2.26 In any set of recommendations for a new National Classification Scheme, there needs to be not only a consideration of the changing external environment and the underlying principles that inform proposed recommendations, but also a rigorous evaluation of both the nature of the problems that policy makers are seeking to address, and the ways in which existing policy instruments are working – or failing to work – in approaching those problems.
2.27 In the Australian Public Service Commission’s paper, Smarter Policy, these questions are addressed in the following way:
(1) A rigorous analysis requires an assessment that the policy intervention will achieve net benefits for the community after taking account of its impacts. The identification of a social, economic or environmental problem does not justify government intervention in itself. Policy makers need to demonstrate that the benefits of intervening outweigh the costs.
(2) Policy makers do not start with a clean slate. The choice of policy instruments is invariably constrained, to some extent, by the existing array of government interventions. Thus an audit of current policy instruments already operating in the policy space is a prerequisite for a good policy design process. This audit would ideally include interventions by all levels of government and the full range of policy instruments—both regulatory and non-regulatory. 
2.28 The Terms of Reference require the ALRC to inquire into whether the existing National Classification Scheme continues to provide an effective framework for the classification of media content in Australia. Some of the perceived positive and negative aspects of the current scheme are discussed below.
Positive aspects of the current scheme
2.29 The classification cooperative scheme that came into place in 1995 was a significant improvement. Before then, there existed a complex network of Commonwealth, state and territory laws that bore only a limited relationship to one another and which meant, in practice, that the classification of a single film could involve 13 pieces of legislation across various jurisdictions.
2.30 There was also a lack of commonality between the classification guidelines and markings that applied for films and those for television. John Dickie, the last Chief Censor and the first Director of the Office of Film and Literature Classification, observed that the 1995 reforms had considerable merit, and that because of ‘the investment by Government and industry over many years to inform media consumers’, the ALRC Inquiry
should try to improve the system rather than start all over again. It took many years for the viewing public to synthesise the classification categories for film and DVDs with those for television when they were altered in the early 90’s.
2.31 Under the current system, the Classification Board makes over 7,000 decisions within prescribed time limits every year, and few of these decisions attract controversy. Commentators have noted that distributors generally have realistic expectations about eventual classifications, particularly for films and DVDs.
2.32 The public generally knows and understands the current classification system. In a 2005 survey undertaken by the Office of Film and Literature Classification, virtually all who responded were familiar with the classification system for film and DVDs, and the vast majority believed that classification symbols were useful.
2.33 The Classification Board and the Classification Review Board are independent statutory bodies, operating apart from government, industry, and each other. This formal independence has been viewed as one of the Australian classification system’s very important and highly valued features.
2.34 A co-regulatory framework has now operated in broadcast and subscription television for 18 years, and it has strong support from the industries involved. In its submission in response to the Issues Paper, Free TV Australia observed that:
This system of regulation, which is underpinned by a robust complaints handling process which applies across the Code, the [Children’s Television Standard] and the [Australian Association of National Advertisers] Codes, is working well. This is evidenced by the fact that there is a very low level of complaint about programming content (including advertisements), even though commercial free-to-air broadcasters are transmitting content twenty-four hours a day, three hundred and sixty five days a year across nine channels—an annual total of 78,840 broadcast hours. In 2010 Free TV’s average daily reach was 13.8 million people. Yet only 834 classification complaints were received for the whole year, with only six upheld by broadcasters. In 2009–2010, the ACMA conducted 85 investigations into commercial television broadcasters, of which only 30 related to classification matters, with only 11 of those resulting in a breach finding.
2.35 The Australian Subscription Television and Radio Association (ASTRA) was also highly supportive of co-regulatory arrangements for subscription television:
ASTRA supports an approach where general principles and a national framework for content classification are determined by the Government through Parliament, but where content providers are primarily responsible for ensuring compliance with classification and content regulations that may apply. Working within a framework that reflects prevailing community attitudes and standards, content providers are best placed to respond appropriately and in a timely manner to consumer concerns relating to content classification. The current co-regulatory model for subscription television is an example of industry-based content classification regulation that works well both for consumers and broadcasters.
2.36 The ACMA has noted that co-regulatory mechanisms as applied through industry codes can be an important part of any future regulatory framework, as they can, subject to a number of conditions, provide the basis for more efficient and effective ways of achieving policy goals by influencing the behaviour of relevant industry stakeholders.
