Volume 2

Responsible service of gambling

Introduction

1. The financial position of Victoria in 1991 was grim. The State’s public sector debt had risen to $28 billion, from about $23 billion in 1988. Unemployment was around 10 per cent. The budget deficit for the year was expected to exceed $1 billion.¹
2. For some time, the government had been subject to pressure to legalise casinos in the state. Given the circumstances, it is not surprising that the government finally agreed. The reasons were compelling. Significant economic benefits were expected. There would be a growth in employment. Tourism to the state would increase. Associated businesses would benefit. And, importantly, government revenue would rise.
3. In the second reading of the Casino Control Bill, the responsible Minister explained that ‘[Melbourne] is a world-class city and the time has come when it should have a world-class casino’.²
4. The Minister acknowledged that there were significant risks associated with establishing a casino. The risks the Minister identified were the potential for criminal activity and the influence of organised crime. In his 1983 Report, Mr Connor, QC warned that criminal organisations would find casinos ideal for the purposes of money laundering.³
5. The Minister said that the Casino Control Bill was ‘designed to provide strict control over all aspects of the operation of casinos’ so as to exclude criminal activity and influence.⁴
6. Nothing was said by the Minister introducing the Casino Control Bill about the potential harmful effects of gambling at a casino.⁵
7. The opposition supported the establishment of a casino. The Member for Monash, a former barrister, said that the opposition:

   decided that, after very careful investigation of the economic, social and regulatory factors involved, there should be a casino in this State and that it should be what is described as a world-class casino.⁶

8. The Member for Monash went on to say:

   On balance the economic benefits of casinos outweigh the risk on the regulatory side, the risk that is undoubtedly the greatest being that of organised crime taking an interest in casinos and intruding into them. The opposition came to the view that the level of surveillance and regulation is such that it will reduce the risk to a very low level.

9. The only mention of the harmful effects of gambling during the parliamentary debate of the Casino Control Bill was in the context of loansharking and extortion. It was pointed out that there was a real potential for extortion where people have a gambling problem. They would be concentrated in one area and would potentially fall prey to those who lend money.⁸
10. The stated purposes of the Casino Control Bill, which remain in the Casino Control Act to this day,⁹ reflected the government’s priorities and concerns. They were to:

    [e]stablish a system for the licensing, supervision and control of casinos with the aims of:

    1. ensuring that the management and operation of casinos remains free from criminal influence or exploitation; and
    2. ensuring that gaming in casinos is conducted honestly; and
    3. promoting tourism, employment, and economic development generally in the State.¹⁰

11. Following the passage of the Bill in June 1991, the government took immediate steps to establish a casino, commencing the process to issue the casino licence in late 1991.¹¹ The casino was anticipated to be a $1 billion development that could earn $100 million per year in gambling revenue for the State.¹²

The benefits of gambling

12. Gambling in Australia has become a large and expanding industry. It incorporates a diverse range of activities, from charitable gambling to internet gaming. New products are being developed. The trend to increased spending on recreation and leisure and the expansion of commercial forms of gambling allows gambling to be promoted as a legitimate form of entertainment.¹³
13. The gambling industry makes a significant contribution to the Victorian economy in terms of employment, investment tourism and tax revenue.¹⁴ Over 15,000 people are employed at clubs and hotels that have EGMs, at the Melbourne Casino and at standalone TAB agencies.¹⁵
14. In dollar terms, between 2001 and 2019 more than $4 billion was spent on all forms of gambling in Victoria each year.¹⁶
15. Gambling taxes have become a stable source of State revenue, with between $1.63 billion and $2 billion received annually by the State in the 2009 to 2020 financial years.¹⁷ In the 2020 financial year, gambling taxes were the State’s fifth-highest source of revenue.¹⁸ This revenue helps fund some of the essential services that the government provides, including health services, community projects and community education initiatives.
16. Crown’s contribution to the economy must be acknowledged. Crown is a major employer (over 20,000 people are employed across the Crown Resorts businesses, including over 11,500 who work in Melbourne)¹⁹ and makes a substantial contribution to Victorian, Western Australian and Commonwealth revenues. It provides training and educational opportunities and, through its philanthropic arm, the Crown Foundation, contributes to cultural and charitable causes.²⁰
17. More specifically, Crown paid over $650 million in taxes in Australia in 2019. Since 2014 it has paid at least $812.4 million in corporate income tax to the Commonwealth as well as contributing over $3 billion to Victoria’s revenue. Through its procurement activities, Crown also supports many other Australian businesses.²¹
18. In a submission to a 2015 Productivity Commission research paper into tourism, Crown Resorts contended that, with the exception of airlines, it was Australia’s largest generator of tourism revenue and that a third of its revenue came from international visitors. Crown Resorts also asserted that, in circumstances where Australia’s market share of tourism from China in particular was declining, it stood to ‘capture growing international demand for luxury travel, as [Crown’s integrated resorts] cater to the desire of the Asian middle class’.²²
19. Crown Melbourne was the fifth most visited attraction in Melbourne in 2019, with 2.2 million overnight visitors. Of this number, 1.6 million were domestic overnight visitors and 610,800 were international overnight visitors.²³
20. In the 2020 financial year, the Melbourne Casino and other gambling services contributed $149 million in ‘direct tourism gross value added’ to the State. While this industry sector does not make the highest direct tourism gross value added contribution, the amount is still significant.²⁴
21. More broadly, many people who gamble (including at the Melbourne Casino) do so because they enjoy it. Some studies have tentatively linked certain forms of gambling with an improved sense of wellbeing.²⁵ The recreational and functional benefits of the Melbourne Casino extend beyond gambling to other forms of entertainment, and to accommodation and function spaces.

The harm caused by gambling

A brief overview

22. The Productivity Commission conducted the first independent national review of the social and economic impacts of the gambling industries across Australia.²⁶
23. Its report was published in 1999.²⁷ It was a novel and influential effort to evaluate the costs and benefits of gambling. The Productivity Commission’s work has been augmented by reports from the VRGF,²⁸ the work of other organisations in Victoria²⁹ and interstate,³⁰ and a growing body of international reports and scholarship.³¹
24. The Productivity Commission identified problem gambling as a significant social cost resulting from the rapid growth and commercialisation of the gambling industry. It noted the industry’s ability:

    simultaneously to provide entertainment that is harmless to many people, while being a source of great distress—and even of financial and personal ruin—to a significant minority. The imbalances between the consequences for each group can be very marked, a feature not found in other entertainment industries.³²

25. A common research tool to assess the risk and prevalence of problem gambling is the Problem Gambling Severity Index (PGSI). The PGSI is a tool based on research on the common signs and consequences of problematic gambling,³³ and is a standardised measure of at-risk behaviour used by the VRGF.
26. The PGSI is used by respondents to self-assess their gambling behaviour over the past 12 months. They answer nine questions by selecting a score for each: never (0), rarely (1), sometimes (1), often (2) or always (3). The scores are added up and respondents are placed in one of the following categories:
    • non-problem gambler (the person’s gambling has no negative consequences)
    • low-risk gambler (the person experiences a low level of problems with their gambling with few or no identified negative consequences—for example, they may very occasionally spend over their limit or feel guilty about gambling)
    • a moderate-risk gambler (the person experiences a moderate level of problems leading to some negative consequences—for example, they may sometimes spend more than they can afford, lose track of time or feel guilty about gambling)
    • a problem gambler (the person gambles with negative consequences and a possible loss of control—for example, they may often spend more than their limit, gamble to win money back and feel stressed about their gambling).³⁴
27. This and similar indices, such as the Short Gambling Harm Screen, have been used to measure the level of problem gambling in the population.

The number of problem gamblers

28. In 2009, the Productivity Commission conducted a further inquiry into Australia’s gambling industries. The report, published in 2010, estimated that there were between 80,000 and 160,000 adults suffering severe problems from their gambling and between 250,000 and 350,000 adults at moderate risk, experiencing low levels of harm, and who could progress to problem gambling.³⁵ In its 2017 report, ‘The Social Cost of Gambling to Victoria’ (2017 VRGF Report), the VRGF estimated that out of a total Victorian population of around 4 million people, there were approximately 35,000 problem gamblers, 122,600 moderate-risk gamblers and 391,000 low-risk gamblers.³⁶ In a later report, published in March 2020 (2020 VRGF Report), the VRGF estimated that there were approximately 36,000 problem gamblers, 118,000 moderate-risk gamblers and 329,000 low-risk gamblers in Victoria.³⁷
29. In 2018, the VRGF conducted an online questionnaire, rather than using the usual telephone-based survey method, and found markedly higher rates of problem gambling. It estimated that averaged over all age groups, the prevalence of problem gambling was 11 per cent and that the prevalence in the 25–34 year age group was 23 per cent.³⁸ The authors observed that individuals may be more willing to acknowledge their gambling problems in an anonymous online questionnaire than in a telephone interview. They also noted that participants were chosen to be more representative of the general Victorian population than in other studies.³⁹
30. Evidence given to the Commission was that the prevalence of problem gambling in the Victorian adult population in the 2019 financial year was 0.7 per cent.⁴⁰

The money lost to gambling

31. Research showed that in the 2019 financial year, approximately 70 per cent of Victorian adults had participated in some form of gambling in the previous 12 months.⁴¹ The principal forms of legal gambling in Victoria are EGMs, casino table games, betting, lotteries, raffles and bingo.⁴²
32. Annual gambling losses are substantial. The amount lost per adult in Victoria in the 2018 financial year was estimated to be $1,163.⁴³ Broken down by gambling product, the losses on EGMs are the greatest. Some $2.7 billion was lost on EGMs in Victoria in the 2018 financial year. This may be compared with sports betting losses in Victoria, which were around $371.7 million in the same period.⁴⁴
33. It is instructive to consider gambling losses by reference to problem gamblers and moderate-risk gamblers.
34. The 2010 Productivity Commission Report estimated that problem gamblers likely accounted for around 40 per cent (possibly as much as 60 per cent or, in the most conservative case, as low as a (still significant) 22 per cent) of EGM losses, and moderate-risk gamblers accounted for a further 19 per cent (possibly as much as 27 per cent or, in the most conservative case, 7 per cent). Problem gamblers accounted for $2.6 billion of EGM losses.⁴⁵
35. More recently, the 2017 VRGF Report estimated that problem and moderate-risk gamblers in Victoria accounted for 59.4 per cent of EGM spending in the 2015 financial year (moderate-risk gamblers accounting for 23 per cent and problem gamblers accounting for 35.8 per cent), and that only 18.7 per cent of EGM spending came from non-problem gamblers.⁴⁶ It also found that problem gamblers accounted for 58.7 per cent of table games spending at the Melbourne Casino, moderate-risk gamblers accounted for 19.1 per cent and low-risk gamblers accounted for 15.3 per cent. A mere 6.9 per cent of the casino’s table games spending came from non-problem gamblers.⁴⁷
36. The total amount spent on gambling at the Melbourne Casino is significant. Between the 2008 and 2018 financial years, this amount rose from approximately $1.1 billion to approximately $1.8 billion.⁴⁸

The response of government and industry

37. In 2006, the State Government acknowledged that over 55,000 adult Victorians had become addicted to gambling. The vast majority were addicted to gambling on EGMs.⁴⁹
38. As more evidence of the harmful effects of problem gambling emerged and the cost of those effects mounted, both the government and the industry took action to minimise the harm. Initiatives included:
    • prohibiting minors from accessing gambling
    • conducting community awareness campaigns
    • requiring the provision of information about gaming rules, odds and rates of returns
    • establishing self-exclusion programs
    • putting warning messages on gambling terminals
    • placing restrictions on advertising
    • establishing gambling assistance hotlines.⁵⁰

Non-gamblers affected by gambling

39. The number of people with gambling problems is much smaller than the number of people who may be affected by those problems.⁵¹
40. Work carried out by the VRGF in 2016 confirmed that the harm done by gambling extends well beyond the gambler. The types of harm experienced by ‘affected others’—people in the familial and social networks of gamblers who are experiencing harms—include:
    • relationship disruption, conflict or breakdown
    • poorer health
    • emotional and psychological distress
    • financial harm
    • reduced performance at work or in study
    • cultural problems (for example, personal conflicts about gambling when it is against cultural beliefs, reduced ability to participate in cultural practices or meet community expectations, and reduced connection to the cultural community)
    • criminal activity
    • life course and intergenerational harms.⁵²
41. The 2017 VRGF Report stated that in the 2015 financial year:
    • Gambling-related harm imposed both direct and indirect costs on the gambler.
    • The costs imposed by gambling-related harm extended to affected others in the form of divorce or separation; experiences of violence; emotional distress; and, in extreme cases, the impact of suicide attempts or fatality by suicide.
    • Costs extended to third parties and the community in the form of productivity loss and work impacts; the cost of crime to businesses and the Victorian justice system; and costs to the health and human service sector, the mental health sector and homelessness services.
    • Every problem gambler affected approximately six others through their gambling, while gamblers at moderate risk affected three others, and low-risk gamblers affected one other.⁵³
42. The 2017 VRGF Report estimated that affected others could constitute over 22 per cent of the Victorian population; however, it noted that a substantial percentage of this population would be experiencing minor harms, not enough to give rise to a high degree of emotional stress and the costs associated with that.⁵⁴

Costing the harms

43. The cost to Victorians of the harms caused by gambling far exceeds the amounts lost by those gambling. The Victorian Auditor-General has assessed this cost to be around $7 billion a year, through damage to relationships, health and wellbeing, monetary losses and other social costs.⁵⁵
44. A brief survey of some of the types of harms that contribute to those costs follows.

Financial costs

45. The financial costs of gambling harms are substantial, and can stem from bankruptcy, unpaid debts and excessive spending on gambling (which may result in financial strain, debt or less money available for essential items). The VRGF 2017 Report estimated that in the 2015 financial year alone, 2,693 bankruptcies may have been the result of gambling in Victoria. It estimated the annual cost of gambling-related bankruptcy in Victoria to be $70.1 million.⁵⁶ That figure did not take into account the indirect costs that may arise from bankruptcy, such as costs to relationships (for example, emotional distress and divorce), and the use of government services such as housing assistance or financial support.⁵⁷

Costs to health and wellbeing

46. The physical and psychological impacts of gambling can be very grave. Problem gambling is associated with substantially lower levels of life satisfaction. The 2020 VRGF Report used the Australian Unity Wellbeing Index to measure Victorian adult respondents’ overall life satisfaction, as well as their satisfaction with how safe they felt; their standard of living; their personal relationships; their health; their future security; what they were currently achieving in life; and their feeling of being part of a community. Problem gamblers had notably lower scores than other respondents in every domain.⁵⁸
47. The 2017 VRGF Report indicated that in the 2015 financial year, over 40 per cent of problem gamblers reported increased depression due to gambling within the previous 12 months. Some 7.5 per cent of problem gamblers reported that their gambling had contributed to or caused a suicide attempt or ideation. Even adjusting this rate to accommodate the possibility that gambling was not the sole contributing factor, this amounted to 2,112 suicide attempts or ideation among problem gamblers alone within the previous 12 months. The total number of suicide attempts or ideation for low-risk, moderate-risk and problem gamblers was estimated to be 8,802.⁵⁹
48. The 2017 VRGF Report estimated (again, applying a reduction to account for those who may have committed suicide in any event) that there were 587 suicides in Victoria caused by gambling problems in the 2015 financial year.⁶⁰

Costs to relationships and family

49. Problem gambling has been shown to have disruptive and destructive consequences for relationships and families.
50. The 2017 VRGF Report records that almost 20 per cent of problem gamblers in Victoria reported that their gambling contributed to or caused their divorce or separation. Applying a 20 per cent reduction to account for instances of divorce or separation that may have occurred in any event, it was estimated that gambling problems contributed to or caused 14,693 divorces or separations among low-risk, moderate-risk and problem gamblers.⁶¹
51. Gambling has also been empirically associated with family violence. The relationship between gambling and family violence is complex.⁶² Gambling can result in stress, anger or financial crisis, which in some cases may increase the likelihood of family violence. In other cases, problematic gambling may be an effect of family violence. Some research indicates that there is a nearly threefold increase in the probability of violence in families where there is problem or moderate-risk gambling.⁶³

Productivity and work costs

52. Problem gambling can interfere with a person’s ability to function as a productive, gainfully occupied member of the community. The 2017 VRGF Report considered, for example, the cost of gambling-related job losses, absenteeism and lost productivity in the 2015 financial year. Datasets indicated that reduced productivity at work due to gambling problems cost businesses over $323 million that year.⁶⁴ More than 16,000 people were estimated to be absent from work because of gambling problems, costing over $46 million.⁶⁵ Further, over 11 per cent of problem gamblers, and almost 5,000 people with varying levels of gambling problems were estimated to have lost their job as a result of gambling problems (again adjusted to account for those who may have lost their job in any event).⁶⁶

Costs to government

53. Gambling imposes substantial costs on various branches of government. There are costs to the justice system as a result of gamblers who commit offences connected with gambling problems. In the 2015 financial year, some 18,513 people with varying levels of gambling problems were estimated to have committed a crime due to gambling.⁶⁷
54. Wider costs to government include the cost of establishing and maintaining the public structures that regulate, research and treat gambling-related problems; and the cost of people with gambling problems accessing health and human services, mental health services and homelessness services.⁶⁸

Concluding remarks

55. Concentrating attention on the financial costs of harms caused by gambling problems ignores the larger picture. Many of the most profound impacts of gambling problems defy quantification. The true impact of a life lost to suicide on the person’s family and friends is incalculable. The same is true of the personal cost to a life of irrecoverable years spent overwhelmed by addiction, uncertainty and hopelessness, or of a childhood marred by violence or homelessness.

The number of problem gamblers at the Melbourne Casino

56. The Melbourne Casino is a huge, attractive and busy venue. In the five financial years from 2016 to 2020, Crown spent some $2.46 billion on marketing, rewards and other benefits and enticements to attract customers.⁶⁹ These measures have been very successful. In each of the years 2016 to 2019, the Melbourne Casino had between 22.4 and 23.4 million visits. Numbers declined in 2020 because of the closures resulting from the COVID-19 pandemic.⁷⁰
57. The number of visits includes players who visit the Melbourne Casino on more than one occasion in a day. This means that estimating the number of individuals who attend each day is difficult. The likely number is somewhere between 12,000 and 14,000 players per day.⁷¹
58. The Melbourne Casino attracts many gamblers who have problems with their gambling. Data from the 2020 VRGF Report shows that in 2018−19:
    • Twenty-five per cent of people who had gambled at the Melbourne Casino in the previous 12 months experienced some harm from gambling.
    • Just over a third of Victorians experiencing problem gambling, and nearly a third of all Victorians at moderate risk of experiencing problem gambling, had gambled at the Melbourne Casino in the previous 12 months.
    • Compared to the broader population of Victorians who gamble on table games, EGMs, bingo and Keno, those gambling at the Melbourne Casino are more likely to report having experienced at least one form of gambling harm.
    • Sixty-one per cent of people gambling on EGMs at the Melbourne Casino experiencing ‘problem gambling’ had used unrestricted EGMs in the previous 12 months.⁷²
59. Using data from the 2020 VRGF Report, Ms Rosa Billi, Branch Head for Research and Evaluation at the VRGF, concluded that the prevalence of problem gamblers at the Melbourne Casino may be three times higher than among all Victorian adults who gamble.⁷³
60. Crown says there are three issues of concern with Ms Billi’s analysis: (a) it is not statistically significant; (b) the sample size is too small to draw an accurate conclusion; and (c) since her conclusions were drawn from the 2020 VRGF Report’s findings but not published within it, they have not been peer-reviewed.⁷⁴
61. Those concerns can be put aside. First, the issues were not raised with Ms Billi, so she could not rebut or answer any criticism. To rely on them now is unfair.
62. Second, Ms Billi’s analysis has some support in the research. A 2015 paper titled ‘Responsible Gambling and Casinos’, commissioned by Gambling Research Australia, reached the following conclusion:

    In general, regular casino gamblers were found (i.e. by prevalence studies) to be more likely compared to other gamblers to be problem gamblers with 10 per cent of casino gamblers in the general population likely to be moderate risk to problem gamblers (New South Wales); casino gamblers were over three times more likely to be problem gamblers and moderate risk gamblers than other gamblers (South Australia).

