The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

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Resource material › Regulatory Impact Statements › Gambling Act - Proposed Regulations (Harm Minimisation)

June 2004

Regulatory Impact and Compliance Cost Statement

Statement of the nature and magnitude of the problem and the need for government action

1. Gambling can have significant personal, social and economic costs. These include financial costs, effects on productivity and employment, crime, personal and family impacts, and treatment costs. Problem gambling is a significant health issue in New Zealand that affects some groups disproportionately and contributes to poverty and socio-economic inequalities.

2. Problem Gambling Committee statistics indicate that gaming machines are the most harmful form of gambling. In 2003, 77% of problem gambling counselling clients cited pub and club gaming machines as their main problem, and 10% cited casino gaming machines. 4.7% of clients cited race betting. These forms of gambling share the characteristic of being “continuous”, which means people can place bets quickly and repetitively. These high-risk forms of gambling have grown rapidly during the last decade.

From 1999 to 2003 public expenditure on machines at pubs and clubs almost trebled from $360 million in 1999 to $941 million in 2003. For the same period, expenditure in casinos increased from $294 million to $457 million.

3. The Gambling Act 2003 received Royal assent on 18 September 2003. The Act itself goes some way towards addressing the issues highlighted above, but also makes provision for regulations to assist in achieving its objectives. However, there are currently no regulations in place to minimise the harm from high-risk forms of gambling.

Statement Of The Public Policy Objectives

4. The objectives are to prevent and minimise the harm caused by gaming machines and other high-risk forms of gambling and to facilitate responsible gambling.

Statement of the feasible options (regulatory and/or non-regulatory) for achieving the desired objectives

Option 1 – Status Quo

5. The Gambling Act 2003 contains measures to prevent and minimise harm, including: provision for the Ministry of Health to develop a public health strategy for preventing and minimising the harm from problem gambling; a new statutory age limit for playing gaming machines (18); a prohibition on new casinos (and the expansion of opportunities for gambling in existing casinos); a prohibition on advertising overseas gambling; a licensing criterion that the operator must minimise the risks of problem gambling; requirements for operators and venue managers to provide information to people they believe are problem gamblers; a prohibition on gaming machines that accept banknotes with denominations greater than $20; and a prohibition on remote interactive gambling (with limited exceptions). The Act also makes provision for regulations to minimise the harm caused by gambling. However, there are currently no such regulations in place.

6. In addition, there is currently a gaming machine stake limit of $2.50 and prize limits of $500 for a single machine and $1,000 for a linked machine jackpot. There are also requirements for operators to provide brochures and venue notices encouraging players to bet at levels they can afford and to inform them of counselling and other support services. These requirements are set out in gaming machine licence conditions administered under the Gaming and Lotteries Act 1977, which the Gambling Act will replace on 1 July 2004. There is also an Advertising Standards Authority Code for Advertising Gaming and Gambling, which contains principles for ensuring that advertising gambling is conducted in a socially responsible manner and does not mislead or deceive the consumer. Breaches of the principles are addressed by way of a complaints procedure.

7. It is not appropriate to maintain the status quo as it does not meet the policy objectives.

Option 2 (preferred option) – make regulations under the Gambling Act 2003

8. The proposed regulations will:
    i declare certain venues as unsuitable for gaming machines, for example venues which might attract or be easily accessed by children (such as dairies, amusement parlours/arcades/parks or theme parks).

    ii retain the current pub and club gaming machine stake and prize limits.

    iii prohibit all gaming machine jackpot advertising discernible from outside the venue (including media advertising). Current advertising that falls within this prohibition will need to be removed within one year of the regulations coming into force.

    iv ban ATMs from the gambling area in casinos and pub and club venues and from all dedicated TAB venues (ie not sub-outlets with just a counter for selling TAB products). In casinos the “gambling area” means just the gambling floor, not the entire premises, and in pub and club gaming machine venues, it means the entire venue unless the Secretary of Internal Affairs has specified otherwise. TABs do not have a designated gambling area, so the ban will apply to the entire venue. Existing ATMs must be removed within 6 months after the regulations come into force.

    v require all gaming machine operators to provide player information on the odds of winning.

    vi introduce gaming machine design features providing information on game characteristics (including the odds of winning) and individual play (cash spent and duration). Gaming machines must also display the current time at all times during game play, and have a feature that interrupts play (eg after 60 minutes and then every 30 minutes), informs the player of the time spent playing and asks whether they wish to continue. New machines purchased from 1 July 2005 must be compliant (and all machines by 1 July 2009).

