Commercial Agreements - Cash for Comment Round 2

Another ‘behind the pot plant' scoop for Media commercial arrangements. But it has also referred the matter to the DPP for prosecution. Watch, John laws as star witness on the 7.30 flagged that apart from some recommendations The ABA also found that 2UE breached a Report and Denton, comments from the Prime for changes to the Commercial Radio Codes of corresponding licence condition and some Minister on his association with Alan Jones, Practice it does not intend to further regulate provisions of the Codes of Practice. and the resignation of Professor David Flint... the field. But with Jones, the ABA found that the the ABA investigation into 2GB, Alan Jones and Real progress was made in the regulatory agreement was made with the licensee and the Telstra was anything but routine. The Authority's measures implemented after Cash for Comment money was paid to the licensee. This meant April 2004 report on the commercial agreement Round 1. And the moves by the ABA to enforce that there was no commercial agreement1 in between 2GB and Telstra largely took the the penalties for breach of the new Standards place. Accordingly, Jones was not required to form o f a response to the CLC's complaints of in the case involving 2UE, John Laws, Telstra disclose the arrangement when he engaged in October 2002 but the debate that followed took and NRMA demonstrated that - at least in some editorial discussion of issues involving Telstra. broadcasting standards to the centre of political cases - the rules themselves are sound and the The ABA did find that there was an 'arguable debate in Australia. After all the media attention, ABA is committed to their effective operation. case' that 2GB (not Jones) would need to make what remains of the original complaint? But the case of Alan Jones, 2GB and Telstra announcements that the station's sponsors has led the CLC to express grave reservations include Telstra, but there is no requirement for about the overall effectiveness of the current Jones to make any qualifying statements at the regulatory arrangements. time that he is promoting that sponsor. Round 2 Investigations Findings on the effectiveness There were three investigations into 2UE and of current regulations 2GB launched in 2002: These investigations led the ABA to question whether the existing regulations concerning • The investigation into ownership and disclosure of commercial agreements need control of 2GB and 2CH (via Macquarie review and amendment. The ABA concluded that Radio Network or MRN, the parent the Standards have operated effectively, that is company of the licensee Elarbour Radio Pty they have met their objectives for distinguishing Ltd) and specifically, the interests of Alan between advertising and editorial comment and Jones (Report #1, June 2002) for disclosing commercial agreements between • The investigation into the commercial presenters and sponsors. In the third report on arrangements of John Laws and 2UE (via Alan Jones, the ABA notes that the Disclosure Southern Cross Broadcasting, the parent Standard was never intended to cover the company of the licensee Radio 2UE Sydney situation of arrangements between sponsors P/L) and specifically, the sponsorship and licensees - it is only designed to cover arrangements involving Telstra and NRMA arrangements between sponsors and presenters. (Report #7, November 2002) However the ABA did question the effectiveness • The investigation into the commercial of the provisions in the Codes of Practice that In April this year the Australian Broadcasting arrangements of Alan Jones and 2GB (via deal with opportunities for the presentation of Authority (ABA) delivered its third and final MRN) and specifically, the sponsorship different views and the distinctions between report in a series of investigations into the arrangements involving Telstra (Report #3, advertising and editorial. The ABA expressed commercial arrangements of presenters, April 2004). the view that these provisions might need licensees and sponsors of commercial radio. The investigations produced the following improving and signalled its intentions to discuss A bystander could be expected to ask, 'didn't all principal results. this with Commercial Radio Australia. this happen in 1999?'