Commonwealth Numbered Regulations - Explanatory Statements

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CLASSIFICATION (PUBLICATIONS, FILMS AND COMPUTER GAMES) REGULATIONS(AMENDMENT) 1997 NO. 282

EXPLANATORY STATEMENT

STATUTORY RULES 1997 No. 282

Issued by the authority of the Attorney-General

Classification (Publications, Films and Computer Games) Act 1995

Classification (Publications, Films and Computer Games) Regulations

The Classification (Publications, Films and Computer Games) Act 1995 (the Act) is the Commonwealth's contribution to a Commonwealth, State and Territory cooperative scheme for the classification of publications, films and computer games. Under the national scheme States and Territories have adopted classification provisions in the Act in their enforcement legislation.

The Act establishes the Classification Board (the Board) and the Classification Review Board (the Review Board) and sets out procedures for classification. The Board and the Review Board are supported in their work by the Office of Film and Literature Classification (the Office).

Section 93 of the Act provides, amongst other matters, that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed.

The Classification (Publications, Films and Computer Games) Regulations prescribe fees for actions taken under the Act where provision is so made in the Act. The purpose of the Classification (Publications, Films and Computer Games) Regulations (Amendment) is to change these fees in the context of the Government's budget decision to have the Office recover its costs in full.

The amendments generally increase the fees and expand the range of fees that are charged. For example: previously, the Regulations prescribed 2 fees for classification of a film for public exhibition dependent on the running time of the film whereas the amended Regulations prescribe a range of 19 fees for this classification, dependent on the running time and the version of the film submitted (Regulation 5). The amending Regulations insert new definitions for terms used to differentiate the fees (Regulation 3).

The amending Regulations change the fees for applications for the following actions under the Act: classification of publications, films and computer games (Regulations 4,5 and 6 respectively); approval of advertisements (Regulation 8); exemption of films for advertising purposes (Regulation 9); provision of certain information (Regulation 7); provision of certificates (Regulation 11); and, review by the Review Board (Regulation 10).

Details of the amending Regulations are set out in the attachment.

The amending Regulations come into effect on 1 November 1997.

ATTACHMENT

Details of the Regulations are as follows:

Regulation 1 provides that the Regulations commence on 1 November 1997.

Regulation 2 provides that the Classification (Publications, Films and Computer Games) Regulations are amended as set out in the Regulations.

Regulation 3 inserts definitions of 'interactive or click-on access film', 'revised version', 'running time', 'title change' and 'trailer' into Regulation 3.

Regulation 4 omits the table of fees for the classification of a publication in Regulation 4 and provides that the prescribed fee is that in Part 1 of new Schedule 1 to the Regulations.

Regulation 5 omits the tables of fees for the classification of a film in subregulations 5(1) and 5(2) and provides that the prescribed fees are those in Parts 2 and 3 respectively of new Schedule 1. Subregulation 5.3 inserts new subregulation 5(3) which prescribes that the fee for classification of a film for public exhibition and for sale or hire is specified in Part 4 of new Schedule 1. Subregulation 5.3 also inserts new subregulation 5(4) which prescribes that the fee for classification of an interactive or click-on access film is specified in Part 5 of new Schedule 1.

Regulation 6 omits the table of fees for the classification of a computer game in Regulation 6 and provides that the prescribed fee is that in Part 6 of new Schedule 1.

Regulation 7 omits regulation 7 and substitutes new regulation 7 which provides that the prescribed fee for subsection 27(2) of the Act is specified in Part 7 of new Schedule 1.

Regulation 8 omits the table of fees for the approval of an advertisement in Regulation 8 and provides that the prescribed fee is that in Part 8 of new Schedule 1.

Regulation 9 omits Regulation 9 and substitutes new Regulation 9 which provides the prescribed fee for a certificate of exemption for a film for advertising purposes.