63. Finally, even if the issues raised by Crown were valid, it is open to conclude that, as a matter of common sense, problem gamblers are more likely to be found in the casino when compared to all Victorian adults who gamble.
64. So much appeared obvious to Parliament when considering the establishment of a casino in Victoria. During the debate on the Casino Control Bill, the Member for Monash said:

    Finally, it was pointed out to those who consulted on the issue that the potential for extortion is enormous where those who have a gambling problem … can be seen as concentrated in one area, and will perhaps be prey to those who lend money (emphasis added).⁷⁶

65. The evidence and submissions received by this Commission indicate that problem gamblers are drawn to the casino for many reasons, including because it is open 24 hours a day and has more EGMs than any other venue.⁷⁷

The features of EGMs

66. It is important to understand why such a large proportion of problem gamblers are attracted to EGMs, and why most money gambled by problem gamblers is spent on EGMs.
67. Ms Billi said research that had examined the structural characteristics of EGMs has identified a range of factors associated with gambling harm. These factors include:
    • the rapid speed of play relative to other forms of gambling
    • the lack of natural breaks from gambling
    • the highly variable and unpredictable outcomes, together with product characteristics such as ‘near misses’ (where losses are presented as ‘almost wins’) and ‘losses disguised as wins’ (where a person loses more than they stake, yet the outcome is accompanied by the celebratory machine sounds and graphics that occur when a person wins),⁷⁸

    which may lead to persistent gambling in the face of losses, particularly among those experiencing problem gambling.⁷⁹

68. Ms Billi said research shows that:
    • people who experience problems with gambling are more likely to gamble out of a desire to escape or alter mood, and products that offer rapid, continuous gambling appear to be a more effective means of achieving these goals
    • faster, more continuous gambling activities are more conducive to potentially harmful patterns of gambling behaviour, such as increasing stake size in an attempt to recoup losses
    • the absence of a natural break from gambling prevents a person from reflecting on the gambling outcome
    • increased EGM play speed may be associated with higher spending, greater underestimates of the amount spent, placing of higher bets and impaired recall of outcomes.⁸⁰
69. Other research confirms Ms Billi’s evidence. For example, there is evidence that EGMs can induce a dissociative ‘flow state’ where a gambler’s awareness of self, the passage of time and surroundings is diminished.⁸¹ For problem gamblers in particular, that ‘flow state’ may itself be addictive,⁸² especially for those suffering from depression, who find superficial relief in a dissociative state.⁸³
70. Research suggests that losses disguised as wins produce a response in the brain similar to that produced by wins, encouraging gamblers to continue gambling, and that they can enhance the ‘flow state’.⁸⁴ Similarly, losses presented as ‘near misses’ may stimulate an even greater urge to continue playing than an actual win, and can result in players gambling for longer than intended.⁸⁵
71. In addition to having these general characteristics, the EGMs at the Melbourne Casino have particular characteristics that others in Victoria do not. The restrictions imposed on the EGMs at the Melbourne Casino are less stringent in many instances than those imposed on EGMs at other gaming venues in Victoria. The following table sets out the operational differences.

    EGM features	Clubs and hotels	Crown (restricted mode)	Crown (unrestricted mode)
    Spin rate	Cannot be shorter than 2.14 seconds	Cannot be shorter than 2.14 seconds	No restriction
    Bank note acceptor	Cannot accept bank notes greater than $50	Cannot accept bank notes greater than $50	No restriction
    Load-up limit	Limit of $1,000	Limit of $9,949	No restriction
    Pay-out limit	Winnings higher than $2,000 must be paid by cheque	Winnings higher than $2,000 must be paid by cheque	No restriction
    AutoPlay	Prohibited	Prohibited	Allowed
    Maximum bet per spin	$5	$10	No restriction

    Source: Submission 60 VRGF, 31 May 2021, 20.

72. As can be seen from this table, EGMs at the Melbourne Casino can operate in both restricted and unrestricted mode. Of the 2,628 EGMs permitted to be operated at Crown Melbourne,⁸⁶ 1,000 are permitted to operate in ‘unrestricted’ mode when certain requirements are satisfied (including that a player has a pre-set time and loss limit on their YourPlay account, and has not exceeded either limit).⁸⁷ Crown Melbourne is the only venue in the state that has EGMs permitted to operate in unrestricted mode.⁸⁸
73. Mr Mark Mackay, Executive General Manager of Gaming Machines, acknowledged that because there are no maximum bet limits on unrestricted EGMs and there are higher bet limits on restricted EGMs at the casino than at other EGM venues, the risk of harm from gambling at the Melbourne Casino is greater than the risk of harm from gambling on any other EGMs in Victoria.⁸⁹

The Gambling Code

74. It is a condition of Crown Melbourne’s casino licence that it must implement a Gambling Code.⁹⁰ Repeated breaches of its Gambling Code is a ground upon which the regulator may take disciplinary action against Crown Melbourne.⁹¹
75. The requirement to implement a Gambling Code came about in the following way.
76. In October 2006, the Victorian Government issued its report ‘Taking Action on Problem Gambling’.⁹² The Report set out the steps the government intended to take in response to problem gambling. The steps included establishing a code of conduct for the Victorian gambling industry to be implemented in 2007.⁹³
77. The requirement that there be a Gambling Code was implemented by the Gambling Legislation Amendment (Problem Gambling and Other Measures) Act 2007 (Vic). This legislation introduced a number of measures designed to deal with the prevention, early intervention and treatment of gambling-related harm.⁹⁴ In relation to casinos, the measures included limiting the availability of ATMs in the casino, making it an offence to provide gaming machines outdoors and making it an offence to allow an intoxicated person to gamble.⁹⁵
78. It also required a range of gambling licence holders, including Crown Melbourne, to implement a Gambling Code. For Crown Melbourne, this new obligation was imposed under section 69 of the Casino Control Act.⁹⁶
79. Section 69 now provides:

It is a condition of a casino licence that the casino operator implement a Responsible Gambling Code of Conduct that complies with—

...

[the relevant Ministerial direction]⁹⁷

80. The latest Ministerial direction that applies to Crown Melbourne was made on 17 September 2018.⁹⁸ The required contents of a Gambling Code are set out in part 2 of the direction. Most are concerned with the provision of information to customers. Others require positive action by the casino operator.⁹⁹
81. Under the heading ‘Interaction with customers’, the Ministerial direction provides:

    A code must require the relevant person to interact with customers to foster responsible gambling, and must identify how this will occur.

    In particular, a code must specify a process for interacting with those customers who:

    1. have requested information about, or assistance with, a gambling problem or self-exclusion; and
    2. are displaying indicators of distress that may be related to problem gambling.¹⁰⁰

82. An important question that arises is whether Crown Melbourne is implementing its Gambling Code. The answer to that question requires an investigation into:
    • Crown Melbourne’s obligations under its Gambling Code
    • what action it takes to comply with those obligations
    • whether that action is adequate to secure compliance.
83. Before answering those questions, it is necessary to consider the terms of its Gambling Code.

A brief history of the Gambling Code

84. Crown Melbourne has adopted different versions of its Gambling Code.
85. The first version, adopted in 2009, required the following interaction with customers:

    A customer displaying signs of distress or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required. These signs are known by our staff and may include, but are not limited to, a person:

    • either gambling every day or finding it difficult to stop gambling;
    • gambling for extended periods without a break;
    • avoiding contact while gambling;
    • communicating very little with anyone else;
    • barely reacting to events going on around them;
    • displaying aggressive, antisocial or emotional behaviour while gambling; and
    • making requests to borrow money from staff or other customers or continuing to gamble with the proceeds of large wins.

    The assistance offered by staff may take the form of:

    • interaction with the customer and encouraging them to take a break from gambling;
    • offering the customer non-alcoholic refreshments such as a cup of tea or coffee in a quieter and more private area such as our break-out lounge areas or the [Responsible Gaming Support Centre].¹⁰¹

86. The Gambling Code also required that all contacts with a customer by the Responsible Gaming Liaison Officers (RGLOs) and senior management would be recorded in an incident register, along with the action taken.¹⁰²
87. The circumstances in which there would be interaction with a customer were altered in the third version of the Gambling Code, which was adopted in 2012. The relevant part then read:

    A customer displaying signs of distress or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required.

    Observable Signs are seen or reported behaviours or patterns of behaviours which are potential indicators that a person may be experiencing problems with their gambling behaviours. These are seen or reported in context and usually more than one is displayed to indicate potential problems with gambling. Observable signs are included in Crown’s Responsible Service of Gaming training …¹⁰³

88. The ‘Observable Signs’ changed, to the following:
    • Self disclosure of a problem with gambling or problems related to gambling
    • Request to self-exclude
    • Distorted and irrational attitudes about gambling
    • Barely reacting to surrounding events
    • Intolerance to losing, displayed as bad temper or distress
    • Significant variation in mood during a gambling session
    • Children left unattended whilst parent/guardian gambles
    • Regular complaints to staff about losing or blaming the venue/staff for their losses
    • Requests to borrow money for gambling
    • Showing a pattern of gambling for long periods without a break
    • Progressive reduction of self-care e.g. appearing unkempt or fatigued
    • Requests for assistance from family and/or friends concerned about an individual’s gambling behaviour¹⁰⁴
89. The Gambling Code noted:

    These [Observable Signs] are adapted from ‘Identifying Problem Gamblers in Gambling Venues’, Delfabbro et al, 2007 and ‘Current Issues related to identifying the problem gambler in the gambling venue’ various authors, Australian Gambling Council, 2002.¹⁰⁵

90. The fourth version of the Gambling Code, adopted in July 2016, made further changes to the section on intervention with customers. Three are material:

    The following change was made (marked up against third version added):

    As part of delivering exceptional customer service, our staff are encouraged to engage with our customers. A customer displaying observable signs of distress or unacceptable behaviours that may be related to potential problem gaming behaviours or unacceptable behaviour will be approached by a staff member who will offer assistance and referrals to specialist support as required.¹⁰⁶

    The list of Observable Signs of problem gambling became:

    • Self-disclosure of a problem with gaming or request to self-exclude
    • Requests for assistance from family and/or friends concerned about an individual’s gaming behaviour
    • Children left unattended whilst parent/guardian gambles
    • Gets angry while gaming or shows signs of distress during or after gaming
    • Often gambles for long periods without a break
    • Witnessed or heard that a customer was trying to borrow money for gaming
    • Significant decline in personal grooming or appearance
    • Observed conflict over gaming between family members or friends
    • Unrealistic remarks about gaming
    • Complains to staff about losing or blames the casino or gaming product for losing
    • Secretive or embarrassed about being at the casino or stays on to gamble when friends leave the venue
    • Gambles without reacting to what is going on around him/her and avoids contact or conversation with others
    • Frequent visits to the ATM¹⁰⁷

    In similar terms to earlier versions of the Code, the fourth version provided:

    Persons displaying [Observable Signs] will be referred to RGLOs or senior management who have undergone advanced responsible gaming training.¹⁰⁸

91. The fourth version stated that, in addition to the sources mentioned in the third version, the Observable Signs in this version were also adapted from the 2014 ‘Validation Study of In-Venue Problem Gambler Indicators’ (2014 Study), by Anna Thomas, Paul Delfabbro and Andrew R Armstrong.¹⁰⁹
92. The fifth version, adopted in October 2016, made no relevant changes.¹¹⁰ The sixth version, adopted in 2019, made only one relevant change. Instead of persons displaying Observable Signs being referred to ‘RGLOs or senior management’¹¹¹ they were now to be referred to ‘[Responsible Gaming Advisors] or management for referral to the [Responsible Gaming Advisors]’.¹¹² During the Commission hearings, in May 2021, a seventh version of the Gambling Code was adopted. It contained no relevant changes.¹¹³
93. In summary, the most recent Gambling Code requires Crown Melbourne staff to act if a customer displays an Observable Sign that may be related to potential problem gambling behaviours or unacceptable behaviour. One action is for the staff member to approach the customer and offer assistance. The other is for the customer to be referred to a Responsible Gaming Advisor (RGA) or to management for referral to an RGA.

A key Observable Sign under the Gambling Code

94. As has been explained, there were originally separate Observable Signs, being ‘either gambling every day or finding it difficult to stop gambling’ and ‘gambling for extended periods without a break’.¹¹⁴ The two were subsequently combined into: ‘showing a pattern of gambling for long periods without a break’.¹¹⁵ That Observable Sign then became ‘often gambles for long periods without a break’.¹¹⁶ This Observable Sign was the subject of considerable attention during the Commission hearings.
95. The proper understanding of Observable Signs can be gathered from the research cited in the Gambling Code, namely the 2014 Study,¹¹⁷ the 2007 study, ‘Identifying Problem Gamblers in Gambling Venues’ (2007 Study)¹¹⁸ and the 2002 study, ‘Current Issues Related to Identifying the Problem Gambler in the Gambling Venue’ (2002 Study).¹¹⁹ While the focus of the research was on EGMs, the 2007 Study involved participants who gambled on other games and the 2002 Study referred to casinos generally.¹²⁰

Long periods without a break

96. The 2002 Study is not a research project, but ‘a compilation of submissions from a [panel] of Australian and international experts working in research or clinical practice’.¹²¹ As to length of playing sessions, the 2002 Study states:

    The panel had a wide range of session times indicative of problems. While most may not agree that the lower end of the range (1 hour) is indicative of anything serious, certainly five to six hours and beyond would raise concerns especially if linked to a number of sessions per week—although this latter feature was not a frequent response from the panel … This is also harder to quantify in absolutes, and people may lose very quickly if playing maximum stakes, many lines and experiencing a bad run. But clearly, a long session can be an indicator of trouble.¹²²

97. The 2007 Study involved a literature review and empirical research. The authors found that ‘there are certain behaviours that most, if not all, problem gamblers produce on at least some occasions’.¹²³ One was that ‘[a] problem gambler typically gambles for long periods (often 3 hours or more) and often lose[s] track of what is going on around them’.¹²⁴ The authors developed a list of indicators that would assist gaming venue staff to identify problem gambling. The list included ‘gambles for three hours or more without a break of 15 minutes or longer’ and ‘gambles for five or more hours without a break of 15 minutes or longer’.¹²⁵
98. The 2014 Study revised the indicators of a gambling problem identified in the 2007 Study. The authors noted the importance of long periods of continuous play; that is, play without a meaningful break:

    The results of the present study showed that the most common visible indicators of problem gambling which can be observed in venues relate to the duration and intensity of gambling or to ways of raising funds or chasing wins. Problem gamblers were likely to be intensely focused on their play, want to play for long periods of time without a proper break and play very rapidly or frenetically (emphasis added).¹²⁶

99. The revised list of indicators of a gambling problem in the 2014 Study included as a ‘probable’ indicator of a gambling problem, ‘often gambles for long periods (3+ hours) without a proper break’.¹²⁷
100. These studies make clear that the reference to ‘gambl[ing] for long periods’ in Crown Melbourne’s Gambling Code should be understood to mean gambling for at least three hours, with an outer limit of five to six hours, without a proper break.
101. For its part, Crown Melbourne contends for a different approach. It says that the reference to a ‘long period without a break’ is a reference to the periods of permitted play set out in its internal Play Periods Policy.¹²⁸
102. There is no merit in this contention. The proper meaning of any aspect of a Gambling Code cannot be affected by a document not incorporated by reference into the Code.

‘Often’

103. Since the fourth version of Crown’s Gambling Code, the relevant Observable Sign has required the customer to exhibit the behaviour of ‘often gambles for long periods without a break’ (emphasis added). The meaning of ‘often’ is unclear.
104. The research contained in the 2002 Study suggests ‘often’ could mean a number of gambling sessions per week,¹²⁹ gambling at least once a week,¹³⁰ or gambling more than five hours a week.¹³¹
105. The preferable view is that ‘often’ means two or more gambling sessions in a week. Gambling for a long period without a break for more than one session a week may not be an indicator of problem gambling. Gambling for five hours in a week is also unlikely, without more, to be a sign of problem gambling. It is reasonable to proceed on the basis that gambling for two or more sessions in a week could be a sign that there are problems.
106. In the end, the correct construction, whatever it is, will not affect the outcome of the Commission’s analysis. This is because it is also reasonable to proceed on the basis that a significant number of players who gamble for extended periods are likely to do so more than once a week.

Play Periods

107. Crown Melbourne has an established policy that sets out the steps for Crown Melbourne staff to ‘administer and supervise those parts of the [Gambling] Code’ related to the Observable Sign ‘Often gambles for long periods without a break’ and to ‘breaks in play’.¹³²
108. This policy is the Play Periods Policy mentioned earlier.

A brief summary of the Play Periods Policy

109. Following a proposal in 2010,¹³³ a ‘Play Periods Trial’ was implemented in May 2012.¹³⁴ The trial provided that:
     • after 12 hours of play, the customer would be observed by a manager and/or RGLO and action or no action would be taken as required
     • after 16 hours of play, the customer would be spoken to by a manager or RGLO and action or no action would be taken as required
     • after 20 hours of play, the customer would be spoken to by an RGLO and action or no action would be taken as required
     • after 22 hours of play, the customer would be spoken to by an RGLO and action or no action would be taken as required
     • after 24 hours of play, the customer may be asked to leave depending on prior engagement/observation.¹³⁵
110. Version 1.1 of the Play Periods Policy was adopted in February 2018 and provided that:
     • after significant continuous gambling for less than 24 hours, the customer would be reminded to take substantial regular breaks
     • after 24 hours of continuous gambling, the customer would be asked to leave and be directed by an RGLO to take a 24-hour break
     • SYCO (being the loyalty program data collection system in place)¹³⁶ reports would be generated every four hours, and RGLOs would check all ratings where there was gambling for 16 hours or greater.¹³⁷
111. Version 1.2, also adopted in February 2018, was in relevantly the same terms as Version 1.1.¹³⁸
112. Version 1.3, adopted in December 2018, made the following relevant changes:
     • After significant continuous gambling ‘without appropriate breaks’ for less than 24 hours, the customer would be reminded to take substantial regular breaks.
     • After 24 hours of continuous gambling ‘without appropriate breaks’, the customer would be asked to leave and would be directed by an RGLO to take a 24-hour break.
     • Gaming staff or an RGLO would interact with the customer at 12, 16 and 20 hours of gambling to encourage the customer to take a break from play.
     • If the customer also displayed ‘any observable signs’, the customer would be asked by staff to take a break.
     • RGLOs would check all ratings where there was gambling for 12 hours or greater.¹³⁹
113. Version 1.4, adopted in May 2019, was in relevantly the same terms as Version 1.3 (save that the title of ‘RGLO’ was changed to ‘RGA’).¹⁴⁰
114. No Version 1.5 was produced to the Commission.
115. Version 1.6, adopted in December 2019, was in relevantly the same terms as Version 1.4 save for two key changes:
     • It expressly applied only to Crown loyalty program members as distinct from all customers.
     • It provided that gaming staff or an RGA would interact with or observe, as appropriate, the member (as distinct from interact with only) at 12, 16 and 20 hours of gambling to encourage the member to take a break from play.¹⁴¹
116. Version 1.7, adopted in December 2020, also expressly applied only to Crown loyalty program members. It included the following relevant changes:
     • Members who continuously gambled ‘without appropriate breaks’ for significant periods of less than 18 hours would be reminded to take regular breaks.
     • Members who continuously gambled for 18 hours ‘without appropriate breaks’ would be asked to leave and be directed by an RGA or Gaming Manager to take a 24-hour break.
     • Gaming staff or an RGA would interact with or observe, as appropriate, the member at 12, 15 and 17 hours of gambling to encourage the member to take a break from play.¹⁴²
117. Accordingly, since Version 1.3 of the policy, the first time a staff member is required to check on a player, on the basis of their length of continuous play without appropriate breaks, has been at the 12-hour mark. No interaction has ever been required before this time under the various versions of the Play Periods Policy. This is also reflected in practice.¹⁴³
118. Moreover, Versions 1.6 and 1.7 of the Play Periods Policy do not mandate interaction, and permit observation of the customer at the 12-hour mark.¹⁴⁴ Indeed, in practice, an RGA would only observe from afar and would not interact with the customer unless there was some other Observable Sign displayed at that time.¹⁴⁵ The same process may occur at the 15 and 17-hour mark (under Version 1.7 of the Play Periods Policy).¹⁴⁶

What constitutes a break?

