYK: What forms of advertising do you use? Can you tell me. It is not just online?

Mr Twaits : No, it is not. We do not do any cold-calling but we do a range of other advertising, so we have done television, we have done a little bit of radio, but not much, and newspapers, magazines, that type of thing, but the bulk of it is online.

Senator BILYK: Do you have any concerns about the billed proposal to prohibit advertising during certain times and programs?

Mr Twaits : Yes. Our submission deals with that and, as I said, we are happy to cooperate with regulators and broadcasters et cetera to find a workable solution, but I guess the point we would make is that the wagering industry is already highly regulated. We think we represent the high-water mark in acting responsibly with regard to harm minimisation and integrity management. We do not see any reason for severe limitations on the times or locations that we can advertise. I would point out that the effect of the restrictions on—

Senator BILYK: Do you not think that you should not advertise through kids' prime-time television, for example, or—

Mr Twaits : We would not be advertising on Playschool or Bananas in Pyjamasbut in terms of—

Senator BILYK: That is because they are on the ABC, so you would not have the opportunity—

Mr Twaits : I knew as soon as I was saying it that it was a bad example! To the extent that we would advertise during the cricket, if it is a one-dayer starting at 10.30 in the morning I do not think there should be any restrictions on that provided the nature of the advertising is not designed for or likely to appeal to under-18s.

Senator BILYK: Do you think it has the potential to affect sponsorship or partnership agreements that you might have in place?

Mr Twaits : Definitely, if we cannot advertise we would not have sponsorship agreements in place or they would be severely limited.

Senator BILYK: Okay, thank you. You previously mentioned some words that reminded me I had a question regarding harm minimisation. You submit that the current prohibition based approach has failed and then you argue that the government should consider adopting a national process in regard to regulations. Could you expand on that and explain to the committee what your views are there, especially on people who deal with harm minimisation?

Mr Twaits : One of the key points is that we think there should be a national register of excluded persons. We would entertain that being across different forms of gambling as well.

Senator BILYK: Like the database, for example.

Mr Twaits : Exactly. We already have some semiformal arrangements in terms of cooperating with other operators when it comes to fraud but we think they should be extended to problem gambling, whether it is in relation to loss and deposit limits or self-exclusion. That is one thing we would say. You made the point that our submission said that prohibition had failed. It absolutely has. The Productivity Commission's finding was that online poker and casino, which is an illegal product in Australia, is three times bigger than the regulated sports betting market here. So if you are looking at online gambling as a whole I think you need to separate out the focus on the regulated part of it here in Australia with the unregulated illegal part of it which, as I said, is much, much bigger than the regulated component here.

Senator BILYK: Am I correct in presuming that you think count based betting is a good approach towards harm minimisation because, as I understand it, you can basically track everything on an account, can you not?

Mr Twaits : It is the starting point. We understand that there is the once-a-year punter who wants to go and have a bet on the Melbourne Cup every year and that they want to have their $10 or $20 dollars. We are not suggesting that they need to do that through an account but certainly above certain thresholds we strongly advocate that both for harm minimisation reasons and for integrity management reasons it should be done through an account in terms of wagering.

Senator BILYK: If people did online wagering for say the Melbourne Cup but also did other things and had set up false accounts or whatever, would someone be able to work out that they were false accounts?

Mr Twaits : If they are false accounts they will not get verified.

Senator BILYK: They just will not get verified. Right.

Mr Twaits : No. So they will not be able to operate the account beyond the 90-day period. They definitely will not be able to withdraw any money.

Senator BILYK: Just for my clarification: if you set up a false account, you potentially have those 90 days for it to be verified. Say I put $1,500 in; can I actually bet in that time?

Mr Twaits : You can with that money, yes—up to $500 a month.

Senator BILYK: Okay. So I could actually lose my money—

Mr Twaits : Yes.

Senator BILYK: but, if I were on a winning streak, on a roll or whatever the terminology is, I would not be able to reclaim my winnings?

