The Ontario Racing Commission (ORC) is no more. The Alcohol and Gaming Commission of Ontario (AGCO) is now in charge of regulating the sport. What do these changes mean for the industry and what is coming next?

AGCO CEO Jean Major — who was CEO of the ORC from 1995 to 2004 — outlined that and more in a long interview with Canadian Thoroughbred conducted at the end of April.

Responsibility for regulating the sport in Ontario officially transferred from the ORC to AGCO on April 1. How much work was it to shut down one commission and transfer everything over to AGCO?

“Well, just to give you some context, the government wanted the soft merger… to be done over a two-year period. I insisted that we would work hard to do it much more quickly. So, nine months is what we landed on and it was one heck of a ride. We had, I think, more people involved in the merger logistics than actual people that were moving over to the AGCO.”

Is it true that this the first time a major commission has been shut down in Ontario?

“Yes. There was not a lot to borrow from in terms of lessons learned. We did our homework in terms of looking at how mergers occur in the private sector and there are a surprising number of failures. The vast majority of them fail. In large measure, it’s not the logistics, it’s the mix of cultures that clash. In this particular case, we spent a lot of time on the soft leadership skills here and the values of the two organizations are very similar. So, that went a long ways in terms of ensuring the culture was a good fit within the AGCO. The other thing was on messaging and approach. This is not an assimilation. We’re not forcing or trying to tack it on to the AGCO, but, rather, true integration, which means the gaming and liquor side of the business also has to make some changes to accommodate racing. It’s not the poor cousin of the agency, it’s in fact, very much part of the family. I think, in part, I had some history there, some credibility with the staff, so it wasn’t a huge leap for them because they knew what they were getting in terms of a leadership style.”

What is the status of that transition?

“The logistics of the merger have been very well executed on time and on budget. That’s the transfer of assets and the transfer of people within the organization. Everyone is now physically here and the next few months we’ll be working on integrating the racing regulatory functions within the infrastructure of the AGCO. We’re not, as an agency, divided by lines of business. We don’t have an alcohol division or a gaming division or an Internet gaming division. We’re largely structured by function. We have licensing and inspectors. We gain some significant operational efficiencies by having say a liquor inspector, if he’s in Kenora, he can go see a lottery retailer in Kenora, go see a bar, go see a bingo hall, go see a casino. So, you save a lot in terms of time and gain some efficiencies in doing so. Racing will be falling in that same logic. The only function that racing has that the rest of the agency doesn’t have is the officiating function. That’s the judges and the stewards. They will be a branch of racing operations that recognizes the uniqueness of that particular function, because it doesn’t fit anywhere else. But, other than that, the inspectors will go with the inspection division and licensing will go with licensing. We have some racetracks, for example, that we have a few touch points with them. They will come and talk to us to get a liquor license. Then they will talk to us to get a racetrack license. They will talk to us to get a gaming license. So, now it’s a one-stop shop. We’re trying to line these things up to make it easier for the businesses, as well, to deal with us and lessen the paperwork.”

On the inspector front, that means you have more inspectors at your disposal. Will that increase the number of inspections that are racing related?

“Off the cuff, yes, I think it’s a fair assumption because we have quite a contingent of OPP officers. While they spend a lot of their time on casino enforcement units, they can be available for large-scale investigations with respect to inspections. We had worked with the Racing Commission in the past on joint forces operations. We worked jointly, for example, to do the background checks of racetracks. We worked together to develop one report, as opposed to two. I know that was appreciated by some of the tracks because it’s an intensive process in terms of doing backgrounds. Now just more of the same and it will be a lot easier because we’re all part of the same family.”

What have you heard from the industry about the transition?

“My guess is the rank and file are probably not very much aware of AGCO or what this will do in terms of impact and, for the most part, that was by design. We didn’t want to create shock and awe in the industry and disrupt people’s businesses or licenses. So, one of our key goals was to ensure that this, from a horseman’s perspective or a track’s perspective, was seamless. They won’t know, necessarily, what is going on behind the scenes. They just know that they can start racing at certain dates. So, for us, the internal side was shielded from the public and the external facing was, ‘Let’s make sure that nobody knows there was a merger; that it was that smooth.’ The reaction from some — particularly with OHRIA (the Ontario Horse Racing Industry Association) who were briefed through the process in terms of logistics of what this meant — was extremely supportive of the merger itself, which is, by itself, the majority of the battle. There was no resistance with this internally with staff and externally to the industry. Nobody was saying, ‘This is a bad idea.’ In fact, people saw the logic of it. We integrated the business, we might as well integrate the regulators.”

Does AGCO have oversight over the Horse Racing Appeal Panel (the new body that will hear appeals brought by those challenging a fine and/or suspension)?

