When Does Mission Creep Become Censorship?

The Australian Securities and Investments Commission is completely out of control.

The corporate regulator is an independent government agency. It is not directly accountable to a minister. It is only partially accountable to parliament.

And over the past nine months ASIC has been ordering internet service providers to censor websites it suspected of hosting fraudulent investment material.

To do this, ASIC has been utilising an obscure section of the Telecommunications Act usually used to prohibit extreme cases of child pornography.

The outrage only came to light because 1,200 other websites were accidentally censored as well.

Renai LeMay at the technology website Delimiter has the full story. In the Drum last week,the convenors of Melbourne Free University – one of those innocent websites taken down by ASIC’s actions – explained what happened when
they were blocked.

It’s an almost perfect illustration of regulatory mission creep.

Legislative provisions designed to only deal with the most extreme crimes are eventually used to pursue lesser offences. Given that this involved full-blown censorship – and censorship without oversight or appeal – ASIC’s actions are incredibly reckless.

Censoring the internet is a gross abuse of its status as an independent regulator.

Perhaps we could forgive an abuse of power if it was a one-time thing. But it’s part of a pattern.

In September and October last year the federal government was pushing hard for a data retention scheme to govern the internet. Such a law would have compelled internet service providers to retain the browsing habits of their customers for two years, on the off-chance law enforcement agencies wanted to have a look at them later.

The data retention proposal was both vague and authoritarian. Senior ministers claimed the policy was to protect us against the worst of the worst: terrorists, paedophiles, the most terrifying cyber-criminals.

When an IPA colleague and I appeared in front of the Parliamentary Joint Committee on Intelligence and Security to oppose data retention, we were informed by one Labor backbencher, Michael Danby, that “extreme civil liberties” placed Australia at risk of another terror attack.

But as the hearings progressed it was revealed that one of the biggest advocates within Canberra for data retention wasn’t the security agencies or the Federal Police, but ASIC.

And not only did ASIC want the internet metadata to be retained – information like date and timestamps – but the corporate regulator even wanted our content to be retained too. That is, it wanted internet providers to store every single word in our emails, and every website we’ve ever visited.

Such an extreme breach of our privacy was not to protect us against terrorists, but insider trading. (The details, such as they are, are on pages 26 and 27 here.)

It’s not like ASIC doesn’t have any draconian powers already.

Judges have repeatedly slapped ASIC down for its approach to regulatory enforcement. In one case ASIC was condemned for being oppressive, for abusing process, and bringing the administration of justice into disrepute.

In another, the judge admonished ASIC’s lawyers for alleging dishonesty without any basis in evidence.

Judges often question ASIC’s motives.

One of the key insights of the public choice school of economics is that bureaucracies often act in their own interest. They want a bigger share of the government budget, more public profile, and greater powers.

ASIC is hardly the only example of a rogue agency. Under Allan Fels, the Australian Competition and Consumer Commission was similarly unchecked.

At Catallaxy Files, Sinclair Davidson has pointed out that ultimately the federal parliament is responsible for ASIC’s actions. Politicians write the laws under which the regulator operates. Politicians grant them their powers. But by deliberately setting them outside the political process – by giving them statutory independence – they’ve made them unaccountable, and allowed them to get out of control.

So politicians have to reign ASIC in. But there’s a more fundamental problem. The sort of abuse of power we are seeing out of ASIC is endemic to the regulatory state.

The logic is as follows.

The relationship between a regulator and a regulated organisation (let’s say a company operating in a marketplace) is like a continuous game of cat and mouse. A regulator makes a rule. A company changes its behaviour to comply with the rule. But, assuming the rule imposes some sort of cost on the company, the company will look for loop-holes to minimise the cost.

The frustrated regulator will write another rule to close off the loop-hole. The cycle continues.

The economist Edward Kane calls this relationship the regulatory dialectic. ASIC is a perfect case study.

Caught up in its never-ending battle with the companies it regulates, it has been lobbying for powers which no free society ought to grant even to its national security services. It has been trying its hand at censorship. And it’s launched legal crusades to raise its profile and its political and financial support.

Lawyers and economists like to talk about the content of regulation. What does a regulation permit? What does it prohibit? Nobody wants to legalise fraud or theft.

But ASIC’s extraordinary abuses of power reveal how regulation plays out in the real world – not on the clean page of legislation, or the tight confines of an economists’ model, but when self-interested bureaucrats are asked to enforce uncertain laws against an unwilling private sector.