Gaps in gambling research. Discussion paper

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1 Gaps in gambling research Discussion paper Allen Consulting Group Pty Ltd, 2010

2 Introduction This is the third in a series of discussion papers prepared for RGAC by the Allen Consulting Group (ACG). Each paper is broadly focussed on a particular theme. This paper is concerned with gambling research. Gambling research in Australia usually falls within broad categories such as the nature and extent of gambling or gambling impacts. Over 40 per cent of the gambling research undertaken in Australia relates to these two areas (PC 2010). A number of gaps remain within the research spectrum and this discussion paper aims to identify these gaps. Specifically, this paper aims to: consider where consumers and the consumer s perspective sit within gambling literature; highlight key areas of regulatory debate in gambling policy and the available research; and identify those areas of research that have the potential to contribute significantly to the evidence base. Approach This review of gambling literature was undertaken using the methodology set out below. This approach is aimed at identifying clear opportunities for action research. Step 1: Identify the relevant hot topic regulatory issues in gambling in Victoria based primarily on the issues discussed in the Productivity Commission s gambling inquiry and the Victorian Government s submission to the inquiry. Step 2: Examine those references in the inquiry report and submission that related to the identified regulatory issues. Step 3: Conduct a detailed literature search using a range of relevant search terms on each topic on relevant bibliographic databases. Step 4: Rate the confidence of the research gap assessment based on the availability of key papers, maturity and commonality of the research issue from a consumer perspective, and the absence of any associated projects already underway. Overarching cross-sectorial issues This section examines key areas of regulatory debate that cut across the Victorian gambling industry, namely competition, informed choice, access and advertising. For a summary of the literature as it relates to these issues, see Table 1. Competition Increased competition in a market will result in improved outcomes for consumers. In a gambling context, this translates into better odds from gambling products or new innovative products for consumers. However, in some instances, competition may lead to trade-offs in these areas. For example, increased competition in the wagering market has led to lower prices for consumers but resulted in less revenue and hence support for local racing industries (see s.16 PC 2010). In the Victorian Electronic Gaming Machine (EGM) sector, the impact of the theoretically more competitive venue model on consumers remains to be seen.

3 An important aspect of protecting consumers and promoting competition is that suppliers of gambling services adhere to trade practices law. This can involve regulators ensuring the probity of gambling services or preventing instances of unconscionable conduct. The role of governments in this area of consumer protection is generally not contested (PC 2010). Informed choice Consumers of gambling services are often poorly informed as to the nature of gambling products. A common example is the lack of consumer understanding around EGMs. For example, players often believe that various factors influence payouts on EGMs despite the statistical independence of the games (see s.8 PC 2010). Informing players about issues such as probability, the likelihood of winning and payout schedules is argued to be an important aspect of responsible gambling (Blaszczynski et al. 2004; Blaszczynski et al. 2008). However, the extent to which informed choice significantly impacts on gambling behaviours is relatively unclear (Delfabbro & Le Couteur 2008). Access There is a general link between the accessibility of gambling services particularly EGMs and gambling harms (PC 2010; Abbott 2006). It is for this reason that governments restrict consumer access to gambling services. The implementation of regional and municipal limits on the number of gaming machines in Victoria is an example of these consumer protection measures (Victorian Government 2009). However, the impact of the auction of gaming machine entitlements in April 2010 on accessibility across the state is as yet unknown. Recent research has identified a broader range of factors not related to physical proximity that may keep and attract gamblers to EGM venues. These multidimensional factors of accessibility include comfort, cleanliness, safety, cost, after-hours availability and convenience, and importantly, a sense of social inclusion and connection (see Thomas et al 2009 and Moore et al 2010). Last but not least, the long-term impact of the indirect exposure of children to gambling activities (EGM venues in particular) as well as new and evolving arcade-style games of chance are issues of ongoing policy debate. Advertising General concerns around gambling advertising include the potential to perpetuate consumer misconceptions about gambling, depict gambling inappropriately to children and to reinforce problem gambling (PC 2010). To protect consumers and to reflect these concerns governments regulate most aspects of gambling advertising. There is current regulatory debate around at least two issues relating to advertising. The first relates to current advertising exemptions that have the potential to expose children to gambling advertising. The second relates to the growing trend of licensees based in one jurisdiction to advertise products around the country. In particular, the High Court case of Betfair v State of Western Australia has significantly eroded state-based licensing restrictions. In practice, this has meant that Betfair s betting exchanges in Tasmania can now be promoted and accessed by customers anywhere in Australia, despite being unlicensed in most jurisdictions.