Mr Twaits : No. And that is made very clear on the site too, once you register: before you make your deposit, you cannot withdraw any money until you verify it. So that should act as a natural deterrent—that is our experience—to anyone, whether it is kids or third parties.

Senator BILYK: It sounds quite logical to me, but maybe it does not to problem gamblers. Okay. Thanks for that.

CHAIR: Does Betfair facilitate betting on elections?

Mr Twaits : Yes.

CHAIR: How popular is that?

Mr Twaits : I can compare it to an AFL game. The federal election was pretty popular last time around. I think your seat was particularly popular!

CHAIR: I noted that I opened at 50 to 1, and I was 15 to 1 the night before the poll. Someone cleaned up!

Mr Twaits : It is a pretty small part of our business. It is topical, it is good content for newspapers and political journalists, but we do not make a lot of money out of it.

CHAIR: You don't?

Mr Twaits : No.

CHAIR: How many people—what is the order of magnitude, roughly?

Mr Twaits : How many people would bet on it?

CHAIR: Is it in the thousands or tens of thousands of people?

Mr Twaits : It would not be tens of thousands. I think at the last federal election it would have been between 1,000 and 10,000. I am happy to share the detail with you.

CHAIR: I would be interested to know that, if you do not mind.

Mr Twaits : Yes.

CHAIR: By the way, I did not lay a wager on myself!

Mr Twaits : I am happy to also give you the detail of how much we match. It is one of the other things that we do differently from most of the other operators, in that we publish how much is matched from each of our markets, and consumers can actually go in and see how much money is bet at each price. They cannot see the identity of other customers, obviously, but they can see exactly how much money goes through at each price point.

CHAIR: A final question: would Betfair include gaming, if it were allowed? Would you be likely to take it on?

Mr Twaits : You are talking about regulated online casino and poker?

CHAIR: Yes.

Mr Twaits : It is not part of the joint venture agreement at the moment, so that would be something that we would have to refer back to the shareholders to talk about.

CHAIR: But you are of the opinion that, if gaming were allowed by Australian operators, it would attract people who are currently gambling on offshore sites?

Mr Twaits : I think it would, particularly since the actions of the federal government in the US in effectively shutting down Full Tilt and taking action against others. As I said earlier, customers will naturally gravitate towards well-regulated local entities, so I think that is inevitable.

CHAIR: Okay. Thank you. Senator Xenophon, you had a couple of questions?

Senator XENOPHON: Yes.

CHAIR: Just so there are no misunderstandings, I did not bet on myself!

Senator XENOPHON: Just on that, though—Betfair notifies regulators if there is any suspicious transaction or whatever, but to what extent? Would you have a difficulty if there were a regulatory framework in place that said that insiders—if you are a candidate or a party insider, working for the party machine or on a campaign—should not be able to place a wager? Would you have difficulty with that sort of arrangement?

Mr Twaits : No, and the insider would probably already be caught by the Tasmanian legislation in terms of being classified as a participant. So, if Mr Wilkie wanted to lay a bet on himself in the election, he would probably be caught as a participant under the Tasmanian legislation, but there is no—

Senator XENOPHON: That would apply to, say, his chief of staff as well?

Mr Twaits : It probably would, in terms of laying a bet. But what you are talking about is similar to the rules that the AFL, the NRL and Cricket Australia have in place, and we have no problem there. One of the things that we are encouraging the sports to do more and more is proactively provide us with details about players, officials and anyone else who is covered by their gambling rules, so that we can wash that against our database and put flags against people so we can actively tell if they are breaching those rules.

Senator XENOPHON: In terms of election outcomes, would a pollster or someone who works for a pollster be subject to the Tasmanian rule?

Mr Blanksby : I would not think so.

Senator XENOPHON: If a pollster is on a poll that has not been released publicly, they would have inside knowledge as to how things were tracking, wouldn't they?

Mr Twaits : They may, but there is a strong argument to say the betting markets are more accurate than the polls. They have certainly proven that in the last few years.

Senator XENOPHON: So who needs Newspoll!

Mr Twaits : That is right!

