An application brought in an Australian Court that Aristocrat’s Dolphin Treasure electronic gaming machine (or EGM) was misleading and deceptive in contravention of the Australian Consumer Law (ACL) has been dismissed.1
Last year, Ms Shonica Guy (the Applicant) made national headlines for bringing court proceedings in the Federal Court of Australia (the Court) against casino operator Crown Melbourne Limited (Crown) and gaming machine manufacturer Aristocrat Technologies Australia Pty Ltd (Aristocrat) (together, the Respondents).
This was the first time that legal proceedings have been brought in Australia alleging that an EGM is inherently misleading in breach of the law.
In a landmark ruling on 2 February 2018, the Court handed down its decision, with Justice Mortimer finding that the Dolphin Treasure EGM complies with regulations and is not misleading, deceptive, or unconscionably supplied and made available to customers.
Background
The Applicant alleged that the Dolphin Treasure EGM is misleading and deceptive because:
- The game appears to the player to display five reels with approximately 30 symbols on each reel when, in fact, the game has five reels, with approximately 30 symbols on the first four wheels and approximately 44 symbols on the fifth reel (Equal Reel Size Representation);
- It appears to the player that there is an equal chance of a certain symbol appearing on each reel when, in fact, the total of each of the symbols which appear in the game are not evenly distributed across each of the five reels (Equal Symbol Distribution Representation); and
- The likely return to a player of the game is advertised as 87.8% of the money gambled when, in fact, the 87.8% figure is calculated over the lifetime of an EGM and includes jackpots that players rarely win, meaning that a return of 87.8% is not the likely return to a player in one gambling “session” (Risk Representation).
The Applicant claimed that the following features of the game contribute to the Equal Reel Size Representation and the Equal Symbol Distribution Representation:
- Each of the symbols on each reel is of even size, spin at an even pace, and come to rest consecutively at approximately even intervals;
- The Dolphin Treasure EGM plays “ticking” sounds as each of the reels comes to rest which is played for approximately the same period of time before each reel comes to rest; and
- The symbols are distributed so that no two symbols of the same kind appear on any given reel once the reels have come to rest.
The Applicant contended that the combination of these features meant that the likelihood that the player will win on the Dolphin Treasure EGM is significantly less than the player would expect based on the Equal Reel Size Representation and the Equal Symbol Distribution Representation.
The Applicant also submitted that, by continuing to supply (in the case of Aristocrat), and make available to members of the public (in the case of Crown), the Dolphin Treasure EGM, despite:
- having knowledge of the above matters; and
- knowing that the Dolphin Treasure EGM uses sounds and visual stimuli which are displayed whenever a player receives a return, whether or not the amount won exceeds the amount wagered,
each of the Respondents was engaging in unconscionable conduct under the Australian Consumer Law.
Relief Sought
The Applicant did not seek damages from Crown and Aristocrat, but instead sought declarations from the Court that:
- Crown had engaged in conduct which was misleading and deceptive or likely to mislead or deceive in contravention of section 18 of the ACL (alternatively, section 52 of the Trade Practices Act 1974 (Cth) (TPA), and a system of conduct or pattern of behaviour constituting unconscionable conduct in contravention of sections 20 and 21 of the ACL.
- Aristocrat had engaged in, and aided and abetted, conduct which was misleading and deceptive or likely to mislead or deceive in contravention of section 18 of the ACL, and a system of conduct or pattern of behaviour constituting unconscionable conduct in contravention of sections 20 and 21 of the ACL.
The Applicant also sought injunctions pursuant to section 232(1) of the ACL restraining Aristocrat from supplying, and Crown from making available for play, the Dolphin Treasure EGM or any EGM with:
- a reel configuration;
- symbol distribution; and
- a display including return to player information,
substantially the same as, or having substantially the same effect as, the Dolphin Treasure EGM.
Defence
The Respondents defended the case on numerous grounds including that a reasonable person playing the Dolphin Treasure EGM would not draw the inferences regarding game features alleged by the Applicant to give rise to misleading and deceptive representations. The Respondents also argued that the return to player information provided to players conveyed an accurate representation about the statistical risk of playing the Dolphin Treasure EGM, and complied with all applicable regulations under the Gambling Regulation Act 2003 (Vic) (GRA).
The Respondents pointed to their ongoing compliance with the Australian and New Zealand Gaming Machine National Standard (National Standard) (and the Victorian Appendix to the National Standard), enforced in Victoria by the Victorian Commission for Liquor and Gaming Regulation. The Respondents submitted that the National Standard requires that, to be approved under the GRA, an EGM must display accurately the odds of winning and must not be misleading, illusory or deceptive.
