CrownBet says punters will pay more if Tabcorp merges with Tatts

The hearing for the $11 billion merger between Australia’s two gambling giants, Tabcorp and Tatts, has presented a number of consequences irrespective of the outcome.

Evidence for both sides of the argument has been presented with the opposition, CrownBet, suggesting punters will be impacted if the deal goes through. Meanwhile, supporter, Racing and Wagering Western Australia (RWWA), believes horse racing prize money will end up as it has in the UK if the merger does not get the green light.

CrownBet’s CEO, Matthew Tripp, presented his case to the Australian Competition Tribunal in Melbourne last week stating punters will end up being charged more and the odds will be worse if the deal goes through.

He believes “take out rates” by the merged entity would increase in its operational states and territory and weakened competition in the racing and sports betting industry would result in a smaller dividend pool for winning punters.

While Tabcorp needs legislative approval to increase take out rates in New South Wales and Victoria, Tatts can do so without regulatory approval in its operational states, including Queensland.

CrownBet believes Tatts has not done so already as Tabcorp is a stronger competitor. If the merger goes through, this competition will be eliminated.

Tripp told the Tribunal this would result in a failed public benefit test as prices for gamblers would increase.

“Tabcorp wants punters to pay the price for the merger through worse odds and service,” he said.

“If the merger goes ahead, the price of wagering services will rise and irreversible changes to the market will stifle competition.”

Tabcorp’s executive general manager of corporate development Doug Freeman rejected Tripp’s claim.

“The take-out is a minor factor in the indicative dividend,” he said.

“The amount of bets on those horses is by far the most significant driver of that price.

“The take-out is not where competition happens in the parimutuel [tote betting] market. The actual indicative dividend is what the customer looks at.

“The key driver of the indicative dividend is the amount of investments on each runner in the race.

“So if there’s a large number of bets on a horse in a race, its price will be lower.”

Tabcorp also argued that the take-out issue had not been raised by the Australian Competition and Consumer Commission (ACCC) in its statement of issues earlier in the year. This was prior to Tabcorp bypassing the regulator and going straight to the Tribunal.

While Tripp did not provide evidence to the Tribunal with regards to the public benefits test, CrownBet’s chief operating officer, Nick Tyshing will this week. He has already submitted a claim that the Tabcorp-Tatts deal will result in synergies of up to $130 million.

“In my opinion, this cannot be claimed to be a public benefit. To the contrary, it must be a significant public detriment,” Mr Tyshing said.

Tabcorp claims a number of public benefits, including $50 million in additional funding every year for racing codes around the country.

Meanwhile, the supporter of the merger RWWA’s chief, Richard Burt, has claimed prize money will be poor if the deal does not go through. He said corporate bookies will dominate as they do in the UK.

“You can see how the market is going to unfold,” Burt told the tribunal.

“If the TABs don’t remain competitive, I believe you will end up with more of a UK-type model. And when corporates get a hold of the customers en masse, as evidenced by the UK, you end up with situations from a racing jurisdiction … you will find racing will decline.

“I’m very concerned that a non-competitive TAB going forward that doesn’t have greater capacity to compete in marketing and digital innovation and when the market is moving that way, you will find there will be much greater market share shift and an underfunding of racing.”

He also believes Tabcorp will not be able to continue to fund Victoria racing as pari-mutuel betting will decline.

Burt addressed the argument the merged entity would end up being the only bidder for the Western Australian TAB if the state government ends up selling it.

Counsel for the Victorian racing industry, Simon White SC, said corporate bookies did not have the experience to run a tote and that would hinder their chance at bidding. But Burt dismissed these claims.

“The skills involved in running a risk-based corporate book are more intellectual than what running a tote is. They’re not unique skills, to be honest, and the corporate bookmakers through their parents have got the skill in the UK. Genuinely they’re not unique skills,” Burt said.

“You can acquire the talent very easily and they have a background of having this experience through their parents.”

The Tribunal is in the midst of the 14-day hearing to determine whether the companies should merge and if it does, Tatts boss Robbie Cooke will lose his job. He will appear before the Tribunal this week along with Racing NSW chief Peter V’Landys, who said claims the merger will weaken competition for racing broadcasting is “a furphy”.

Racing.com is another objector of the merger, alongside CrownBet and Racing Victoria, and is arguing Tabcorp’s broadcaster, Sky Racing, will be able to benefit from joint venture arrangements and get better vision deals.

A decision over the merged entity will be determined mid-June.