“Yes, that’s right. The accountability is to the (AGCO) board. There are three fundamental segments to a regulatory body. There is the governance function. There is the regulator and there is the adjudicator. Those three segments were housed in the Racing Commission in the past. So, the (ORC) board was regulator, adjudicator and governor. Those three segments are now segmented. (AGCO’s) board of directors govern. They have governance oversight over the legislative mandate of the agency… The regulator makes the rules and enforces the rules or ensures compliance. The adjudication is separate now and goes to this particular panel or the License Appeal Tribunal, depending on the nature of the appeal. So, while the Horse Racing Appeal Panel is a construct of the statute that’s accountable to the board, it’s entirely independent in its decision making.”

The licensing appeal group already existed?

“That’s correct. It hears appeals from a whole bunch of different statutes. The Licensing Appeal Tribunal is a bit of a factory. They hear appeals on honesty and integrity questions on a daily basis and they’re very good at that. But, to read a race? No. To get into the chemistry of drug violations? I don’t think so. So, we wanted to pull that out to have people that actually understand the business and still maintain the independence from the regulator… Sonny Sadinski is the chair, which is great news. Sonny was an excellent chair of the Racing Commission, I thought. We worked very well together. Although, the nature of this relationship is, obviously, going to be very different.”

Is the Horse Racing Appeal Panel up and functioning?

“Yes, they’re up and functioning and I think they have a few hearings already scheduled [as of the end of April]. The old (ORC) board will continue on matters that were ceased. That’s maybe three or four cases. There was a regulation that was passed that allowed them to continue to finish those hearings.”

Is it accurate that there will be a review of the Rules of Racing this spring?

“Yes it is.”

What are you hoping to accomplish by looking at the Rules?

“It seems to me that since the Racing Commission Act of 2000 was developed there really hasn’t been a comprehensive review of the regulatory framework. The biggest part of which is the Rules of Racing. But it’s not limited to that. In the rest of AGCO, we have undergone for the last several years — at least eight, nine years — a complete rethink to our approach to regulating casinos and liquor. They’re driven by a philosophy about outcome-based and risk-based approaches to regulation. We’ll be launching in the spring a comprehensive review of the entire regulator framework. Nothing is off the table. So, the Rules of Racing, the directives, the policies, our processes, our approach. Ways we can reduce our regulatory or administrative burden and really challenge old assumptions, including: Who does what? How do we manage positive tests? How do we investigate those things? I have some ideas and I think we need to flip some of these things on their head because they’re not working or are sub-par.”

People figure out how to work around them?

“Yes, and there’s been advances in technology. We’re still operating a structure that’s based on a different time. What should the role of judges and stewards be at the track other than officiating? What should be the role of inspectors versus investigators? Which commission official should report to the AGCO as opposed to the racetracks? So, that’s what I mean about ‘Who does what?’ On both the gaming and liquor [matters], there’s one thing staff here know and that is never to answer a question with… ‘Because we’ve always done it that way.’ Why? If you can’t articulate it, maybe we shouldn’t be doing it.”

You mentioned judges and stewards. You are a big advocate of transparency and protecting the public. Is there a role for stewards and judges to explain their decisions directly to the public after they make them?

“I think that’s part of the dialogue that I want to have. That’s an important element of it: that the betting public understand the reasoning, as opposed to having this curtain. It’s not helpful to the track if people are upset by a call. I’m not saying that it is necessarily what we’re going to do, but I think it’s part of the dialogue we need to have. That’s what I mean by approach to regulation. As a regulator, I feel fairly strongly that regulators regulate and businesses run the business. We have a public interest to protect, which includes, certainly, the betting public. It includes the horsemen, it includes the tracks and it also includes the horse. It’s a balance of those various interests. We need to find that sweet spot. We can do that. We can be fair. We can be a tough regulator, but fair, but if we can help in the process the business — whether it’s through the horsemen or through the associations or through the racetracks — then I’m not opposed to that. Part of the discussion we need to have is, ‘What is it that you want as a regulator?’ We’re part of the business in order to protect it. We’re not there to regulate the business and drive it into the ground. On the contrary, we’re trying to make sure that it’s thriving and it’s accomplishing its objectives from a regulatory perspective and a public interest perspective.”

You mentioned protecting the horse. Are you hoping to enhance drug-testing protocols?

“Yes. One of the things I think is sorely lacking and I’m very encouraged with the Canadian Pari-Mutuel Agency (CPMA). We’ve had some excellent discussions and dialogues with Steve Suttie, who is the executive director there, about education… It is certainly a cornerstone in our approach to regulating casinos and liquor to change the focus from strictly enforcement to our performance metrics, which is in compliance with the law. It includes enforcement, but that’s not where we stop. Once you’ve readdressed your lens to a compliance focus, then education and training of your licensees to at least understand the rules and understand expectations becomes a central component of your approach to regulating. The very least of what we could do or should be doing is educating people about the drug control program… It is complicated, but people need to understand the science. They need to understand how to use the guidelines, the withdrawal guideline book. There is a commitment from the CPMA to do so. We will be there to help them.”

What about oversight of racetracks? Is the AGCO going to have an increased role in terms of requiring higher facility standards?

