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Betfair Challenge To Racing NSW Begins In Federal Court

Thursday, 19th November 2009

Meanwhile betting exchange Betfair & Racing NSW “faced up to each other in the Federal Court yesterday on the 1st day of a trial that has huge implications for the funding of racing in Australia,” reported The Sydney Morning Herald. In the “landmark case for punters”, Betfair claims it is suffering a “discriminatory burden of a protectionist kind” in the form of a 1.5% turnover tax imposed on it by Racing NSW & the tax is “contrary to the section of the Australian Constitution that enshrines free trade between the states”. Betfair's barrister Alan Robertson declared his low-margin client received “a raw deal because the turnover fee equated to a tax of more than 50% on the revenue Betfair earned charging a take-out of 2-5%”; in contrast, the “high-margin” NSW TAB charged a take-out of about 16% & the turnover tax was equal to only about 10% of its gross income. Robertson said the turnover fee was “designed to protect the TAB from low-cost wagering operators such as Betfair, which offered punters better prices”. Instead of the turnover fee, Betfair wants to pay Racing NSW a fee based on 10% of its income (the margin it makes as an exchange) as it does with Victoria's racing authority. But Racing NSW barrister Justin Gleeson argued Betfair had effectively crippled itself by choosing a “high-turnover, low-margin business model” & now expected “special favours”. Gleeson noted: “Section 92 (of the Australian Constitution) doesn't privilege a decision by one operator . . . . to charge at a lower price . . . . than a competitor.” He said things were unequal for Betfair “because of its own decisions”. Gleeson said Racing NSW believed a turnover fee was “the most competitively neutral way to treat vigorous rivals”. The case is expected to continue for 3 weeks.

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