Under communications and media legislation, self- and co-regulatory arrangements require industry participants to assume responsibility for regulatory detail within their own sectors, and this is underpinned by clear legislative obligations, with the regulator retaining reserve powers. These arrangements provide flexibility for the ACMA, as the regulator, to exercise a variety of roles dependent on the nature of the concern, such as whether the issue is a policy matter or market issue. This includes the flexibility to not intervene to allow market-based solutions to develop, provide advice to government on policy issues, or encourage industry-based solutions. 
Negative aspects of the current scheme
2.37 Respondents to the Issues Paper drew attention to specific aspects of the current classification framework that have become dysfunctional, are failing to meet intended goals, and create confusion for the industries involved and the wider community. As these are discussed in more detail in later chapters, they are noted in this chapter as issues requiring attention in a revised National Classification Scheme.
2.38 Major inconsistencies exist in the application of classification guidelines across media platforms. The major anomaly has been in the treatment of computer games as compared to films and publications, with the absence of an R 18+ classification for computer games. This arose out of concerns that existed in 1994 about the possible effects of greater interactivity. This decision, which has only recently been reversed, can be seen as overly restricting the rights of adults to access content on a particular media platform, and as marking a reversion to earlier censorship-based understandings of the role of government.
2.39 Another problem of the current scheme is the pervasive ‘double handling’ of media content for purposes of classification. Feature films that were classified for cinematic release need to be reclassified when subsequently released as DVDs or in an equivalent home entertainment format, because the content has been ‘modified’ by virtue of the inclusion of additional features—even if the final classification is in almost all cases the same. For example, television programs that were classified when initially broadcast have to be reclassified by the Classification Board if re-released as a DVD ‘box set’. Such activity is costly to the media industries, time consuming for the Classification Board, and diverts resources from other areas of potentially greater public concern.
2.40 The Classification Act provides that Commonwealth, state and territory ministers must agree to any amendment to the National Classification Code and on classification guidelines or amendments to those guidelines, and the Intergovernmental Agreement under which the scheme is established and maintained may be amended only by unanimous agreement. This process is time consuming and poorly designed to deal with significant changes in either community expectations or technological advances. Agreement among the Commonwealth, states and territories to the introduction of an R 18+ classification for computer games took over a decade to achieve through the framework of the Standing Committee of Attorneys-General meetings.
2.41 While the classification cooperative scheme overcame some of the anomalies in the treatment of media content in different states and territories in Australia, significant differences remain. The sale and distribution of X 18+ material is permitted in the ACT and the Northern Territory, but not in the states, while states have different regulations relating to restricted publications and the sale and display of R 18+ films and computer games. There are also significant differences in enforcement and penalties provisions between states and territories. Some states and territories approach enforcement of classification laws as a criminal matter dealt with by the police, while others, such as the ACT and Queensland, deal with it through trade and commerce related agencies.
2.42 There is evidence of considerable, and growing, non-compliance with Classification Board decisions, and a refusal on the part of distributors to submit submittable publications to the Board. The Issues Paper drew attention to ongoing difficulties in controlling access to, and enforcing penalties for, online material, the distribution of unclassified or incorrectly marked material, distributors not complying with call in notices, the resources that would be required to more effectively investigate and prosecute breaches, and inconsistent enforcement provisions between states and territories.
2.43 The absence of an X 18+ classification for sexually explicit material across Australia means that there is what one submitter described as a significant ‘grey line between R 18+ and RC’ in the classification scheme. The exhibition and distribution of X 18+ material is permitted in the ACT and the Northern Territory but not in the states, where the possession of such material is permitted, but sale or distribution is prohibited. This has led to the existence of a ‘grey market’ in publications and DVDs distributed nationally—estimated to be worth about $20–30 million a year. The significance of this ‘grey market’ becomes even greater as adult content is now largely migrating to the internet, and is distributed on an international basis.
2.44 The breadth of the current Refused Classification (RC) category has been identified as a problem with the current scheme, particularly as it may be applied to online content through a proposed mandatory internet filter or through voluntary filtering activities undertaken by ISPs themselves. The RC category is discussed in detail in Chapter 10. As it currently stands, RC covers material that is illegal under criminal law to produce, distribute or possess—for example, child abuse material—and material that is illegal to distribute but is not illegal to possess—for example, material depicting various sexual fetishes.
2.45 The RC category also covers material that ‘promotes, incites or instructs in matters of crime or violence’. This means that material relating to drug use, shoplifting, graffiti or euthanasia can be refused classification on grounds similar to that which would be applied to material advocating murder, rape or terrorist acts. While almost all stakeholders accepted the need for an RC category, many considered the current RC category to be overly broad, too ambiguous in its application, and highly problematic in the context of any proposed mandatory internet filtering.
