BUSINESS

Why the Tabcorp-Tatts merger is two-faced, bad for Australians

TAGs: Australia, Editorial, Tabcorp, Tatts Group

The impending Tabcorp/Tatts merger is a lesson in corporatism with the media playing the part of cheerleader/propagandist for rent-seeking Big Business. It’s also a lesson in the inherent stupidity of artificial laws that restrict voluntary business activity.

Why The Tabcorp-Tatts Merger Is Two-Faced, Bad For AustraliansThe main reason for Tabcorp and Tatts to merge is for them to be able to increase their leverage over the Australian government. There are other tangential banal reasons that any merger can use as an excuse such as merging clientele and cross-selling, but anyone can make that case. What Tabcorp really wants is for the Aussie government to shut out its competition. Back in April it got one step closer with the O’Farrell review of the 2001 Interactive Gambling Act (IGA).

Tabcorp had a lot to do with encouraging this “review” in the first place, the review basically consisting of recommendations on what to do practically in order to tighten the Australian gambling market and restrict it from access by non Australian operators. Protectionism scores another goal. Donald Trump would applaud. The noble review, which was initiated in order to protect the children and consumers from a gambling zombie apocalypse that would surely have occurred if the children were left alone and consumers allowed to do what they wanted, had 18 of 19 recommendations accepted by the Australian feds. Why not all 19? You have to at least give the pretense of being independent. Otherwise people might think you were just a mafia enforcer of policies advocated by business too lazy to compete on the free market.

The whole situation is quite bizarre. The act restricts in-play betting to telephone and retail channels, clearly in an attempt to cut out international operators that can most easily operate online. This artificially favors Australian companies like Tabcorp and Tatts over William Hill, Ladbrokes, and other British operators. Here’s where the situation is laid bare though. William Hill had spearheaded an attempt to technically comply with the silly law via a voice-activated phone app that technically makes the betting “over the phone” and therefore compliant with the Interactive Gaming Act. Others copies the strategy, but the reviewers are not happy about it. Why not? Because it disrespects the Act’s “original intent”.

Well, why not just write in plain words what that original intent is then? Because it would be too bald-faced. The original intent of the law of course is to prevent foreigners from providing certain gambling services to Australians. That is the original intent. So instead of restricting in-play betting arbitrarily to certain venues that happen to give local companies a clear advantage and hide behind a save-the-children justification, just have some courage and conviction and just write that only Australian companies may provide in-play betting services and then we can all get past this silly cat-and-mouse game. But the law can’t actually say that, because out in the open it sounds obnoxious, and all the hackneyed words everybody uses these days like racist, discriminatory, xenophobic etc. Somebody may be able to challenge the law if it were actually worded that way.

But clearly, since foreign companies are complying with it but still operating and that is going against the “original intent,” it is clear what that original intent is.

Most mainstream media articles on this issue are worded in a protect-the-consumer kind of way, painting a subtle picture to the effect that Australia is infested with gambling addicts and big corporations are coming in for the kill so that all Aussies will gamble their lives away and starve in the streets. Meanwhile the noble Australian government is coming in to save everyone and provide the ultimate redemption from the bloodthirsty foreign corporations providing in-play betting by phone app, those dastardly corporations! Lip service is then given to the other side to sound “balanced” when the other side is buried deep within the article and given no prominence whatsoever.

Now, an $11.3 billion merger looks like it will be completed, from which Tabcorp and Tatts will tighten their grip on the Australian gambling regulatory framework. They will continue to strengthen the regulation box that surrounds them, effectively protecting them from competition, raising the price of gambling for the average Australian by lowering the supply.

If the merger goes through, it would mean that the duo have an iron grip on policy going forward. That would mean that foreign players would be even more restricted from Australian markets. How to trade this? Simple. If the merger goes through, simply shift some of your UK positions to Tabcorp and Tatts to compensate. Australian revenue will be further cut off to UK companies who will struggle, and the difference will be made up by domestic Aussie betting firms.

Any possible challenge to the merger from regulators can now be seen from an even more ludicrous perspective. The purported job of the bureaucrats overseeing mergers is to stop “anticompetitive” moves. These wise men, who are somehow able to spot what is anticompetitive, will give their sage opinions as to whether a merger will be anticompetitive or not, and whatever they say goes. Well, speaking of “anticompetitive”, isn’t blocking companies from offering a service just because they are foreign, “anticompetitive”? Yes, yes it is, and that should be illegal on the same grounds as whatever would theoretically make a Tabcorp/Tatts merger illegal.

This is yet another reason why legislators cannot simply write explicitly into the IGA that foreign operators are no longer allowed to provide in-play betting. They have to instead think up some artificial restriction like “phone betting only” and rely on some nebulous “original intent” which they are not even allowed to spell out, just wink at you, and when foreigners circumvent that with a voice-activated phone app, get into a hissy fit and complain about circumvented unspoken intent.

I wonder how these childish laws and law reviews would play out in a world where nobody was able to lie and everything was just put out there straight, like in the movie The Invention of Lying.

So, bottom line, if the merger is approved, lighten UK positions and add to Australian positions. That’s where the revenue is going to go.

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