119. There is little evidence of what length of time constitutes a ‘break’. This makes it difficult to determine when a patron has gambled for a particular time ‘without appropriate breaks’ (as specified in the Play Periods Policy since Version 1.3). According to an internal paper prepared by the VCGLR in June 2020, the position is as follows:

     RGAs are provided with … mobile phone alerts of members who have been on the gaming floor for more than 12 hours without a substantial break, based on their loyalty club use. This new technology seeks intervention at:

     • 12 hours of continuous play without breaks of more than 2 hours
     • 14 hours of continuous play without breaks of more than 3 hours
     • 20 hours of continuous play (irrespective of breaks), and
     • 24 hours of continuous play (irrespective of breaks).¹⁴⁷

120. The break times are not unreasonable. On the other hand, the length of the break time is largely irrelevant as a harm mitigation measure by Crown Melbourne for reasons that will be explained.

A recent ‘enhancement’ to the Play Periods Policy

121. In May 2021, and in direct response to this Commission’s exploration of the issue,¹⁴⁸ the Crown Resorts board endorsed a plan to introduce Responsible Service of Gaming (RSG) ‘enhancements’.¹⁴⁹ These enhancements will be discussed later. At present, it is only necessary to mention that one enhancement was an alteration to the Play Periods Policy. The alteration was that:

     Crown will introduce the following time limits on playing at Gaming machines, Table Games and Electronic Table Games:

     • Domestic Players—12 hours in a 24 hour period with observation/intervention at eight and 10 hours. Customers will not be able to play for more than 48 hours in a week.
     • International Premium Program Players—staying less than seven days—18 hours in a 24 hour period with interventions at hours 12, 14 and 16. Players staying for longer than 7 days would align with Domestic Player limits.¹⁵⁰

122. Crown has indicated that a new Play Periods Policy, reflecting the above changes in respect of domestic players, was approved on 24 May 2021.¹⁵¹
123. While the change is a positive development, precisely how the new Play Periods Policy will operate is not clear.
124. Further, the change was developed and approved in just six days, and in circumstances where the person responsible for the change, Mr Steven Blackburn (Group Chief Compliance and Financial Crime Officer of Crown Resorts),¹⁵² did not appear to have a full understanding of the issues involved. This is not intended to be a criticism of him.¹⁵³
125. One final matter should be noted. There is evidence that Crown Melbourne was ‘also looking at implementing a 3-hour check, between three and four-hour and implementing an additional check at that stage’.¹⁵⁴ Crown has not indicated when a change along those lines would be implemented.¹⁵⁵
126. What follows focuses on Play Periods Policy Version 1.7 (unless the context indicates otherwise).

Breaches of the Play Periods Policy

127. The evidence reveals the following:
     • Crown Melbourne has consistently failed to comply with both the Gambling Code and the Play Periods Policy. Players have been allowed to gamble continuously for 12 hours or more without any observation or interaction.¹⁵⁶ Some customers have been allowed to gamble continuously for well over 24 hours.¹⁵⁷
     • Faithful compliance with the Play Periods Policy is inconsistent with the requirements of the Gambling Code (this observation applies equally to the May 2021 enhancement). The Gambling Code requires that a customer be approached and offered, or referred to, assistance when they display an Observable Sign. It provides that ‘often gambl[ing] for long periods without a break’ is an Observable Sign.¹⁵⁸ The literature on which this Observable Sign is based shows that a ‘long period’ is between three hours and five to six hours.¹⁵⁹ Yet, the various versions of the Play Periods Policy discussed above do not require an observation or interaction by Crown Melbourne staff until at least 12 hours of gambling (without a break of two or more hours).¹⁶⁰ In practice, the position is worse. At the 12-hour mark, staff will only observe a customer, not interact with them, unless they are displaying some other Observable Sign.¹⁶¹
     • The alerts sent to RGAs in relation to play periods do not include information about how frequently customers gamble, making it very difficult for the RGAs to know whether a customer has been gambling ‘often’.¹⁶²
     • The alerts are concerned with ‘carded’ customers only (that is, Crown loyalty program members).¹⁶³ RGAs must rely on observation alone to determine whether an ‘uncarded’ customer has ‘often gambled for long periods of time without a break’. That is an almost impossible task. As one RGA agreed, her job would be ‘much, much easier … if people were playing carded’.¹⁶⁴
128. The evidence that establishes these propositions will now be addressed.

Identifying patrons with gambling problems

The measures implemented by Crown Melbourne

129. Ms Sonja Bauer, then Group General Manager of Responsible Gaming at Crown Resorts, gave detailed evidence about how Crown Melbourne deals with customers with gambling problems. She explained that:
     • All Crown Melbourne employees are trained in RSG when they commence employment. Operational staff such as food and beverage and gaming staff undertake refresher training every two years thereafter.¹⁶⁵ The training includes Observable Signs.¹⁶⁶ Staff are trained to inform an RGA,¹⁶⁷ or their manager (who will in turn inform an RGA), when they notice a customer displaying Observable Signs.¹⁶⁸ Some staff also attend VIP/Operational management meetings where gaming managers are updated on RSG matters.¹⁶⁹
     • Crown Melbourne established a Responsible Gaming Centre (RGC) in 2002. It comprises ‘a reception area, private counselling rooms and an office area, and is located close to, but away from the casino gaming floor’.¹⁷⁰ It is staffed by RGAs, responsible gaming psychologists and a chaplaincy service.¹⁷¹ There are three responsible gaming psychologists and one part-time chaplain.¹⁷²
     • RGAs are trained to implement and deliver Crown Melbourne’s responsible gaming programs and services ‘with the aim of minimising harm for customers and their families’.¹⁷³ RGAs are required to spend a proportion of their time walking the gaming floor ‘to approach and respond to customers exhibiting problem gaming indicators, and [to attend] to referrals and enquiries from staff’.¹⁷⁴
     • Crown Melbourne maintains an electronic database known as the Responsible Gaming Register (Register), used by responsible gaming staff ‘to log activities pertaining to the service of responsible gaming’. It generates daily reports and can produce reports on particular customers when required.¹⁷⁵
     • The Play Periods Policy is applied to regulate the time customers spend engaged in gambling.¹⁷⁶ The evidence indicates that customers may gamble at the Melbourne Casino using a Crown loyalty card (enabling them to gain points and associated benefits), or without a card. Crown Melbourne staff commonly refer to this as ‘carded play’ and ‘uncarded play’. Where a player is engaged in carded play on EGMs, it is possible to measure the time they have spent gambling within a given day. If a carded player spends 12 hours gambling without a break of two or more hours, an RGA will receive an alert on their mobile phone via a system called ‘Splunk’, which enables the RGA to identify the player’s location. The RGA can then check on the player. Further alerts are received at 15, 17, 18, 20 and 24 hours of play (without appropriate breaks).¹⁷⁷
     • There is a ‘Crown Model’, which is a predictive data modelling tool that Crown Melbourne has devised. Using characteristics of carded players who have subsequently self-excluded, it attempts to predict problematic play. The model does not operate in real time. Rather, RGAs are provided with reports listing a tranche of 100 members whom the model identified as appropriate for interaction with the RSG Team. Efforts are then made to interact with that person.¹⁷⁸ The evidence indicates that the reports are created approximately every six weeks, and the RSG Team has about four to five weeks to action each report, and to evaluate and report on the data obtained.¹⁷⁹
     • Crown Melbourne maintains a Self-Exclusion Program where individuals who wish to self-exclude can visit the RGC and undertake in writing to do so, or can self-exclude via the online portal on Crown Melbourne’s website. Customers will self-exclude for a minimum of 12 months, during which Crown Melbourne’s policy requires certain steps to be taken to ensure those customers cannot gamble at the Melbourne Casino. A third party exclusion program also operates, permitting family members or others to apply to Crown Melbourne to review a person’s gambling behaviour. Third parties may also contact RGAs to report concern for others.¹⁸⁰
     • There is a Time Out Program, which is an adjunct to the Self-Exclusion Program. Through this, customers can elect to ban themselves from the gaming floor for three or six months.¹⁸¹
130. These tools are not effective. Crown Melbourne now understands that there are ‘serious deficiencies in some aspects of its Responsible Gambling services’.¹⁸²

Staffing levels and staff training

131. The challenges of administering RSG at the Melbourne Casino are immense. The venue is enormous. In the years 2016 to 2019 there were between 22.4 and 23.4 million visits to the gaming floor each year,¹⁸³ with an estimated 12,000 to 14,000 unique visitors each day.¹⁸⁴
132. The key RSG staff on the casino floor are the RGAs.¹⁸⁵
133. Until 2018, Crown Melbourne employed only seven RGAs. In 2018, the number was increased to 12 following concerns raised in the VCGLR’s Sixth Review.¹⁸⁶
134. Increasing the number of RGAs to 12 was intended to provide even coverage across the 24 hours of the day that the Melbourne Casino is open.¹⁸⁷ But with only 12 RGAs, no more than three are at work at any one time.¹⁸⁸ The Commission assumes that as has been announced, when a further four RGAs are hired,¹⁸⁹ there will be no more than four RGAs at work at any one time.
135. Whether the number of RGAs present at one time is three or four, it is inadequate.¹⁹⁰ RGAs have numerous responsibilities. These include providing information or advice to staff, entering information into the Register, speaking with customers who are contemplating self-exclusion and managing customers who have attempted to enter the gaming floor despite having self-excluded.¹⁹¹
136. The RGA position description specifies that only 30 per cent of an RGA’s role will be dedicated to ‘Customer Service and Operations’, which includes walking the gaming floor.¹⁹²
137. This means that most of the time, there are fewer than three RGAs present on the gaming floor. Sometimes no RGA is present on the gaming floor because they are attending to other duties.¹⁹³
138. Even when all three RGAs are on the gaming floor, each has to supervise approximately 870 EGMs and approximately 180 gaming tables (including poker and other table games).¹⁹⁴
139. Save for the RGAs, operational staff have little training in responsible gambling. All operational staff (including gaming, food and beverage and security personnel) receive a 45-minute training session as part of their induction,¹⁹⁵ and online refresher training for an hour every two years.¹⁹⁶ Staff working in EGM areas of the casino receive a further hour of advanced training,¹⁹⁷ and some staff are required to undertake additional hospitality or management training.¹⁹⁸ However, only 10 minutes of the induction training,¹⁹⁹ and five minutes of the advanced training, are dedicated to Observable Signs.²⁰⁰
140. Crown Melbourne expects the task of the RGAs to be supported by all staff working on the gaming floor. That expectation is not the reality. In the end, Ms Bauer accepted that, more often than not, food and beverage staff and dealers were there to do their primary jobs and were not, for example, keeping track of play periods.²⁰¹
141. In any event, there are practical difficulties with the approach that all Crown Melbourne staff are involved in RSG.²⁰² The roles of operational staff—whether they are serving food and drinks at a busy bar or dealing hands at a blackjack table—do not permit them to provide meaningful support to the RGAs in relation to the dozens, if not hundreds, of customers in their immediate vicinity.
142. Research has found that staff are not keen to intervene with customers displaying problem gambling behaviours.
143. Research indicates that staff in gaming machine venues are generally reluctant to make an uninvited approach unless the customer is being aggressive, trying to borrow money or appears to be extremely upset. Approaches to offer assistance were very rare.²⁰³ This research suggests that staff will only intervene to prevent disruption to other patrons on the gaming floor rather than to assist the problem gambler.
144. Crown submits that an operating model under which all staff are charged with at least some responsibility for looking out for Observable Signs is possible.²⁰⁴ That might be so in theory. But it would require extraordinary changes to workplace practices for such a model to operate effectively. Certainly, it will not be achieved in the short term.
145. A number of Crown Melbourne staff who work on or near the gaming floor were randomly selected to give evidence about the assistance they give to RGAs. The staff included food and beverage staff, dealers and hosts. Each gave their evidence anonymously.
146. There were compelling similarities in their evidence. For example, several of them:
     • were not even familiar with the term ‘Observable Signs’, let alone able to name specific Observable Signs²⁰⁵
     • could not accurately explain Crown’s Play Periods Policy²⁰⁶
     • did not know what RSG meant,²⁰⁷ or did not often encounter or deal with RSG issues in their work²⁰⁸
     • did not know where the RGC was located or had never been there²⁰⁹
     • could not name any of the 12 RGAs at Crown and/or could not recall speaking to them²¹⁰
     • had never, or not more than once over their years of employment, referred anyone to the RGC or suggested to their manager that someone be referred.²¹¹

The evidence from customers

147. That Crown Melbourne staff face an impossible task attempting to identify and deal with customers who gamble continuously for extended periods is borne out by the evidence of what actually happens on the Melbourne Casino gaming floors.
148. The Commission heard from several people who had gambled at the Melbourne Casino. Most gave evidence about their past or ongoing struggles with problem gambling. Their evidence provided a vivid and powerful picture of the sometimes devastating consequences of gambling.

Case studies

149. The Commission also received submissions attesting to lengthy gambling sessions at the Melbourne Casino with no or insufficient staff intervention.²⁴⁷
150. Then there are places at the Melbourne Casino where gamblers may be left unnoticed by staff.²⁴⁸
151. Ultimately, Ms Bauer agreed that during the casino’s busiest times, problem gamblers could ‘get lost in a big crowd’, because staff are ‘busy doing other things’.²⁴⁹ Even during quiet periods, problem gamblers go unnoticed because staff levels are lower and the gaming floor is huge.²⁵⁰
152. This is aggravated by the fact that RGAs only receive alerts in relation to customers who use carded play.²⁵¹ For uncarded players, RGAs must rely on face-to-face observation of individual customers.²⁵² On a busy and expansive gaming floor, recognising long periods of continuous play by uncarded players is a difficult, if not impossible, task.
153. Ms Bauer accepted that uncarded players are ‘the least likely to be picked up for reminders’ about excessive play periods. Ms Bauer also accepted that if a customer prefers anonymity, they are unlikely to engage in carded play and may well be ‘the ones most likely to be trying to avoid’ being reminded to, for example, take a break.²⁵³

Evidence from support workers

154. The Commission heard evidence from several people who work with those experiencing gambling harms.
155. In the last five years, ‘Gloria’, a gambling counsellor and social worker, has counselled around 200 clients.²⁵⁴ About 85 per cent of her current clients (or their family members) are gambling at the Melbourne Casino. Gloria also visits the casino from time to time as part of her work.²⁵⁵
156. Gloria gave evidence that a client had gambled continuously at the casino for more than two days, sleeping on sofas, at the food court and in cars in the car park.²⁵⁶ Gloria said it was common for problem gamblers who visited gambling counsellors to spend more than 24 hours at a time at the Melbourne Casino.²⁵⁷ Gloria also said that staff would only intervene and encourage people to take a break or ask them to leave if they misbehaved (such as by arguing with other customers) or appeared dishevelled.²⁵⁸
157. Gloria also gave evidence about the consequences of excessive gambling at the Melbourne Casino. One horrific incident must be mentioned:

     A: … One example is the most horrible one. It happened five years ago. And then the wife is like came to my office and reported family violence related to her husband who has the gambling behaviours. And when this man is lose money at Crown Casino he will come back home and whack his wife, then blaming her that she brings bad luck after they getting marriage because before getting marriage the man can win some money, after they get marry he keep losing the money. So he thinks that is all his wife’s fault.

     Q: And just so the Commissioner understands, how did the husband propose the money be repaid?

     A: He force his wife to provide sex work in their massage shop. He ask his wife to provide either hand job or blow job to the client to collect more money.²⁵⁹

158. ‘Ronaldo’ has worked with 70 to 80 clients over the course of a career as a social worker, and currently has 15 active clients.²⁶⁰ Ronaldo estimated that around 75 per cent of clients gamble at the Melbourne Casino for up to 12 hours a day.²⁶¹ Ronaldo mentioned that one client had gambled for four days, occasionally sleeping in front of EGMs, but that ‘none of the staff there have approached her ever’.²⁶²
159. Ronaldo had also never heard of casino staff regularly approaching customers who had been gambling for long periods and asking them to take a break.²⁶³ During regular work-related visits to the Melbourne Casino, Ronaldo had seen people ‘crying on their phone and … staff walking by without approaching them’, and ‘a lot of people sleeping right in front of the pokie machines’.²⁶⁴
160. ‘Prita’, a gambling counsellor,²⁶⁵ also gave evidence. The following exchange took place:

     A: So, my clients told me that they can spend hours, like 24 … more than 20 hours per day, or they can stay at Crown for several days without being check in, whether to see if they is okay. And they even report to me that if they keep playing, no one come in and check in with them regardless the longest hour that they’ve stayed at Crown. They always been approached if they were too tired and they fall asleep. That is why one of the staff will check in with them and ask them to leave the venue and take a nap or something like that.

     Q: So the only times that your clients reported to you that they had been asked to leave is when they have fallen asleep?

     A: Yes.

     Q: No other client has been told they were asked to leave because they were gambling too long or exhibiting signs of distress?

     A: No, never.²⁶⁶

161. One of Prita’s clients, a black tier member (of the Crown loyalty program), told Prita that she had gambled for more than 10 days without stopping, and staff did not check on her or ask whether she was okay.²⁶⁷
162. Regrettably, the evidence revealed that the consequences of excessive gambling included loansharking,²⁶⁸ criminal activity,²⁶⁹ forced prostitution²⁷⁰ and even suicide.²⁷¹ These are precisely the kinds of harms that were identified as potential consequences of gambling at the outset of this chapter.

Evidence from a Responsible Gaming Advisor

163. The Commission also heard evidence from an RGA.²⁷² The RGA gave evidence anonymously. This is what was said:
     • Customers sometimes engaged in uncarded play to avoid detection.²⁷³
     • At times customers were permitted to gamble continuously for periods in excess of 12, 14, 16, 18, 20 and even 24 hours.²⁷⁴ Some were permitted to gamble for 24 hours or more without a significant break and without being spoken to or approached.²⁷⁵
     • RGAs do not receive alerts in relation to play periods for uncarded players; instead, RGAs must rely on their visual observations as they circulate around gaming areas. This is more difficult than monitoring carded players.²⁷⁶
     • Customers sometimes fell asleep at EGMs. In some instances they were woken up and asked to move along, but were not offered any assistance or referred to RSG services.²⁷⁷
     • RGAs would receive an alert when a carded player had gambled for 12 hours. Provided the player was not displaying other Observable Signs, they would not approach and speak to them.²⁷⁸
164. It is worth expanding on the last point. The RGA gave the following evidence:

     Q: … if you get a [phone] alert at 12 hours, and you get to the customer in time and you observe the customer, let’s take that hypothetical example, and I know every case is different, but if you then observe the customer and they are not displaying any other observable signs, in the ordinary course, your approach is to just make that observation at 12 hours; is that right?

     A: Yes.

     Q: And not, at 12 hours, to go and approach and speak to the customer, in the ordinary course?

     A: In the ordinary course, yes.²⁷⁹

The Mahogany Room

165. The Mahogany Room is the high roller room at the Melbourne Casino.²⁸⁰ Access is restricted to platinum and black tier members of the Crown loyalty program. There are about 7,000 platinum members and about 750 to 800 black tier members.²⁸¹ Together, they contribute 62 per cent of turnover from Crown loyalty program members.²⁸² The goings-on at the Mahogany Room are of some importance.
166. Mr Peter Lawrence, the General Manager, VIP Customer Service, accepted that customers in the Mahogany Room often gamble for more than 12, 14 or 16 hours.²⁸³
167. The evidence given by Mahogany Room customers was consistent with Mr Lawrence’s observation, and indicated that there was no intervention by staff during these periods of gambling. One current black tier member gave the following evidence:

     Q: … Is the casino staff and the hosts, are they encouraged to get people in no matter what if they know someone has a problem or are they astute and they try to help people with that?