Senator XENOPHON: In South Australia, the SA TAB have a precommitment system in place—I am not sure if you are familiar with it—so that you can precommit that you want to spend only $50 in the course of a week. It is not mandatory as such, but it is an option. So, if you lock in, you cannot lose more than $50; and, if you want to change that, you have to give, I think, a week's notice—in other words, a period similar to the one that you are bound by. Is that something that Betfair offers?

Mr Twaits : It sounds exactly the same. Although I assume that this is only for account based customers, not cash based customers.

Senator XENOPHON: Yes, that is right. So you offer something similar?

Mr Twaits : You can set a daily, weekly or monthly limit.

Senator XENOPHON: To change, say, a monthly limit, how much notice do you have to give?

Mr Twaits : Seven days. It can be immediate if you are tightening the restrictions on yourself but if you are relaxing them the cooling-off period is seven days.

Senator XENOPHON: How many people do that?

Mr Twaits : About 12½ per cent.

Mr Blanksby : I think, as we said before, about 12,000 have used those tools.

Senator XENOPHON: So that would be about five or six per cent of your customers?

Mr Blanksby : Yes, but the 200,000 accounts you are referring to are the accounts that have been opened. The number that have actually been activated—that is, on which a bet has been placed—is 100,000. So the percentage is like 11 to 12 per cent.

Senator XENOPHON: Would you have a difficulty if there was a requirement to lock people into precommitment? I am not suggesting it is on the agenda.

Mr Twaits : I think it would depend on what restrictions were put around the cash based operators here. They have a long way to go to get to—

Senator XENOPHON: You want a level playing field, basically.

Mr Twaits : Exactly—within the wagering industry.

Senator XENOPHON: The High Court decision just meant, effectively, that you could advertise freely and promote your business.

Mr Twaits : Yes.

Mr CIOBO: I know you made some comments earlier on about your concern with respect to the proposed prohibition on placing loss bets. I would just ask you to expand on why you think it is not a bad idea and not a riskier proposition.

Mr Twaits : The starting point is that you can bet on a losing outcome through a bookmaker or a TAB. History has shown that people who have set out to profit from either inside knowledge or intentional conduct—for instance, rigging a race—have used bookmakers and/or TABs. So in a sense we are no different. I guess what I would say is that I think we have shown over the last 5½ years here, and beyond that globally, that transparency is the key to protecting the integrity of racing and sporting events. As I said, we think we are the high-water mark in dealing with integrity issues in sport. We provide a power of veto to sports in terms of saying what markets we can offer and, if they are unreasonably risky or they take too many resources to deal with, we will not offer them.

Senator XENOPHON: In year submission you said that, I think, 95 per cent of your bets are placed on the actual outcome of the game. Is that right?

Mr Twaits : Roughly, yes, including the handicap markets.

Senator XENOPHON: That means that that microbetting—the ball-by-ball, or exotic, betting—that is referred to only makes up a very small part of your business.

Mr Twaits : Very small, yes.

Senator XENOPHON: So in terms of your business model it would not be the end of the world if that was restricted.

Mr Twaits : Not really, for the most part. There are some exotic bet types that are more popular than others and have some promotional benefits, but the volume of that type of betting is quite small.

Senator XENOPHON: When Mr Speed, and I think Sportsbet as well, gave evidence there was a suggestion that, with exotic bets, like all bets, there might be an argument for having limits on what you can win to reduce the risk of crush. I think Mr Speed in his submission particularly discussed that. Do you have a view on that?

Mr Twaits : I do not think that is the way to address it.

Senator XENOPHON: What do you think the best way is?

Mr Twaits : Having a transparent system in place where you know the identity of the punters and that information is available to the sports and law enforcement authorities. That is the way to address it—not through putting limits on how much people can win. I can understand that approach in the cash based environment, where there is complete anonymity about who is putting the bets on, save for a CCTV inquiry. Once you have the account based system in place with proper verification, that should be the start and finish of it.

CHAIR: Thank you very much. That was very helpful. We are very grateful for you time and the help you have given the committee.