4 Gambling-related crime The impact of problem gambling on the broader community through gambling-related crime has been a key point of interest in the media in the last two months. Firstly, there have been reports on the significant over-representation of Vietnamese women in the Victorian prison system; with many of these women citing gambling related debts as a key reason for engaging in criminal activity. The Victorian Government released a report by Wheeler, Round and Wilson (2010) which found a significant relationship between gaming expenditure and crime. This is consistent with the findings of a wide range of academic and policy research in this area.

5 Table 1: OVERVIEW OF CROSS-SECTORIAL RESEARCH (#) Issue Key papers Consumer/ community perspective Potential research gap Confidence of gap assessment (1) Competition Productivity Commission, Gambling, 2010 Productivity Commission, Gambling, 1999 No Yes High (2) Informed choice Blaszczynski et al. Informed choice and gambling: Principles for consumer protection, 2008 Blaszczynski et al. A science-based framework for responsible gambling: The Reno model, 2004 Yes Yes High (3) Access Thomas, et al. Gambling and the multidimensionality of accessibility: more than just proximity to venues, 2009 Storer et al. Access or adaptation? A meta analysis of surveys of problem gambling prevalence in Australia and New Zealand with respect to the concentration of electronic gambling machines, 2009 Abbott, Do EGMs and problem gambling go together like a horse and carriage?, 2006 Victorian Government (underway), The relationship between access to gambling and gambling behaviour in Victoria: a longitudinal study using surveys and community-level data with a focus on problem gambling (4) Advertising Derevensky et al. An empirical study examining the impact of gambling advertisements on adolescent gambling attitudes and behaviours, 2010 Binde, Exploring the impact of gambling advertising An interview study of problem gamblers, 2009 Binde, Selling dreams causing nightmares? On gambling advertising and problem gambling, 2007 Delfrabbro and Panozzo, Informing the Codes of Practice: A summary of finding from the 2002 focus groups undertaken by the Independent Gambling Authority of South Australia, 2005 Yes Yes Medium Yes No High (5) Gamblingrelated crime Wheeler, Round and Wilson, The relationship between crime and gaming expenditure in Victoria, 2010 Yes No Medium

6 Sectorial issues Wagering and other betting Wagering involves placing a bet on the outcome of either a horse, harness or dog race. However some of the regulatory issues are common to sports betting, betting exchanges and other forms of betting. Of the current regulatory issues in wagering in Australia, three are particularly relevant in a consumer context. Table 2 provides an overview of the literature on these issues. Interstate Tote odds betting Tote-odds betting refers to the practice of corporate bookmakers offering more attractive odds to consumers than those offered by Totaliser Agency Boards (TABs). It is made possible by relatively lower cost structures and results in a loss of market share for local historically state-owned TABs. This in turn has adverse consequences for the local racing industries which rely heavily on the local TABs for revenue. The practice results in a better price for consumers but calls into question the distinction between the traditional wagering industry and the burgeoning betting industry more broadly. Differential tax rates At present, there are a number of differential tax rates across state and territory jurisdictions. Victoria for instance, charges a rate of percent of gross revenue pooled from totalisators, whereas Tasmania applies no specific taxes. With the advent and maturation of new technologies, this creates both tax and market competition between jurisdictions as bets can be placed interstate either over the phone or online. Given that funding of the racing industry has been based on local funding arrangements with the local totalisator, interstate competition may result in the erosion of revenue and support to the racing industry (PC 2010). Inducements Unlike most other forms of gambling, the practice of placing inducements particularly free bets is permitted in some wagering advertising. At present, the Productivity Commission sees the practice as not representing significant risk to consumers (PC 2010). Table 2: OVERVIEW OF WAGERING RESEARCH (#) Issue Key papers and projects underway Consumer/ community perspective Potential research gap Confidence of gap assessment (6) Tote odds betting (7) Differential tax rates and funding for the racing industry VGRP Changes in wagering within the racing industry 2005 Forrest, Consumer Interests and the Regulation and Taxation of Gambling, 2008 VGRP Changes in wagering within the racing industry 2005 No Yes Medium Yes Yes Low (8) Inducements VGRP Changes in wagering within the racing industry 2005 Yes Yes Medium