. Of course it did and in fact Are there any regulatory the main players are the same: Alan Jones, John Findings in relation to the Laws, and the licensees of 2GB and 2UE. And just gaps? as in 1999, Media Watch broke the story about commercial arrangements of The Telstra-2GB agreement is excluded from undisclosed commercial arrangements and the John Lauus and Rian Jones the disclosure requirements despite numerous Communications Law Centre (CLC) put the case The two investigations into commercial personal messages and contacts between to the ABA for better regulation. arrangements found that both Laws and Jones Alan Jones and Telstra executives. It should But there are differences between the were personally involved in securing these deals. be remembered that in April 2002 Jones was Commercial Radio Inquiry (widely known as the In the case of Laws, the benefits flowed directly recorded on six separate occasions continuing Cash for Comment inquiry) and the three later to him. This resulted in the arrangements his long-standing practice of making critical investigations covering the period November qualifying as a 'commercial agreement' within comments on a national communications carrier. the meaning of the Disclosure Standard. The 2002 to April 2004. However, the ABA report reveals that he then fact that Laws did not make the required In the period between the two sets of personally involved himself in negotiating a investigations the ABA has found continuing disclosure statements meant that the licensee lucrative sponsorship deal between that carrier breached the Standards. Accordingly, the ABA non-compliance with rules established to cover and the radio station. That agreement was signed

ABA Investigations into Alan Jones/2GB and John Laws/2UE November 2002 to April 2004 Report #1 Alan Jones, 2GB No breach of the Broadcasting Services Act 1992 (BSA). Jones did not acquire an equity interest Ownership and control in MRN as widely reported in April 2002; Jones and associated companies were in a position to exercise control as at 24 October 2002 by virtue of an entitlement to a dividend interest exceeding 15%. This was reported to the ABA consistent with the requirements in the BSA. Report #2 John Laws, 2UE Several breaches of the Commercial Radio Standards and the relevant licence condition Commercial agreements in relation to agreements between Laws and NRMA and Laws and Telstra. Matters to be referred to the Director of Public Prosecutions (DPP). Report #3 Alan Jones, 2GB No breach of the BSA, the Commercial Radio Standards, or the Codes of Practice. Commercial agreements

Communications Update June 2004 - Issue 166 - page 1 on 17 July 2002 and from this point on his standards, privatisation, and the acquisition of We understand that the ABA is prepared to critical comments cease; instead they become naming rights to sports stadiums. discuss the matters more broadly with industry favourable comments on matters that include Some say that the difference between 1999 and and interested parties. In view of the continuing current political matters such as the privatisation 2004 is that we are now quibbling over who is failure of at least some sections of the industry of Telstra. In fact from this point, Telstra gains the purchaser and who is the seller. Telstra and to self-regulate to an appropriate standard, we opportunities for favourable comments. the ABA have commented that the deal was have expressed a lack of faith in any industry- based initiatives, including any amendments to The 2GB arrangement is a clever one. In the known to the public. Telstra, of course, had no the Codes of Practice. Commercial Radio Inquiry Jones was found to interest in keeping the deal quiet - it wanted its have breached the Commercial Radio Codes of name mentioned as often as possible - as long The CLC will continue to push for improvements Practice on a number of occasions. His conduct as the comments were favourable. In this way, to the Commercial Radio Standards. when at 2UE, as well as that of John Laws, led the hourly sponsorship announcements imposed Derek Wilding to the implementation of the Commercial Radio in some cases by the Disclosure Standard are Standards. John Singleton, when enticing Alan a bonus for an advertiser such as Telstra. But Jones to 2GB in 2002,'decided to avoid these the ABA report reveals that Macquarie wanted Stop press: complications. Instead of agreements that to keep the deal under wraps. If Telstra had not On 28 June 2004 the ABA announced that the would be between Jones and sponsors such as wanted the arrangement made public, is there DPP has declined to pursue the prosecution of Radio 2UE in relation to the breaches of the Telstra, the new agreements would be direct anything in the current regulations that would with 2GB. require any disclosure? Disclosure Standard by John Laws. Acting ABA Chair Lyn Maddock said, 'The burden of proof But Jones' role was clear: in addition to In fact we do not know whether there are any in criminal cases is much higher than in civil his salary as a paid employee, he would be other deals between sponsors and licensees that cases and for a successful prosecution in this exist and of which the public is unaware. The leveraged into the company itself, as its growth case it would have to be proven that Radio ABA has not asked anyone that question. was based on his own popularity arrd the 2UE engaged in the conduct with the requisite potential growth in influence. The deal for Jones criminal intention' (MR66/2004). was expressly based on his potential to increase Recommendations This result leaves the ABA with no effective the value of the company: he is not entitled to a In a letter to the ABA on 8 April this year, the enforcement powers, other than the revocation proportion of the current shares, but he would CLC set out its comments as follows: be entitled to buy into this private company as of a licence. The ABA has itself raised this problem In our view, the fact that Alan Jones and and sought additional administrative remedies it grows by way of an expansion in the number 2GB did not breach any o f these provisions of shares. By 2007 he will be entitled to own under the BSA. The result in the 2UE case does not mean that their conduct was demonstrates the rise of self-regulatory remedies. 