The newly formed Bloodstock Industry Forum (BIF) has pledged a commitment to improve practices following a damning report on the conduct of a minority of buyers and sellers.
Justin Felice’s report, commissioned by the British Horseracing Authority, emphasised the bloodstock industry is “not a fundamentally unsafe place to do business”, but improper practices “by a small number of unscrupulous individuals have been allowed to continue without challenge in a way which adversely affects the industry as a whole”.
It stated unethical and/or unlawful practices “which appear to be most prevalent” include secret profiteering and dual representation, which is where an agent works for both buyer and seller — charging commission to both parties — unbeknown to one or both parties.
Also on the list were luck money, where the agent for the buyer demands money from the seller on the sale of a horse, and bidding up, which is the artificial increase in the sale price of a horse at auction through a series of pre-agreed bidding, whereby the buyer pays more for the horse than they otherwise would have done.
The 83-page report was officially published by the BHA in December.
One of the main reasons it was commissioned was a concern that racehorse ownership was in gradual decline, which would create major issues for the sport if not addressed. The BHA was also concerned one reason for the marked decline of 18% in sole ownership, compared to a 4% increase in syndicate ownership, was owing to concerns about the integrity of the bloodstock industry.
Mr Felice found the top end was a “vibrant industry operating on a significant scale”, compared to vulnerability at the lower end of the market.
Statistics from the Thoroughbred Breeders’ Association found return on capital investment for breeders was at only around 1-3%, with as many as 66% of breeders facing an unprofitable year in 2017, compared with 45% in 2013.
The review team interviewed a wide cross-section of the industry and did have some positive feedback, including one sales house stating the “vast majority of people are scrupulous and honest”.
“There was however considerably more in the way of negative feedback,” added the report.
“The overwhelming perception of the review team is that there is a substantial level of anxiety within the bloodstock industry that it is highly vulnerable to unethical and potentially unlawful practices, resulting not only in financial loss for those participants who are victims of such practices, but also public exposure which could cause serious damage to the credibility and reputation of the industry.”
In terms of sales houses, the team received both positive and negative comments and clarified that it “has not seen any evidence that the sales houses operate with a lack of integrity themselves”.
The investigating team was also told of a small proportion of agent “bad apples”.
“The evidence suggests that this behaviour is only undertaken by a small, but significant, minority of agents in the industry,” states the report.
“No interviewee suggested that this is a problem which affects all agents (or, indeed, only agents).”
In the concluding comments, the report states that these issues are not new, and while previous reviews in 2004 and 2008 led to an industry code of practice, “in the absence of proper monitoring and enforcement, the improper practices have been able to thrive”.
“The bloodstock industry is at a crossroads,” it states. “It can either collectively grasp the opportunity that this review affords to achieve transformational change or continue to turn a blind eye to concerning practices which, at some point, will cause the industry significant damage.
“As one of the sales houses remarked, ‘we need to change what is deemed as acceptable and what isn’t’.”
What has happened since?
The new forum (BIF) was created in September as a result of the report.
It is made up of representatives from across the industry, including the Federation of Bloodstock Agents, Goffs, the National Trainers Federation, the Racehorse Owners Association, Tattersalls, the Thoroughbred Breeders’ Association, the Breeze-up Consignors Association and the BHA.
Tighter regulation from the BHA is also on the cards. It was decided that the reports recommendation of licensing of bloodstock agents was not the way forward, but the Federation of Bloodstock Agents has committed to put in place “more rigorous requirements” on its membership, including an integrity course for all.
Work is under way in several areas, including on a new code of practice, which will introduce a complaints procedure independent of the industry bodies with sanctioning power lying with the BHA.
BIF chair Jimmy George, Tattersalls marketing director, said: “Every one of the component members of BIF is committed to introducing a more effective programme of education, awareness and communication of appropriate conduct for all participants.” He added that the aim is to have “full harmonisation” of the new code with the relevant Irish governing bodies as well.
“The British and Irish bloodstock industry is a genuine success story and it is our collective responsibility to do all in our power to preserve and enhance its global status.
“All those involved in the BIF, including the BHA, are committed to ensuring the highest possible standards of integrity, and to maintaining and increasing confidence in an industry which is admired throughout the world.”
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