7 Electronic Gaming Machines EGMs serve as platform for a range of non-strategic games where wins are generally represented by matched icons and are based on random number generation. There are a wide variety of regulatory issues associated with EGMs but there are two technology related issues that are relevant from a consumer perspective, particularly in light of the Productivity Commission s recent recommendations. Table 3 provides an overview of EGM research as it relates to these issues. Bet limits Setting bet limits on EGMs involves restricting the size of bets per game the maximum intensity of play per button push. Limiting bets is argued to allow the targeting of problem gamblers and high intensity play while having little impact on recreational players. Current regulated limits are $5 and $10, however, the Productivity Commission has recommended these limits be significantly reduced. Pre-commitment Pre-commitment refers to gamblers pre-setting limits on their future gambling as a means of reducing the possibility of excessive gambling and related harm. Partial pre-commitment involves the setting of non-binding limits whereas full pre-commitment allows players to set binding limits (PC 2010). The Victorian Government intends to introduce pre-commitment measures for Victoria through legislation for all machines by 2013 but it is as yet unclear what type of pre-commitment technology will be adopted by the state. Key considerations include the extent to which such a system may be easily circumvented, the impact on gamblers, privacy concerns and the impact on EGM revenue and tax receipts.

8 Table 3: OVERVIEW OF EGM RESEARCH (#) Issue Key papers and projects underway Consumer/ community perspective Potential research gap Confidence of gap assessment (9) Bet Limits Blaszczynski et al. The Assessment of the Impact of the Reconfiguration on Electronic Gaming Machine as Harm Minimization Strategies for Problem Gambling, 2001 Livingstone & Woolly, Risky Business: A Few Provocations of the Regulation of Electronic Gaming Machines, 2008 No Yes Medium (10) Precommitment Centre for the Advancement of Best Practices, Play information and Management System, 2009 Ryan, Recent Global Developments in Precommitment Public Policies, Responsible Gaming Networks, 2008 McDonnell-Phillips Analysis of gambler precommitment behaviour, 2005 Yes Yes High Interactive online gambling The Australia Government s decision not to accept the Productivity Commission s recommendation to liberalise interactive online gambling has significantly narrowed the range of possible future policy developments in this area. However, there remain three general regulatory issues relevant from a consumer perspective. Table 4 provides an overview on research as it relates to these issues. Online gambling and problem gambling Unlike most gaming venues, the online gambling environment operates 24 hours a day. In addition, there is a reliance on credit cards for online play. There are concerns that the ease of access associated with online gambling coupled with the use of credit cards to purchase services could result in increases in problem gambling. International provision Australian residents are already able to access online gambling services from international providers. Domestic supply of online gambling services will likely result in a much larger group of online gamblers (PC 2010). This may lead to increases in problem gambling prevalence. Moreover, to some extent this will reduce market share held by current online and retail suppliers. However, the lack of regulated consumer protection measures inherent in international provision is a strong premise for liberalising domestic supply. Youth and online gambling There are fewer age and identification checks for online gambling services than in physical gaming venues. Online gambling therefore poses an increased risk to young people. However, the requirement of credit cards for online gambling to some extent reduces the likelihood of underage gambling but does not eliminate the concerns. Although Australian residents are already able to access online gambling services based in international jurisdictions, there are also broader concerns that the ease of access coupled with the use of credit cards could result in increases in problem gambling.

9 Table 4: OVERVIEW OF ONLINE GAMBLING RESEARCH (#) Issue Key papers and projects underway Consumer/ community perspective Potential research gap Confidence of gap assessment (11) Online gambling and problem gambling (12) International provision (13) Youth and online gambling Wood and Williams, Internet Gambling: Prevalence, Patterns, Problems, and Policy Options, 2009 LaBrie et al. Inside the virtual casino: a prospective longitudinal study of actual internet casino gambling, 2008 Cotte and Latour Blackjack in the kitchen: understanding online versus casino gambling, 2009 Marco and Doris, Online gambling reconciling New Technology and International Consumer Interest, 2007 Derevensky and Gupta, Internet Gambling Amongst Adolescents: A Growing Concern, 2007 Froberg, Gambling among Young People: A Knowledge Review, 2006 Victorian Government (underway) A study on the impact of broadband and interactive gambling developments on youth consumption and wellbeing Victorian Government (underway) Factors affecting youth gambling: a comprehensive model of the antecedents and consequences of gambling in younger people Yes Yes Low No Yes Medium Yes Yes High