    vii continue to require casinos, pub and club gaming machine operators and the New Zealand Racing Board (NZRB) to provide brochures and venue notices encouraging players to bet at levels they can afford and providing information on the basic characteristics of problem gambling and where to get help.

    viii require casinos, pub and club gaming machine operators and the NZRB to provide problem gambling awareness training to venue staff (all casino staff in direct contact with gamblers and enough pub/club staff and NZRB staff in TABs to ensure that there is always a trained person at the venue at all times), effective from one year after the regulations come into force. The regulations will specify that the training must enable trained employees to approach a player whom they believe to be showing signs of problem gambling and provide information (ie basic characteristics of problem gambling, how to access help, and the procedures in the Gambling Act to exclude problem gamblers from the venue). These tasks focus on the provision of information and not counselling. Operators will be required to develop and deliver their own training programmes.

9. The above requirements will be monitored and enforced by the Department of Internal Affairs in accordance with its compliance policies, which are currently being developed in preparation for the Act coming fully into force on 1 July 2004.

Option 3 – Alternative Option (variation to preferred option)

10. An alternative to the preferred option was considered, which included the proposals set out above, with the following variations:
    i Prohibit advertising jackpot totals outside the venue, or inside the venue in a way that is discernible from outside (instead of prohibiting all gaming machine jackpot advertising outside the venue); and

    ii Ban ATMs from the entire venue (instead of just the gambling area).

11. Variation i was not included in the preferred option because advertisements could be designed to have a similar effect on passers-by, but without explicitly stating the current total. Variation ii was not included in the preferred option because a complete ban would unduly inconvenience non-gambling patrons at venues with a variety of entertainment options.

Option 4 – Alternative Option (in addition to preferred option)

12. An alternative to the preferred option was considered, which included the proposals set out above, with the following additions:
    i make gaming machine jackpots less predictable to prevent “feeding frenzy” gambling when the jackpot total reaches the level at which it is most likely to strike; and

    ii introduce a minimum gaming machine game duration of 3.5 seconds (to lessen the harmful, continuous nature of playing gaming machines by slowing play).

13. These measures are not included in the preferred option because submissions raised concerns that they might be counter-productive.

Statement of the net benefits of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options

Government

14. The costs and benefits of the proposed regulations have not been calculated separately from those of the entire regulatory regime under the Act. The only cost additional to those already discussed in the earlier RIS on this regime is that the Department will have to prioritise its monitoring and compliance activity to accommodate the additional work within its budget.

15. The regulations will provide benefits to the Government in ensuring that a key gambling policy objective is met (ie to prevent and minimise the harm caused by gambling).

Gambling Operators

16. The proposals will affect the 6 casinos and 661 licensed operators of gaming machines operating on 2,007 venues and the 101 NZRB owned dedicated TAB agencies. The NZRB may also apply for a licence to operate gaming machines at dedicated TAB sites. While casinos and the NZRB have commercial objectives and their costs will impact on profits, all other gaming machine operators are non-commercial societies. Their costs are funded by money raised by gaming machines and all the profits go to the community. Any impact would therefore be in terms of less money for community purposes than would otherwise be available, rather than a loss to the operators.

17. Under the Act, gaming machine operators must minimise their expenses and maximise the return to the community (as well as return a minimum percentage of funds raised to the community). The Secretary of Internal Affairs must refuse to license operators unless convinced that they will comply with all regulatory requirements and still meet the minimum percentage return requirement. The proposed regulations, which add to the Act’s requirements, are likely to contribute to some operators being unable to achieve this. This would lead to fewer societies (particularly small ones) being licensed, or choosing, to operate gaming machines.

18. Declaring certain venues as unsuitable for gaming machines will mean that licence holders currently operating machines on these venues will not have their licences renewed. Those operators could either relocate the machines to another venue, or sell them. The venue owner would no longer be able to receive site payments from any operator, or use gaming machines to attract customers.

19. The costs of removing existing gaming machine jackpot advertising will vary between operators depending on the extent of the advertising and how they choose to remove it. It would vary from neon signs that would require an electrician to remove them (or could simply be switched off as a cheaper option), to promotional material listing jackpots as an attraction at the venue. Investments in signage and other advertising that must be removed will be lost. However, the costs are one-off and operators will have one year to comply.
    20. There will be costs involved with removing ATMs and associated refurbishments (if necessary), but they are one-off, and operators are allowed 6 months to comply. It is assumed that the costs will be incurred by gambling operators, but this will depend on their lease agreements with the bank. Five out of the six casinos have ATMs (and some are in the gambling area), but not many non-casino gaming machine venues have them. It is expected that not many TAB venues have ATMs. Operators would need to store extra cash on the premises to cater for increased EFTPOS withdrawals (particularly denominations of $20 and below because of the Act’s requirement that gaming machines must not accept banknotes of denominations higher than $20), which may increase security risks.