Regulation 10.1 omits the table of fees in subregulation 10(1) and provides that the prescribed fees for review of a decision to which paragraphs (a) or (b) of the definition of "decision" in section 5 of the Act apply, are provided in Parts 1 and 2 respectively of new Schedule 2 to the Regulations.

Regulation 10.2 and 10.3 amend subregulation 10(2) by substituting new fee amounts in the table, being fees for review of a decision to which paragraphs (c), (d) or (e) of the definition of "decision" in section 5 of the Act apply.

Regulation 10.4 amends subregulation 10(2) by inserting new item 4 into the table. Item 4 specifies the fee for review of a decision to which paragraph (f) of the definition of "decision" in section 5 of the Act applies.

Regulation 11 amends Regulation 11 by substituting new fee amounts in the table, being fees for the issue of a certificate under section 87 of the Act.

Regulation 12 inserts new Schedule 1 and new Schedule 2 to the Regulations after Regulation 12.

CLASSIFICATION (PUBLICATIONS, FILMS AND COMPUTER GAMES) REGULATIONS: PROPOSED CLASSIFICATION FEES

REGULATION IMPACT STATEMENT

The following information is provided in accordance with Guidelines provided by the Office of Regulation Review, Industry Commission.

A       PROBLEM IDENTIFICATION AND SPECIFICATION OF REGULATORY OBJECTIVES

Users of classification services provided by the Office of Film and Literature Classification (OFLC) are required to pay fees for the services they receive. Such fees are being incrementally increased following the coming into effect of a revised cooperative national legislative classification scheme. Prior to the commencement of the cooperative national scheme, classification fees, which were prescribed. under State and Territory laws, recovered only a small proportion of classification costs and had not been adjusted since 1984.

This regulatory initiative seeks to ensure that a fair fee structure is introduced to recover the full cost of providing classification services from users.

The fee increases are based upon a previous Government decision to incrementally recover 100% of classification costs from users by 1 July 1998.

The approach adopted in this proposal gives effect to relevant recommendations in the independent PIVOTAL Report "OFLC Pricing Policy Review", December 1996. However, the proposal accelerates the timing of fee increases in order to ensure that costs are recovered to off-set reductions in the OFLC budget allocation in the current financial year.

It is noted that in the 1997-98 Budget, the Government has moved to require that all OFLC operating costs will be recovered from users from 1 July 1998.

B       IDENTIFICATION OF ALTERNATIVES

Alternatives for achieving a fair fee structure include:

1) increasing fees within existing categories on the basis of a proportional attribution of costs by volume; or

2) establishing an expanded fee scale on the basis of an activity based costing methodology.

Both options 1 and 2 would recover the cost of providing classification services. Neither approach takes. any account of capacity to Pay.

Option 1 would mean increasing fees within the existing fee-categories on the basis of a proportional allocation of costs with respect to application volumes for publications, films and computer games. This option would not take Any Account of variances in workload or resource requirements for the services provided.

Option 2 would enable more accurate costs for each service to be ascertained and would minimise the possibility of any cross subsidisation between services for publications, films or computer games. This option also provides for the introduction of new fee categories identified on the basis of resource differentiation and actual costs involved and therefore a more equitable costing framework.

OFLC clients would expect to be treated fairly with fees being determined on the basis of service cost attribution without any reduction in service quality or performance. It is for this reason that the proposed fees have been calculated on the basis of an activity-based costing analysis conducted by an in dependent accountancy firm.

C IMPACT ANALYSIS

Impact Group Identification

The proposed new fees will impact upon all OFLC clients comprising large and small private businesses producing or importing classifiable publications, films and computer games for local or national distribution.

The financial impact will vary depending upon the nature or market appeal of the product being classified and upon the size of the applicant's business. Typically, businesses producing or importing products in small volumes for niche markets will pay proportionately more per unit than businesses producing or importing products in larger volumes for a mass market.

