Defamation law reforms – the good and bad news for Australian small businesses

“The system has become unworkable.” That was the damning verdict on Australia’s defamation laws, according to Marcus Strom, the Media Entertainment and Arts Alliance’s president in May 2019. While the Alliance clearly has a vested interest in reforms to the law, many judicial voices have also spoken out about the increasing number of “trivial” social-media-related defamation cases they have to deal with and have also urged reform. It seems the Australian Government has finally reached the same conclusion. At the end of July 2020, New South Wales Attorney-General announced changes to the national laws “as soon as possible”, with a particular emphasis on cutting down on frivolous claims.

Of course, this has both positive and negative implications for small Australian businesses. Small businesses with less than 10 employees have – sometimes controversially – always been allowed to sue for defamation. But before we turn to the actual changes, let’s quickly review why they were necessary.

The reason behind the need for reform is in your hand right now, if you are using a smartphone. The last changes to the law were made in 2005, before the first iPhone was invented, and before the mass movement onto social media began. Now, hostile news stories or negative write-ups on proliferating review websites can spread virally in moments, causing as much damage as a virus to the named business. Courts say they are dealing with a massive rise in defamation cases, with social media a crucial factor: more than 50% of cases are “digital cases” and that proportion is rising.

Now new law will attempt to stem that tide. The most important changes include a new “serious harm” requirement for any charges to be levelled, a change most have welcomed. There is also a new “public interest” defence which will be of most use to large media companies, a new approach to limitations that finally recognises the fact content can remain online and be shared for years and capping on damages (almost certainly brought in because of some very high profile cases, such as Geoffrey Rush’s near $3 million damages from the Daily Telegraph).

If you are a small business, let’s take a look at the bad news first. In theory, the law could reduce your ability to fight back against hostile online actions, such as negative reviews or other online skulduggery motivated by malice and bad faith. We’ve written in a previous blog (LINK?) about businesses like the hair and beauty chain established by Melbourne businesswoman Gee McCracken which were destroyed by negative reviews. We’ve pointed out that although there are other ways to tackle the problem of online reviews, they are often very ineffective and in the hands of unresponsive tech giants like Google, so sometimes legal action is a sad but necessary last resort.

Last resort is the key phrase in that last sentence. In practice, we don’t think the new laws will change the situation for small and medium-sized businesses a great deal. By the time they come to firms like ours, they have usually exhausted every other avenue in trying to deal with the defamation. They usually come in knowing that legal action is expensive, risky and not always a “good look” in PR terms, but the damage to their business is simply too great to be ignored. This would surely meet the new threshold of “serious harm” We agree with Michael Douglas, Senior Lecturer In Law, who writes it would be better to find a mechanism for “smaller defamation disputes to be resolved quickly and cheaply.”

The better news is that smaller and medium-sized businesses will have some protection themselves from trivial defamation lawsuits. This is extremely pertinent if you work in the traditional or social media industries, which are the two which are most affected by the reforms. However, there are other circumstances where it could also be valuable. While we would never advise that a business should ever criticize a competitor publicly, for ethical as well as legal reasons, there are times when it could be argued to be in the public interest or a reasonable exercise of free speech. Reducing the risk of trivial defamation charges, as a result, is something we broadly agree with, although the key thing will be how courts interpret the law.

Defamation laws are always complex and we will be watching keenly to see how these new changes develop and are implemented. But no matter what happens, this is hardly likely to be the end of the matter. Just as the media landscape is in a constant state of flux, so is the law, and we know there will be another wave of reforms directed at social media giants in the future. Only one thing is certain – law firms like ourselves will need to be very diligent in keeping up with the pace, helping our clients navigate their way through a landscape which changes with every step.