My article yesterday about the extraordinary Participant's Bulletin issued by Racing NSW CEO Peter V'Landys a few days ago attracted an interesting response from Betfair Australia CEO Andrew Twaits.

In the Bulletin, V'Landys stated:

"While Betfair has not clearly stated how much it is prepared to pay, the Government in Betfair's "home State" of Tasmania has announced that it will be introducing its own race fields legislation, with fees charged on Betfair's preferred "gross revenue" basis. The fact that the Tasmanian Government has stated its race fields fees will be 10% of gross revenue could be regarded as providing a fair guide as to the level at which Betfair would like to see fees set."

This statement is disingenuous to say the least.

Twaits forwarded me a document submitted to Darrell Loewenthal at Racing NSW and copied to V'Landys dated 16th April 2007.

The document was submitted at Racing NSW's invitation, in order to better formulate their submission to government concerning the regulations attaching to the Racing Legislation Amendment Act (NSW) 2006.

In it Twaits pointed out that Betfair already paid 35% of Australian gross profits to the Tasmanian government. He highlighted the fact that in Victoria, where Betfair had been approved to use race fields, its obligation was offset against the amounts paid to support Tasmanian racing.

It is clear from Twaits submission that even then Racing NSW seemed determined to tear up the gentlemen's agreement, meaning that they sought to impose a fee on use of its race fields by all interstate operators, with no credit for what they paid in their own state.

Despite the obvious inequity, Betfair offered to pay 20% of gross profits to Racing NSW. At the time, this was estimated to be about $600,000 for 2007 rising to $840,000 in 2008. In addition, Betfair also offered to pay $1.4 million, being 20% of the profits on NSW racing it had earned before incorporating in Australia.

Then the story gets a great deal more interesting.

Betfair also offered to pay $1 million a year as sponsorship of NSW thoroughbred races and advertising at tracks.

This means that the offer on the table was worth $3.24 million in its first year or well in excess of 20% of gross profits.

According to Twaits, Betfair never received a response to this proposal.

At least part of the reason that Betfair is now taking action against Racing NSW in the Federal Court over the level of the race fields levy, is the complete absence of procedural fairness involved in asking for a submission and then ignoring it.

Contrary to V'Landys assertion in his Bulletin, he ought to be aware that Betfair is paying both Racing Victoria and Greyhound Racing NSW on a gross profits basis, ignoring the fact that turnover based payments are progressively being phased out around the world.

Of more consequence is that Racing NSW would have known then, what has only recently come to light, which is that its Racing Distribution Agreement with TabCorp prohibits race sponsorship or racecourse advertising from any competitor.

While NSW had legislation in place prohibiting interstate operators from advertising the existence of such a restriction was a moot point.

However now we know that Betfair's sponsorship offer was never capable of acceptance by Racing NSW, except that it was too cute to say so.

More importantly, the advertising restriction component of the RDA brings into question how much of what TabCorp pays is a so called race fields fee and how much is for exclusive advertising rights?

We know already that TabCorp pays Racing NSW on a gross profit basis, despite V'Landys repeated and wrong assertions to the contrary.

The amount is around 20% of gross profit, roughly half of which is for race fields publishing rights. The other half is effectively for exclusive advertising rights.

So it would seem that Betfair has a very good case in the Federal Court.

For its 20% of gross profit, all it would get are race field publication rights and would have to pay extra for sponsorship even if it could do it.

By concealing its obligations to TabCorp under the RDA, Racing NSW was never negotiating in good faith. Not a good position to be in when you are fighting a Court case.

Cyberhorse 2020 Bill Saunders Published 30/10/08