Media Curbs Go Down a Dangerous Road

26 July 2012

The Australian Financial Review
26 July 2012

By Tony Shepherd
President, Business Council of Australia

Changes to media regulation being considered by the federal government highlight the risk of reactive and ill-conceived regulation, go beyond the role of government in regulating the market, and in some cases represent a threat to freedom of the press and, importantly, freedom of speech.

Good regulation can help clarify the rules of the game, increase certainty and reduce barriers to investment and expansion for business. Poorly conceived regulation imposes significant costs on business and the community by impeding innovation, discouraging investment, narrowing consumer choice, raising prices, lowering wages and discouraging job creation.

Unfortunately, proposals from the government’s Convergence and Finkelstein reviews fit firmly into the latter camp. Of particular concern are proposals for a new public interest test for the ownership of media assets, a new “super” communications regulator and a publicly funded statutory authority to monitor journalistic reporting, with increased penalties and scarce rights to appeal.

In assessing suggestions for new regulation, business has a right to expect that there is a genuine problem that has been rigorously analysed, and the need for regulation has been thoroughly tested.

It is disappointing that the media proposals prematurely recommended regulatory models largely on the basis of theoretical assertion of market failure, with little hard analysis or evidence. By failing to adhere to appropriate regulation-making processes, these proposals raise two fundamental issues that are of considerable concern to the broader community.

First, increasing government control over media ownership and standards around the world has diminished the freedom of the media to meet its Fourth Estate obligations.

That is to protect and enhance democratic principles and the rights of citizens against misdeeds, missteps and corruption by governments, business and individuals.

Second, if we accept it is appropriate for government to decide who owns media companies, what is the risk that government – now or in the future – may seek to have a say in the ownership of other types of businesses deemed to have a public interest role?

Is it appropriate for governments to decide ownership of banks, insurance companies, health service providers or educational institutions, for example? It should be made clear that the so-called public interest test would be in addition to existing competition law and existing media diversity laws and would give us one of the most regulated media sectors in the world.

New Zealand has no such laws and no local content requirement, but it has a robust and quality media and a creative television and movie industry. Such proposals fly in the face of well understood rights of ownership. After all, it is investors who put their capital at risk and it is these investments that create jobs.

In addition, Australia has world-leading corporate governance practices. Under these practices, it is directors, shareholders and management that are best placed to determine the long-term direction and strategy for a company. It is a fundamental right of ownership.

In the case of media regulation proposals, it seems there is little attention being paid to shaping the optimum regulatory environment to take advantage of technological innovation and the impact this is having on expanding consumer choice and empowerment.

An innovative and dynamic communications and media environment, driven by rapidly evolving technologies, demands a combination of restraint and creativity when it comes to regulatory proposals.

Overregulation, particularly in this burgeoning new digital media landscape, has the potential to undermine investment that could ensure a greater diversity of media voices in the future. In this context, proposals for strengthening self-regulation do warrant closer consideration.

Put simply, the proposals fail fundamental regulatory tests where benefits demonstrably outweigh the costs. Taking the public interest test as an example, there must be grave doubts on this score.

The Convergence Review’s own discussion paper conceded that such a test could hinder investment and innovation, introduce a new level of administrative complexity and increase industry uncertainty.

A subjective test would also put media asset values at risk and deter investors at the very time we need to boost our capacity to take advantage of digital media opportunities.

Another principle of good regulation-making is that existing regulation should always be utilised before seeking to introduce new rules. It is not clear that existing competition law administered by the Australian Competition and Consumer Commission is failing consumers by seeking to maintain appropriate competition within and between media platforms. It is this very competition, aided by rapid technological advances, that is enhancing consumer choice and facilitating media diversity.

It is unclear why a new super media regulator is required to supersede the Australian Communications and Media Authority, which enforces existing media diversity rules. The authority was established from a merger between the Australian Communications Authority and Australian Broadcasting Authority just eight years ago to better deal with the demands of convergence in the digital age.

In addition to failing fundamental principles for regulation-making, the proposals also fall short on principles of good governance and the appropriate independence of regulators. Bringing responsibility for press standards closer to government, even at arm’s length, could be the first step in the gradual erosion of media independence and political accountability.

Now is not the time for government to back away from a corporate regulatory environment based on market fundamentals with a stable, low-cost regulatory system that encourages private investment.

A cautious and careful response to these two reviews would be sensible.



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