Further supplementary memorandum submitted
by the Racecourse Association (RCA)
The Racecourse Association (RCA) and its member
racecourses are deeply concerned about the extremely emotive parliamentary
lobbying campaign waged by the Federation of Racecourse Bookmakers
which has grossly misrepresented the facts. At the same time the
FRB has refused to engage constructively on future commercial
arrangements, as was intended by the Gambling Act 2005.
We were disappointed to see the Early Day Motion
613 (Racecourse Bookmakers), which does not correctly summarise
the position. It is a gross distortion to imply that the livelihoods
of on-course bookmakers are threatened by either the RCA or member
racecourses or indeed that it is unintentionally facilitated by
the Gambling Act 2005. This is a matter that can best be resolved
by discussions between the bookmakers and the racecourses, which
are most certainly not being facilitated by this ongoing campaign.
We attach a note which summarises the key issues
relating to the bookmaker list positions. Please do contact us
if you require any further information.
ON-COURSE
BOOKMAKER ARRANGEMENTS
Key Facts
1. British racecourses offer customers a
wide choice of betting opportunities on-course through the Tote,
on-course betting shops and the traditional on-course bookmakers.
Racecourses, and the RCA, value the contribution that on-course
bookmakers make to the theatre of racing. We want them to remain
an important part of the show.
2. Under legislation with its origins in
the 1920's, the "five times rule" restricted racecourses
to charging five times the public entrance price to bookmakers
entering the betting ring on race days to trade. Bookmakers have
been well aware, and particularly since the early 1990's, that
the "five times rule" prevented the racecourses from
establishing commercial arrangements. The bookmaker organisations
were also well aware pre-1998 that no property rights could be
created between racecourses and bookmakers and that racecourses
would not "sell" pitches to bookmakers. The National
Joint Pitch Council (NJPC), through the National Pitch Rules,
made this clear to bookmakers at the outset in 1998.
3. This led to the bookmakers devising List
Positions and the transfer of them as between bookmakers. Although
traded between bookmakers since 1998, a List Position does not
and has never entitled bookmakers to any interest in land on the
racecourse. In addition, racecourses have no involvement in the
market for List Positions, nor have they received any financial
benefit from the trading of List Positions as this was, and still
is, prohibited by the "five times rule".
4. Following a parliamentary undertaking,
the mandatory and default premises licence conditions attached
to The Gambling Act 2005 (the Act) stipulate that the "five
times rule" will continue, in respect of existing betting
areas only, for five years to 31 August 2012. From that point,
racecourses would enter into direct commercial arrangements with
on-course bookmakers.
5. Meanwhile, racecourses can now enter
into commercial arrangements for new betting areas and this trade
has already started. From 2012 racecourses will have complete
freedom to site betting areas on-course where they believe will
best benefit their business and race goers. The principle of commercial
arrangements is welcomed by the RCA and racecourses and is acknowledged
by the Federation of Racecourse Bookmakers (FRB).
6. The FRB has prevented a proper analysis
and debate of the issue by engaging in an extremely emotive campaign
that grossly misrepresents the facts. At no stage has the FRB
produced any proposals as to how the commercial market provided
for in the 2005 Act would work from 2012. Nor have they had the
courtesy of responding to our proposals.
7. The "five times rule" created
a disconnect between the cost of operating a pitch on-course and
the financial return a bookmaker can get from it. The subsequent
values generated by trading List Positions reflected that disconnect.
It was inevitable that once the "five times rule" was
removed, which is an intended consequence of the 2005 Act, that
values of List Positions would be substantially eroded.
8. There is no reason to suggest that bookmakers
and racecourses would not be able to conclude mutually beneficial
commercial arrangements which would enable bookmakers to continue
to trade on the racecourse.
9. Legislation has never prescribed anything
regarding List Positions.
10. The ability to trade List Positions
only came into effect in 1998. The body which facilitated this,
the NJPC, never gave any guarantees of security of tenure and
its rules and auction literature in 1998 (and all subsequent versions)
made clear that the trade did not compromise racecourse property
rights.
11. Anyone buying a List Position was aware
that it was dependent upon current arrangements continuing and
appropriate warnings were given by the NJPC for bookmakers to
be aware of the full implications of the Act.
12. Racecourses have never been bound by
the trade of List Positions between bookmakers and they were prevented
by legislation (The Betting, Gaming and Lotteries Act 1963) from
receiving any commercial benefit from these trades. Consequently,
any rights and obligations were between bookmakers and did not
involve racecourses.
13. Bookmakers have no legal basis to look
on List Positions as long-term assets.
14. The RCA has established that the overall
level of individual "list values" is not significant
and do not equate to long term assets. In most cases bookmakers
will, by 2012, have had between seven and 14 years to have generated
an economic return from the cost of List Positions. Bookmakers
do not publish either their turnover or gross win figures and
the FRB has provided no evidence that they have not received fair
value for their trade in List Positions.
15. Government has never involved itself
in the issue of List Positions. It should not do so now. The Minister
for Sport has stated that this is a commercial matter between
racecourses and bookmakers. That is the way forward.
16. The value of List Positions has already
been significantly eroded, first by the removal of off-course
betting deductions In 2002 and the subsequent emergence of competing
products, particularly betting exchanges. It is likely that further
substantial changes will evolve over the next five years.
17. The historic values of List Positions
were an artificial consequence of the "five times rule".
This provided that all bookmakers within an existing betting area
would pay the same entry charge, although the profitability of
the positions within the ring varied widely.
18. This price fixing mechanism was set
in legislation dating back to 1928. Since those times racecourses
have been unable to receive a true return from those operating
in betting rings on course.
19. The "five times rule" was
widely recognised as anachronistic including in The Budd Report
2001 and DCMS position paper 2003. Its replacement by a commercial
mechanism is not disputed by bookmakers and was an intended consequence
of the 2005 Gambling Act.
20. The replacement of the "five times
rule" in 2012 by commercial arrangements would have had a
major effect on the "value" of positions in the betting
rings as charges to bookmakers will be more closely linked to
the profitability of the positions. This was recognised in 2003
by DCMS and this sentiment has been reflected by the RCA in our
recommendation to members that they continue to recognise List
Positions until September 2012.
21. Further than that the RCA has also proposed
to the FRB that existing bookmakers be offered a first right of
refusal of commercial terms in 2012. It would then be up to those
bookmakers whether they wished to continue to trade from those
positions.
January 2008
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