10 References Abbott, M 2006, Do EGMs and problem gambling go together like a horse and carriage?, Gambling Research, vol. 18, no. 1, pp Binde, P 2007, Selling dreams causing nightmares? On gambling advertising and problem gambling, Journal of gambling issues, vol. 20, pp Binde, P 2009, Exploring the impact of gambling advertising: An interview study of problem gamblers, International Journal of the Mental Health and Addiction, vol. 7, no. 4, pp Blaszczynski, A, Sharp, L & Walker, M 2001 The Assessment of the Impact of the Reconfiguration on Electronic Gaming Machines as Harm Minimization Strategies for Problem Gambling, Report for the Gaming Industry Operators Group, University of Sydney Gambling Research Group, Sydney. Blaszczynski, A, Ladouceur, R & Shaffer, H 2004, A science-based framework for responsible gambling: The Reno model, Journal of Gambling Studies, vol. 20, pp Blaszczynski, A, Ladouceur, R, Shaffer, H & Nower, L 2008, Informed choice and gambling: Principles for consumer protection, Journal of Gambling Business and Economics, vol. 2, no.1. pp The Centre for the Advancement of Best Practices 2009, Play Information and Management System, report for the Responsible Gambling Council, Canada. Cotte, J and Latour, K 2009, Blackjack in the kitchen: understanding online versus casino gambling, Journal of Consumer Research, vol. 35, no. 5, pp Delfabbro, P.H & Le Couteur, A 2008, Australasian gambling review ( ), Independent Gabling Authority, South Australia. Delfabbro, P.H & Panozzo, S 2004, Informing the Codes of Practice: A summary of findings from the 2002 focus groups undertaken by the Independent Gambling Authority of South Australia, commissioned by the Independent Gambling Authority. Derevensky, J & Gupta, R 2007, Internet Gambling Amongst Adolescents: A Growing Concern, International Journal of Mental Health & Addiction, vol. 5, no. 2, pp Derevensky, J, Sklar, A, Gupta, R & Messerlian, C 2010, An Empirical Study Examining the Impact of Gambling Advertisements on Adolescent Gambling Attitudes and Behaviours, International Journal of Mental Health & Addiction, vol. 8, no. 1, pp Forrest, D 2008, Consumer Interests and the Regulation and Taxation of Gambling, Proceedings of the conference for Colloquium on the Economic Aspects of Gambling; Economic aspects of gambling regulation, Tilburg University, pp Froberg, F 2006, Gambling Among Young People, report for the Swedish National Institute of Public Health, Stockholm. LaBrie, R, Kaplan, S, LaPlante, D, Nelson, S, Schaffer, H 2008, Inside the virtual casino: a prospective longitudinal study of actual internet casino gambling, European Journal of Public Health, vol. 18, no. 4, pp Livingstone, C & Woolley, R 2008, Risky Business: A Few Provocations on the Regulation of Electronic Gaming Machines, Independent Gambling Authority, Adelaide. McDonnell-Phillips 2006, Australian National Survey of Gambler Precommittment Behaviour 2005, commissioned by Gambling Research Australia.

11 Marco, S & Doris, M 2007, Online Gambling Reconciling New Technology and the International Consumer Interest, Proceedings of the conference for Law and technology, Berkeley, California, pp Moore, S M, Thomas, A C, Kyrios, M, Bates, G, and Meredyth, D, 2010, Gambling accessibility: a scale to measure gambler preferences, Journal of Gambling Studies, Online First, 6 June. Productivity Commission (PC) 1999, Gambling, report no. 10, Canberra. Productivity Commission 2010, Gambling, report no. 50, Canberra. Ryan, P 2008, Recent Global Developments in Pre-commitment Public Policies, Responsible Gaming Networks, NAGS Conference, December. South Australian Centre for Economic Studies and Swinburne Institute for Social Research 2005, Changes in Wagering Within the Racing Industry, The Victorian Gambling Research Panel, Melbourne. Storer, J, Abbott, M, Stubbs, J 2009, Access or adaptation? A meta-analysis of surveys of problem gambling prevalence in Australia and New Zealand with respect to concentration of electronic gaming machines, International Gambling Studies, vol. 9, no. 3, pp Thomas, A C, Bates, G, Moore, S, Kyrios, M, Meredyth, D, and Jessop, G, 2009, Gambling and the multidimensionality of accessibility: more than just proximity to venues, International Journal of Mental Health Addiction, 20 October. Victorian Government 2009, Submission to the Productivity Commission Inquiry into Gambling in Australia, Melbourne. Wood & Williams 2009, Internet Gambling: Prevalence, Patterns, Problems and Policy Options, Final Report prepared for the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada.

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