Racing Victoria Chairman Michael Duffy was blunt when asked recently about the recently passed race fields legislation in New South Wales.

"It won't stick", he said.

Duffy was chairing a media conference which announced a $23.6 million lift in Victorian prizemoney, funded by a combination of cost savings and increased revenue from RVL's wagering partner, Tabcorp.

Questioned about the likely effect of TabCorp in Victoria having to pay Racing NSW millions of dollars through the race fields levy of 1.5% of wagers on NSW racing, Duffy was adamant that the legislation could not withstand a challenge on Trade Practices grounds.

If anyone should know it would be Duffy, a former Federal Attorney-General and an expert on the Trade Practices Act.

He fully expects that one or more of the corporate bookmakers affected by the move will challenge the NSW legislation in the Federal Court on competition grounds.

Duffy was instrumental in making sure that Victoria's race fields legislation, conceived by the then CEO, Robert Nason, was not used as a means of banning Betfair, which was its original intention. The justification was obvious as the move would have been in breach of the TPA.

Instead there was implemented a watered down version of the original, where no one was banned from publishing Victorian race fields on so called integrity grounds. Even worse for Victoria, interstate TAB's were exempted from paying anything because they were already funding their own state's racing.

This policy was announced by Nason just as he was leaving RVL to double his salary at TabCorp. Perhaps not surprisingly, it is that very policy which enables TabCorp to be just about the only cheer leader for the New South Wales law.

A remarkable aspect of the Racing NSW announcement of the race fields regulations was the complete absence of any mention that it had effectively torn up the so called "gentlemen's agreement" whereby each state could use the other's racing without paying a product fee.

This most significant feature of the NSW move, which saw 1.5% levied on turnover (not profit) only came to light when we asked TabCorp whether its Victorian operation would pay Racing NSW.

Robert Nason made the first public admission of that fact when interviewed by Steve Moran on Sport 927 on Wednesday this week.

He was at pains to point out that the demolition of the gentlemen's agreement was all the idea of Racing NSW, even having the cheek to say that he thought that uniform payment of race fields levies by all wagering operators was a good idea, even though he let TabCorp off the hook when formulating the RVL policy when he was in charge.

It was clear from Nason's interview, combined with the paper that he contributed for publication, that he sees the future of racing industry funding as being fundamentally driven by TabCorp.

In order to do so, Nason sees a web of interlocking legislation to enforce :-

• all other wagering operators to pay race field fees based on turnover, while TabCorp gets to pay on profits
• no other operator can offer to match or better the TabCorp dividend (tote odds)
• TabCorp to have the liberty to offer fixed odds services at will either through its Sportsbet service or its new Northern Territory aNTi-TAB bookmaker
  

The effect of all this legislation would of course be to enshrine TabCorp as the be all and end all of racing industry funding while simultaneously marginalising most of its competitors so that they could not afford to offer a funding alternative.

The party who is going to fund this scenario is the punter, who will effectively forego the benefits of competition in the wagering market in order to retain the market share of TabCorp.

It is no surprise that the only two parties on the public record as being in favour of the NSW race fields regulations published by Racing NSW are it and TabCorp.

Peter V'Landys, CEO of Racing NSW makes much of the fact that TabCorp pays 5 cents in the dollar of turnover to fund the industry while everyone else pays nothing.

He seems to forget that in order for his body to get the 25% share of wagering profit that the 5 cents represents, TabCorp collects the other 75%.

No wonder TabCorp is cheering!

He also conveniently ignores the fact that companies like Betfair have been offering for years to pay a fee to Racing NSW but it has never even put up a proposal for consideration.

According to Betfair, 80% of the races run in Australia do not have a sponsor. Advertising restrictions designed to protect TabCorp have the effect of preventing TabCorp's competitors from contributing directly to racing via sponsorship and other promotions which might draw people to the track.

V'Landys alternative to opening up the sponsorship market is to provide greater protection for TabCorp.

TabCorp of course has the alternative of demolishing its high cost wagering model and competing on price. Even when it has a low cost delivery method like internet betting, it could offer higher dividends but refuses to do so.

Perhaps the technology is beyond it. After all this is the company that still cannot offer markets on races with more than 24 horses.

But given these inadequacies, why should there be ever more draconian legislation to protect a company which can't help itself? Why should TabCorp's competitors have a man with a red flag walking in front of them to slow them down until it can catch up?

Betfair's High Court win against West Australia highlighted the fact that states cannot prop up inefficient wagering operators by legislating their competition away. Similarly the TPA says that private bodies cannot collude to increase the price that consumers pay.

It may come as some surprise to V'Landys to know that Racing NSW is just as subject to the TPA as Racing Victoria is.

It has certainly not escaped the attention of TabCorp's competitors that Racing NSW and TabCorp have enjoyed an unusually close relationship.

If it can be demonstrated that there was any collusion between the two to disadvantage TabCorp's competitors the race fields regulations are defunct.

Equally, even without collusion, they can be struck down on anti-competition grounds.

The case fought out between the Sydney Airport Corporation and Virgin Blue illustrates the point. SACL sought to put in place arrangements for fees which on the surface appeared to apply equally to Qantas and Virgin Blue. Because of their different cost structures however, Qantas was advantaged and Virgin Blue was penalised.

The new fees were struck down by the Federal Court.

Duffy has an alternative game plan if for some reason the NSW legislation is not successfully challenged.

"We'll change our race fields regulations so that every other state pays", he said.

That will hurt Racing NSW far more than whatever income it can pick up in race fields levies because NSW punters bet more on Victorian racing than they do on their local races.

V'Landys would be better off addressing that problem rather than trying to throw people in jail.

© Cyberhorse 2010 Bill Saunders Published 18/07/08