Assessment of Costs and Benefits

Option 1 would recover classification costs but would not reflect actual service costs with any accuracy. It could be expected that this approach would result in services which require fewer resources being charged at a commensurately higher rate than services which require greater resources, and therefore subsidising those services. This approach would be unacceptable to industry.

Option 2 would recover the cost of providing classification -services and would require the creation of a new scale of differential fees. This approach could be expected to minimise any possible cross-subsidisation between publications, films and computer games. It could also be expected that the introduction of differential fees suggested by industry, for example new timeband fees for film classifications and new discounted fees for services provided subsequent to an initial classification, would result in a more equitable fee structure.

Currently classification fees range between $25 and $500, with review fees of up to $1,000. It is expected that under the new Regulations classification fees will range between $100 and $1,500, with review fees of up to $6,500. Under the proposed new fee structure, classification fees would remain lower than those which apply in comparable countries overseas. Currently in the United States of America film classification fees are approximately $US24,000, or $94 per million people. In Britain the classification fees for a film are approximately $6,000, or $109 per million people. In New Zealand, where the New Zealand Government has moved to recover all the costs of operating their OFLC from users, the fees are approximately $1,500, or $500 per million people. By comparison, under the new Regulations classification fees for a film in Australia will rise to up to approximately $1,500, or $85 per million people.

The financial impact upon individual businesses will vary, but overall can be expected to be relatively minor. For example, a classification, which costs between $100 and $1,500, equates to a right to publicly exhibit, sell or distribute certain publications, films and computer games in Australia, which represents a market of approximately 17 million people. A successful publication, film or computer game could achieve gross sales worth millions of dollars. For instance, a classification for a film such as Jurassic Park; which grossed over $30 million, cost $245 in 1995 prior to the commencement of the Commonwealth Classification (Publications, Films and Computer Games) Act 1995. Similarly, its sequel The Lost World, which was classified in 1997 at a cost of $500, has grossed in excess of $17 million. Small distribution or special interest products on the other hand, may only generate sales worth thousands of dollars. In certain instances legislative provision has been made to waive classification fees on the basis of educational or public health grounds if the public interest is served.

As the OFLC budget appropriation has been reduced on the basis that the cost of classification services is to be recovered from users, there is no facility to provide a public subsidy for such services. Accordingly, any reduction in revenue to be recovered from fees, as proposed, can, be expected to have an adverse impact upon the level of services provided to industry by the OFLC.

D OTHER REQUIREMENTS

Consultation

The incremental approach to recovering classification costs and the initial increase in fees on 1 January 1996 was endorsed by the Government following a Senate Committee recommendation to allow the fees in July 1996.

All OFLC clients have been consulted. A survey of OFLC clients was conducted in June 1996 and a report produced. Formal industry consultation meetings were held in December 1995, September 1996 and March 1997. Industry bodies including the Australian Visual Software Distributors Association, the Motion Picture Distributors

Association of Australia, the Eros Foundation and the Amusement Arcade Machine Operators Association have also been consulted.

In the March 1997 consultation meetings, clients and industry bodies commented on the PIVOTAL Report "OFLC Pricing Policy Review". While, industry expressed concern about any increase in classification fees, the revised fee structure was endorsed and strong support for an incremental approach to implementing fee increases was expressed. Industry has indicated a clear preference for fees to be increased to 75% cost recovery on .1 July 1997 with a further increase to 100% on. 1 July 1998.

The Government has extended the cost recovery policy in a, Budget decision to recover all OFLC costs, rather than classification costs alone from users from 1 July 1998.

Administrative Simplicity, Economy and Flexibility

The proposed changes will not add to the administrative workload of industry clients or the OFLC.

Explanatory Material

Explanatory material on the subject has been and will continue to be provided to all OFLC clients and relevant industry bodies for the interest of their members.

E       REVIEW

The proposed new fees will be replaced by revised fees on 1 July 1998 on commencement of the new legislative arrangements. Subsequently, fees will be reviewed on a regular annual basis in consultation with industry.


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