Statement of Peter V'landys
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IN THE AUSTRALIAN COMPETITION TRIBUNAL No . ACT of 2017 Tabcorp Holdings Limited Proposed acquisition of Tatts Group Limited by Tabcorp Holdings Limited by way of scheme of arrangement STATEMENT OF PETER V'LANDYS Statement of: Peter V'landys Address: Level 7, 51 Druitt Street, Sydney NSW 2000 Occupation: Chief Executive, Racing NSW Date: Thursday, 9 March 2017 Contents BACKGROUND RACING NSW 2 NSW THOROUGHBRED RACING INDUSTRY 4 FUNDING OF NSW THOROUGHBRED RACING INDUSTRY 4 VIEWS ON THE PROPOSED TRANSACTION 8 ANNEXURES 11 I, Peter V'landys, Chief Executive of Racing NSW, say that: BACKGROUND I am the Chief Executive of Racing NSW, a position I have held since February 2004. Immediately prior to that, I was the Chief Executive of the major NSW harness racing club, a position that I held from 1988. As such, I have held senior executive positions in the NSW racing industry for almost 30 years. Having been involved before and after the NSW TAB privatisation in 1998, where the wagering environment significantly changed. Accordingly, I have an extensive knowledge of the wagering market as this is the prime source of revenue for the NSW racing industry. Filed on behalf of - Tab~_9!P-_ ti9!2!D.9.~_ Limi.!~9.. .C~2J?Jl~.a n !). _____________________, ___ ·--··---------- Prepared by Luke Woodward --·-·-·--···---·-·-·····---·-·---·- ····················-·---·--·--·-...······- ···-·----······-·········---·--·-·--···-·····---··---·--·---------·--- -·--···-····-...··----- Law firm Gilbert+ Tel +61 2 9263 4014 Fax +61 2 9263 4111 ····························-······--··- ............................................................,_ ,,,,,,,_,,,........ , ___ ___________ ,,,,,,, ··················-····-·----···---·----·--·--·-----·--·-·-·-···--·-····-·-····-...· ····-·-···-···-······· Email · ·""'O()cJ'I-J..C'[email protected]:l l/l/· com. a u~-..···--····----·---- ... -------········-..·- ................................_ ......................... ---·----- Level 35, Tower Two International Towers 200 Barangaroo Avenue, Barangaroo Address for service Sydney NSW 2000 RACING NSW 2 Racing NSW is an independent, autonomous body responsible for overseeing the conduct of thoroughbred racing in NSW. Established under the Thoroughbred Racing Act 1996 (NSW) (the Act), Racing NSW's functions and powers are prescribed by the Act. The principal commercial and regulatory functions of Racing NSW are: (a) to initiate, develop and implement policies considered conducive to the promotion, strategic development and welfare of the horse racing industry in NSW and the protection of the public interest as it relates to the horse racing industry; (b) to control, supervise and regulate horse racing in NSW; and (c) to ensure that all thoroughbred racing and associated wagering activities in NSW are conducted with the utmost probity and integrity. 3 As Chief Executive of Racing NSW, I have a general oversight of Racing NSW's day-to-day operations. In particular, I am responsible for securing funding for the NSW thoroughbred racing industry. I have been responsible for a number of funding initiatives, the most significant being the introduction of the Race Fields Scheme in 2008 and subsequent defence of the validity of that scheme against challenges by wagering operators, Betfair and Sportsbet, which Racing NSW won by unanimous judgments from the High Court in March 2012. However, it is important to note that the Race Fields story is not confined to the period during which the matter was argued through the courts but goes back to 2004 as outlined below: (a) In 2004, it was identified that the emergence of interstate corporate bookmakers and betting exchanges posed a huge threat to the future funding of the thoroughbred racing industry. At that time, the existence of the "Gentlemen's Agreement" essentially meant that the only funding that the NSW Thoroughbred Racing Industry received was from wagering operators located within New South Wales, namely TAB Limited and on-course bookmakers. Other States wagering operators betting on NSW races, kept that revenue. (b) The emergence of interstate corporate bookmakers and betting exchanges taking bets from residents in New South Wales, without contributing to the industry in New South Wales, meant that there was a fundamental need for the industry to safeguard and utilise its intellectual property rights to ensure its funding. Billions of dollars were being wagered through these wagering operators that were free riding on the NSW Thoroughbred Racing Industry. (c) In other words, these wagering operators were making millions of dollars in profits from betting on NSW thoroughbred event without paying for the use of the product. It must be stressed that they were making a