2.46 The current classification framework potentially applies greater restrictions to online content as compared to similar, or even the same, content in other media formats. Dr Gregor Urbas and Tristan Kelly observed that, under the current Broadcasting Services Act
more content is prohibited online than offline … With the introduction of iPads and the rise in popularity of digital books, more existing publications are likely to become available over the Internet, and this inconsistent standard will become more problematic.
2.47 At the same time, a complaints-based approach to the classification of online media content, as compared to a statutory requirement to submit content for classification in other media, generates inconsistencies of treatment across media platforms. Lack of clarity in the relationship between online and ‘offline’ media classification manifests itself in an uncertain relationship between the ACMA and the Classification Board as regulators of media content.
2.48 The ACMA has been responding to an increasing number of complaints about online content. In May 2011 alone, it received 754 complaints, more than the total number of complaints for the entire year of 2006–07. Between 1 July 2010 and 31 May 2011, the ACMA received 4,155 complaints, investigated 3,565 of them, and actioned 1,768 items deemed prohibited or potentially prohibited content. Given the exponential growth in the number of complaints about online content, and the slower growth of the number of films, publications and computer games requiring classification, online investigations will soon exceed the activities of the Classification Board. This raises the issue of whether there should be a single point for all classifications and investigations that operates across all platforms, rather than the current platform-based division of responsibilities.
2.49 Finally, schs 5 and 7 of the Broadcasting Services Act have been described as ‘highly complex and confusing legislation that is almost incomprehensible’ and legally uncertain. Telstra pointed out that, where content is assessed under sch 7, the legislation as currently drafted may involve a costly ‘double classification’ obligation, which disadvantages Australian online content providers.
This superfluous ‘double classification’ obligation for online content creates unnecessary uncertainty for industry participants implementing these arrangements and raises the spectre of prohibitive compliance costs should online content provided by Australian content providers need to be formally classified by the Classification Board … Australian online content providers subject to this requirement would be put at a major competitive disadvantage to overseas based content providers who would not be subject to these obligations.
 Australian Public Service Commission, Smarter Policy: Choosing Policy Instruments and Working with Others to Influence Behaviour (2009).
 Australian Law Reform Commission, Censorship Procedure, ALRC Report 55 (1991), 55 (1991), [1.11].
 J Dickie, Submission CI 582, 11 July 2011.
From 1 July 2009 to 30 June 2010, the Classification Board received 7,302 applications, including applications to classify 4,820 films, 1,101 computer games, 291 publications (228 single issue and 63 serial publications), 258 online content referrals from the ACMA, and 88 referrals from enforcement agencies. These figures are generally consistent with the number of applications the Classification Board has received over the previous two years: D McDonald, Correspondence, 6 May 2011.
 See, eg, J McGowan, ‘Classified Material’ (2007) Law Society Journal 22, 22.
 Office of Film and Literature Classification, Classification Study (2005), 6, 17, 32.
 Free TV Australia, Submission CI 1214, 15 July 2011.
 ASTRA Subscription Television Australia, Submission CI 1223, 15 July 2011.
 Australian Communications and Media Authority, Optimal Conditions for Effective Self- and Co-regulatory Arrangements (2010), 1.
 G Griffith, Censorship in Australia: Regulating the Internet and Other Recent Developments (2002), 12.
Classification (Publications, Films and Computer Games) Act 1995 (Cth) ss 6, 12.
Agreement Between the Commonwealth of Australia, the States and Territories Relating to a Revised Co-operative Legislative Scheme for Censorship in Australia (1995), cl 3(2).
 See also Australian Government Attorney-General’s Department, Submission to Senate Legal and Constitutional Affairs References Committee Inquiry into the Australian Film and Literature Classification Scheme, 4 March 2011; Senate Legal and Constitutional Affairs Legislation Committee—Parliament of Australia, Estimates: Transcript of Public Hearing 18 October 2010, 11, 14 (D McDonald).
 I Graham, Submission CI 1244, 17 July 2011.
 Eros Association, Submission CI 1856, 20 July 2011.
 G Urbas and T Kelly, Submission CI 1151, 15 July 2011.
 Australian Communications and Media Authority, Monthly Summary: Online Content Complaints, May 2011.
 I Graham, Submission CI 1244, 17 July 2011.
 Telstra, Submission CI 1184, 15 July 2011.