     A: They don’t try to help anybody in there ...

     Q: Have you ever seen, for example, someone gambling who looks tired or might have been there for a while and someone come along and tap them on the shoulder and say, ‘You’ve been here for a long time, why don’t we get a drink and have a break’?

     A: No.²⁸⁴

168. A former black tier member said this:

     Q: And if you were to gamble—if you were to gamble for 10 hours in a row, or 11, 12, 13, have you gambled those periods?

     A: I have on many occasions …

     Q: Has anyone tapped you on the shoulder to have a break?

     A: Never. Never.

     …

     A: I’ve never seen anyone tapped on the shoulder and asked the question, you’ve exceeded … I’ve seen people fall asleep.²⁸⁵

The Responsible Gaming Register

169. Another source of evidence is the data in the Register. The Register records interactions between RSG staff members and customers and other parties in relation to responsible gaming.²⁸⁶ Ms Bauer extracted information from the Register that she said provided ‘an overview of the behaviours that are recorded that may be indicative of problem gambling behaviours’.²⁸⁷ What the extract shows, for example, is that:
     • in 2016, there were a total of 1,470 interactions. Of these, 846 arose from customers voluntarily requesting assistance or seeking self-exclusion, a further 42 were identified by a third party (such as a concerned family member reporting a person’s problem gambling) and 582 were identified by Crown Melbourne staff.
     • in 2017, there were a total of 1,603 interactions: 957 voluntarily identified, 34 identified by third parties and 612 identified by Crown Melbourne staff
     • in 2018, there were a total of 2,125 interactions: 1,012 voluntarily identified, 67 identified by a third party and 1,046 identified by Crown Melbourne staff
     • in 2019, there were 3,366 interactions: 1,724 voluntarily identified, 198 identified by a third party and 1,444 identified by Crown Melbourne staff.²⁸⁸
170. We return to these figures later in this chapter. As will be made clear, the figures demonstrate that there is little interaction by Crown Melbourne staff with customers who gamble for extended periods.
171. The Register shows many instances where no interaction occurred in response to a phone alert to an RGA (in relation to play periods) for several hours after the alert was received.²⁸⁹ The Register also disclosed many instances where the action taken was not the interaction required by the applicable Play Periods Policy and the Gambling Code.²⁹⁰ Examples include failures to take any action at the 12-hour mark, 16-hour mark, 20-hour mark and even after 24 hours (as required by the relevant Play Periods Policy).²⁹¹
172. These are not isolated instances. They are part of a pattern of systemic failures that is evident from a close examination of the Register.
173. An examination of an arbitrarily chosen day from the Register, 10 June 2019, highlights the point.

     Time	Comments
     8.05 am	PP16 [ie Play Period alert] VIP Tables Local Host manager [A] advised [patron] playing for 19hrs with no significant break.
     8.31 am	PP20 VIP Tables Local Host manager [A] advised [patron] playing for 20hrs with no significant break.
     9.27 am	P24 PRE Tables TG ACM [B] advised [patron] playing for over 24hrs with no significant break.
     10.50 am	PP16 VIP Machines GM VOSM [C] advised [patron] playing for 19hrs with no significant break.
     10.55 am	PP16 PRE Machines GM VOSM [C] advised [patron] playing for 18hrs with no significant breaks (staying in-house).
     12.33 pm	PP20 VIP Tables Local Host manager [A] advised [patron] playing for nearly 24hrs with no break longer than 4.5hrs.
     12.33 pm	PP16 VIP Tables Local Host manager [A] advised [patron] playing for 19hrs with no break longer than 3.5hrs.
     12.34 pm	PP16 VIP Tables Local Host manager [A] advised [patron] playing for 19hrs with no significant break.
     2.58 pm	PP24 VIP Tables Local Host manager [D] advised [patron] playing for over 24hrs with no significant breaks.
     3.15 pm	PP20 PRE Machines GM VOSM [E] advised [patron] playing for 21hrs with no break longer than 4.5hrs.
     4.58 pm	PP24 PRE Machines GM VOSM [F] advised [patron] playing for over 24hrs with no significant breaks.
     5.21 pm	PP16 VIP Tables Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
     5.22 pm	PP16 VIP Tables Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
     5.22 pm	PP16 VIP Tables Local Host manager [D] advised [patron] playing for 19hrs with no significant break.
     5.23 pm	PP20 VIP Tables Local Host manager [D] advised [patron] playing for 20hrs with no break longer than 4hrs.
     7.43 pm	PP20 VIP Tables ACM informed patron has played for 20hrs.
     7.47 pm	PP20 Tables DSM [G] informed patron is at 23hrs.
     9.19 pm	PP24 VIP Tables DSM [H] informed patron has played for 24hrs.

     Source: Exhibit RC0103 Crown Melbourne Responsible Gaming Daily Operations Report, 10 June 2019.

174. Two facts stand out from the Register for 10 June 2019. First, the RGAs and staff who were involved failed to comply with the applicable Play Periods Policy (which required gaming staff or an RGA to interact with customers at the 12, 16 and 20-hour mark, and required an RGA to attend if a customer has been gambling for 24 hours or more without a substantial break) and potentially the Gambling Code (which required that patrons displaying Observable Signs be referred to RGAs or certain senior management).²⁹² That is not a criticism—the task asked of them was impossible. Second, in some cases, the patron was only observed several hours after the RGA received notification that the patron had been gambling for an extended period. Both facts are consistent with the evidence that the Commission has heard from patrons and Crown staff alike (discussed above).
175. The Commission also examined extracts of the Register for other days. In particular, it examined the Register for 5 March 2021 (another randomly chosen day, but after the Commission had been announced).²⁹³ It revealed a similar story.
176. The information from the Register is compelling. It casts considerable doubt on the evidence given by Ms Bauer about the successful operation of Crown Melbourne’s responsible gambling policies.
177. Ms Bauer understood the damning impact of the information from the Register. To deflect that impact and in response to questions from Crown Melbourne’s counsel,²⁹⁴ Ms Bauer said that the alerts received by the RGAs at the 12, 15 and 17-hour marks did not indicate continuous play at the Melbourne Casino but only the time a customer spent ‘on site’. She explained that the times represented nothing more than an initial ‘card-in’ (that is, a member’s first use of their card at the casino) and the latest card-in. Ms Bauer said that a 17-hour alert would be issued if a member had ‘play[ed] for five minutes, [went] to the football and c[a]me back 17 hours later and play[ed] again’.²⁹⁵
178. That this evidence was inaccurate was apparent from information provided by Mr Nicolas Emery, Crown Melbourne’s Chief Marketing Officer.²⁹⁶ He explained that it was possible to determine how long a Crown loyalty program member was at the Melbourne Casino and how long the member was gambling. He said a member’s card ‘tracked … the amount of time someone is spending on a device or a table … We can see the patron hours for our rewards members and we can also see the total patron[’s] hours on the property’.²⁹⁷
179. When Ms Bauer was recalled, she confirmed that carded players are ‘measured’ for their gaming activity.²⁹⁸ She gave the following evidence:

     Q: If a person comes in, I think [Crown Melbourne’s counsel] mentioned on the last occasion they might enter the car park and enter the premises in some way and swipe their card, the systems that Crown has can record wherever the card is used; correct?

     A: Yes.

     Q: And so in that way it can record when someone is physically on the site?

     A: Yes.

     Q: But it can also record, as we’ve already discussed, how long a player has played a particular machine within a certain period?

     A: Yes.²⁹⁹

Concluding remarks

180. Four points should be noted.
181. First, for carded players, the picture that emerges is that, generally speaking, there is no interaction with a customer who gambles for any continuous period up to 12 hours unless that customer displays some other Observable Sign. At the 12-hour mark, a customer might be observed, but no interaction will occur unless the customer displays some other Observable Sign.
182. Second, uncarded players are in an even worse position. The monitoring of uncarded players, which only involves observation, is minimal. While steps are being taken by Crown Melbourne to address this issue,³⁰⁰ the only effective solution is to require carded play on all EGMs.
183. Third, even if the various versions of the Play Periods Policy provided an appropriate guideline for compliance with the Gambling Code (which they do not), the Policy has not been followed.
184. Finally, Crown Melbourne has for many years consistently breached its Gambling Code and, therefore, a condition of its casino licence.

Permitting and encouraging gambling harms

185. To this point, consideration has only been given to the issue of gamblers who engage in ‘continuous play’. It is also necessary to consider how Crown Melbourne approaches its RSG obligations in other areas.
186. In particular, it is necessary to examine:
     • pre-commitment on EGMs
     • the role of hosts
     • Crown Melbourne’s response to behaviours that elevate the risk of gambling harms, including multiple machine use and the use of ‘picks’
     • Crown Melbourne’s capacity to supervise its customers
     • Crown Melbourne’s approach to self-exclusion
     • Crown Melbourne’s marketing functions, including promotional events and activities, Crown’s loyalty program, and select benefits and enticements offered to its customers
     • the use of data and information for research and evaluation.

Pre-commitment on EGMs

187. Research to which reference has been made in this chapter shows that a large proportion of problem gamblers are attracted to EGMs.
188. Research that complements the evidence heard by the Commission also shows that individuals frequently gamble more than intended during sessions of play. Even if such an individual has decided how much time and money they might spend gambling, they make impulsive choices that ignore those earlier decisions.³⁰¹
189. The Productivity Commission made a number of recommendations to deal with these problems, noting that its main concern in relation to the costs of gambling for Australians was the reduction in the social costs of gambling (in particular, problem gambling).³⁰²
190. One recommendation was that there should be a pre-commitment system for EGMs.³⁰³ A pre-commitment system involves a gambler setting limits on their gambling, such as a loss limit and a time limit before they commence gambling.³⁰⁴ According to the Productivity Commission:

     Under ‘partial’ pre-commitment, people are not obliged to be in the system. When they are, they can choose to set or not to set limits, and if they breach such limits, they can continue to play. In contrast, under ‘full’ pre-commitment, people must be in the system, but voluntarily set limits. If they set limits, they are bound by them. Often the former is referred to as ‘voluntary’ pre-commitment and the latter as ‘mandatory’. However, these labels are confusing. Both systems are essentially ‘voluntary’ since the gambler can choose whether to set a limit in either.³⁰⁵

191. To avoid any confusion, pre-commitment will be considered in this chapter by reference to the following categories:
     • partial (where participation is voluntary) or full (where all players must use the system, but are not required to set limits)
     • voluntary (which allows participants to choose whether to set limits) or mandatory (where participants must set limits)
     • binding (where a participant cannot continue gambling once a pre-set limit is reached) or non-binding (where a player can elect to continue gambling once reaching a pre-set limit).
192. The issue of whether a player should be forced to set limits before they gamble is one of the most contentious issues in discussions about EGM reform. There are those who contend that forcing players to set limits is paternalistic and that individual choice would be violated if players are forced to set limits. Others say that personal responsibility should not be paramount. They argue that the addictive nature of EGMs erodes a person’s free choice about their gambling. That is, the problem gambler needs protection from the harms their gambling causes.
193. These arguments will never be fully resolved. In large measure, they depend upon the different personal values and ethics of those who hold the respective viewpoints.
194. Putting to one side debates about values and ethics, the fact is that, as the Productivity Commission pointed out, pre-commitment is an effective strategy to control expenditure in respect of time and money spent on gambling.³⁰⁶ Professor Alex Blaszczynski (who, as detailed below, has acted as a consultant for Crown) and colleagues have pointed out in their report on Operator-Based Approaches to Harm Minimisation in Gambling (Harm Minimisation Summary Review) that:

     support for the strategy [of pre-commitment] is steeped in the findings of a number of studies that have explored typical methods which individuals meeting the criteria for a gambling disorder have applied in self-regulating their gambling behaviour.³⁰⁷

     Moreover, pre-commitment as a harm minimisation strategy has been adopted, or is to be adopted, in a number of jurisdictions (including as a trial).³⁰⁸

195. The Productivity Commission concluded that while partial pre-commitment provided some benefits, such as assisting gamblers to set goals and become more aware of their gambling, a partial pre-commitment system would ‘give Ulysses a knife to cut his bonds when the Sirens call’.³⁰⁹
196. Accordingly, the Productivity Commission suggested that a full pre-commitment system was necessary. It said:

     The Commission’s view is that precommitment is a strong, practicable and ultimately cost-effective option for harm minimisation. It overcomes some of the existing severe deficits in achieving self-control for problem gamblers and for genuine informed consent by many other consumers.

     While recognising that even a full precommitment system cannot be a ‘silver bullet’, it may ultimately take pressure off other regulations aimed at harm minimisation.³¹⁰

197. Professor Blaszczynski and colleagues are of the same view. In their Harm Minimisation Summary Review they wrote:

     Offering pre-commitment where the problem gambler is responsible for making the choice of setting limits may not be realistic; its use may need to be mandated to maximise the positive outcomes [pre-commitment provides].³¹¹

198. The authors go on to make two important points:
     • To be optimally successful, the structure of any ideal EGM-based pre-commitment system needs to apply to all players and to eliminate the option for a player to (a) exchange cards with other players, or be provided with temporary cards by venue operators once pre-set thresholds are reached; and (b) switch play to a cash-based machine.³¹²
     • Any pre-commitment strategy ought to consider setting a reasonable minimum daily amount (losses) as the default level for all individuals. This daily amount can be estimated by taking into account the median losses or the average amount lost by recreational gamblers. This is an arbitrary figure that could be adjusted over time subject to it representing an acceptable daily limit for the majority of problem gamblers.³¹³
199. The Victorian Parliament introduced a pre-commitment system for EGMs in 2014 (effective from 1 December 2015) by amendment to the Gambling Regulation Act. The system is a partial, voluntary, non-binding system. On the second reading of the Gambling Regulation Amendment (Pre-Commitment) Bill 2013 (Vic), the then Treasurer said that the pre-commitment system is voluntary, provides players with choice and is effective for harm minimisation.³¹⁴
200. The pre-commitment scheme, which is accessible on all EGMs in Victoria, is called ‘YourPlay’. Under the YourPlay scheme, individuals can activate a YourPlay player card and then pre-set time and loss limits.³¹⁵ As the VCGLR explained in its Sixth Review:

     Under the YourPlay scheme, when a player has set a time or spending limit and the person reaches the YourPlay set limit, the gaming machine is disabled and a message is displayed on the machine notifying the player that the player has reached the limit. A message then asks the player to choose whether to stop game play on the gaming machine or to continue play. If a person chooses to keep playing, the game play will be re-enabled on the gaming machine and YourPlay will continue to track the play.³¹⁶

201. The scheme has not been successful. Relevantly, in 2019, Crown Resorts established a Responsible Gaming Advisory Panel (RGAP), comprised of Professor Blaszczynski, Professor Paul Delfabbro and Professor Lia Nower.³¹⁷ In August 2020, the panel prepared a paper titled ‘Review of Crown Resort’s Responsible Gaming Programs and Services’ (RG Review).³¹⁸ The RGAP pointed out:

     The uptake of voluntary pre-commitment is extremely low. Most trials show that only 1–5% of people voluntarily sign up for pre-commitment systems and very few use time-based limits. Even when people are actively encouraged to sign up, the rate of utilisation drops off significantly over time and can be close to 0% after around 6 months (citation omitted).³¹⁹

YourPlay at the Melbourne Casino

202. At the Melbourne Casino, when a person reaches a limit under the YourPlay system and elects to continue playing, they are permitted to do so. There is no regulatory obligation on staff to take any action.³²⁰
203. In the RG Review, the RGAP noted that a limitation of the YourPlay system was that players can continue gambling after reaching their self-imposed limit.³²¹
204. Though nothing is being done by Crown Melbourne in this regard, that position need not continue. The following evidence given by Mr Blackburn is important:

     Q: Do you agree that Crown should not permit a person to continue gambling if they reach a pre-determined YourPlay time or money limit?

     A: I do.

     …

     Q: So Crown obviously can’t, at the moment the way things are, set limits for patrons. Do you agree customers should be encouraged by Crown to set realistic and affordable YourPlay limits consistent with what the Foundation’s recommendation is?

     A: I do.

     Q: Do you agree with me that if Crown wanted to have limits and make sure players, when they reached pre-determined limits, stop playing, it is big enough and it has the resources, if it has the will it could make these things happen?

     A: I do.³²²

Hosts

205. There are many different types of hosts at the Melbourne Casino.³²³ The Commission focused on the role of hosts in the Mahogany Room, given the large amounts gambled there.³²⁴
206. A table game host in the Mahogany Room, called a Mahogany Executive Host (referred to in this chapter as a ‘host’), looks after a number of Crown loyalty program members.³²⁵ The host acts as a regular point of contact for those members. The host attends to members’ personal needs, such as making hotel and dining arrangements on their behalf. The host also provides members with incentives and enticements, such as tickets to sporting and musical events.³²⁶
207. The principal function of the host is to encourage members to gamble at the Melbourne Casino.³²⁷ As one former host put it:

     … [A] gambler is a gambler, a punter is a punter. When they are onsite, a lot of the time they’re not just going to come in and park their car, jump on the bus and go to the football, they’re going to come back and play.³²⁸

208. That host said even if a member was taking a break from gambling, they would often contact them and invite them to come to the casino for a catch up. The expectation was that the member might continue their gambling. The host said:

     I was always asked to contact them and make sure that they were okay and continue to offer them, hey, look, you may not want to gamble, but he might want to go to the football, so give him football tickets, or they might want to come in for a bit of dinner, sometime.³²⁹

209. The host said that even if a member had been playing for 15 or 20 hours, they would not suggest they take a break from gambling unless advised to do so by an RGLO (as RGAs were then known).³³⁰ Nor did the host feel obliged to suggest self-exclusion if a member was or seemed to be in relatively serious financial trouble. They said: ‘It wasn’t—it wasn’t the nature in the office to do that sort of thing. I mean, if—yeah—no, not really. No’.³³¹
210. Indeed, the host indicated that they were instructed to subtly discourage clients from self-excluding:

     Q: And if someone said to you, ‘Oh, I’m going to self-exclude, not just have a break’, what would you say in response, in the usual course of conduct? How would you normally respond to that?

     A: We would sort of ask if they … I would ask if … if it was one of my clients, I would ask if they are okay, sort of advise that if they do go down the road of self-exclusion just because they’ve had one bad day on the table, it is going to take more than 12 months to get back in, and when you do get back in you have to go through the Government. It is a big process. So we sort of were asked to steer them away from that option and maybe say, ‘Hey, look, instead of self-excluding, maybe just take time off and go to the football next weekend and take time to cool down, go home. Cool your heels and let’s speak in a few days time.’ That’s the road we went down.³³²

211. The host also said that, in effect, they would ‘sort of talk [their clients] out of’ self-excluding in this way.³³³ They indicated that the Management Team instructed them and other hosts to operate this way.³³⁴
212. The Commission has examples of the kinds of communications that members received from hosts. Some of these were plainly directed towards emotionally manipulating customers into spending more money for the benefit of their hosts.³³⁵
213. In summary, the job of the host is ‘to get people to come in and gamble no matter what’.³³⁶
214. An example of the lengths to which hosts would go to encourage gambling is the case of Ahmed Hasna. Mr Hasna was a black tier card holder.³³⁷ He was also addicted to gambling.³³⁸ On one occasion, Mr Hasna went to the Melbourne Casino. He had a cheque for $100,000 with him as the payee.³³⁹ Mr Hasna asked to exchange the cheque for $100,000 worth of chips. Crown Melbourne agreed to provide the chips.³⁴⁰ Mr Hasna then went to the gaming floor and lost the $100,000.³⁴¹
215. Two days later, the cheque was dishonoured.³⁴² Mr Hasna was called by his host.³⁴³ According to the host, he was directed to make the call by Mr Lawrence.³⁴⁴ Mr Hasna told the host that he was experiencing financial hardship and could not repay his debt.³⁴⁵ He said he was considering self-exclusion.³⁴⁶
216. On Mr Lawrence’s instruction, the host informed Mr Hasna that he could continue gambling at the casino—and maintain all his black card privileges—on the condition that he repay his $100,000 debt out of any future winnings.³⁴⁷ Mr Hasna agreed.³⁴⁸ In due course the debt was repaid.³⁴⁹ He then continued gambling and lost a considerable sum of money.³⁵⁰
217. Mr Lawrence was asked about these events:

     Q: You agree with me, don’t you, that the decision to let Mr Hasna come back to gamble was predatory and irresponsible?

