NZ Racing Board seeks approval on shared betting arrangement with Australia's Tabcorp

Friday 3rd June 2016

The New Zealand Racing Board (NZRB) has applied to the Commerce Commission for approval of provisions on shared betting with Australia's Tabcorp which attempt to stop local gamblers using the Australian platform in preference to the TAB.

NZRB, which operates the TAB, is concerned about commingled betting pools in a certain form of betting, called pari-mutuel betting, which is where the total value of all bets is consolidated in a pool from which the operator takes their share with the remainder paid to winners. When pools are commingled, the operator with the original pool is the 'host', while the organisation which commingles its pools is the 'guest.'

NZRB wants a provision in the new arrangement between itself and Tabcorp, one of three major betting operators in Australia, to restrict the rebates Tabcorp can provide to prevent it using those to encourage high-spending customers to bet via Tabcorp rather than using NZRB. It also wants a provision that the guest operator must process bets in accordance with the host operator's rules, with specific reference to the share an operator can take.

The Commerce Commission can approve agreements which would otherwise breach the Commerce Act if it thinks the public benefit outweighs the detriments from loss of competition. It has asked for public submissions on NZRB's application.

In its application, NZRB said there has been commingled betting with Tabcorp in 2007. That agreement lapsed in June 2015, though some commingling continued on a transitional basis as the two operators negotiated a new agreement.

Tabcorp has introduced new conditions for overseas operators to stop revenue leaking, meaning it won't commingle if the agreement could let an operator target their customers, which gained approval from the Australian Competition and Consumer Commission, the application said. Without introducing rebate restraints, NZRB won't be able to commingle bets with Tabcorp.

"The proposed commingling arrangement, together with developments in technology, may create circumstances where wagering customers (principally high net worth 'premium/VIP' customers) may seek to access pools on New Zealand racing via Tabcorp and vice versa," it said. "Importantly, these opportunities only arise as a result of the commingling arrangement – it is the permission to commingle which creates the possibility of customer movement."

NZRB said the restrictions would limit the loss of revenues to the New Zealand and Australian racing industries.

As part of its application, NZRB commissioned a report from NERA Economic Consulting. The report said there was a public benefit from the proposed arrangement, although the value of that benefit was redacted in the public version, as was the value of the detriment NERA believed would arise to a subset of VIP customers who "might face a price increase due to a restraint on the ability of the NZRB and Tabcorp to offer rebates." They described the detriment as small.

The application mentioned a report by the Offshore Racing & Sports Betting working group which was publicly released in November. The working group estimated $58 million of gross betting profit was lost overseas in 2015 with the number of New Zealanders betting online with the TAB's foreign competitors doubling since 2010 to 40,000.

New Zealanders were betting offshore because foreign gaming companies had a wider product range, offered better odds and were more aggressive in acquiring customers, the report said. The TAB has fought back with the launch of a mobile app, which has become its fastest growing channel, but the report said the betting agency needs to do more to compete, including the introduction of better technology.

BusinessDesk.co.nz

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