Landmark case raises prospect of Australian gambling reform

NikkeiA landmark legal case in Australia has highlighted how Australians have become among the world’s most extravagant gamblers, last year losing a total of nearly $23 billion Australian dollars ($17.65 billion) on gambling and A$11.6 billion on gaming machines (excluding those in casinos), according to Australian government statistics.

At the top end of casino operations, meanwhile, a crackdown in China on one of Australia’s largest casino groups has drawn attention to the stream of Chinese “high-rollers” flocking to casinos in Southeast Asia and Australia.

Even without the high-rollers, who account for about 15% of the total revenues of the Australian gambling industry by some estimates, Australia’s gambling habit is believed to be among the world’s worst. An analysis last year by The Economist magazine found that Australian adults lose an average of US$1,130 each year from gambling — more than the per capita average for adults in any other country.

Among critics of Australia’s gambling industry, hopes for regulatory reform are pinned on a lawsuit filed in the Australian Federal Court on Oct. 26. In the case, a gambling addict who lost much of her money on gaming machines — known as poker machines, or “pokies,” in Australia and as “slot” or “jackpot” machines in other countries — is suing a leading poker machine maker.

Shonica Guy began playing the pokies when she was 17, according to her law suit. Some 14 years later, she had suffered “significant losses,” lawyers will argue, because she played on machines that were in breach of consumer laws against misleading and deceptive conduct. The suit, the first of its kind, focuses on the Dolphin Treasures poker machine, which lawyers will allege is deliberately deceptive about the prospects of winning.

The action is against an Australian poker machine manufacturer, Aristocrat Technologies, and Crown Resorts, one of Australia’s — and Asia’s — leading casino operators. If successful, the case could prompt a change in gambling regulations, possibly including betting limits on machines and curbs on advertising.

“If successful, the litigation will have ramifications for the design of all poker machines in the industry,” said Maurice Blackburn, a prominent Australian law firm, which is representing Guy in the case.

Aristocrat, one of the world’s biggest poker machine manufacturers, vigorously defended its products. “Aristocrat emphatically rejects any suggestion that its games are designed to encourage problem gambling, or in any way fail to comply with all relevant regulations and laws,” the company said in a statement.

High-rollers and the “grind”

Amid concerns about Australia’s increasing addiction to gambling are reminders of the forces behind the high-roller end of the market. In late October, Chinese authorities arrested 18 employees of Crown Resorts in late-night raids across China, for alleged breaches of the country’s gambling laws. The arrests — described by Chinese authorities as part of an investigation into gambling-related crimes — have led analysts to predict a dent in the revenues enjoyed by Australian casinos, which are popular with rich Chinese gamblers.

In the days after the arrests, Crown issued a statement imploring the Australian government to “urgently make contact with and ascertain the welfare of its employees.” But by early November, there was still no clear explanation or action on the detained employees.

Crown, like other gambling groups, is at pains to put the high-roller factor in perspective. Following its annual general meeting at the end of October, Crown clarified further its proportion of earnings from wealthy Chinese gamblers. Around a third of group revenues are generated from overseas visitors, the casino operator said in a statement.

“Less than half of the revenue from Crown’s international VIP gaming programs is currently generated by visitors from mainland China,” the statement continued. “Consequently, this segment of the business represents approximately 12% of the Crown Group revenues in FY16.”

Even so, shares in the Australian-listed group took a battering on news of the arrests, plunging by about 17% in late October before stabilizing. As a result of the arrests, many casino agents and executives have left mainland China, where betting is illegal, except on state lotteries, as is soliciting high-rollers to gamble at casinos outside the country. Penalties range from fines up to 10-year jail terms.

Despite the industry’s fears, many experts say the arrests are unlikely to significantly damage revenues for Crown because most casino profits in Australia come from what is called “the grind” — ordinary people dumping their pay packets into poker machines — rather than from foreign high-rollers. According to official Australian statistics, losses on poker machines outside casinos last year reached A$11. 6 billion, whereas total losses in casinos amounted to just over A$5 billion.

Various attempts to tighten Australian gambling regulations have failed, including an independent lawmaker’s effort in 2011 to push through legislation that would have required gamblers to commit to a loss limit. The gaming lobby mobilized against the move by Andrew Wilkie, who failed to attract sufficient support from other lawmakers.

However, Wilkie and Senator Nick Xenophon, a long-time foe of “predatory gambling,” are again lobbying the government to tighten gambling regulations. Xenophon’s political party, the Nick Xenophon Team, performed well in Australia’s recent federal election, and now includes three senators — a possible indication of increasing sympathy for gambling reform among Australian voters.

In July Wilkie and Xenophon said they would try to exert more pressure on the Liberal and Labor parties, which hold most parliamentary seats, by targeting marginal electorates in pursuit of a betting limit of A$1 on poker machines and a ban on gambling advertisements during television sports broadcasts.

Some observers doubt this reform push will achieve much in the face of substantial tax revenues reaped from gambling and large political donations paid by industry representatives. Australian states and territories earned a reported A$5.8 billion in taxes from gambling in the year to June 2015, a windfall for the federal government facing an economic slowdown.

One of the gaming industry’s largest lobby groups, ClubsNSW, says most Australians gamble responsibly, but “we recognize excessive gambling is a serious problem for a small number of people.”

“ClubsNSW supports the introduction of evidence-based, cost-effective measures (to deal with problem gambling),” the group says on its website. “Over the years, clubs have developed and implemented a range of effective tools and resources, such as multi-venue self-exclusion, and we will continue to research and test measures to find solutions that work.”

Gambling hazards

Charles Livingstone, a public health academic at Monash University in Melbourne, says gaming regulation in Australia will only change significantly when one of the two major political parties decides to act. Since the gaming lobby is well-organized politically, and has extremely deep pockets, that might take some time, he added.

“Australia leads the world in gambling expenditure, with per capita expenditure of A$1,241 overall and over A$1,500 in the most populous and poker machine-dense state of New South Wales,” Livingstone said, referring to last year’s figures. “This is twice the figure for the U.S., and substantially ahead of second-placed Singapore, which relies for much, if not most, of its revenue on tourists.”

Most betting nations restrict gambling to designated betting parlors and casinos, but laws in most Australian states allow gambling in clubs and bars. By some industry counts, despite its relatively small population of about 23 million, Australia now hosts about 20% of the world’s poker machines.

Under Australian law, poker machines are required to return 85% of the takings as winnings, but Livingstone said that does not mean punters win.

“Anybody who plays over an extended period of time will lose,” he said, adding that the punting lifetime of gambling addicts is usually about five years — by which time they are probably jobless and have lost their savings, their pensions and potentially their families.

Clubs claim that they give money back to the community, Livingstone said, but research has found that donations amount on average to just 1.8% of gambling revenue. “They (the clubs) have so much money they don’t know what to do with it,” he added. “It’s a systematic and quite predatory industry. The government has to stand up to these guys. They’re hard to take on, but not impossible.”