Australia: Do slot (aka “pokie”) machines fall foul of the Australian Consumer Law?

By Jane Collis.

Contributing partner – Melinda Upton.

The Alliance for Gambling Reform (the Alliance) thinks so. In October 2015, the Alliance’s representatives spoke with the Australian media to announce that the Alliance, which consists of local city councils, religious organisations and not for profits targeting problem gambling and public health, is working on a potential claim against the multi-billion dollar slot machine industry in Australia.

The claim foreshadowed by the Alliance has two arms:

  1. Australian Consumer Law (ACL): The Alliance argues that designers of the machines have engaged in misleading and deceptive conduct in contravention of section 18 of the ACL because the machines make players think certain things are happening that are actually not. For example – a AU$1 bet may yield a AU30 cent win, which is actually a AU70 cent loss, however the machine will play graphics and sounds that indicate a win. Another design feature said to be misleading is near miss results.
  2. Negligence: The Alliance asserts that some industry players have negligently breached their duty of care to players of the machines under tort law in Australia.

The potential claim is still in its infancy. No specific industry target has been identified or claim filed in any court. The precise nature of the remedies desired are also largely unknown, although the Alliance has indicated that they would be seeking clearer warnings on the machines themselves. Therefore, we can only comment on the potential claim in a general sense.

To establish that a defendant has engaged in conduct that is misleading and deceptive in contravention of section 18 of the ACL, the court will need to establish, amongst other things, the group of people to whom the conduct was aimed. Who that group is will likely be pivotal.

Should the courts determine that the allegedly contravening functions of the machines are aimed specifically at problem gamblers, as the Alliance alleges, this may reduce the level of responsibility the courts require of the gamblers to look after their own interests. Should the courts find that the machines are aimed at the public in a general sense, the public will likely be expected to take reasonable care of their own interests, and conduct will only contravene the provision if it has a tendency to mislead or deceive a person who is wary in this sense. This begs the question, would an ordinary and reasonable player be misled or deceived into thinking that they had won something despite having actually lost money?

Recent Canadian research indicates that graphics and music used by slot machines activate similar arousal levels in novice gamblers as actual wins do and that arousal reinforces the gambling behaviour. The Alliance is therefore likely to argue that players pay more attention to the music and the graphics that dominate the screen as opposed to the actual credit balance. There have been decisions regarding advertising in Australia where misleading and deceptive conduct has been found even though the advertisement contained a true explanation in fine print, as many will only absorb the “general thrust” of the overall advertisement. Nevertheless, a claim that a defendant from the slot machine industry has breached the ACL is unlikely to be straight forward.

In relation to the negligence claim, the Alliance will need to establish that the relevant defendant owed a duty of care to protect players from economic loss. In recent years, there have been a number of unsuccessful claims in Australia for economic loss resulting from gambling and, subject to the precise facts of the claim, establishing negligence may be challenging.

The gambling industry in Australia is estimated to turnover more than AU$180 billion per year. If the foreshadowed claim goes ahead, it has the potential to be a landmark decision in Australia in relation to the application of the ACL to the gambling industry.