“Yes, I think so. I think that has to be part of the dialogue. I know that when I was here in my first round as CEO of the ORC, we were trying to do that with the teletheatres. We were particularly successful on that front, but we also did it for racetrack surface standards. I know that we’re going to be faced with the challenge that people are struggling financially. We need to be reasonable in terms of what we push, but at least have a strategy. Again, I don’t want to dictate business practices or business decisions, but, rather, help the industry move the yardstick in terms of the offerings and whatever it is that we can do. I don’t think this particular objective falls in the hands of just one element of the industry. It’s a combination. To the degree that the regulator can add leverage to ensure that certain standards are met? Absolutely.”

Explain how AGCO will work both with Ontario Lottery and Gaming (OLG) and Ontario Racing (OR).

“When the merger took effect, what was clear was the adjudication was going to be separate from the Commission. The regulation was all going to be transferred to the AGCO and the transfer payment agreements and the Horse Improvement Program would be going to the OLG. What we have affected through the transition required a tremendous amount of collaboration between the three — OLG, OR and ourselves — to ensure in, particular, the transfer payment agreements, that $100 million and the HIP program be completely seamless so there is not one hiccup. We were successful in doing that. We’re still heavily involved in helping OR in whatever way they need. As long as we’re invited, we’ll help in terms of setting up their internal controls and structures to be able to manage those programs. We’re doing the same thing with OLG in terms of transferring institutional knowledge and any assistance that they’d want. But I think OLG is in a pretty good spot… OR, I know they’re in the process of recruiting for an executive director. That’s going to be an important recruit. To me, for the same reasons that it was essential and critical 20 years ago [at OHRIA], a very strong industry body that is fairly representative of the industry is extremely important. All the significant policy issues, at least from a regulatory perspective that we’re going to make, we need to know where the industry stands. If the industry is divided, it’s very difficult to come up with good public policy, because you don’t know who to listen to.”

Does the AGCO have an oversight role directly with Ontario Racing?

“No, it’s an independent body. It will have its own board of directors. I think the idea here is OR has been set up as a non-profit entity to manage the HIP program. I think the idea is to back in the OHRIA piece as part of that in the next several months and to have a robust governance structure in order to not only manage the Horse Improvement Program, but also provide the voice of the industry in its interactions with the OLG, with its regulator and with government in general. The only oversight that we will provide is over the administration of the Horse Improvement Program. It’s not at all to second-guess any business decisions that OR makes, but rather to ensure that the process has been followed and that there is accountability. So, when OR makes plans that they’re going to change the Sires Stakes program or the Thoroughbred Improvement Program that they follow the proper process that’s been disclosed to the public. For example, it should require some consultation. It should be done fairly and openly in the decision-making process. If they say they’re going to use the money for a particular purpose, that it, in fact, it is used. That’s the limit to which we’re going to be involved in any kind of oversight of OR. Otherwise, it’s a very private, independent industry body… It’s in keeping with the industry desire to be more autonomous in making the decisions that affect them. I’m fully supportive of that. That’s where the program belongs. This is money that is taken from the wagers and pumped in, in order to achieve certain goals for the industry and those decisions should be made by the industry.”

What are the most pressing horse racing issues on your plate right now at the AGCO?

“From an operational perspective, now that the operations are over here, I have a chief operating officer named Tom Mungham who is going to be doing the bulk of the heavy lifting in terms of operations. I can’t do the same kind of job I used to do at the Racing Commission because of my additional responsibilities. There’s going to be a very busy agenda because of this fairly comprehensive review of the regulatory framework… Part of the regulatory framework of the rules review is going to be how should we be looking at positive tests? Perhaps doing a much greater due diligence before a positive test is actually called to find out if it was, in fact, contamination that we don’t necessarily go to the length of a hearing.”

The science is so acute now that you can find a range of things that may not have been an attempt to administer a performance enhancer.

“That’s right. When I spoke about public interest before, we have no interest in prosecuting people that are innocent. But, I also have to consider the other horsemen that were in a particular race. I have to consider the betting public and I also have to consider the welfare of the animal. It’s not an easy issue to wrap your mind around, but I think we can make improvements on how we manage it.”

Other priorities?

“Right now, one of my priorities is making sure OR is on its feet. I understand the challenges this industry has with respect to all being on the same page at the same time. I’m not sure everyone is looking for a 100 per cent solution, but looking for a good enough kind of structure, a robust structure that will help us. As soon as that gets done, the faster we can get on to making some changes that are more substantive to the industry. I will be looking forward to the engagement piece, which I’m hoping is late spring, so we have a blueprint moving forward by the fall… We’re going to be going out to the tracks and talking to people and soliciting input in terms of submissions. Some of our ideas will be very specific, others will be open-ended. I don’t want to suppose I know all the issues that are out there… This a great time for people to say, ‘You know what? We’ve been doing this and it hasn’t been working for 30 years. It’s time to change it.’ Let’s look at it.”