Section 92 and the Regulation of E-Commerce: A Casenote on Betfair Pty LTD V Western Australia
| Author | Eli Ball |
| DOI | 10.22145/flr.36.2.7 |
| Published date | 01 June 2008 |
| Date | 01 June 2008 |
| Subject Matter | Article |
CASENOTE ON BETFAIR PTY LTD V WESTERN AUSTRALIA
Eli Ball*
INTRODUCTION
The internet is a new and ubiquitous tool for conducting business. In the age of e-
commerce, distance and physical borders mean very little. The Constitution, however,
was drafted at a time when trade and commerce was characterised by important
geographical considerations, the most significant being the geo-political boundaries
between the several colonies that became the States. The internet has all but destroyed
whatever remnants of that age might have survived the previous 100 years. This
tension between recent technological advancement and long established constitutional
jurisprudence confronted the High Court in Betfair Pty Ltd v Western Australia.1
Betfair is one of a long line of cases dealing with the freedom of interstate trade and
commerce enshrined in s 92 of the Constitution, the most litigated section of Australia's
highest document of government. But it is also truly unique: Betfair is the first time that
the freedom of interstate trade and commerce has been considered in an e-commerce
context. Presented with this opportunity, the High Court has elaborated upon the
approach to s 92 set down nearly 20 years ago in Cole v Whitfield.2 The outcome has
significant consequences for both State and Commonwealth internet regulators.
Betfair strongly suggests that e-commerce in Australia will be difficult to control at a
State level in the future. States are precluded from regulating (or prohibiting) internet
based activities if similar activities (whether they be physically or electronically based)
are provided with a competitive advantage. Regulation will survive constitutional
scrutiny if that competitive advantage is an unavoidable effect of an otherwise
legitimate objective that is reasonably proportionate.3 But even this threshold, Betfair
suggests, will become increasingly difficult to satisfy during the internet age.
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*
B Com (Accg), LLB (Hons 1) (Macq). The author would like to thank Robynne Croft and
Sebastian Hartford-Davis for their input in preparing this piece for publication. All errors
are, of course, the author's alone.
1
Betfair Pty Ltd v Western Australia (2008) 244 ALR 32 ('Betfair').
2
(1998) 165 CLR 360.
3
See generally Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436.
266
Federal Law Review Volume
36
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THE FACTS
Betfair Pty Ltd ('Betfair') is the Australian arm of a well-known online betting agency
that was originally based in London. The service Betfair provides is unlike anything
previously available to punters in Australia from the traditional TAB or racetrack
bookmaker. The key difference is that Betfair operates an online 'betting exchange'.
Punters do not place bets with Betfair. Instead, Betfair acts as an online intermediary
through which punters can place bets with other punters. Another distinct feature of
Betfair's operation is the ability of punters to bet against a team, horse or other
competitor. This feature in particular has attracted heavy criticism from both racing
and government bodies. It has been argued that the ability to 'bet on the loser' provides
all too great a temptation for those with the ability to influence the outcome of a
sporting event (such as trainers, jockeys or those associating with them).4 This, it has
been said, represents an unacceptable threat to the continued health and integrity of
Australian sport.5
There is a further threat posed by Betfair to the status quo of Australian sport. This
threat comes in the form of competition to traditional wagering operators such as the
TAB and local racetrack bookmakers. A report in 2003 to the Australasian Racing
Ministers' Conference received special attention from the High Court on this very
point. Among other things, the report concluded that 'betting exchanges on Australian
racing would pose a serious threat to current betting turnover levels of the three
categories of licensed wagering operator in Australia – TABs, traditional bookmakers
and corporate bookmakers.'6
Despite these concerns Betfair was able to operate Australia-wide, taking bets from
all States on sporting events in all States, until 29 January 2007. The company was (and
continues to be) licensed in Tasmania to operate a betting exchange under the Gaming
Control Act 1993 (Tas). Such a licence is subject to several conditions and restrictions.