    21. There are likely to be printing costs associated with requirements to provide information about the odds of winning and problem gambling. As gaming machine operators are already required by licence conditions to provide other information in a similar form, it is expected that the additional costs arising from this extra information will be minimal.

    22. It is possible that the cost of new gaming machines may increase as a result of the proposed player information gaming machine design features if Australian manufacturers pass some of their costs on to purchasers. However, this type of technology is already available “off the shelf” so new technology will not need to be invented. In addition, some of the proposed design features are required by regulation in the Australian state of Victoria and are therefore already provided by all the major manufacturers. The competitive nature of the gaming machine market should also help to minimise price increases.

    23. Operators will bear the costs of modifying existing machines so that they comply by 2009. The cost is expected to be approximately $2,500 per machine (ie 10% - 20% of the cost of a new machine). However, the depreciation rate of machines, and the Act’s requirement that all machines must be compliant with and attached to an electronic monitoring system (EMS) by March 2007, mean it is likely that most machines will be new (and therefore compliant with the proposed regulations) by 2009 anyway. Operators that retain old machines and modify them to be EMS compliant instead of purchasing new ones could tie in these modifications with the proposed design feature modifications to reduce costs.

    24. Gambling operators will be required to develop and deliver their own problem gambling awareness training programmes (or arrange for contract providers to do so) in order to ensure that their staff can meet the required performance standard specified in regulations. This proposal will involve compliance costs and is discussed in the BCCS.

    25. It is possible that gambling operators will benefit from an improved reputation as responsible licence holders as a result of being licence holders under the stricter requirements.

    Community

    26. Benefits will flow to the community from the reduction in harm arising from gambling and its impact on the wider community, which is a key objective of the Act. Gamblers will also be better informed about the odds of winning on gaming machines, the amounts they spend and the duration of their sessions. This may prevent behaviour associated with problem gambling from developing in some people. The benefits have not been quantified.

    27. The impact of the proposals on community funding will be insignificant because operators must still return a minimum percentage of gaming machine funds to the community and there has been strong, steady growth in gaming machine expenditure in recent years. It is expected that the new regulatory regime will curb this growth to an extent, but not reduce expenditure (and therefore community funding) below current levels.

    28. The proposals are expected to have minimal effects on the enjoyment of most gaming machine players who are not problem gamblers.

    Statement of consultation undertaken

    29. There was wide consultation on the proposed regulations through a targeted mail-out to groups likely to be affected (ie gambling operators, community groups that receive grants from gaming machines, and groups and individuals that have commented on/shown an interest in gambling issues). The consultation document was also published on the Department’s website. A total of 89 submissions were received. While gambling operators, gaming machine manufacturers and their representative groups generally opposed introducing any additional regulatory requirements, submissions raised no significant concerns about the preferred option.
    30. The following Government agencies were consulted: Ministry of Health, DPMC, Treasury, SSC, MED, NZDF, CCMAU, Justice, Police, MFAT, Health, IRD, MSD, Culture & Heritage, TPK, Pacific Island Affairs, Women’s Affairs, SPARC and Youth Development. No significant concerns about the preferred option were raised.

    Business Compliance Cost Statement

    31. The proposal to require gambling operators to provide problem gambling awareness training to their staff will involve the following compliance costs: designing training programmes; delivering the training or buying in training services; time out of work for staff to attend the training (and refresher courses if necessary), and ensuring staff skills remain up to date through periodic testing. Additional sources of costs will include learning the new requirements, and stress (particularly for marginal operators).

    32. The compliance costs fall on the 6 casinos, 661 licensed operators of gaming machines operating on 2,007 venues and the New Zealand Racing Board (101 dedicated TABs). While the costs are not expected to be significant for casinos and large societies, they are likely to be more significant for smaller societies that may lack the resources and expertise to develop and deliver training programmes. However, it is expected that the gaming machine industry will take a co-operative approach to developing and delivering the training programmes, which would assist those societies. Operators are allowed one year to comply, which will give operators time to learn the new requirements and prepare.

    33. Information about the regulations will be sent to all licence holders and other interested parties after the notification of the regulations in the Gazette. Meetings to discuss the new requirements will be held with licence holders if they wish.