     A: Irresponsible, yes.

     Q: You don’t accept that it is predatory?

     A: Yes, it … it is a strong word, but possibly yes.³⁵¹

218. Mr Lawrence said he did not know that Mr Hasna had informed the host that he was in financial difficulty and was contemplating self-exclusion.³⁵² He accepted, however, that he likely knew that Mr Hasna had previously self-excluded and that self-exclusion suggested that the person had problems with gambling.³⁵³
219. Asked more generally about the culture and practices at Crown Melbourne, particularly in relation to higher tier members, Mr Lawrence said that:
     • patrons are not asked about the amount of money they gamble and whether they can afford it³⁵⁴
     • hosts do not suggest self-exclusion, even where a person is in financial difficulty³⁵⁵
     • hosts and Mahogany Room staff rarely check in on the wellbeing of customers before 12 hours of continuous play³⁵⁶
     • patrons regularly gamble for more than 12, 14, 16, 18 and even 24 hours at a time.³⁵⁷
220. Mr Lawrence acknowledged that Mr Hasna’s situation was not exceptional. He said that prior to March 2021, Crown Melbourne often permitted patrons who owed debts they could not repay to gamble to pay back their debts. He agreed that this practice was irresponsible.³⁵⁸ The following exchange then took place:

     Q: And you must agree with me, mustn’t you, that that is because what is driving you, your colleagues in the Mahogany Room, is money. When you are looking at things, you are motivated by money, above all else. That’s the reality of the situation, isn’t it, Mr Lawrence?

     A: I would accept that.

     …

     Q: And the point of all this, the thrust of it, is that when left to balance the competing interests, profits or the welfare of customers in the Mahogany Room, you and your colleagues prioritise money. That is just the reality, isn’t it?

     A: Certainly revenue is an important part of what we need to achieve, but

     …

     Q: Answer my question.

     A: … (overspeaking) … yes, I agree.³⁵⁹

221. It goes without saying, but it must be said, that it is inconsistent with the practice of responsible gambling for a casino to encourage a patron to gamble in the hope that the patron can win enough to discharge their debt to the casino. Yet this is what happened with Mr Hasna. And, according to Mr Lawrence, it has happened in many other instances.³⁶⁰
222. In summary, the evidence before the Commission has made it clear that, at least to a significant extent, hosts engage in the following conduct. They:
     • proactively contact clients and entice them to come to the casino to gamble³⁶¹
     • arrange for customers to collect gifts like tickets from the casino, and invite patrons to dinners at the casino, in the hope that when the customer enters the complex they will gamble³⁶²
     • do not speak to clients about the amount of money they are gambling or whether they can afford it³⁶³
     • rarely ask customers to take a break from gambling³⁶⁴
     • continue to contact clients if they have not visited the casino for a period of time, or had decided to take a break from gambling (though according to Mr Lawrence, contact would be made after an appropriate break had been taken, to entice the customer back into the complex in the hope that they started gambling again)³⁶⁵
     • before March 2021, irresponsibly permitted customers to gamble even if they owed the casino money,³⁶⁶ with the practice only changing in response to this Commission³⁶⁷
     • do not suggest that customers should self-exclude, and perhaps even discourage self-exclusion.³⁶⁸

The misuse of gambling products

223. Mr Mackay was asked about the use of picks and similar devices to depress the ‘play’ buttons on EGMs, and about customers gambling on more than one EGM at a time.
224. On the first issue, it is important to understand that restricted EGMs are designed to require a player to press ‘play’ for each game. To be clear, the use of picks allows players to depress the play button without having to manually interact with the machine.³⁶⁹
225. Mr Mackay acknowledged that customers sometimes used picks and similar devices for this purpose.³⁷⁰ He agreed this was an issue that Crown Melbourne had known about for some time.³⁷¹ He agreed that ‘if one were to prioritise the welfare of Victorians, [Crown Melbourne] wouldn’t have a practice that allowed people to have picks and other devices that depressed the play button’.³⁷²
226. As it turned out, prior to February 2018, Crown Melbourne issued Crown-branded picks to allow patrons to simulate ‘autoplay’. When the use became public knowledge, staff were instructed to confiscate Crown-branded picks if they observed them being used. However, according to Mr Mackay, where players used picks or similar devices that did not carry a Crown brand, the players were discouraged from using them but were not stopped from playing in that way, and the use of these devices continues.³⁷³
227. While Mr Mackay did not accept the proposition, it appears that preventing the use of only Crown-branded picks indicates that Crown Melbourne is concerned with the reputational damage rather than preventing the harms caused by the use of those devices.³⁷⁴
228. Under the current gaming rules, in certain circumstances a customer can play on up to three EGMs at a time.³⁷⁵ That is something that must change.
229. Mr Mackay agreed that if Crown Melbourne were to prioritise the welfare of Victorians, it would not allow play on multiple EGMs to occur.³⁷⁶ He also acknowledged that the use of multiple EGMs was a practice that Crown Melbourne had known about for at least a few years.³⁷⁷
230. Mr Mackay said that in January or February 2021, ‘with the pending update of the casino rules’, a direction was issued requiring staff on the main gaming floor to request customers to stop playing multiple machines.³⁷⁸ The practice is still allowed in the premium Teak and Mahogany Rooms.³⁷⁹
231. At the conclusion of his evidence, Mr Mackay accepted that Crown Melbourne could have done more over the years to foster RSG and minimise gambling harms.³⁸⁰ He could hardly have done otherwise.

Supervision of at-risk customers

232. Ms Bauer estimated that in 2016 there were 1,470 interactions recorded in the Register that may indicate problem gambling behaviours, in 2017 there were 1,603, in 2018 there were 2,125, and in 2019 there were 3,366. Many of those interactions likely relate to multiple attendances on the same person.³⁸¹
233. As was noted earlier, in the 2019 financial year problem gamblers were found to constitute approximately 0.7 per cent of the Victorian adult population.³⁸² They were found to constitute approximately 1.1 per cent of the Victorian adult population who gambled.³⁸³ There is a wider cohort who are at risk of becoming problem gamblers (‘moderate' and ‘low-risk’ gamblers), and a still wider cohort who may suffer gambling harms despite not being problem, moderate or even low-risk gamblers.³⁸⁴
234. It was also noted earlier that people gambling at the Melbourne Casino may be more likely to suffer gambling harms than they would at any other venue.³⁸⁵ In 2018–19, 25 per cent of people who gambled at the Melbourne Casino experienced some type of gambling-related harm. The prevalence of people who experience problem gambling at the Melbourne Casino may be three times higher when compared to all Victorian adults who gamble.³⁸⁶
235. Assume that there are 12,000 to 14,000 unique visitors each day at the Melbourne Casino:³⁸⁷
     • If 1.1 per cent of this group are problem gamblers,³⁸⁸ then on an average day there may be 132 to 154 problem gamblers at the Melbourne Casino and a larger number who are moderate or low-risk gamblers.
     • If 3.3 per cent of this group are problem gamblers (that is, three times the prevalence compared to all Victorian adults who gamble), then on an average day there may be 396 to 462 problem gamblers at the Melbourne Casino and a larger number who are moderate or low-risk gamblers.
     • If 25 per cent of this group experience gambling harm,³⁸⁹ that would be an average of 3,000 to 3,500 people per day who experience such harm.
236. Yet the Register shows that on an average day in 2016 there were only about four interactions relating to behaviours that may be indicative of problem gambling (some of which may have related to the same person).³⁹⁰ That increased to about nine interactions per day by 2019.³⁹¹
237. On any view, a large number of customers engaging in problem or risky gambling are escaping attention.³⁹²
238. Ms Bauer’s written statement to the Commission also included the complete set of interactions relating to referrals to the RGC that were recorded in the Register (not just those Ms Bauer identified as possibly indicative of problem gambling behaviours) for the last five calendar years.³⁹³ The tables show, for example, that there were 4,372 such referrals in 2016, 4,816 in 2017, 12,206 in 2018 and 18,259 in 2019.³⁹⁴
239. Included in these numbers are categories of interaction only tangentially related to problem gamblers or the minimisation of gambling harm. For example, an interaction may be the report of a missing person.³⁹⁵ Further, as is noted above, many of the interactions relate to multiple attendances on the same person.³⁹⁶

Self-exclusion

240. Crown Melbourne’s Self-Exclusion Program is available to customers wanting to voluntarily ban themselves from gaming areas.³⁹⁷ A request to self-exclude is viewed as a ‘very strong’ Observable Sign and staff who are approached by customers wishing to self-exclude are required by the Gambling Code to refer the customer ‘as soon as practicable’ to the RGC.³⁹⁸
241. An RGA then conducts an interview with the customer to provide information about self-exclusion, its implications and the process for revoking a self-exclusion order.³⁹⁹ Customers can choose a self-exclusion period of one, two or three years.⁴⁰⁰ The exclusion remains in place until an application for revocation is made.⁴⁰¹ A customer cannot apply for revocation prior to the end of their chosen period.⁴⁰²
242. Upon self-exclusion, the customer loses all their Crown Rewards loyalty points.⁴⁰³ If they breach, or attempt to breach, a self-exclusion order, an RGA is called and manages the incident.⁴⁰⁴
243. In July 2016, Crown Melbourne introduced an online self-exclusion process. This has received only a very minimal response.⁴⁰⁵
244. Several submissions received by the Commission state that customers who have self-excluded continue to enter the casino with no staff intervention.⁴⁰⁶
245. One reason is likely to be that there is an insufficient number of RGAs.⁴⁰⁷
246. Another is the slow deployment of facial recognition technology, which is a valuable tool to detect the presence of self-excluded customers.⁴⁰⁸ Mr Craig Walsh, Executive Director, Security and Surveillance, gave this evidence:

     Q: Do you now regret not prioritising or at least making facial recognition technology occur sooner in the roll-out program than it did?

     A: My wishes would have been to roll out facial recognition in 2012/13.

     Q: You wanted to do it in 2012 and 2013?

     A: I did.

     Q: The business wouldn’t spend the money on it?

     A: That’s correct.⁴⁰⁹

247. Despite that evidence, Crown Melbourne says that it is unfair to suggest there was a ‘delay’ in the rollout of the technology.⁴¹⁰ It says that the only delay was in the creation of the technology.⁴¹¹
248. Whatever the true position, two points are clear. First, only now is Crown Melbourne completing its transition to a full digital facial recognition system.⁴¹² Second, the time it has taken to roll out the technology is regrettable. Had the technology been in place earlier, fewer excluded persons would have gained access to the casino floor,⁴¹³ and that may have resulted in less harm being caused.

Crown’s marketing activities

249. Crown Melbourne’s marketing activities are a key part of its operations. Mr Emery explained that the marketing activities can be classified into groups:
     • Promotional events, activities and associated customer communications led by Crown Melbourne’s Marketing Team. Crown Melbourne orchestrates more than 200 promotions in a given year, ranging from direct-to-member offers to promotions offered to higher tier or general Crown Melbourne members, to red carpet and bingo campaigns.⁴¹⁴ There are also events such as sporting competitions, galas and prize draws.⁴¹⁵
     • The operation of the Crown Rewards loyalty program. In addition to its basic membership, Crown Melbourne has silver, gold, platinum and black tiers.⁴¹⁶ Membership in these tiers is determined by ‘status credits’ that are based on the amount of money and time a given player spends gambling.⁴¹⁷
     • Benefits and enticements offered directly to customers by Crown Melbourne’s gaming business units. These take many forms, including prizes, rebates, credits, tournaments and complimentary items or benefits such as food, beverages, accommodation, transport, tickets and free parking.⁴¹⁸
250. Mr Emery said that some promotions and benefits are aimed at enticing members to increase their level of spending.⁴¹⁹ For example, to be eligible for a cash prize, a person may need to spend a certain amount in a given period, and the promotion may be open to members for whom that amount would represent a significant increase in their spending.⁴²⁰ Equally, members may be incentivised to increase their spending by the promise of attaining a higher membership tier.⁴²¹
251. The following preliminary matters are of note with regard to marketing at Crown Melbourne.
252. First, promotions are designed to draw people into the casino so they will gamble.⁴²² If marketing entices customers to gamble more frequently, and to gamble larger amounts, that is a successful outcome.⁴²³ Crown evaluates the success of a promotion predominantly on whether it drives visitation and whether or not participants in the promotion spent money while at the casino.⁴²⁴ All of that is unsurprising—the higher the gambling turnover, the higher Crown’s profits would be.⁴²⁵
253. Second, the consequences of marketing promotions can be devastating for Victorians. For example, a black tier member came to the casino to collect ‘free’ Phil Collins tickets, and lost $30,000 gambling.⁴²⁶ Nonetheless, Mr Emery accepted that was a ‘good outcome’ from a marketing perspective.⁴²⁷
254. Third, before Crown Melbourne invites members to participate in promotions, it does not consider whether they can afford to participate in the promotion,⁴²⁸ nor does it consider any player data analytics relevant to RSG (other than ‘stop codes’—codes applied to individuals subject to self-exclusion, Time Out or Withdrawal of Licence).⁴²⁹ Crown Melbourne only considers loyalty status data to ensure that its high-value customers receive the high-value offers.⁴³⁰
255. Fourth, Crown Melbourne has structured its loyalty program so it rewards higher-turnover customers, meaning problem gamblers are more likely to benefit from the program as compared to people who gamble in a safe manner.⁴³¹
256. On the other hand, Crown Melbourne allows customers to opt out of receiving marketing material.⁴³² Further, Crown Melbourne does not send marketing material to those loyalty program members with stop codes on their accounts.⁴³³ Mr Emery accepted that the number of persons with RSG-related stop codes is small, meaning this measure is inadequate.⁴³⁴

The Red Carpet Program

257. Some promotions targeted potentially vulnerable or financially constrained people. Several witnesses gave evidence about Crown Melbourne’s recently discontinued Red Carpet Program (previously known as the Bus Program).⁴³⁵ This program, which had been in operation since the 1990s,⁴³⁶ was directed towards older people who were members of community organisations, including members of CALD communities.⁴³⁷
258. Participants were bussed to the Melbourne Casino.⁴³⁸ The cost was subsidised by Crown Melbourne. Prior to April 2018, in order for their community organisation to qualify for the subsidy, participants were required to stay for between four and six hours.⁴³⁹ They were offered a free musical performance and a buffet lunch.⁴⁴⁰ They were given other benefits, such as a parking voucher for a future visit, meal vouchers and vouchers for discounts at select outlets within the Melbourne Casino Complex.⁴⁴¹ In their time at the casino many participants gambled, particularly playing EGMs.
259. Professor Linda Hancock, an experienced gambling researcher and former Chair of the Victorian Gambling Research Panel, filed a submission with the Commission dealing with the vulnerability of older adults to gambling disorders. Professor Hancock identified various factors that may contribute to that vulnerability, ranging from age-related cognitive conditions, fixed incomes and social isolation. Women over 60 years of age were identified as a particular at-risk group, as were CALD groups.⁴⁴²
260. Professor Hancock referred to a 2010 survey of Red Carpet Program participants by North East Primary Care Partnership, a metropolitan health service. The survey found that over 42 per cent of participants spent more than they had planned gambling at the casino and almost a quarter planned to return to win back their losses.⁴⁴³
261. The VCGLR discussed the Red Carpet Program with the Ethnic Community Council of Victoria in 2017. A note of the meeting records the attendees’ concerns that participants in the Red Carpet Program were overspending, many to the extent that they did not have enough money to purchase their medication.⁴⁴⁴
262. In May 2021, Crown Melbourne decided that the Red Carpet Program would be discontinued because it was inconsistent with its RSG obligations.⁴⁴⁵ This is a welcome decision. It should have been made years earlier.

Bingo at Crown Melbourne

263. The Red Carpet Program is just one example of how Crown Melbourne’s marketing activities have the potential to cause harm to vulnerable people.
264. Crown Melbourne conducted a Bingo Program until May 2021.⁴⁴⁶ Dr Sarah MacLean (an Associate Professor at La Trobe University) and colleagues conducted research into the program.⁴⁴⁷ According to their work, playing bingo was free, but players were required to become Crown loyalty program members.⁴⁴⁸ They were given vouchers for table games and EGMs and thereafter received Crown Melbourne promotional material by email.⁴⁴⁹ Three bingo sessions were held at two to three-hour intervals during the day. People spoken to by Dr MacLean and her colleagues attended more than one session. Each session lasted for around 30 minutes, allowing participants to remain at the casino between sessions.⁴⁵⁰
265. Dr MacLean and her colleagues observed that after the bingo game, most of the participants went directly to the gaming floor.⁴⁵¹ They formed the view that: ‘[t]he provision of Bingo at Crown Melbourne is designed to draw people into the venue with the expectation that a significant proportion of visitors will then use other forms of gambling including EGMs’.⁴⁵²
266. Dr MacLean and her colleagues spoke to a number of participants. For some it was a ‘pleasant and affordable experience’.⁴⁵³ Others were exposed to significant gambling harms.⁴⁵⁴ One participant described a friend who was unable to resist gambling on EGMs after attending bingo sessions and suffered significant financial and psychological harms.⁴⁵⁵
267. In May 2021, Crown Melbourne decided that the Bingo Program would be discontinued.⁴⁵⁶

Other concerns raised by community organisations

268. Ms Manorani Guy is the President of the Victorian Working Group on International Student Employability (VicWISE), which provides pastoral care and employment pathways to international students. Ms Guy gave evidence that international students may be unfamiliar with casinos, and so may be especially vulnerable to enticements such as ‘attractive giveaways, free parking, free meals, access to high roller rooms and being treated like a celebrity’.⁴⁵⁷
269. Gambling counsellors working with certain CALD communities gave evidence indicating that members of such communities are susceptible to a range of gambling harms, including mental illness, relationship breakdowns and family violence, and face difficulties effectively self-excluding from Crown Melbourne.⁴⁵⁸

Supporting research into gambling harm

270. There is evidence indicating that Crown Melbourne has been reluctant to support research and evaluation of gambling harms or to supply data to those investigating those harms.⁴⁵⁹ The Commission heard from researchers who considered that Crown Melbourne was resistant to providing data for research purposes.⁴⁶⁰
271. Mr Shane Lucas, the CEO of the VRGF, voiced those concerns, though he conceded that the VRGF had not, in recent times, sought any data from Crown Melbourne. Mr Lucas suggested that it not having done so reflected ‘an understanding in the research community’ that the response ‘might simply be negative’, or that Crown Melbourne would ‘seek to exercise a degree of control over the ultimate outcomes of the research that you did based on the data’.⁴⁶¹
272. Whatever may have been the position in the past, Crown Melbourne has indicated that it is now amenable to providing information and assistance to enable independent research to be undertaken into problem gambling and gambling harms.⁴⁶²

Recent initiatives by Crown

273. There are two recent RSG initiatives that should be noted.

Crown’s Responsible Service of Gaming Advisory Panel

274. As has been observed, in 2019 Crown Resorts established a RGAP, and in August 2020 the RGAP prepared a ‘Review of Crown Resort’s Responsible Gaming Programs and Services’.⁴⁶³ The review made 17 recommendations. In brief, they included:
     • changes to staff training programs and staff roles
     • the expansion of the RGC to facilitate confidential and sensitive interaction with customers requesting assistance
     • sharing and promoting information about self-exclusion and third party exclusion programs and the provision of additional support services to self-excluded persons
     • procedures for self-exclusion, revocation and reinstatement
     • evaluation of the facial recognition technology to enhance detection of possible breaches by self-excluded individuals
     • changes to the Crown Model.⁴⁶⁴
275. Some of the recommendations have been implemented; others are in progress. Crown must be commended for the creation of the RGAP and its work.⁴⁶⁵

RSG enhancements

276. As has been briefly mentioned, in May 2021 Crown Resorts approved a series of RSG enhancements. These involved:
     • the employment of a new ‘Manager RG’, ‘RG Administration Officer’, four new ‘RGAs’ and a part time ‘RG Psychologist (Research)’ at Crown Melbourne
     • the recruitment of additional RGAs with priority given to those from CALD backgrounds, including language skills that are underrepresented in the staff profile but overrepresented in persons experiencing harm from gambling
     • increased remuneration for RSG staff
     • new play period time limits for domestic players (12 hours in a 24-hour period, with ‘observation/intervention’ at eight and 10 hours) and for international premium program players
     • support for a statewide exclusion register
     • the permanent cessation of the Red Carpet Program and of Bingo for Crown’s loyalty program members
     • subject to the direction of the Victorian Government, an intention to move to cashless gaming
     • controls to ensure that direct-to-member offers do not require customers to exceed historical behaviours (spend or visit frequency) in order to get their first benefit
     • replacing gaming vouchers received on sign up to Crown Rewards with a non-gaming/promotional voucher
     • undertaking research into whether any aspects of the Crown Rewards loyalty program are causing harm and what measures can be put in place to control that risk
     • considering RSG implications of all future employee incentives.⁴⁶⁶
277. It is appropriate to make some comments regarding how these enhancements came about.
278. First, and as already observed in this chapter, most of the enhancements were developed urgently,⁴⁶⁷ between 18 and 24 May 2021. The urgency was driven by the directors, who wanted to ensure that Crown Melbourne had something positive in its statement to the Commission.⁴⁶⁸
279. Mr Blackburn explained the matter:

     A: So I met with three members of the Board [on] … the morning of 18 May, to present to them in advance to brief them on the papers I was bringing to the board … And the RG enhancement paper at that stage included only reference to capacity and remuneration …

     …

     … one of the board members said … are there other things we can change to help uplift our program, and I said I would take that away and discuss it with Sonja [Bauer].

