I know I bang on about this stuff a lot, but two things I’ve seen on the internet since Friday have served to illustrate very clearly once again what governments don’t seem to be able to see.
The first was a posting on a forum, which asked the question, “Is Betdaq better than Betfair in Australia?”
Forget the answer. The point is that Betdaq aren’t licensed in Australia and therefore don’t have all the onerous restrictions on them that Betfair do, which prevents the latter from offering in-running betting over the internet. It is clear that consumers have no idea that it’s regulatory restrictions that make products inferior, and wouldn’t care anyway. They don’t know which product is licensed and which isn’t when they can just find them with the click of a mouse.
The second, reported in today’s EGR, further illustrates the point. Bwin.Party co-CEO Norbert Teufelberger is quoted as saying of Bet365, who are not licensed in France but apparently continue to operate there, “They cannot necessarily market in the same way we do, but they can market by PR. The problem is they are just one click away. The odds key difference [due to the high turnover tax levied on licensed operators] is so substantial in France, it very easy for a customer to see that he can get much better offers from non-licensed operators.That advantage goes away if that difference becomes marginal, because consumers don’t care if they get a 2-3% better price, but they do care whether they get a 50% better price. News on the net travels very fast these days, through blogs, forums, and so forth. That’s the way you can market those products in those markets.”
How long before regulators start to realise this stuff? Forget going after Bet365, for whatever they are allegedly doing. I’d rather have a system that allows big brand operators to be able to offer product efficiently and in line with market realities, than I would have artificial and ineffective barriers put in place which cannot be enforced and just make life stressful for everyone, for one reason or another.
I understand that these days you write – very enjoyably although normally from a different angle to me – in a personal capacity not on behalf on any commercial organisation any more, but isn’t the sneering condescension towards seedy unlicensed betting operators that seems to drip from virtually every line of your post just a little rich?
Betfair may have made a strategic decision a few years back to become cheerleaders in chief for the “we’re whiter-than-white, highly-regulated and in bed with government in every jurisdiction we do business in” sector of the gaming industry, but let’s both agree that this must have sprung from a cold-headed business decision rather than any longstanding corporate moral compass or conscience crisis about regulation.
I presume such an approach would have been adopted by the firm for 2 main reasons; 1) Appearing ultra-legal smoothed a path to an IPO and becoming a public company allowing management to cash in and 2) because the company reckoned that a long-term gameplan of appearing whiter than white would put them in pole position for hitting the jackpot in regulated markets long-term once they finally opened up, especially once the relevant governments could be hooked on the heroin of spiralling gaming tax revenues.
In any event, I seem to recall that in Betfair’s early days it’s attitude to accepting business from jurisdictions where online betting was illegal was rather less moralistic and condescending than its relatively new found haughty condescension directed towards “unlicensed operators”,
Even today, I find it pretty hard to square BF’s self-publicising in the Sates as some sort of template of a model licensed operator with the company’s business activities in places like Greece and Cyprus where the service being offered appears to me simply downright illegal under eixsting laws. I seem to recall that Stanleybet have long since drawn stumps on the old EU competition defence chesnut and fled this jurisdiction. God knows how they get doing business in Greece past public company compliance, but hat’s off for the achievement!
While we wait to see whether BF’s business decision to play the clean cut little miss Bo Peep innocent routine comes off for them in the States, it increasingly looks like a problematic decision, to put it mildly, in relation to Oz.
But decisions must have been made to adopt this approach tactically by clever people who had their eyes firmly open. So they are hardly entitled to turn round now like a group of upset naive PPI misselling victims here who have just found out how jolly unfair it is that good clean boys like them who always does what teachers tells them and never smokes can’t enjoy a level playing field with those nasty, dangerous, sinister offshore illegal operators we are all so scared of who are probably lighting up a fag behind the bike sheds even while a fuss is made about them….
Hi Druid
I can’t comment on the Betfair strategy because I am restricted on them until 1st July, but your main point seems to me to demonstrate that I must have singularly failed to communicate my position on this if you think that I am ‘sneeringly condescending’ to ‘seedy, unlicensed operators’. My beef is not with unlicensed operators which I do not consider to be seedy at all, inasmuch as they are defined by any of the companies named in this post, but with governments around the world who either refuse to license them, or who put up barriers to their being able to operate effectively such that they do not get involved in the market in an open manner.
I can understand Norbert’s irritation when his company is paying a huge turnover tax which makes them a lot less competitive than a company which isn’t, but it’s not Bet365 that i am frustrated by, but the French government.. Stopping Bet365 from taking bets from France will simply mean that some operator we know nothing about starts to fill the gap created by the removal of someone offering a sensible price, instead. It won’t suddenly mean that all of Bet365’s business goes to Bwin.Party, because the rason Bwin.Party isn’t getting the business is that it is forced by legislation to price itself at a rate which is unattractive to the consumers looking elsewhere. So it seems t me that the problem (in regulatory, rather than commercial, terms) is not with Bet365, but with legislation which doesn’t recognise the reality of the internet.