Outcome
In the judgment handed down on 2 February 2018, Justice Mortimer found in favour of the Respondents, determining that there was insufficient evidence to conclude that a hypothetical person would consider how the reel configuration or symbol distribution may affect the probability of a winning line occurring. Notably, her Honour entirely dismissed the expert evidence given on behalf of the Applicant by neuropsychologist Professor Murat Yucel, who, it was revealed in cross-examination, had copied parts of his evidence from Wikipedia.
Despite accepting that the return to player information displayed on the Dolphin Treasure EGM is initially confusing, Justice Mortimer determined that this confusion would be dispelled once the customer began using the machine. Accordingly, her Honour held that a contravention of the ACL could not be made out.
In relation to the unconscionability issue, Justice Mortimer held that the Applicant had not satisfied all the elements of the alleged contravention, including by failing to identify a person who had been exploited or victimised by Aristocrat or Crown in the manner required by law.
Her Honour dismissed the Applicant’s case in its entirety and directed the parties to meet with a view to negotiating the issue of costs.
The Applicant has 28 days to appeal the Court’s decision. This period expires on 2 March 2018.
Wider implications of the case
In her judgment, Justice Mortimer noted that it was the role of the Court to exercise judicial power, irrespective of any view that gambling may be a desirable or an undesirable activity. In other words, the Court should not engage in policy deliberations as it is the role of Parliament to determine whether gambling should be lawful and to what extent.
Many comments were made by Justice Mortimer in connection with gambling and the participation by players with gaming machines. One of the comments was the following:
“On the evidence, if there is one message which is conveyed by the publicly available material to those who gamble on EGMs, it is that the machine will always come out ahead. I am satisfied on the evidence that most individuals who gamble on EGMs understand this reality at some level….Yet human nature being what it is, people have a capacity to deny, downplay or ignore objective reality.”
The authors of this paper consider that, while the Court found in favour of the Respondents in this matter, EGM suppliers, operators, and regulatory authorities, are likely to continue to come under scrutiny from anti-gambling lobbyists and media. Justice Mortimer’s comments in particular regarding return to player information being initially confusing may become the focus of subsequent campaigns for regulatory reform, and is an area that the industry may wish to address voluntarily. Her Honour stated that an ordinary and reasonable gambler would not understand the concept of a theoretical return to player, at least as it is expressed on the player information display. Further, the Court specifically commented on the difficulty involved in understanding the player information being made available by significant elements of the Australian community.
Of particular relevance is the following statement:
“Further, there is a significant proportion of the Australian community who have little or no literacy skills in English, even if it is their first language. They also will not be assisted by written information, although they will be able to understand the symbols.
“Most of the authorities to which the parties referred also involve these unstated premises. Many also implicitly assume a fairly high level of formal education in the “ordinary and reasonable” consumer. It is a larger question, and not one that needs to be answered in this proceeding given the findings I have made and the lack of engagement by the parties with the matter, but at some stage courts may need to start readjusting the approach taken to the hypothetical “ordinary and reasonable consumer”, so that it does not involve an inherent bias towards individuals with a relatively high level of formal education and literacy who have English as their first, or at least completely proficient, language.”
Although it was not argued by the Applicant, the Court in this case inferred that it may be possible to find that certain features of the Dolphin Treasure EGM that contribute to a player perceiving an increased number of “near misses” give rise to unconscionable conduct by Aristocrat and Crown under the ACL.
This view is supported by Recommendation 5 in the Gambling Minimisation Report authored by the University of Sydney Gambling Treatment Clinic that was released late last year by the NSW Government. The recommendation stated that positive alerts to players, in reference to “losses disguised as wins” be added to the gaming machine Prohibited Features Register in respect of future gaming machines.
It is also relevant that, in obiter, the Court noted that neither a supplier nor an operator of EGMs could be considered to be a mere conduit for a contravention “committed” by the other party. Accordingly, in an appropriate case, both operators and suppliers of gambling services (with the requisite knowledge of the relevant conduct) may be liable for a contravention of the ACL.
In light of Justice Mortimer’s comments, Addisons encourages both software developers and gambling operators to evaluate carefully their gaming machine products to ensure compliance with the ACL.
One final issue raised in the Court’s decision is whether, irrespective of the mandatory nature of the National Standard, compliance with the National Standard may constitute conduct that is in itself misleading or deceptive or capable of being characterised as unconscionable for the purposes of the ACL. If so, this will leave suppliers in a dilemma on the basis that failure to comply with the National Standard may cause them to be in breach of their obligations as an authorised manufacturer, whereas strict compliance with the National Standard may cause them to be subject to allegations that they, and their venue customers, are in contravention of the ACL.
These are matters that will no doubt be the subject of further discussion by the gaming machine sector, irrespective of whether or not an appeal is filed.
If you would like more information about your obligations under the ACL, or how it affects your business, please contact a member of Addisons’ Media and Gaming team.
1.Also referred to in Australia as “poker machines” or “pokies”and in the United States (and elsewhere) as “slot machines”.
Liability limited by a scheme approved under Professional Standards Legislation.
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