Joint Committee on the Draft Gambling Bill Minutes of Evidence


Examination of Witnesses (Questions 765 - 779)

THURSDAY 22 JANUARY 2004

MR MARK DAVIES, MR DAVID WILLIAMS, MR ANDREW SILVERMAN, MR ROB HARTNETT AND MR KEVIN GRIFFITHS

  Q765  Chairman: Can we now welcome from Betfair Mark Davies, David Williams and Andrew Silverman and then from two other exchange companies, Betdaq, Rob Hartnett and Kevin Griffiths from Sporting Options. Can I begin by a general question, do you think you should share the responsibility for assisting the regulation and funding of horse raising and other sports on which bets are placed through Betfair and Betdaq?

  Mr Davies: Yes to both questions. As far as regulation is concerned absolutely yes, we already do it voluntarily as initiatives like the RMOU show. We would be very happy to see it enshrined in legislation. As far as funding is something concerned again yes. We believe we should pay in line with everyone else, with all operators being charged on an equitable basis irrespective of their operating margins.

  Mr Hartnett: I agree with what Mark says. We currently already contribute to both the regulation and the funding, to the funding on exactly the same basis, via gross profits tax and in contribution to the levy as every other betting organisation and on the regulation side through a long-standing at least in our short lifetime relationship with the Jockey Club which can only get deeper now that the Jockey Club has appointed a new head of security and would appear to be moving very much towards the beefing up of that role in terms employing betting expertise.

  Q766  Chairman: That is interesting. In that case why then have we had a response from the Jockey Club and the National Trainers' Federation expressing concerns that betting exchanges have exacerbated the corruption of the sport of racing?

  Mr Davies: I do not know why they said that. I do not think there is any evidence to support it. I also do not think that is a view that is necessarily held across the breadth of those organisations. I will quote the new Director of Security for the Jockey Club Paul Scotney who was quoted in last Friday's Racing Post as saying "I do not hold to the idea that problems have increased with the advent of betting exchanges, the exchanges have probably just made it easier to expose certain people".

  Mr Hartnett: I think there is a perception that there has been a change in the very nature of gambling by virtue of the work of the betting exchanges. That perception has, with all due respect, been put forward in many cases by commercial rivals. In fact the reality is that whilst the betting exchanges do allow a range of choice on what to bet on and how to bet they have not materially impacted on the way in which people could in theory benefit from a horse or a participant in a team not actually performing well. You could use as an example the fact that we would have the argument thrown at us at the moment that if there was an even money favourite in horse racing that somebody knew to the best of their knowledge was not going to win they could go on to a betting exchange and take money directly from other punters who were willing to back that particular horse and thereby make money out of it. It has always been the case that if somebody or some group of people "knew" that an even money selection was not going to win they could always have gone to other betting shops, other bookmakers and other betting organisations and backed all of the other runners in that race to secure a guaranteed return on the race and a guaranteed income. The difference now is that on a betting exchange all of the bets which are struck against a particular horse, or for a particular horse or participant are recorded and attributable to an individual whereas in previous cases with bookmakers that was never the case. There is now a clearly defined audit trail which the authorities could in fact use from an information point of view and in terms of a prosecution point of view.

  Q767  Chairman: We will come back to a number of those points. Mr Griffiths, did you want to comment?

  Mr Griffiths: In terms of regulations I certainly believe that betting exchanges are a great help to British horse racing, particularly with the memorandum of understanding that the exchanges will have signed up to. The audit trial is far better with a betting exchange that it is with cash betting on course or in a betting shop. If anyone feels any crime is being perpetrated there is an audit trail back to the person who may have perpetrated that crime.

  Q768  Mr Meale: I am very interested, Mr Davies, how many clients/customers do you have?

  Mr Davies: We have round 200,000 registered clients of whom about 30,000 are active on the site in any given week.

  Q769  Mr Meale: How much will your turnover be?

  Mr Davies: The last time we gave a published figure it was in excess of £50 million a week. You have to put that turnover in context. There has been a great deal of misunderstanding as to what that turnover means and it has been defined in a series of different ways, not least the way that we define our turnover is different from the way that Betdaq define theirs. We define ours that if you and I bet £10 with each other we would call that £20 of matched money. Betdaq's turnover is odds dependent, so if you and I bet £10 with each other with odds of 10-1 they would say one of us is a £100 risk and one is £10 risk, so that makes £110 turnover for the same bet. For all sorts of reasons our turnover looks like a far higher number than you might expect to see. I can give you countless examples of why that might be. For instance if I were back a horse at 10-1 in £10 and I was then to lay it back at 5-1 in £10 I have generated £40 of turnover. What would that have been through the betting shop? It would probably have been one £10 bet and you would not have been able to take the other side, so we have immediately overstated it by four times. Our turnover is really an irrelevant number. People have spent a lot of time focusing on it but this industry is not taxed on turnover and it is not charged on turnover, it is a gross profits tax, and gross profits are a combination of your turnover and your margin. As everyone knows when your margin goes down and your turnover goes up in the event that our margin approached the margin of a high street bookmaker our turnover would come down to compensate to the same number.

  Q770  Mr Meale: You have hundreds of thousands of clients registered, you are handling billions of pounds every year in facilitating gambling, that is your trade.

  Mr Davies: We are a bookmaker.

