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It is January already and Christmas now seems a distant memory. Last year was a particularly busy one for Pigott Stinson with a number of clubs developing land into retirement villages, childcares and even breweries. A key motivator for many of the projects we worked on was a desire by clubs not to be solely reliant on gaming as their main source of income.

There are a number of risks for clubs that are heavily reliant on gaming revenue. Firstly, there is the risk of competition by way of the internet and mobile devices. Secondly, there is the risk of new and unexpected regulation (such as the short lived ATM ban). Finally, there is the very real risk of a club breaching the existing legislative restrictions.

This risk of breaching the Gaming Machines Act 2001 (GM Act) can be increased when clubs try new and innovative methods to seek to increase gaming revenue through marketing and/or targeted player rewards schemes.

Gaming machine advertising

Clubs need to be careful to ensure that any marketing/advertising which promotes the playing of gaming machines, is not in breach of the GM Act.

The starting position is section 43(1) of the GM Act, which provides:

“A person (whether or not a hotelier or club) must not publish or cause to be published any gaming machine advertising.”

The definition of “gaming machine advertising” is very broad and includes any form of advertising that gives publicity to, or promotes, the playing of gaming machines at a club. The definition of “publishing” is also very broad and it means to “disseminate in any way”. This covers promotion through the internet and social media including email, the club’s website and even the club’s Facebook page.

The only way a club can publish gaming machine advertising is if it strictly complies with the exceptions allowed in the Gaming Machines Regulations.

Clubs also need to ensure that any marketing they do complies with the Spam Act 2003 and the Privacy Act 1988. 

Player rewards schemes

Player reward schemes are permitted by the GM Act. However, clubs need to be aware of the broad powers of the Independent Liquor & Gaming Authority (“Authority”) to control those schemes by sanctions. On the most serious end of the scale, section 129(3) of the GM Act allows a complaint to be made to the Authority on the ground that a:

“club has engaged in conduct that has encouraged, or is likely to encourage, the misuse and abuse of gambling activities … on the premises of the club”

As player reward schemes are permitted by the GM Act, the mere existence of such a scheme will not encourage the “misuse or abuse” of gambling. However, a club’s particular implementation and operation of a scheme could well be grounds for a complaint.

For example, if a club used a scheme to target particular members who spend significant amounts on gaming machines, there is the risk of a complaint being brought. Accordingly, clubs need to ensure that the operation of their scheme does not encourage “misuse or abuse” of gambling. Clubs also need to ensure that their scheme is covered by the Club’s privacy policy and complies with the Privacy Act.

We are aware of a case that involved section 129(3) which was determined by the former Licensing Court some years ago. One of the issues the Court decided in that case was that the club had encouraged members to spend more than they otherwise would by aggressive promotion of the club’s gaming operations. The court determined that the complaint was established on the ground that the club had engaged in conduct which was likely to encourage abuse and misuse of gambling.

Consequences of a complaint

If a complaint is successful, the risk is significant. If the Authority is satisfied that a complaint is made out, it has extensive powers to take disciplinary action against a club. For example the Authority could:

(a) impose a penalty of up to $550,000 (in aggravated circumstances);

(b) cancel or suspend a club’s gaming related licence;

(c) cancel or suspend the club’s liquor licence; and/or

(d) disqualify a person being a secretary or director of a Club for a period that the Authority sees fit (including for life).

Section 129(3) of the GM Act appears to have been rarely relied upon as the majority of complaint proceedings are dealt with under the Registered Clubs Act and Liquor Act. However, there is always the risk that that this could change. In our view, this risk increases when there is increased media focus on problem gambling.

Strongly held views

As clubs are no doubt aware, there are a significant number of individuals who have real concerns with the accessibility of gaming machines at clubs. In keeping abreast of legal decisions we came across interesting comments by Judge Norrish QC in a District Court case, R v Arnaout, Thi Chup [2018] NSWDC 110 (Arnaout’s Case). Arnaout’s Case dealt with the sentencing of a 62 year old lady who worked as a cleaner and had pleaded guilty to bringing a suitcase with approximately 5 kilos of methamphetamine into Australia after an overseas trip.

Relevantly, in the month before taking the overseas trip this lady played poker machines at a registered club on eighteen separate days for a total of 70 hours and 29 minutes. She sustained a net loss in that period of time of $23,845.82. His Honour, in determining the appropriate sentence, considered the offender’s prospects of rehabilitation. In doing so the Judge also made the following comments about his view on gaming machines in Clubs:

“poker machine gambling … has the capacity to compel people to spend far more than they are able to afford. It is a constant source of concern to the community that it would appear registered clubs and other organisations will permit people to develop debts in relation to such activities that they have no prospect of repaying. Although there is no evidence of any loan sharks being involved in this, it is a constant feature of these cases and other cases that there is evidence of people wandering around clubs offering the loan of money for a great price in return. It is very disturbing indeed. In fact, … whenever I go into a registered club and I see an ATM machine, I feel like physically picking it up and carrying it out into the street because people gambling, unlike as was the case 20, 30, 40 years ago, are able to get access to funds immediately on losing all their money by going to an ATM machine…”

The comments are a timely reminder of the strongly held views by some members of the public (and in this case the judiciary) and the importance of diversification to avoid relying solely on increasing gaming revenue to survive.

Next steps

Clubs need to ensure that their marketing practices strictly comply with the GM Act to avoid the risk of serious consequences not only for the club but also for directors and the Club’s Chief Executive Officer.

Further Information and Contact Details

If you have concern over your club’s practices in relation to the operation of player reward schemes, gaming machine advertising or compliance with the GM Act, Privacy Act or any other legal matter please contact any member of the Clubs team on 8251 777 or by email:

John Ralston:j.ralston@pigott.com.au
Bruce Gotterson:b.gotterson@pigott.com.au
Ray Travers:r.travers@pigott.com.au
Michael McCluskey:m.mccluskey@pigott.com.au
Matt Goodwin:m.goodwin@pigott.com.au

 

 

This Newsletter is produced by Pigott Stinson. It is intended to provide general information only. The contents of this Newsletter do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this Newsletter. Liability limited by a scheme approved under Professional Standards Legislation.