substantial part of their profits from bets placed by NSW residents rather than residents in the Northern Territory where they were licensed, in accordance with the "Gentlemen's Agreement". In essence, they were taking our revenue away and not paying for the cost of supply of the racing product. (d) In the first instance, it was essential for Racing NSW to ensure that there were no impediments to it utilising its intellectual property in NSW Race Fields information. However, under agreements entered into by previous management, the NSW industry had effectively given up its rights in NSW Race Fields information and paid a substantial amount of money to be part of Racing Information Services Australia (RISA). Unfortunately, in the calculation of the monies to be paid to purchase a share in RISA under those agreements, there was a major omission which originally resulted in overpayment by Racing NSW. (e) As ownership of the intellectual rights in NSW Race Fields was critical to the funding of thoroughbred racing in New South Wales, action was taken to ensure that Racing NSW owned those rights and was able to renegotiate the price to be paid to purchase a share to a more commercially acceptable amount. Accordingly, Racing NSW renegotiated its participation in RISA so that Racing NSW owned and controlled the NSW Race Fields information for wagering purposes and significantly reduced its purchase price for its 35% share in RISA. (f) Having secured ownership of the intellectual property rights for wagering purposes, Racing NSW then explored the options available to the industry to secure funding, including enforcement of copyright in its racing information and the introduction of new NSW legislation. This ultimately resulted in the NSW Government enacting specific legislation guaranteeing our right to impose a fee on wagering operators using our Race Fields information for their wagering operations. (g) As a result, in 2006 the NSW Government introduced amendments to the Racing Administration Act 1998 (Race Fields Legislation) which prohibited wagering operators from "publishing" (later amended to "using") NSW Race Fields information without prior approval from the respective controlling authority and allowed the controlling authorities to impose a fee for the use of that Race Fields information. (h) A scheme was then developed for the administration of this legislation and the collection of an appropriate fee. At all times we were cog nizant of the need for Racing NSW to do so in accordance with the Australian Constitution, particularly in light of the High Court decision in Betfair v Western Australia delivered in March 2008. In mid-2008, Racing NSW determined that the fee imposed by it should be uniform and should be 1.5% of turnover subject to an exempt fee threshold of $5 million. The scheme came into effect on 1 September 2008. (i) In October and November 2008, Betfair and Sportsbet respectively commenced the long and protracted litigation challenging aspects of the Race Fields Legislation which saw the matter come firstly before a single Judge of the Federal Court, then the Full Court of that Court and, ultimately, the High Court of Australia. Sportsbet's position was not to pay any amount for the use of the product. Betfair on the other hand wanted to pay a price that fitted its business model even though the price would not meet the cost of product. The -----,\{/ unanimous decisions of the High Court in favour of Racing NSW in March 2012 justified the stance taken by Racing NSW to defend the challenges instigated by Betfair and Sportsbet and provided certainty for racing administrators throughout Australia to charge what they considered appropriate for those wagering on their product. NSW THOROUGHBRED RACING INDUSTRY 4 The NSW thoroughbred racing industry plays an important role in NSW and makes a strong economic and social contribution throughout the state. Annexed at Annexure PVL-1 is Racing NSW's 2014 Strategic Plan. In formulating the Racing NSW 2014 strategic plan, it was estimated that the NSW thoroughbred racing industry provides an economic contribution of $1 .2 billion annually and supports in the order of 50,000 jobs, comprising various industry participants (see page 2 of Annexure PVL-1). This economic benefit is widely spread throughout NSW, as the industry here holds more race meetings than any Australian State. Further, the race meetings are conducted across an expansive network of clubs serving communities in all regions of NSW. At the conclusion of the 2014/1 5 season there were 104 7 trainers, 147 NSW based jockeys and 76 NSW indentured apprentice jockeys with an additional 3,484 stable hands and foremen registered in NSW (see page 4 of Annexure PVL-1 ). A large portion of NSW thoroughbred racing industry participants are unskilled. 5 The