‘With friends like this’ Part IV: regulation by the unregulated

“In 2008-09, DEWHA was assessed as non-compliant for the Resale Royalty Right for Visual Artists Act 2009 and a post-implementation review is required to commence within one to two years of implementation.”¹

The reason why the Artist Resale Royalty Act was assessed as non-compliant was because the Office for the Arts did not do the required Regulatory Impact Statement. Significant regulatory decisions that are not accompanied by a RIS require a Post-Implementation Review (PIR) to be undertaken within one to two years of implementing the regulatory legislation. And a PIR prepared on this issue will only be assessed as adequate if it meets the requirements in the PIR guidelines.

The reason why the Office for the Arts has not completed and submitted a PIR is because it has not done so. The Office of Best Practice Regulation does not know why the requirement that a PIR be undertaken within one to two years has not been met.  The OBPR cannot find any documents detailing why the Office for the Arts has waived the requirement for the Act to undertake a PIR until June 2013, four years after the Act was passed by Parliament .

If there ever was a law that needed an RIS  pre-implementation, the Artist Resale Royalties Act 2009 was it.

  •  The ARR is not opt-in for artists therefore it is not an individual economic right: it is a market regulation mechanism.
  • The ARR was intended to regulate unconscionable “carpetbagger’ practices in a section of the indigenous art market. The indigenous art market is about 10% of the value of the total art resale market. 90% of those affected by this regulation are not the intended target of the regulation.²
  • The ARR involves significant market distortions and creates real substitution issues. Long dead artists, New Zealand and other non-resident artists are not affected by the regulation. The regulation is effectively a discriminatory tariff against resales of  living Australian artists work.
  • ARR adversely affects primary market sales: good ‘second hand’ prices for anything that can cost many tens of thousands of dollars is obviously a factor in initial purchase decisions.
  • ARR  is unlikely to ever pass a cost-benefit test. The administration fee is 10%, therefore the royalties on $100 million of affected resales would only generate $500,000 in administration fees. This scheme can never be self-funding; it will always need government funding.³
  • ARR was introduced without any real, wide consultation with those directly affected by it. Given its significant effects upon market and buyer behaviour, this was an unforgivable act.
  • The ARR Act is sui-generis; it is not part of the Copyright act. Copyright is never compulsory. Because the Act was not a modification of an existing known system  its consequences were and are inherently unpredictable.
  • At the level of intention, the ARR is deeply confused as to exactly what its purpose is and who it is for: it is an individual economic right that is semi-compulsory and inalienable; a contradiction in terms. ARR’s benefits to the majority of artists directly affected by it are very questionable; in its 2004 report Access Economics was right to warn that claims of net benefit to artists were based on very unrealistic assumptions about market behaviour.

The other day we had a long conversation with someone at the Office for the Arts. In this conversation, the official repeatedly linked “need” for ARR to a need for regulation of the “unregulated” commercial art market.  Claims by the government art sector that the commercial  indie art sector needs regulation are so common as to be unremarkable.  An hour later we realised that this claim for a need of regulatory power came from a representative of a government office that has not complied with the regulatory requirements of the  Office for Best Practice Regulation for almost three years so far !!

Apparently for the Office for the Arts, compliance with internal governance requirements is optional, if it suits. It is the Office for the Arts that is in need of regulation.

Parts 1, 2 and 3 of ‘With friends like this”  With friends like thisWith friends like this: Part II ,  and   Artist resale royalties: a strange loop.

¹ www.finance.gov.au/obpr/…08…/bestpracticeregulation0809.pdf

² There are people in remote parts of Australia who live and operate outside regulation, taxes and the law. The problem is not lack of regulation, the problem is the difficulty of enforcement.

³ About $700,000 in royalties has been collected since the scheme was enacted more than two years ago, therefore administration fees so far are about $70,000. The government, to date, has had to commit a total of $2.25 million to implementation of the scheme. And as the scheme gets bigger it will exhibit reverse economies of scale; the collection threshold at $1,000 is well below the economic-to-collect and deliver thresholds.

About john r walker

Have been exhibiting for 30 years . Utopia Art Sydney is my sole outlet. Apart from painting representations I have had a long interest in deep time , history in general and the representation of representation. http://johnrwalker.com.au/
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