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30 Mar 2012

High Court upholds constitutional validity of race fields fees

This morning the full bench of the High Court unanimously dismissed both the Sportsbet Pty Ltd and Betfair Pty Ltd appeals from the Full Federal Court with costs. The decisions have been much anticipated and have widespread implications for the industry. They provide much needed certainty for the NSW race fields regime which has been effectively frozen for some three-odd years, and in a broader sense, for the variety of other legislative race fields regimes around Australia.

While each case was conducted differently, both Sportsbet and Betfair questioned the validity of the fee conditions imposed under the Racing Administration Act 1998 (NSW) and Racing Administration Regulations 2005 (NSW) on the basis that they offended Federal laws guaranteeing freedom of interstate trade and commerce between States and Territories. It was argued that the 1.5% fee on turnover was a discriminatory and protectionist burden upon interstate traders.

By way of brief summary, in both decisions, the High Court found that the relevant race fields approvals granted by HRNSW and RNSW which required the payment of the 1.5% turnover-based fee were valid. Some key findings in the majority judgements include:

Sportsbet

  • It was found that the power of approval conferred by the Race Fields Legislation does not have the legal or practical effect of imposing a burden or disadvantage on trade and commerce between the Northern Territory and NSW which was not imposed on intrastate trade and commerce of the same kind.
  • The concept of "practical operation or effect" was discussed at length. Relevantly, it was found that the practical operation of the $5m and $2.5m wagering threshold exemptions was not to provide a protectionist measure to insulate NSW on-course bookmakers as both intrastate and out of State competitors could benefit from the threshold. With respect to the payments under the Deed of Release associated with the Racing Distribution Agreement, it was found that the Full Court correctly concluded that TAB did "not obtain a discriminatory advantage, protectionist or otherwise over Sportsbet by virtue of the payment to TAB under [the Release]."

Betfair

  • It was found that the practical operation of the fee structure did not show an objective intention to treat interstate and intrastate trade in wagering transactions alike, notwithstanding a relevant difference between them.
  • It was found that, in any event, the fee structure did not burden interstate trade to Betfair's competitive disadvantage, noting that Betfair did not demonstrate that the likely practical effect of the imposition of the fees would be a loss to it of market share or profit or an impediment to increasing share or profit.

At first blush, it appears that there are nuances in the decisions which require close examination in order to fully appreciate the ramifications for the various industry participants. Clayton Utz will be conducting that examination and monitoring developments closely.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.