     Q: Understand. But you agree with me that somewhere along the line, part of these enhancements were about positioning Crown for the purposes of this Commission?

     A: That wasn’t my goal but I agree it may have been part of the broader goal.

     Q: Part of the broader goal of the directors and the way Ms Bauer has interpreted things?

     A: Yes. Absolutely.⁴⁶⁹

280. Second, and again as earlier observed, the person who proposed the ‘enhancements’, Mr Blackburn, had no experience, training or expertise in RSG.⁴⁷⁰ To reiterate, that is not a criticism of Mr Blackburn. He only took up his position at Crown Resorts on 24 February 2021, two days after this Commission was announced.⁴⁷¹ He was retained for his expertise in financial crime, not to assist in developing and monitoring RSG at the casino.⁴⁷² He was given the role of head of RSG following the departure of the former Chief Legal Officer.⁴⁷³
281. Third, the enhancements are actions that, at a minimum, Crown Melbourne should already have been undertaking. As Mr Blackburn put it, they are common sense changes. They are not a comprehensive set of reforms.⁴⁷⁴
282. Finally, the VCGLR noted in the Sixth Review that changes in Crown Melbourne’s responsible gambling practice have largely been driven by regulatory and other external pressures.⁴⁷⁵ The development of the enhancements on the fly, in response to the Commission, demonstrates that the position identified by the VCGLR remains true.
283. Notwithstanding those observations, the evidence of Mr Blackburn and others indicates the proposals are a well-intentioned effort to address deficiencies obvious in Crown Melbourne’s approach to RSG.⁴⁷⁶
284. Turning to the enhancements, it is appropriate to make some observations about each of them.

The marketing controls and sign-up benefits

285. The ‘controls’ with respect to direct-to-member offers are informal assurances from Crown Melbourne’s Marketing Team that direct-to-member offers will henceforth be designed in a particular way.⁴⁷⁷
286. Direct-to-member offers constitute only one of many forms that promotions may take. In addition to direct-to-member offers there are ‘cross-complex campaigns’, which are promotions open to members and sometimes non-members across the main floor and gaming rooms; promotions open to all members, specific tiers of members and specific cohorts of members, including promotions run from the main gaming floor and in members-only rooms; member jackpots; poker tournaments and so on.⁴⁷⁸ The proposed reform applies only to one form of offer.
287. Further, within direct-to-member offers the proposed reform will apply only to ‘first benefits’. A direct-to-member offer may, however, be structured so that a customer is eligible for additional benefits beyond the ‘first benefit’. For example, it may be that if a customer comes to the casino in accordance with an offer made to them they receive a benefit (their ‘first benefit’), such as a voucher; and if they come again, they receive a further benefit.⁴⁷⁹
288. Equally, the replacement of gaming vouchers on signing up with non-gaming or promotional vouchers may make very little difference if, in either case, a person is incentivised by the non-gaming or promotional vouchers to spend more time and money gambling at the casino.

Researching the link between problem gambling and loyalty programs

289. Crown Melbourne appears to envisage conducting or commissioning research to determine whether there is a causal relationship between Crown Melbourne’s loyalty program and problem gambling. Crown Melbourne has not, to date, taken any such steps.⁴⁸⁰
290. The following matters are important.
291. First, in a supplementary statement to the Commission, Ms Billi referred to research that demonstrated that loyalty programs can be effective in attracting gamblers and facilitating gambling.⁴⁸¹ The research suggests that loyalty programs may harm vulnerable individuals by providing rewards to frequent gamblers, so as to link positive reinforcement to the amount of money gambled rather than the outcome of gambling sessions (for example, wins or losses). Broader research also indicated that the desire to engage in an activity, including gambling, increases with proximity to a reward.⁴⁸²
292. Ms Billi noted research that had concluded that loyalty programs in the gambling industry ‘may be antithetical to harm minimization strategies’.⁴⁸³ Ms Billi acknowledged, however, that further research was required to determine whether there is a definitive causal link between loyalty programs and problem gambling.⁴⁸⁴ Nevertheless, she said that people with gambling problems are overrepresented among loyalty program members.⁴⁸⁵ There is evidence, for example, that loyalty program points and rewards are linked to an increased urge to gamble beyond pre-planned limits;⁴⁸⁶ and that incentives provided by gambling venues may increase the amount wagered by gamblers and particularly problem gamblers.⁴⁸⁷ The research also indicated that people with gambling problems perceived that promotions and rewards offered by venues increased their gambling and distorted their perception of their gambling.⁴⁸⁸
293. Second, there are reasons why immediate action on this issue is warranted:
     • There is evidence that people who are vulnerable to, or experience, gambling harms are overrepresented in loyalty programs.⁴⁸⁹
     • It is inherently likely that a membership program that requires people to maintain or increase the amount of time and money they spend at a casino, and offers them enticements and incentives to do so, has the potential to cause harm.
294. Third, while the research enhancement proposed by Crown is in principle a good initiative, one matter of concern should be mentioned. Crown was asked to respond to the following question: ‘What research (if any) has been undertaken by Crown Melbourne or Crown Resorts to ascertain the effect the loyalty program has on problem gambling?’. Mr Emery provided the response. He said:

     To the best of my knowledge the business has not undertaken any research into the effect the Crown Rewards program has on problem gambling. The responsible gaming team do however keep abreast of academic research into problem gambling and this also includes academic research on the above topic.⁴⁹⁰

295. When asked about that answer, Mr Emery gave the following evidence:

     Q: If the casino was serious about undertaking research about the link between loyalty programs and problem gambling, it would have been mentioned in paragraph 85 of your statement?

     A: Yes, correct.⁴⁹¹

296. There is a risk that the need for further research could be used to justify continued inaction.

Remuneration

297. The proposal that employee incentives consider RSG implications is far from concrete. Merely considering the matter does not tether Crown Melbourne to a particular approach.
298. There is a further concern. Presently, Crown Melbourne hosts receive a bonus that is based, at least in part, on customer visitation.⁴⁹² It is safe to infer a relationship between turnover and visitation.
299. It appears this will not change. In a paper dated 19 May 2021, prepared by the General Managers, Responsible Gaming of Crown Perth, Crown Sydney and Crown Melbourne, the following recommendation was made:

     5. Elimination of Gaming Host Turnover-based Commission/Bonus Rewards.
        In whatever form there may still exist bonus payment incentives among Crown management/staff to encourage from our customers, higher stakes and/or longer play periods, these must cease.⁴⁹³

300. A proposal in that form was not put to the Crown Resorts board or approved as part of the responsible service of gaming enhancements.⁴⁹⁴

Play periods

301. The development of the play periods enhancements raises concerns about the RSG Team. The RSG Team told Mr Blackburn that a 12-hour play period was reasonable.⁴⁹⁵ There is, of course, no research or academic learning suggesting that a 12-hour play period is reasonable. The following exchange between Mr Blackburn and the Commission took place:

     Q: If the 12 hours is absurdly wrong, what does that tell you about your team who were pushing it? They say 12 hours is fine. Let’s say they are wrong … but what would it tell you about the team you have if 12 hours is absurd?

     A: That I need to revisit my team.

     Q: Yes. And what does that mean. When you use the word ‘revisit’, what do you mean by the word ‘revisit’?

     A: I need to understand the expertise they apply in reaching conclusions of that nature. I need to apply judgment to it.⁴⁹⁶

Cashless gambling

302. While the move to cashless gambling is to be encouraged—both as an AML measure (see Chapter 6) and because play periods can be more effectively monitored through carded play—it must be developed and seen through a gambling harm reduction lens. Concerns include the frictionless nature of transactions, where there is less likelihood of time for reflection; and it being potentially difficult for people to track their spending during gambling.⁴⁹⁷

Observations on the recent initiatives

303. Many of the concerns voiced in this chapter were previously raised with Crown Melbourne by the VCGLR. In its Sixth Review, the VCGLR noted that Crown Melbourne’s approach to responsible gaming was ‘essentially unchanged’ since its Fifth Review five years earlier.⁴⁹⁸ Its Report noted:
     • Crown Melbourne’s RGC had no ‘quantified key performance measures’, and outcomes for patrons who interact with the RGC were not systematically measured.⁴⁹⁹
     • Poor use was made of Crown Melbourne’s internally available data, in contrast to its use of data to measure the effectiveness of its responsible service of alcohol practices.⁵⁰⁰
     • RSG staffing levels were inadequate and there was inadequate engagement with people who may be experiencing gambling harms.⁵⁰¹
     • Crown Melbourne’s RSG strategy relies almost exclusively on Observable Signs and people self-identifying as having gambling problems.⁵⁰²
     • Crown Melbourne’s reliance on the wider body of staff to discern Observable Signs was limited by the fact that those staff are busy with their core duties.⁵⁰³
     • The amount of time patrons were left unattended before staff intervention as mandated by the Play Periods Policy was not conducive to responsible lengths of play for local players.⁵⁰⁴
     • Crown Melbourne’s use of player data analytics to support interventions was still in a trial phase five years after being recommended as part of the Fifth Review and 10 years after first being raised with Crown Melbourne.⁵⁰⁵
     • ‘Where there has been change in responsible gambling practice, this has largely been driven by regulatory and other external pressure …’.⁵⁰⁶
304. Notwithstanding the above, and in fairness to Crown Melbourne, the Sixth Review made several RSG recommendations, all of which the regulator concluded were satisfactorily implemented (save for those recommendations that have not yet fallen due).⁵⁰⁷
305. It must also be acknowledged that Mr Blackburn genuinely intends to further reform Crown’s RSG program.⁵⁰⁸

Conclusion

306. The problems raised in this chapter are not easily repaired. They reflect a flawed organisational structure, a dysfunctional culture, failures of leadership and an unfavourable regulatory regime.
307. There are four areas where, based on current learning, steps can be taken to reduce gambling harms.

Carded play

308. As has been shown, it is nearly impossible to monitor uncarded players at the Melbourne Casino. For that reason, it is appropriate that all customers should use a player card for all forms of gambling at the Melbourne Casino. A recommendation to that effect has been made in Chapter 6.
309. To enable proper research into problem gambling, it is important that the player card also be used to collect data.

Pre-commitment and time limits

310. An important step is to control gambling on EGMs, which is a form of gambling that causes more harm than others.
311. Pre-commitment is an obvious area of reform. If a full, mandatory, binding, pre-commitment system is implemented, that will significantly reduce the incidence of problem gambling.
312. The State has explained that there are practical difficulties that stand in the way of an immediate implementation of this system. Nonetheless, when these practical difficulties can be overcome such a system should be introduced.⁵⁰⁹

Gambling Code

313. Another area where reform is desirable is the content of the Gambling Code for casinos.
314. The contents of a Gambling Code are set by a Ministerial Direction made under section 10.6.6 of the Gambling Regulation Act.
315. Currently there are two Ministerial Directions in force, one for casinos and other gambling licensees (made on 17 September 2018) and the other for EGM venue operators (pubs and clubs) (made on 21 February 2020).⁵¹⁰
316. There are material differences between the two Ministerial Directions. The differences are set out in the following table.

317. It is accepted that there are differences in the operating environment of a casino on the one hand and a local pub or club on the other. This may account for some of the differences in the treatment of casino operators and EGM venue operators. But it does not account for all. Some requirements, appropriately amended, should apply to the casino operator. There are distinct risks that arise from the nature and scale of the Melbourne Casino that should be reflected and addressed in its Gambling Code.

318. It is appropriate to remind Crown Melbourne that its Gambling Code should be written in plain and unambiguous language. Its current Gambling Code does not satisfy that description as is evident from the discussion about the meaning of some of the Observable Signs.

Access to data

319. The final point is access to data. It is generally accepted that data collected by Crown Melbourne and other gaming venues should be made available to researchers.⁵¹¹ This will enable serious research into the causes of problem gambling and gambling harms.

Casino tax

Introduction

1. Crown Melbourne, as the casino operator, is obliged to pay a casino tax and other moneys to the State. The obligations are not imposed by the Casino Control Act.¹ Rather, they are found in the Management Agreement made between Crown Melbourne (then known as Crown Casino) and the State on 20 September 1993.²
2. The Management Agreement was ratified by the Parliament by passage of the Management Agreement Act. That Act provides that the Management Agreement ‘takes effect as if it had been enacted in [the] Act’.³ That is to say, the agreement has the force of a statutory enactment.
3. The Management Agreement has been amended by 10 Deeds of Variation. Each deed has also been ratified by an Act of Parliament.⁴
4. This chapter describes the amounts Crown Melbourne is required to pay to the State under the Management Agreement, with particular emphasis on the casino tax.

Casino tax

5. The Management Agreement in its original form provided that Crown Melbourne was to make the following payments to the State:
   • a Premium Payment ($10 million) and a further payment of $190 million, in consideration for the grant of the casino licence⁵
   • a Casino Supervision and Control Charge ($5 million) to be paid each financial year from 30 June 1994 until 30 June 1997, in respect of the regulator’s expenses of supervising the establishment of the temporary casino and the Melbourne Casino⁶
   • an additional casino tax of $2,400,000 each month from 1 July 1994 until 30 June 1996 (in aggregate $57,600,000)⁷
   • for each month until 30 June 1997, 20 per cent of the GGR for that month and from 1 July 1997, 21.25 per cent of the GGR for each month⁸
   • a community benefit levy of 1 per cent of the GGR each month⁹
   • an additional casino tax calculated by reference to the amount by which the GGR exceeds what is called the Base Amount.¹⁰
6. ‘Gross Gaming Revenue’ was defined as:

   the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) less the total of all sums paid out as winnings during that period in respect of such conduct or playing of games.¹¹

7. The payment obligations have changed over time. It is not necessary to describe each change. Reference will only be made to those changes that relate to Crown Melbourne’s obligation to pay casino tax.

Second Variation

8. The Management Agreement was varied by the Second Variation Deed made on 12 October 1995. This variation amended Crown Melbourne’s obligations in relation to the construction of the southern tower of the hotel that was originally required to be completed as part of the original Melbourne Casino Complex. The variation imposed an obligation on Crown Melbourne in respect of revenue from Commission Based Players.
9. A ‘Commission Based Player’ is a player who participates in a premium player arrangement or a junket.¹²
10. The variation also imposed obligations on Crown Melbourne:
    • to pay a casino tax of 9 per cent of the Commission Based Players’ Gaming Revenue (CBPGR) each month¹³
    • to pay a community benefit levy of 1 per cent of the CBPGR each month¹⁴
    • if the casino tax on the CBPGR and the community benefit levy for the year commencing on 1 January 1996, or the six-month period commencing on 1 January 1997, was less than $5 million, to pay an additional casino tax to bring the amount paid up to $5 million¹⁵
    • if the casino tax on the CBPGR and the community benefit levy for any financial year commencing on or after 1 July 1997 was less than $10 million, to pay an additional casino tax to bring the amount paid up to $10 million¹⁶
    • to pay an additional casino tax if the CBPGR exceeded the Commission Based Players’ Base Amount¹⁷
    • to pay as an additional tax a monthly guaranteed minimum base tax of $2.8 million from 1 January 1996 and ending 31 December 1998¹⁸
    • to pay $5 million to Tourism Victoria in five equal annual payments of $1,000,000.¹⁹
11. There was also an obligation to pay interest for any unpaid amounts under clause 22 (tax on GGR and other payments), clause 22A (tax on CBPGR) or clause 22B (guaranteed minimum base tax).²⁰ Interest is at the rate set under the Penalty Interest Rates Act 1983 (Vic).²¹
12. ‘Commission Based Players’ Gaming Revenue’ was defined as:

    the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period after 31 December 1995 by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) by Commission Based Players less the total of all sums paid out as winnings during that period to Commission Based Players in respect of such conduct or playing games.²²

13. In addition, the definition of ‘Gross Gaming Revenue’ was varied by including the words ‘but excluding any Commission Based Players’ Gaming Revenue’ at the end of the definition.²³

Sixth Variation

14. In June 1999, the Commonwealth, States and Territories entered into the Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations. That agreement requires each State or Territory to adjust their gambling tax arrangements to take account of the GST on gambling operations.²⁴
15. The Intergovernmental Agreement was given effect by the Sixth Variation Deed to the Management Agreement made on 3 April 2000. By that variation, the total amount of casino tax payable under clauses 22 and 22A was reduced by the State Tax Credit, being an amount equivalent to the amount determined under division 126 of the GST legislation.²⁵

Ninth Variation

16. The Ninth Variation Deed was made on 4 June 2009. It made a number of changes to the rate of casino tax payable to the State:
    • The rate of casino tax payable from 1 July 1997 until the day before the commencement of the Ninth Variation Deed was set at 21.25 per cent of the GGR for the relevant month.²⁶
    • From the commencement of the Ninth Variation Deed the casino tax became:
      • 21.25 per cent of the GGR attributable to the operation of Table Games; plus
      • 22.97 per cent of the GGR attributable to the operation of gaming machines.²⁷
    • The casino tax on the GGR attributable to the operation of gaming machines was to increase by 1.72 per cent on 1 July 2010 and each year thereafter with the final increase to be in the year commencing 1 July 2014.²⁸

Tenth Variation

17. The Tenth Variation Deed was made on 3 September 2014. By that time Crown Casino had changed its name to Crown Melbourne Ltd and the VCGLR had become the casino regulator.
18. The Tenth Variation Deed led to several important changes. First, the deed recorded that the Casino Control Act would be amended to permit an increase in the maximum number of gaming machines (from 2,500 to 2,628) that could be located at the Melbourne Casino.²⁹ Second, it was agreed that the term of the casino licence would be extended by 17 years until 18 November 2050.³⁰ Third, it was noted that the casino licence would be amended to increase the maximum number of gaming tables for playing Table Games (from 400 to 440) and to increase the number of stations connected to FATGs (from 200 to 250) at the Melbourne Casino.³¹
19. In return, Crown Melbourne agreed to make the following further payments to the State:
    • $250 million within seven days³²
    • $250 million on 1 July 2033³³
    • if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4 per cent, a payment of $100 million, on 1 September 2022³⁴
    • if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4.7 per cent, an additional $100 million, on 1 September 2022³⁵
    • if the casino tax paid to the State in respect of GGR and CBPGR from New Gaming Product in any year from 1 July 2015 to 30 June 2021 is less than $35 million, an additional casino tax to bring the amount paid up to $35 million.³⁶
20. Three new definitions were introduced:

    Normalised Gaming Revenue means Gross Gaming Revenue, plus Normalised Revenue from Commission Based Play.³⁷
    
    Normalised Revenue from Commission Based Play means the total turnover from Commission Based Players, multiplied by 1.35%.³⁸
    
    New Gaming Product means the new gaming products permitted to be installed as a consequence of the amendments to the Casino Licence referred to in clause 2.2(b) of the Tenth Deed of Variation and does not include any gaming product installed at the Melbourne Casino as at the Tenth Variation Commencement Date.³⁹

21. There was also an obligation to pay interest for any unpaid amounts under clause 21A (the two payments of $250 million) and the casino tax payable under clause 21B (the uplifts if the rate of growth of the Normalised Gaming Revenue exceeded 4 per cent and 4.7 per cent, respectively, in the relevant years).⁴⁰ Interest is at the rate set under the Penalty Interest Rates Act.⁴¹

Conclusion

22. Crown Melbourne has acknowledged that since at least 2012 it has been underpaying casino tax owed to the State.
23. In July 2021, Crown Melbourne paid approximately $61.5 million to the State on account of unpaid casino tax (including penalty interest).⁴²
24. There is an unresolved question as to whether the underpayment of casino tax was far greater. The details of that issue are dealt with in the next chapter.