  Q771  Mr Meale: You are a bookmaker. Some may deny that because you have not been given a fit and proper person test?

  Mr Davies: Yes, we have. We are a registered bookmaker and we have passed the test.

  Q772  Mr Meale: Why then did you intimate a short time ago in your answer that everybody in the industry does not have the same position and you quoted somebody from the Jockey Club. We had Mr Foster here earlier in the week and he had a different view than that expressed by one of his under links, he is the Senior Administrator in the Jockey Club. He said that they were very worried about it and like the ABB and other bookmakers they were saying that you were eroding and "under the present plans you were continuing to damage the countries reputation for firm and sensible regulation of gambling". What do you have to say to that?

  Mr Davies: I would reject that entirely. I think that is absolutely wrong. I think there are no new regulatory questions that we raise as an operator or that are raised by our customers. I think it is quite clear that we are raising the fight against corruption and for evidence of that I would cite the fact that bookmakers have recently followed our lead in signing a memorandum of understanding which puts in place a much better structure for the Jockey Club to be able to access information. The reason that you are hearing the negative comments is there has been a lot of talk about the price of horses and the length of them and people are equating that with corruption, and I think that is a step which is completely wrong to take. This is now a free market where all of the prices on both sides of the market are visible to everyone. Previously one set of people could see all of the prices and another set could not. In the same way some currencies are fixed to other currencies and others float in a free market and when the currency comes away from its peg for whatever reason and suddenly devalues by 20 per cent, 30 per cent or 40 per cent nobody turns around and says there is corruption or there is somebody suddenly inherently weak in that country's economy, it is purely the result of market forces which are allowing that price to shift. There has been an awful lot of talk about horses drifting and the fact that that therefore means there is corruption. People have pointed to 171 horses which Clive Reams organisation Racefax has identified as being potentially problematic. People comment on drifting horses when they lose, they do not comment on drifting horses that win. In 2003 more than 1,700 horses on Betfair compared with 171 Clive Reams pulled out, drifted out, lengthened in price to more than double their price and won, some of which were absolutely extraordinary examples. At Stratford in October a horse called Boing Boing went from 7-1 to 80-1 and won by 10 lengths. People do not comment on horses that drift and win they comment on horses that drift and lose. It is not a question of the horse drifting that applies to corruption any more than it is true than when you suddenly put a speed camera on a road and you discover that 20 cars were speeding overnight you have suddenly increased speeding, what you have done is put in place something that allows you to see what has happened.

  Q773  Mr Meale: Taking that into account just going back to my original question about whether or not you are a bookmaker. You say that you are, in your own publication it says "Betfair is a sport betting exchange not a bookmaker". How do you explain that?

  Mr Davies: That is a marketing document which is intended to explain to people why we offer a service which—

  Q774  Mr Meale: You have just told this Committee you are a bookmaker and you are telling your customers that you are not a bookmaker, is that not misleading?

  Mr Davies: It is not misleading anymore than the advert that Toyota ran last year where their car drove itself is not misleading either, it is there to imply the car gives a very smooth drive and it does not feel like you are doing any work.

  Q775  Mr Meale: That is bizarre that you should have a publication saying that you are not a bookmaker, you have just stated to this Committee that you are a bookmaker and the example that you have given is a Toyota car in a car advert, that is extraordinary.

  Mr Davies: I would disagree it is extraordinary. I think it is fair to say that a marketing campaign played on people's understanding of something and when we started as a business—

  Q776  Mr Meale: That is a lie.

  Mr Davies: It is not a lie.

  Q777  Mr Meale: You said that you are not a bookmaker, you are.

  Mr Davies: It is a marketing tool. If you want to complain about our marketing slogans then that is fine. The fact is that we are a bookmaker in that what we do and what bookmakers do is exactly the same. When you as a customer come to us you submit a bet request and you ask us if we will take your bet. We make a decision whether we are going to take that bet or not.

  Q778  Mr Meale: You do take bets?

  Mr Davies: Yes, we are a bookmaker. Our decision is that we will take that bet in the event that we can immediately offset it. Your experience as a punter coming to us is exactly the same as it is when you go to William Hill or Ladbroke's.

  Q779  Chairman: That is the key point, you are suggesting that there is a time gap virtually between the two transactions, whereas in reality there is not, is there? The person accepts the person requesting the bet, he is not, if I understand it correctly, able to place the bet until somebody else says, yes I will accept it. You do not do anything, you provide the machinery.

  Mr Davies: When you go into Ladbroke's or William Hill you submit a bet request and they have a set of criteria under which they will accept or not accept that bet request, which is whether it fits their risk profile. The chances are if you are a small gambler it will always fit their risk profile and they will always take that bet. If you ask them for a particularly large bet they might say, "we will take some of it at this price and the remainder at that". They have a criteria by which they accept a bet or not. In turn we have a criteria as to whether we accept that bet or not. Our criteria happens to be that we want to immediately to offset that bet. Because we are matching as many bets as we are a minute you as a customer of ours are not aware of that, yes there is a delay and we thought if the delay was too long and you would be disgruntled as a customer and go away and not do business with us. We are perfectly at liberty to take that bet on our own account. It just happens that we are making the business decision to be a risk-free bookmaker and because we have the technology to do it can offset that bet straightaway. We are doing exactly the same thing as every other bookmaker. Going back to your marketing thing—


 
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