These include a prohibition on wagering on illegal activities, the requirement that
betting exchanges maintain the capacity to freeze player funds where inappropriate
activity is suspected, and the prohibition of wagering on any event which the
Tasmanian Gaming Commission considers inappropriate.
After 29 January 2007, however, Betfair was no longer able to operate in Western
Australia, nor with respect to Western Australian sporting events. The Racing
Legislation Amendment Act 2006 (WA) made it an offence to establish or operate a
betting exchange.7 It also created the offence of betting through a betting exchange.8
This latter prohibition, when read in conjunction with ss 12 and 13 of the Criminal Code
Act Compilation Act 1913 (WA), had the effect of making Betfair liable for aiding,
counselling or procuring the offence. This was so even if Betfair itself never acted in
Western Australia.
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4
See, eg, Western Australia, Parliamentary Debates, Legislative Assembly, 13 September 2006,
5877-5878 (Mark McGowan MLA); Katherine Jimenez, 'Tabcorp seeks betting exchange
ban', The Australian (Sydney), 29 November 2007, 23.
5
See, eg, Andrew Darby and Orietta Guerrera, 'Betfair gets foot in door in Australia', The Age
(Melbourne), 4 November 2005, 2.
6
Report of the Betting Exchange Taskforce Australasian Racing Ministers' Conference Volume 1
(July 2003) 2.
7
Betting Control Act 1954 (WA) s 27B(1).
8
Betting Control Act 1954 (WA) s 24(1aa).
2008
Section 92 and the Regulation of E-Commerce 267
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These were not the only limitations placed upon Betfair's activities. An essential
part of its operations depended on the provision to punters of information about the
events they wished to bet on. For horseracing this essential information was contained
in the 'race field'. Section 27D(1) of the amended legislation however made it an
offence for a person (be they a bookmaker, totalisator or betting exchange operator) to
publish or otherwise make available a Western Australian race field in the course of
business. This prohibition applied unless the person was granted ministerial
approval.9 Further, because the Minister had to have regard to the policy behind the
legislation in granting an approval, and because that policy included the prohibition
on betting exchanges, it was virtually impossible for Betfair to gain such approval.
Indeed, Betfair was denied approval for this very reason.10
Betfair was thus left in the awkward position of being unable not only to access the
racing industry in Western Australia, but also to take bets on sporting events around
Australia from anyone who happened to be in Western Australia at the time of making
the bet. Because Betfair, like many businesses today, operated through the internet and
telephonic means which transcend physical boundaries, the prospect of a cyber
limitation in the peculiar shape of Western Australia was an unsettling and
troublesome one. It is against this background that Betfair (with the intervening
support of Tasmania) challenged the validity of the Western Australian legislation.
Western Australia's defence was joined by the Commonwealth and the States of New
South Wales, South Australia, Victoria and Queensland. Betfair's challenge was based
on two alternative grounds. First, it argued that both ss 24(1aa) and 27D(1) were
invalid in their application to Betfair by virtue of s 92 of the Constitution.11 Secondly,
and with respect to s 27D(1) only, Betfair argued that it was invalid by reason of s 118
of the Constitution and an implied constitutional restraint on the extraterritorial reach
of State legislative power.12
The High Court unanimously accepted Betfair's submissions with respect to s 92,
and for this reason it was unnecessary to consider the alternative arguments.13 The
impugned Western Australian law was held to impose a discriminatory burden of a
protectionist kind that was neither proportionate nor appropriate and adapted to a
legitimate object and purpose. For this reason it violated s 92 of the Constitution and
was invalid.14
The decision came in two separate judgments. The main judgment was delivered by
Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ. Justice Heydon gave a
short, separate concurring judgment. In reaching the conclusion that it did, the High
Court reiterated the approach to s 92 that has emerged since Cole v Whitfield. However,
with what will no doubt attract a collective sigh from students and enthusiasts of
constitutional law alike, the Court added the rider that ...
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