Unpaid casino tax

Introduction

1. Crown Melbourne is required to pay casino tax to the State. The amount of tax is a percentage of GGR and a percentage of CBPGR, each then adjusted for GST. There is also an uplift (called super tax) if the GGR or CBPGR exceeds a certain amount.
2. GGR is defined to mean:

   the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) less the total of all sums paid out as winnings during that period in respect of such conduct or playing of games but excluding any Commission Based Players’ Gaming Revenue.¹

3. CBPGR has an equivalent meaning but is confined to revenue received from Commission Based Players. These are players who participate in premium player arrangements or junkets.²
4. Stripped down to their essential elements, both GGR and CBPGR are the difference between ‘sums … received … from playing games’ and ‘sums paid out as winnings’. The underpayment of casino tax has engaged each element.
5. To understand the issues raised, it is necessary to explain some background matters regarding Crown Melbourne’s operations, including its loyalty program.

The loyalty program

6. Members of Crown’s loyalty program, Crown Rewards, receive various benefits and privileges.
7. Members accrue Crown Rewards points based on the amount they gamble at Crown Melbourne and how much they spend at Crown Melbourne participating hotels, and retail and food and beverage outlets, such as restaurants and clubs.³
8. Crown Rewards points can be exchanged for goods or services from many outlets at the Melbourne Casino Complex. The outlets include those operated by Crown Melbourne as well as those operated by third party retailers.⁴ The retailers include high-end stores such as Bvlgari, Hugo Boss, Omega and Rolex, as well as restaurants such as Nobu and Rockpool Bar & Grill.⁵ If a member elects to use their points at one of the outlets, Crown Melbourne pays the supplier the cost of the goods or services.⁶ Points can also be exchanged for car parking, meals and hotel accommodation.⁷
9. Separately, benefits are also awarded to members simply based on their type of membership. For example, platinum tier members will, by virtue of that membership, be entitled to free car parking, hotel accommodation or discounted meals.⁸ On occasion, Crown staff will provide those benefits to selected members as a sign of goodwill.⁹

Crown’s promotional activities

10. Crown Melbourne also offers benefits to its members as part of its promotional activities. The benefits include:
    • category 1: Pokie Credit Rewards (Welcome Back/Free Credits Program)
    • category 2: Mail Outs (Bonus pokie offers)
    • category 3: Pokie credits (Matchplay)
    • category 4: Random Riches (Carded Lucky Rewards)
    • category 5: Jackpot Payments
    • category 6: Consolation
    • category 7: Pokie Credit Tickets
    • category 8: Bonus Jackpots (dining, hotel accommodation and parking).¹⁰
11. Most benefits (apart from some in category 5 and all of categories 3, 6 and 8) are provided in the form of pokie credits that can be used to gamble on an EGM.¹¹
12. There is an important distinction between the types of member benefits that are provided. The benefits in categories 1, 2, 4 and 7 are provided in the form of pokie credits to be used to gamble on an EGM.¹² They cannot be converted to cash and are non-transferable.¹³
13. Category 3 is different. Matchplay are Crown Rewards points that a patron has converted to pokie credits to gamble on an EGM.¹⁴
14. Category 5 benefits (Jackpot Payments) are also different. A jackpot is defined in the Casino Control Act, in substance, as the ‘winnings … payable’ from money that accumulates as contributions are made to a special prize pool.¹⁵ The benefits in category 5 are time-based jackpots. That is, members can win prizes distributed at random by playing on participating EGMs during scheduled promotional times. The prizes include pokie credits, cash, food and beverage vouchers (redeemable at participating Crown Melbourne restaurants) and third party gift cards (for example, for use at David Jones, Coles or BP service stations).¹⁶
15. Category 6 benefits (Consolation) allow a member to double the amount they would otherwise win on an EGM.¹⁷
16. An important feature of each of the benefits in categories 1 to 7 is that (except for fixed prize category 5 promotions such as cash or gift cards), in its calculation of GGR and CBPGR, Crown Melbourne has accounted for the benefits when redeemed as a sum received and has deducted the value of the benefits as a sum paid out as winnings. By this method, the benefits had no effect on the calculation of the casino tax.¹⁸
17. It is worth emphasising that although categories 1 to 7 were often referred to by Crown Melbourne as ‘Bonus Jackpots’, none (apart from possibly categories 5 and 6) were jackpots in accordance with the statutory definition or with ordinary parlance.

The category 8 promotion

18. Turning to category 8 Bonus Jackpots (dining, hotel accommodation and parking), the manner in which Crown Melbourne treated this category for the purpose of calculating GGR and CBPGR was different to how it treated the other categories.
19. From at least 2000, one of Crown Melbourne’s promotions was its gaming loyalty food program.¹⁹ The program allowed a member to earn points based on gambling turnover. The member could purchase a meal or obtain a discount on a meal at participating Crown restaurants based on points accrued on EGMs and table games.²⁰
20. In late 2011, Crown Melbourne investigated whether it could treat the cost of its loyalty food program as a sum paid out as winnings for the purposes of GGR.
21. The concept was set out in a presentation titled ‘Gaming Machines Food Program Initiative’, prepared in October 2011. The following are extracts from the presentation:

    Change Gaming Machines Food Program to be controlled by the Linked Jackpot Equipment to reduce costs and increase profit/margin.

    ‘If anyone in this country doesn’t try to minimise their tax they want their heads read’ (Kerry Packer 1991—House of Representatives Select Committee).

    …

    Proposal

    • Transfer the Issuance control of the Gaming Machine Food Program from Syco to Dacom
    • Classify the Gaming Machines Food Program to be a Bonus/Jackpot as per Welcome Back (earn X receive Y)
    • Allow the Gaming Machine Food Program Costs to be a Gaming Machine Tax Deduction

    Reduce

    • Gaming Machines Total Revenue
    • Reduce Marketing Costs
    • Reduce Tax

    Increase:

    • Gaming Machines Profit
    • Gaming Machines Margin

    …

    Legal/Compliance Approval

    VCGR/Treasury Questions on Tax Deductible Item

    • Focus on Bonusing and Jackpots.²¹

22. Two points should be noted about the proposal. First, it intended to treat the category 8 benefits differently to the category 1 to 7 benefits. The category 8 benefits, when used, were not to be treated as sums received for the purposes of calculating GGR. If they were, then there would be no tax advantage. Second, although it was to be styled as a ‘jackpot’, the program did not have any of the characteristics of a jackpot.²² Treating the Gaming Machines Food Program as a jackpot would mask its true character.
23. On 6 March 2012, Crown Melbourne decided to go ahead with the proposal.²³ There was, however, concern that the regulator might query the addition of the benefits to the sums paid out as winnings. This was for good reason. No aspect of the food program initiative was a sum paid out for a win by the member. So, Crown Melbourne decided to conceal what was about to take place.
24. On 22 March 2012, Mr Edwin Aquino, Revenue Audit Manager, sent a memorandum to Mr Peter Herring, now the Group General Manager, Product, Strategy and Innovation. The memorandum stated:

    I refer to your proposed reclassification of Gaming Machines Food program to be part of the Bonus Jackpot and allow the promotional cost to be a Gaming Machine Tax deduction.

    …

    Factoring in the refurbishment, economic environment, impacts from negative publicity and the increase in Gaming Machines Gaming Tax by 1.72% in 1 July 2012, we are of the opinion that the proposed change will not be noticed by the VCGLR.

    We would recommend the Gaming department prepares a roll forward style explanation in the event that the VCGLR questions the budgeted gaming tax once our budgets are eventually submitted. We are happy to assist in this process.²⁴

25. Ms Debra Tegoni, Crown’s then in-house counsel, considered the permissibility of treating the food program as a sum paid out as winnings. She recorded her views in a memorandum dated 28 March 2012.²⁵
26. Ms Tegoni’s memorandum did not definitively say the cost of the food program could be treated as winnings. All Ms Tegoni did was to set out potential arguments for and against that view. She said:

    As there is no definition of ‘bonus jackpots’ one can argue that these types of rewards are a ‘bonus’—an unexpected reward in the ordinary meaning of that word and in any event is correctly described as a ‘winning’ to justify a deduction from Gross Gaming Revenue …

    An alternative argument on this point may be that the reward or bonus is not a ‘sum paid out as winnings’ … to be properly calculated as a deduction. The bonus/reward or prize … does not arise in respect of the playing of games …

    [W]e would also rely on a course [of] conduct that such deductions have been allowed in the past ... [t]his is not a strong argument for us …²⁶

27. Ms Tegoni said that proceeding with the deductions ‘is aligned with what we have done in the past and so puts us in no worse a situation, other than if any dispute were to arise, the potential for claw back quantum obviously increases’.²⁷
28. In a section of her memorandum headed ‘Opinion and Risks’, Ms Tegoni wrote that the doubts she raised about the permissibility of the deduction would be:

    … of course only relevant if the change [were] picked up; hence Finance and Revenue Audit’s view on how likely it is that the change will be obvious and assessing this risk in making this decision is critical.

    Provided extending the reclassification of the gaming machine’s [sic] food program does not alert anyone’s interest and so a review in tax payable, the risk appears fairly low and if required a reasonable argument can be put to justify our position. The risk may increase as and when more deductions are included over time …²⁸

29. The idea was to conceal the new deduction from the regulator. Crown Melbourne initially proposed to implement the deductions gradually, over a period of time. This was a risk management strategy to conceal the deductions from the regulator.²⁹
30. Crown submits that the ‘unchallenged evidence is that the staged rollout occurred for “technical” reasons’.³⁰ That is not correct according to Mr Herring’s evidence:

    Q: The March 2012 Gaming Food Program Initiative proposed that the roll out of dining awards … be staged … Was that proposal designed to ensure, or expected to have the effect that, the regulator did not become, or would not become, aware of the deductions? …

    A: … the initial staged roll-out discussion was technical, staged to ensure the systems operated as designed but I do recall a request via Mr [Richard] Longhurst wanting to see a staged roll-out in the presentation as a risk management strategy which I presume was relating to the regulator becoming aware but I cannot be sure (emphasis added).³¹

31. The cost to Crown Melbourne of implementing the deductions in stages was estimated to be $950,000 in additional casino tax.³² The implementation timetable was subsequently accelerated.³³
32. In April 2013, Crown Melbourne decided to add the benefits that members received for hotels and parking to the food program deductions.³⁴ This included benefits to which a member was already entitled because of their membership status (for example, a black tier member was entitled to free parking, regardless of the outcome of any gambling event). The effect of this further change would be that a proportion of the deductions were in respect of benefits not based on gambling turnover.³⁵ The same is likely to be true of the dining rewards deducted as part of the food program.³⁶
33. The extension of the deductions and the risk of detection were recorded in another note by Ms Tegoni. She wrote:

    Basically they are saying that parts of the Crown Signature Club Program, which have been a cost of doing business for the program will be allocated as a deduction where it can be linked with play.

    Essentially it is an internal adjustment whereby where [sic] the reward, wining [sic] in terms of deduction under the Casino Management Agreement (can be linked to play) than [sic] a transfer price deduction will be deducted. If there is no link to play eg silver members who are entitled to general free car parking, Crown will in its discretion continue to offer, as a benefit of membership, car parking. We may be forced to defend this at some point with the Regulator but it is agreed that it is the issue of ‘winnings’ like the other deductions that will potentially be an issue and also this with an additional element of us providing a member benefit and deducting it when it is linked to play, which on one view is appropriate.

    This also applies to the hotel benefits.³⁷

34. The evidence indicates that car parking was treated as a sum paid out as a winning in late 2013 and that hotel deductions were treated that way from 2014.³⁸
35. The most likely inference is no one at Crown Melbourne who knew of the deductions believed that the category 8 deductions were legitimate. They nonetheless proceeded with the changes because they believed the chance of the deductions being discovered was limited, and sufficiently limited to warrant Crown Melbourne running the risk of detection.
36. The evidence given by both Mr Mark Mackay, Executive General Manager of EGMs, and Ms Michelle Fielding, Group Executive General Manager and a qualified lawyer,³⁹ supports this inference.⁴⁰ The labelling of category 8 benefits as jackpots was confined to discussions regarding GGR. In no other context were the benefits of meals, accommodation and parking referred to as jackpots. The benefits were described as jackpots in a GGR context to mask their true character.

External legal advice in 2014

37. In December 2014, Crown Melbourne sought advice from senior and junior counsel on whether its premium player commissions were winnings for the purposes of calculating GGR.⁴¹ The premium player commission was an amount paid to a player calculated as a percentage of the player’s turnover in the casino or as a percentage of the player’s losses at the casino. In addition, a complimentary allowance covering accommodation, food, drinks and airfares, also calculated on the player’s turnover, was provided.⁴²
38. Counsel said that the complimentary allowances were not ‘winnings’. Their reasons are worth setting out:

    Such allowances do not bear the character of a ‘sum paid out as winnings’ but are in the nature of gifts or gratuities, albeit Crown calculates the value of the gift or gratuity based on a player’s turnover. Allowances may only be applied to accommodation, food and beverage and airfare costs, and may not be redeemed for cash. We accept that a ‘winning’ may be a non-monetary prize, but we do not see that a gift whose size is calculated by reference to turnover or losses is capable of being a ‘prize’. Complimentary Allowances are not awarded to the winner of a game.⁴³

39. The conclusion about the complimentary allowances is plainly correct. The reasons for that conclusion also make clear, and it would have been clear to Crown Melbourne, that the category 8 benefits (dining, hotel accommodation and parking) were not winnings to be taken into account for the purposes of calculating GGR.
40. Notwithstanding the advice received from senior counsel, Crown Melbourne continued to treat the value of category 8 bonuses as sums paid out as winnings.

VCGLR’s inquiries in 2017 and 2018

41. In mid-2017, the VCGLR looked at the Bonus Jackpot issue.
42. On 29 June 2017, there was a meeting between representatives of Crown Melbourne and the VCGLR. At that meeting, Ms Tracy Shen of the VCGLR raised the impact of the different jackpot types on the EGM revenue calculation. She requested ‘a breakdown of Bonus Jackpot[s] for one day’. Mr Matthew Asher, Strategy and Innovation Manager, Gaming Machines, said he would provide that information.⁴⁴
43. The VCGLR subsequently met with Mr Asher to discuss the issue.⁴⁵
44. On 31 May 2018, Mr Jason Cremona of the VCGLR emailed Ms Fielding and asked a number of questions about the Bonus Jackpots. These included a request for confirmation that the Bonus Jackpots treated as winnings were specific to amounts earned or awarded on an EGM. He also sought details of each type of Bonus Jackpot.⁴⁶
45. Mr Cremona’s enquiry provoked a flurry of activity at Crown Melbourne. It involved directors of Crown Melbourne, Mr Ken Barton and Mr Barry Felstead; and senior executives Mr Xavier Walsh, Crown Melbourne’s COO, and Mr Alan McGregor, Crown Resorts’ CFO. Mr Herring, in-house counsel Mr Joshua Preston, and Ms Fielding, then Crown Resorts’ Group General Manager, Regulatory and Compliance, were also involved.⁴⁷
46. The result of this activity was agreement as to the form of response to be given to the VCGLR.⁴⁸ The response was sent by Ms Fielding on 5 June 2018. It provided the following information:

    1. Pokie Credit Rewards (Welcome Back/Free Credits Program)
       • Based on Pokie Points earned on a Gaming Machine during a patron’s last visit, will determine the patron’s reward value
       • Senior Pokie Credit Reward receive a bonus $3 at specific levels
    2. Mail Outs
       • These are Bonus Pokie Credit Offers sent via mail to Crown Reward Members for varying amounts
    3. Pokie Credits (Matchplay)
       • These are Pokie Credits received by exchanging Crown Rewards points for Pokie Credits at any gaming machine
    4. Random Riches (Carded Lucky Rewards)
       • Rewards based on earning Pokie Points on a gaming machine for specific groups of Crown Rewards Members

    Miscellaneous

    5. Jackpot Payments
       • Pokie Credit payments as Pokie Credits from Lucky Time Jackpots
    6. Consolation
       • Consolation payments e.g. issued from Lucky Time Jackpots or Lucky Numbers
    7. Pokie Credit Tickets
       • Promotional Pokie Credit Game Tickets issued to players for redemption at Gaming Machines
    8. Bonus Jackpots
       • Based on Pokie Points earned on Gaming Machines
         • Carpark 25 Pokie Points in a day
         • Valet Parking for Black and Platinum Crown Rewards—1,000 Pokie Points
         • Hotel Night Benefits Crown Rewards Rewards [sic] Black—1,000 Pokie Points
         • Hotel Night Benefits Crown Rewards Rewards [sic] Platinum—1000 Pokie Points
         • Dining Rewards, the amount issued is based on Pokie Points earned on Gaming Machines during a visit example:
           • Receive $7.50 Dining Reward by earning 150 points on gaming machines in a day.⁴⁹

47. Ms Fielding also addressed the specific questions raised by Mr Cremona. The answers are in italics:

    Just to clarify my understanding of the discussion, I noted the following dot points. Can you please advise if I am correct in my interpretation:

    • Bonus Jackpots deducted from Gaming Revenue are specific to amounts earned or awarded on a gaming machine. No amounts earned outside of the gaming machine, such as hotel rewards (if applicable) can be redeemed on a gaming machine and/or deducted from Gaming Revenue; That is correct, but for exceptions noted at points 2, 3 & 7 above;

    …

    • Bonus jackpots are only accumulated and deducted from gaming tax AFTER being redeemed/used and NOT when earned. All bonusing is only deducted at the time of redemption.
    • A patron cannot redeem ‘loyalty points earned’ for credits on a gaming machine. This is incorrect—note point 3 above. Bonuses must be earned or provided with a specific condition to earn the bonus, ie; returning to Crown to earn X bonus credits. That is correct;

    A couple of action points too:

    • Peter said that bonus prize/points are not ‘linked to signature club’. Can you get him to expand on this? Neither Pete or I recall this—however, to clarify, they generally are related.
    • Can I also get an explanation of each of the ‘Bonus Jackpots’ outlined on the Bonus Jackpot Analysis Report. These include Free credits Program, Mail Outs, Matchplay, ‘Jackpot Payments’, Random Riches Promotion, Consolation BJ and each of the bonuses under the ‘Bonus Jackpots’ banner. Essentially with the explanation I am looking for information regarding a brief description of the bonus, how prize earned, how prize redeemed, etc. See listing above ...⁵⁰

48. There was one important matter that Ms Fielding did not disclose to Mr Cremona. She did not explain that many members were entitled to category 8 benefits because of their loyalty program membership status (black, platinum, gold and silver) and not because of an EGM gambling event. It is unclear who was aware of this at the time,⁵¹ though Mr Herring appears to have known about it.⁵²
49. It is not clear whether the failure to disclose the true nature of the category 8 benefits was inadvertent. This was not investigated during the Commission’s hearings so no findings can be made. Nonetheless, what is clear is that Mr Cremona was not told all the relevant facts.
50. In any event, Crown accepts that it should have been more open in the disclosure it made to the VCGLR in 2018.⁵³

External advice in 2018 and 2019

51. Despite the exchange of correspondence, Crown Melbourne was concerned that the VCGLR was ‘digging around’ about the category 8 benefits.⁵⁴ Mr Preston and others were concerned because Crown Melbourne ‘weren’t on solid ground’.⁵⁵ This could be described as a mild understatement.
52. So, on 17 October 2018, Mr Preston sought advice from Mr Glen Ward, a partner of MinterEllison, regarding the permissibility of Crown Melbourne’s practice in relation to the deductions.⁵⁶
53. Mr Preston informed Mr Ward that the deductions had been made for several years.⁵⁷ Mr Ward was not informed that some members were already entitled to certain of the benefits based on their membership status.
54. A solicitor assisting Mr Ward recorded the instructions obtained from Mr Preston, Mr Herring and Ms Fielding. Her note reads:

    • Health check re food + hotel + carpark program

    …

    • bonus jackpots not broken down into types of jackpots

    …

    • belief that VCGLR would know that credit rewards are being deducted

    …

    • Item 8 does not meet def of bonus jackpot b/c not using ICT

    …

    • evidence over time where we can show [the VCGLR had] clear visibility.⁵

55. Mr Ward provided a draft advice to Mr Preston on 25 October 2018.⁵⁹ The following paragraphs are important:

    …

    21. The VCGLR:
        1. was not advised of this change in the treatment of Gaming Machine Food program costs;
        2. has not approved the Gaming Machine Food Program as a ‘Bonus Jackpot’.
    22. Documents issued at the time of the introduction of these changes to the Gaming Machine Food Program speak of, among other things, the benefit to the bottom line of including these Bonus Jackpots, and the likelihood of the VCGLR detecting this change in treatment.