The same is true of my frustrations in Australia, where I lobbied for years to get Betfair licensed. I could get very few people to understand that if they kept out Betfair, who wanted to work with them co-operatively and pay their way (whatever you believe about the motives for us wanting to do so), then they wouldn’t keep out the *product*, but the single operator; and that single operator’s place would simply be taken by someone outside their reach who less co-operative and willing to pay but could offer teh consumer a perfectly decent alternative – a point which the forum link in the above posting surely proves in spades.
Despite every effort we made, the fact remains that there are wholly artificial barriers in place to doing business which, unsurprisingly, are evaded by others. I am not having a go at the people who smoke behind the bikesheds. I am saying how idiotic it is of the teachers to believe that because they can’t see anyone smoking around the school, that means that no-one is breaking the smoking rules. To extend the analogy and over-dramatise it artificially, if smoking killed people in a matter of weeks rather than over many years, and if people at school only did it for the nicotine hit rather than to be cool, then I would see the solution for any government aiming to protect people from the dangers as being to give all pupils a nicorette patch, rather than to ban anything visible and thinking that would do the trick.
So to be clear: I have no particular beef with operators whose product is sufficiently robust and honest and trustworthy to secure them a licence in an acknowledged jurisdiction from operating in another: I can understand why they do and I am not pasing a moral judgment one way or another. (I also, as it happens, can see the tax difficulties from the government side, but I think they can be dealt with far more effectively if they separate the two issues from each other.) I have an issue with governments who put in place laws which then inadvertently (but obviously) facilitate market entry for operators who are not licensed *anywhere*. And I have an even bigger problem with the way that the governments then lump the licensed-somewhere-decent-but-not-with-us operators in with the not-safe-enough-to-be-licensed-anywhere operators. For me, that’s like saying that if I drive through France on a UK driving licence with UK insurance, I am like someone who has not passed a test or insured his car anywhere in the world and am not safe to be on the roads. The target of legislation should be the people who are a danger to the public and don’t pay their way, not the people who have been regulated to a standard where they aren’t, and do.
To illustrate this point further, EGR is reporting today that a study in Germany has suggested that currently-mooted legislation would capture only 7% of online gambling activity in Germany. Where’s the sense in that?
Mark, broadly I accept your point about the finger in the dyke unsustainability of unrealistic tax/regulatory regimes such as the one France has imposed. However, surely in many cases exactly such an apparently unviable regulatory environment may actually be a given’s government’s desired goal and best way of achieving their aims?
In the face of European or other compeititon law and aggressive legal teams acting on behalf of major betting operators seeking entry such as Betfair, imposing an unsustainably high tax burden and going for an Italian style clampdown on unlicensed operators as best as possible by aggressively restricting unlicensded IP addresses etc may be their best option if their goal (which I wouldn’t share incidentally) was revenue maximisation and protection of their lucrative monopoly incumbent operators.
If it’s not possible for a jurisdiction that wants to protect a monopoly operator such as the PMU or TABs (for reasons such as tax revenue protection) to actually legally bar new low-margin entrants,, then maybe the best way to achieve that objective might be to regulate and impose an unsustainably high tax burden to keep low-margin operators opreating illegally or not at all?
Sure, there still will be some serious tax revenue leakage , but might it be in some circumstances that the resulting lost tax revenue may actually be less severe than giving out licenses on fair terms to low-margin profit-seeking competitors offering a superior product likely to cannibalise an existing juicy national monopoly(/ies)? Such a strategy may also be politically attractive as increasing gambling supply is rarely a vote-winner at the ballot box.
You and I might be classical liberals who oppose government’s behaving in such a way, but would you accept that, depending on a jurisdiction’s objectives, it might actually be the optimal regulatory strategy – from a government perspective – to follow the Australian, French and now apparently German fashion for “pricing out” low-margin private operators from the gambling sector and keeping them grey? You might not agree with their objectives, but if you accepted them for a moment, might this strategy not be the best way of achieving it?
I’m also not entirely convinced by the logic of your beef against governments that lump the licensed-somewhere-decent-but-not-with-us operators in with the not-safe-enough-to-be-licensed-anywhere operators. Across the world local cultural norms and laws are universal. If you drive in such a way in France, you are presumably still committing a criminal offence. Perhaps less offences than your entirely uninsured colleague, but what precisely do you expect in return for your minor transgression? a cushier jail cell than him? a tax rebate? a veneer of greater respectability?
To go analogy crazy for a moment, are we suggesting an American tourist visiting Birtain who heads straight from Manchester Airport to a Moss-side estate to pick up an illegal handgun for his glove compartment – because that’s what he did at home after filling in a form at the WalMart counter – deserves a softer ride if picked up in a random police check than a hardcore British Charlton Heston fan who makes the, to us bizarre, decision to do the same? At the end of the day, both characters have voluntarily walked into a decision to ignore the rules laid down by a democratic government. They come from different cultural backgrounds but is one morally/ethically superior? Is our yank friend less of a danger to the public because he signed up and passed his exams as a member of Sherrif Joe Arpaio’s legal and locally well-respected gun-toting law enforcement posse in Maricopa County Arizona?