Music industry analyst, Phil Tripp, put the proposal for the levy -- which included changes to the Copyright Act to safeguard consumer's rights to copy digital content for personal use -- to music industry associations earlier this month.
ACA senior policy officer for IT and communications, Charles Britton, said the proposal had some merit but that authorities had to go further than guaranteeing consumers' rights to copy music CDs for personal use.
Britton said the proposal behoved authorities to address a raft of issues surrounding consumers' fair use of copyright material, including that of mod-chips, which are currently outlawed in Australia.
"We're not saying [the proposal]'s not a good idea. We're not opposed to the remuneration of copyright holders -- it might be a way of progressing the interest of both parties...on the other hand we have significant issues [with Australia's copyright laws] that need to be addressed before any sort of levy could be sensibly contemplated," said Britton.
Mod-chips commonly allow consumers to circumvent features of their consoles and DVD players that block access to discs printed to run on substantially identical machines built for other regions. However, the mod-chips also allow gaming enthusiasts to by-pass features of their game consoles that block access to pirated game discs.
The ACA has recommended that the use of mod-chips be made legal under Australian copyright laws.
However, such a move is likely to anger consoles gaming industry giants like Microsoft and Sony, the latter having fought a lengthy, high-profile legal campaign to stop the use of the mod-chips in its game consoles in Australia.
Sony spent nearly two years in the Federal Court, fending challenges from Australian Competition Consumer Commission (ACCC), convincing judges the chips were illegal under the Copyright Act 1968.
The legal battle came about as result of a civil action Sony bought against a Sydney man for selling PlayStation mod-chips late in 2001 which became a test case for the devices' legality.
The ACCC intervened in the case in February 2002 to defend consumers' rights to use the chips. The competition regulator argued that the mod-chip circumvented an artificial trade barrier stopping Australians benefiting from global competition in game title market.
-The ACCC believes that overseas markets give Australian consumers access to a wider range of competitively priced film titles with special features not otherwise available here," said the then Chairman of the ACCC, Professor Alan Fels, at the time.
The ACA shares the view put forward by the ACCC when it challenged Sony, and now believes that if Tripp's proposal goes through without intervention, music companies will be able to "double-dip" -- taking a cut of the levy "but still lock material away with contract or technology".
According to Britton, the need for a review is made all the more urgent by Federal Parliament's upcoming deliberation of the US Free Trade Agreement (FTA) which may see Australia adopt what he described as a "draconian US-line on copyright".
"The US has a constitutional guarantee of free speech - we do not. The US has fair use provisions that provide some level of protection for consumers in home copying - we do not," he said.