    …

    26. On a strict interpretation of Gross Gaming Revenue, to constitute a deductible, the amounts must be ‘won’ by the punter or otherwise paid out as winnings. On its terms, this definition would not seem to capture credits earned simply by repeat play, which is what the Gaming Food Program involves.
    27. The concept of loyalty credits accruing based on level of play does not logically fit within the concept of a jackpot, either as that term is commonly understood, or as it is defined in the [Casino Control Act] (which is a very narrow, technical definition).
    28. On the other hand, paragraph 1.03 of the [internal control statement] (sanctioned by the VCGLR) provides a helpful statement of intention … It provides that ‘Crown will include as winnings to its patrons any prize paid out to its patrons on the level of play and in accordance with the rules of the game’. This appears to recognise that turnover based incentives, such as the Gaming Machine Food Program may be able to be treated as ‘winnings’ for the purposes of Gross Gaming Revenue.
    29. According to the Technical Criteria, all Bonus Jackpots need to be approved. The changes to the Gaming Machine Program were not so approved.⁶⁰

56. Crown Melbourne says Mr Ward’s draft advice did not make clear that the deductions were improper.⁶¹ If that is a fair reading of the draft advice, the reader would have at least understood there was a serious risk that the deductions were not permitted.
57. Following receipt of the draft advice, Ms Fielding and Mr Herring made some amendments to it (by providing extra information) and returned it to Mr Ward to see whether he would change his mind.⁶² The amendments were largely rejected.⁶³
58. Mr Preston forwarded the draft advice to Mr Walsh.⁶⁴ It was also provided to Mr Mackay and other senior executives. Mr Mackay, who reviewed the advice,⁶⁵ said he thought that the directors also knew of the advice.⁶⁶
59. On 9 July 2019, Ms Fielding sought further advice from Mr Ward. She asked whether a new draft Technical Requirements Document proposed by the VCGLR changed Mr Ward’s advice on Crown’s tax treatment of its Bonus Jackpots.⁶⁷
60. Mr Ward provided a second advice. That advice accurately identified that ‘the question of whether deductions made in respect of the Gaming Machine Bonus Jackpot Program meet the statutory definition of sums “paid out as winnings” is a question of statutory construction, and not to be resolved by reference to other documents’.⁶⁸
61. Despite this, the second advice can be read as suggesting that if the Technical Requirements Document was altered to reflect the way the Bonus Jackpot promotion program operated, that change may provide some basis for a contention that the Bonus Jackpot could be treated as a winning.
62. The document Technical Requirements for Gaming Machines in the Melbourne Casino, dated 10 July 1996, sets out the technical requirements and the criteria against which approval will be given for EGMs to be used for gambling in the Melbourne Casino.⁶⁹ The technical requirements cover matters such as machine access, monitoring and software integrity. The technical requirements have nothing at all to do with the calculation of GGR under the Management Agreement.
63. Mr Ward must have appreciated that even if the new draft Technical Requirements Document endorsed or reflected the operation of the Bonus Jackpot program, this would have no impact on the GGR definition. In fact, Mr Ward had already made that point explicit. His suggestion to the contrary makes no sense.
64. Mr Ward’s final advice also contained the following paragraph:

    We understand in this respect that the VCGLR has made certain enquiries during the course of 2018 in relation to Crown Melbourne’s treatment of Bonus Jackpots, but to date the VCGLR has not raised any specific issue about the composition of Bonus Jackpots or the treatment of Gaming Machine Bonus Jackpot Program costs as a deductible. Helpfully, under the New [Technical Requirements Document], there is less scope for the VCGLR to raise issues with Crown’s treatment of the Gaming Machine Bonus Jackpot Program.⁷⁰

65. It is difficult to understand the last sentence. As Mr Ward had earlier explained, the meaning of GGR could not be affected by some other document, such as a new draft Technical Requirements Document. It is likely that Mr Ward was attempting to convey the possibility that once the VCGLR dealt with the technical requirements issue, it may not return to the manner in which GGR was calculated.
66. Mr Ward sent his final advice to Ms Fielding on 18 November 2019.⁷¹ She passed it on to Mr Walsh and Mr Herring.⁷² According to Mr Mackay, the directors and Mr McGregor were informed of the advice, and may have been given a copy.⁷³
67. Despite Mr Ward’s advice, the costs of the category 8 promotions continued to be treated as sums paid out as winnings.

The GST dispute

68. In 2020, there was a dispute between Crown Melbourne and the Commissioner of Taxation regarding how GST should be calculated in relation to the commissions and rebates Crown paid to junket operators.⁷⁴
69. The dispute was litigated in the Federal Court and was resolved at first instance in Crown Melbourne’s favour on 10 September 2020.⁷⁵
70. A week later Mr Chris Reilly, General Manager of Tourism at Crown Resorts, emailed a number of people at Crown Melbourne, including Mr Walsh, Mr Herring, Ms Fielding, Mr Barton and Mr Felstead, asking for ‘a chat … to go through some outstanding and historical tax and regulatory matters …’.⁷⁶
71. This caused Mr Herring, on 21 September 2020, to raise the Bonus Jackpot deductions with Ms Fielding. He emailed her that, in his view, Crown Melbourne had been ‘very specific and clear on all deductions’ with the VCGLR. ⁷⁷
72. The next day, Mr Walsh invited a number of senior executives, including Mr Barton, Mr McGregor, Mr Preston, Mr Felstead, Ms Fielding and Mr Herring, to attend a meeting regarding ‘GST judgment—DFT—Next Steps’.⁷⁸ A file note of the meeting records:

    Bonus Jackpots 2012—$4 million

    …

    $40 million

    …

    Is it deductable—what are the components

    Has it been approved …

    1994—no one looked at it

    90% ok going forward.⁷⁹

73. Mr Walsh gave evidence about the meeting. He said that ‘everybody at the meeting understood that there was a residual risk’ as to the deductions by the end of that meeting.⁸⁰ Mr Walsh also said Mr Barton ‘had a view that perhaps [Crown had] taken too narrow a view to what was winnings’,⁸¹ and that Mr Barton was looking to ‘wrap up all the historical tax matters … in a single agreement’ with the State.⁸²
74. Ms Fielding gave evidence that, prior to February 2021, Mr Walsh told her he intended to escalate the tax treatment of Bonus Jackpots to the Crown Melbourne board and ensure the regulator was clear about the issue.⁸³ It does not appear he raised the issue with the board, and he certainly did not raise it with the regulator.
75. The category 8 benefits continued to be treated as sums paid out as winnings.
76. Crown Melbourne contends that this was the fault of Mr Barton and Mr Felstead, both of whom are no longer employed by a Crown company.⁸⁴ Mr Walsh makes the same point.⁸⁵ The contention, however, ignores the fact that other senior executives were involved, to a far greater degree than Mr Barton and Mr Felstead. Some still hold important positions within the organisation.

Meeting between Mr Walsh and Ms Coonan

77. On 22 February 2021, the Victorian Government announced that there would be a royal commission to inquire into the suitability of Crown Melbourne to continue to hold its casino licence.
78. A meeting between Mr Walsh and Ms Helen Coonan, then Chairman of Crown Resorts, was scheduled for the next day. Mr Walsh prepared an agenda for the meeting. Relevantly, it read:

    6. Compliance

    Legacy issue⁸⁶

79. Mr Walsh gave the following evidence about the meeting. He said he raised with Ms Coonan what he described as a ‘legacy issue’, being the ‘tax issue’.⁸⁷ Apparently, he did not go into any detail with Ms Coonan regarding the nature of the ‘legacy issue’. He said Ms Coonan told him to ‘pull the information together’ because she was ‘concerned regarding the matter to, you know, establish a position’.⁸⁸ Mr Walsh was to ‘pull the information together’ and give it to the lawyers for advice and disclosure.⁸⁹ Mr Walsh said that Ms Coonan was ‘definitely going to consider the matter’.⁹⁰
80. Confirmation of this last statement appears in a note taken by Mr Walsh. He wrote in hand on the agenda, adjacent to the words ‘legacy issue’:

    Helen [Coonan] to consider

    XW [Mr Walsh] to think about how best to communicate.⁹¹

81. Mr Walsh explained that the words ‘how best to communicate’ were a reference to how best to disclose the matter to the regulator.⁹²
82. Ms Coonan also gave evidence about the meeting. Her evidence is, in a minor respect, different to that of Mr Walsh.
83. Ms Coonan said that Mr Walsh told her that, in the ‘interests of transparency, there was a legacy matter he wanted to bring to [her] attention’; ‘[i]t related [to] the deductions or calculations of the jackpot tax’; and that ‘there was a memorandum … which … suggested … the VCGLR had not been informed and probably wouldn’t notice’. She said that Mr Walsh was worried about it as a ‘transparency issue’, but that the VCGLR had taken a ‘thorough look at it’ and it had now been approved.⁹³
84. Ms Coonan agreed that she had directed Mr Walsh to ‘pull the information together’ and give it to Crown’s lawyers.⁹⁴ However, Ms Coonan disagreed that she was to consider the issue. Her evidence was:

    Q: When he [Mr Walsh] met with Mr Mackay, Mr Mackay took a note of his instructions from Mr Walsh … and Mr Mackay’s note of what Mr Walsh told him was ‘Helen to consider.’

    A: I understand that, but I had nothing to consider. Nothing was given to me, ever brought back to me. I known, [sic] I don’t know what Mr Walsh meant by that note.⁹⁵

85. Nothing turns on the differing recollections. The conversation between the two on this topic was not long. It is not surprising that their recollections of what was said differs in some respects. In the end, Mr Walsh’s recollection is likely to be more accurate, it being supported by his notation. This is not to suggest that Ms Coonan’s account is inaccurate. It is simply an instance of a short conversation about which recollections differ.
86. Perhaps it could be said that Ms Coonan should have followed up the issue to discover what it was about, as it related to a potential underpayment of casino tax, an obviously important matter. On the other hand, Mr Walsh described it, incorrectly as it turned out, as a ‘legacy issue’, implying that it only related to the past. Taking into account all the problems which, at that moment, Crown Resorts and Crown Melbourne were facing, it is not surprising Ms Coonan thought (even if incorrectly) she had left the matter for others to deal with.
87. The other possibility is that Mr Walsh should have squarely raised the potential underpayment of tax with Ms Coonan.⁹⁶

The spreadsheet

88. On the morning of 24 February 2021, a day after his meeting with Ms Coonan, Mr Walsh spoke to Mr Mackay about the Bonus Jackpots deductions. He instructed Mr Mackay to ‘prepare or pull together the impact of those deductions made under the loyalty program’.⁹⁷ Mr Mackay’s file note of the discussion, which described the matter as a ‘latent’ tax issue, noted that Ms Coonan was ‘reviewing [it] to revert to [Mr Walsh]’.⁹⁸
89. Following the meeting, Mr Mackay asked Mr Herring to send him ‘any detail he had on the Bonus Jackpots in regards to the breakout of each of them’.⁹⁹
90. Mr Mackay subsequently instructed Mr Jose Machado, Finance and Commercial Manager—Gaming, to prepare a spreadsheet setting out the ‘tax impact’ of the Bonus Jackpot deductions.¹⁰⁰ The ‘tax impact’ meant the amount of casino tax Crown Melbourne saved by making the deductions.¹⁰¹
91. The spreadsheet that was prepared only covered the years 2014 to 2019. It indicated that:
    • if all Bonus Jackpots (that is, categories 1 to 8) were not deductible, Crown Melbourne had underpaid casino tax by $167,829,413
    • if category 8 Bonus Jackpots were not deductible, Crown Melbourne had underpaid casino tax by $22,872,944.¹⁰²
92. The calculations were broken down into various categories (namely, category 8 Bonus Jackpots, the Welcome Back deductions and the remainder of the Bonus Jackpots). According to Mr Mackay, this categorisation reflected the different risks as to whether the amounts were deductible.¹⁰³
93. The calculations in the spreadsheet did not make any adjustment for GST. Nor did the calculations take into account super tax or penalty interest payable on any unpaid casino tax.
94. At about 11.30 am on 26 February 2021, Mr Mackay met with Mr Walsh and Mr Herring to discuss the spreadsheet.¹⁰⁴ Mr Mackay knew the spreadsheet was sensitive¹⁰⁵ and he did not email the document to Mr Walsh.¹⁰⁶
95. According to Mr Mackay, he and Mr Walsh understood the potential exposure was about $170 million, excluding super tax and penalty interest.¹⁰⁷ Mr Walsh’s evidence was that he was only concerned with the category 8 deductions.¹⁰⁸

Mr Walsh raises the casino tax issue

96. On 1 March 2021, there was a meeting attended by Mr Walsh, Ms Fielding, Ms Jan Williamson (General Manager Legal, Crown Melbourne), Mr McGregor and Ms Anne Siegers.¹⁰⁹ The unpaid casino tax issue was discussed. Mr Walsh said that most of the attendees were familiar with the issue that was raised in 2018.¹¹⁰
97. The attendees discussed whether unpaid casino tax could be offset against other taxes where there might have been overpayment; whether Crown could rely on the draft Technical Requirements Document to bolster its position; and what would be the public perception of the disclosure of the underpayment of gaming tax.¹¹¹
98. On 3 or 4 March 2021, Mr Walsh discussed the Bonus Jackpot issue with Ms Jane Halton, a director of Crown Resorts and Crown Melbourne.¹¹² According to Mr Walsh, he told Ms Halton about the legal advice that had been received in 2012 and 2018. He described those advices as ‘equivocal’.¹¹³ He also told Ms Halton that the VCGLR had a ‘very close look at it in 2018’ and that the draft Technical Requirements Document would ‘cure’ any issues going forward, but it would not resolve the issue historically.¹¹⁴
99. Ms Halton’s account of the discussion differs somewhat. Her evidence was:

    Q: [C]an you tell the Commission what [Mr Walsh] said to you on that topic on 4 March?

    A: Yes, I can. My memory is that he told me, and it is in the context of a ‘bring out your dead’ broader admonition. This wasn’t a discussion about all of the things … it was a discussion about operation of the business, et cetera, et cetera, but he said to me, ‘One thing that I’ve become aware of, it reflects badly on culture, it is an issue from two thousand’ … and I believe he said ‘12’ … ‘in respect of something that wasn’t fulsomely disclosed and there is a note, a document, that talks about not telling the VCGLR something.’

    I believe he said ‘jackpot’, he didn’t say ‘tax’, and he said that, however this matter was disclosed to the VCGLR in … subsequently in 2018. And that was about the extent of it.

    Q: I see. So did he describe it as a tax, an unpaid tax issue?

    A: No.

    Q: He just described it as something that reflects badly on culture that happened in 2012 that was not disclosed fulsomely …

    A: Correct.

    Q: … but it was fixed up in 2018?

    A: That was what I took from that conversation. Correct.

    Q: His evidence was he talked about advice that had been received in 2012 and 2018 which he described as equivocal. You don’t recall that?

    A: No, I don’t, I’m sorry.

    Q: He said that there was a presentation; you don’t recall him referring to a presentation although you recall him saying something?

    A: A document. He did say a document.

    …

    Q: And he certainly didn’t tell you that was something he’d been aware of since at least 2018, did he?

    A: No, I don’t believe so.¹¹⁵

100. Ms Halton agreed she was ‘concerned’ that Mr Walsh downplayed the tax issue, knowing Mr Walsh was ‘in the midst of it’ in 2018.¹¹⁶
101. Mr Walsh said that he met Mr Nigel Morrison and Ms Antonia Korsanos, both directors of Crown Resorts, on 9 March 2021. He said he provided to them the same information he had given to Ms Halton.¹¹⁷
102. Ms Korsanos’ evidence about the meeting is different:

     Q: Just focusing on the underpayment of gaming revenue tax, what do you remember Mr Walsh telling you in that meeting on 9 March?

     A: The discussion was focused on more a cultural issue. Mr Walsh mentioned that he’d come across a presentation from 2012 that made some references that represented the poor culture and lack of transparency in a change that was made to the tax calculation at the time. The focus was about the comment in the presentation and what … and how that would be looked upon. He did mention that there was a reference … an internal advice.

     Q: Yes.

     A: And also that the situation had been … sorry, the calculation had been audited a few years ago, about three years ago, and full transparency had been made and then also subsequently cured through a technical requirements document update. So the conversation was about the lack of transparency, the lack of engagement and openness with the VCGLR, and again representative of poor culture. Focused on the comment more than anything …

     Q: You said that he mentioned internal advice. Did he also mention external advice?

     A: No, he didn’t.

     Q: Did he tell you what that advice said or the effect of the advice?

     A: Along the lines of ‘It can be done but the VCGLR could argue against it.’ Something along those lines.

     Q: What did you take away as the concern that he was raising with you at that point? Was it the issue about non-disclosure to the VCGLR or transparency to the VCGLR?

     A: It wasn’t an issue … it was definitely a culture and lack of transparency and poor engagement with the VCGLR. It wasn’t an issue on whether there was a concern on that calculation.

     Q: So he didn’t mention it was an issue about underpayment of tax?

     A: Correct. I did not walk away from that meeting believing that there was a concern that tax had been underpaid.

     Q: You had no idea about the quantum in mind either?

     A: No […]¹¹⁸

103. Ms Korsanos said it was ‘a concern’ that Mr Walsh did not disclose to her all he knew about the unpaid casino tax issue.¹¹⁹
104. Mr Morrison did not give evidence about the meeting with Mr Walsh on 9 March 2021. Mr Morrison said he had a very brief conversation with Mr Walsh in a corridor on 19 or 22 March 2021.¹²⁰ Although he could not recall much of the detail, Mr Morrison said he was left with the impression that Mr Walsh had recently come across an issue through a document review,¹²¹ within the past few weeks.¹²² Mr Morrison did not understand that the issue concerned the underpayment of casino tax.¹²³
105. Mr Morrison expressed concern that he had not been informed of the potential underpayment of casino tax even though it was known to Ms Coonan and Mr Walsh.¹²⁴ He said that would particularly be the case if Mr Walsh had known about the issue for years.¹²⁵