15°/o of the total shares in the company (thereby suitable conduct for a highly influential reaching the benchmark of company interests, It also raises the prospect of a regulator forced to presenter and the licensee of a commercial rely largely on good intentions. the same line that kept Kerry Packer's share in radio broadcasting service. Instead, it Fairfax to 14.9% before selling out in 2001). reveals that the regulatory framework Parts of this article appeared in an opinion piece Thus the ABA concludes, "This arrangement governing sponsorship deals in commercial in the Sydney Morning Herald, 30.06.04, p. 13. gave Mr Jones an incentive to contribute to the radio is incomplete. growth of the network over the period of his In these circumstances, the distinction contract" (Report #3, p. 19). between agreements between a sponsor In the CLC's view, the ABA's findings of breaches and a presenter (as in the case o f John by Southern Cross (in relation to the agreements Laws and Telstra) and agreements between Telstra's sponsorship of the between John Laws and NRMA and John Laws a sponsor and a licensee (as in the case Telstra Stadiums' and Telstra) and the Authority's act of referring of MRN and Telstra) is artificial: the 15 July 2002 the matters to the DPP do demonstrate that same culture of commercial promotion the Standards are effective in relation to those Ziggy Switkowski realises the PR is generated, threatening a perception of problems of Telstra paying millions matters they set out to regulate. In this respect, editorial integrity. despite claims made against the ABA about of dollars for the naming rights to Accordingly, the CLC has proposed the following delays and disinterest, the CLC considers that two sports stadiums - he suggests to options for reform: the ABA has taken important regulatory steps in Telstra people to get John Singleton making the Standards and in enforcing them. • The Disclosure Standard could be amended to and Alan Jones involved cover arrangements between sponsors and However, it is our view that the investigations 23 July 2002 licensees (as in the case of Telstra and MRN). reveal gaps in the regulatory framework that have Alan Jones defends Telstra's actions been exploited by commercial radio broadcasters. • A new ’Political Matter' Standard could be in his 2GB radio program While the ABA has indicated that the Disclosure developed to deal with the most important Later th a t same day ... Standard was not designed to apply to agreements cases of threats to editorial integrity (that George Buschmann at 2GB sends a between sponsors and the licensee company of the is, cases where the comment concerns a tape to Alan Pretty at Telstra: radio station, the Alan Jones case is one where a political matter and the independence of presenter was recruited to a competing station for either the presenter or the licensee could be "Alan made com m ent in relation to a very attractive salary package plus an entitlement affected by an agreement with a sponsor). your exciting new sponsorship of key stadiums in Australia". to buy into the company, based on the increase in • The status of agreements to contribute to the value of that company that would flow from production costs could be clarified. The ABA How this is regulated his new role as presenter. report stated that there is only an 'arguable 'Arguable case' that Telstra is case’ that Telstra needed to disclose its contributing to the production costs Is this ‘cash for comment? agreement with 2GB. This needs to be of the Alan Jones program: In one respect little has changed since 1999: the corrected. The definition of 'production • if so, hourly sponsorship ABA report demonstrates that Telstra purchased costs' needs to be expanded to cover any announcements (i.e. de facto favourable comments by Alan Jones on service commercial arrangements. advertisements) requirec; • if not, no'commercial ; "I will continue to pursue that matter with the Prime Minister of watering Australia with Telstra agreement' in existence and no \ money. We have reached the point of no return. If we don't win this time, there may be no need for disclosure. \ farmers left next time. It's critical stuff. Enough's enough, isn't it?" Source: ABA Report #3, Chapter 7 \ Alan Jones, 2GB, 22 July 2002 page 2 - Issue 166 - Communications Update June 2004 ------