On Monday, the Victorian Government announced the establishment of a royal commission into Crown Resorts’ suitability to hold its Melbourne casino licence.
First opened in 1997, Crown has grown to be the one of the state’s biggest single-site employers, with more than 15,000 staff across its hotels, function rooms, restaurants and entertainment facilities.
In 2014, the Napthine Coalition government extended Crown’s Melbourne casino licence to 2050.
Now Victorian Premier Daniel Andrews is saying he is prepared to revoke that agreement if the royal commission says Crown should lose its licence when the final report is handed down by August 1.
“This is a royal commission to determine whether they’re fit to hold that licence. So if you’re having that process, you have to be clear that you’ll implement the findings,” Mr Andrews said.
So will the Victorian Government actually rip up Crown’s licence? And if it does, what will happen next?
Here are four ways experts and gambling industry observers think things could play out.
Crown keeps its licence, promises to do better
Nearly everyone agrees the most likely outcome is Crown will be allowed to retain its licence, as long as it makes some changes.
“The finding could be that Crown have major problems and they need to improve their structure,” Asian Gaming Consultant Ben Lee said.
Even if Crown is found to have breached the law, Swinburne corporate governance expert Helen Bird suspects it may have a contractual agreement which means the licence can’t be easily revoked.
“I suspect there could be a provision in the contract, that would put limits on the regulator in Victoria to remove the licence without some substantial attempt to fix the failings first.”
When the NSW regulator found Crown was unfit to run a casino in Sydney, instead of being immediately stripped of its licence it was given a chance to fix the problems.
If the Victorian royal commission makes an adverse finding against Crown, Ms Bird thinks the same thing could happen due to legal obligations. She wants future casino licencing contracts to be made public.
In the event Crown does continue operating its Melbourne casino, Chief Advocate for the Alliance for Gambling Reform Tim Costello said “it needs to do so with much tighter restrictions that are effectively and consistently enforced”.
The licence is given to another operator
If the commission finds Crown is unfit to run a casino, its licence could be revoked and go to another operator.
In this event the Government would appoint an administrator while the licence went out to tender.
According to Mr Lee, this would be the “worst case for Crown”.
Alternative operators could include the Star Entertainment Group, which runs The Star casino in Sydney, or Auckland-based SkyCity entertainment, which runs the casino in Adelaide. One expert even suggested the government could take over the licence if a suitable private operator couldn’t be found.
Sounds simple, right? In reality it wouldn’t be that easy.
“Crown operates many other hospitality functions on the same site as their gambling operations, complicating what happens there,” Reverend Costello said.
Because Ms Bird suspects Crown has a contractual arrangement that prevents its licence being easily removed, even if there are adverse findings, she thinks the only way another operator might end up running the casino is if the company went broke.
“With inquiries underway in New South Wales, Western Australia and Victoria and coronavirus killing off international trade, you have a lot of issues hitting the profit line of the company,” Ms Bird said.
“All of this points to the possibility of there being financial difficulties and the appointment of an administrator, and that’s when you might see the possibility of a new operator. But not in the short-term.”
Last week Crown Resorts reported a $120 million loss for the second half of 2020.
The end of the casino monopoly
Instead of only issuing one casino licence, the Victorian government could decide to change laws to allow multiple casinos in the state.
This has happened in NSW, where Crown was given a licence to open a second Sydney Casino, and overseas.
“Macau had a single operator, now they have six operators running 41 casinos and employing over 100,000 people,” Mr Lee said.
“If Crown is found to be unfit to hold the licence, potentially the monopoly situation could be changed at the same time.”
So what are the arguments for ending the casino monopoly?
Mr Lee says Victoria has done away with other monopolies in other sectors, like telecommunications and banking, so why should entertainment providers be any different?
“For the life of me, I can’t pinpoint any other monopoly that exist in Victoria, in the private sector,” Mr Lee said.
“Competition keeps everyone honest.”
Others strongly disagree.
The Alliance for Gambling Reform said it would oppose another casino licence in Victoria, and so would most Victorians.
Even if there is a case for liberalising casinos in Victoria, Ms Bird said it was not going to happen in the short-term.
“The NSW inquiry has found serious flaws in the way Victoria’s casino has been run, there is a question mark over the Victorian regulatory arrangements, maybe even national laws might come into play” Ms Bird said.
Victoria could be left without a casino
Speaking to gambling industry observers no one thinks this is actually going to happen, but there is a small chance Victoria could find itself without any casinos.
“Until this week, nobody thought Crown would ever face a royal commission. I’ve personally been waiting decades for this … so all options [including the casino closing] are on the table and should be,” Reverend Costello said.
“The reality is that it is likely that there will always be a casino in Melbourne whether it is operated by Crown or another company.”
If the casino did close, it wouldn’t necessarily follow that the Victorian economy would take a hit.
“Despite protestations to the contrary, the Victorian government is not reliant on gambling tax to operate the state,” Reverend Costello said.
“In fact, the $2 billion brought in by gambling taxes in Victoria is an upfront sugar hit — the crash down is the $7 billion in social costs every year undoing all the harm caused by gambling.”
The Crown complex isn’t just 540 gaming tables and more than 2,000 electronic gaming machines, there are also function rooms, restaurants and on site accommodation.
In the event that Crown lost its casino licence and no-one else took over, it could continue to run non-gambling operations on the Southbank site like it has at Barangaroo.
“I sincerely doubt there is any value in the business without the casino,” Ms Bird said.
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