The Victorian racing industry wanted conditions placed on Victoria's next wagering licence option that would have fettered the state government, the tribunal hearing the Tabcorp-Tatts merger ruled.

The proposal – jointly put forward by Racing Victoria, Harness Racing Victoria and Greyhound Racing Victoria – was condemned by the Australian Competition Tribunal as involving a "degree of political and commercial unreality".

"In some respects the proposed changes are anti-competitive themselves," the tribunal concluded in its judgment, which gave the green light to the merger of Tabcorp and Tatts.

The Victorian racing bodies wanted to compel Tabcorp to participate in the next Victorian licence process and use its "best endeavours" to ensure a bid is successful. Tabcorp holds the current Victorian licence, which expires in 2024.

The Tabcorp joint venture is Victorian racing's major source of funding. "Given the uncertainty surrounding the Victorian licence, such a condition is unreasonable," ruled the tribunal, which was presided over by Justice John Middleton.

The Victorian racing industry also wanted Tabcorp to enter into new arrangements on identical terms with the existing joint venture. That was slammed as "inappropriate" by the tribunal.

"Such a condition fetters the freedom of the Victorian government to restructure licence arrangements, likely compels Tabcorp to pay a non-commercial price and puts Tabcorp at a competitive disadvantage," the tribunal said.

Victorian racing's unsuccessful attempt to shape the next licence is unlikely to be viewed favourably by the Racing Minister Martin Pakula and the state government, which is responsible for structuring the licence auction. The Victorian government did not oppose the merger.

As the tribunal noted, "with the only exception (Victoria) all of the state peak racing bodies supported the proposed merger and have put evidence before the tribunal to this effect".

The tribunal also dismissed a claim by the Victorian racing industry that a decrease in funding for Victorian racing would lead to a decline in participation by international horses and, by extension, tourism.

"The tribunal is not of the view that the merger will lead to a decrease in funding for the Victorian racing industry. The question of how Racing Victoria allocates its funding to premium events is not for the tribunal to determine, but is a matter for Racing Victoria."

The Victorian racing industry was granted leave to intervene in the hearing after suggesting the merger would reduce competition for the next wagering licence and future returns to the racing industry.

The industry has now been left with a legal bill running into hundreds of thousands of dollars.

The merger was also opposed by racing.com and corporate bookmakers spearheaded by CrownBet.