Oz radio's Smashy & Grab

Two stars of Australian broadcasting have been earning millions of dollars in secret sponsorship deals. So why are they still on air?

Sounds familiar: media moguls buying up football teams; embittered ex-prime ministers taking pot-shots at their successors; days of persistent rain; striking teachers and transport workers; illegal immigrants overwhelming resources; Posh Spice on the front pages and the political agenda-setters on the radio. Welcome to Australia.

Here the similarities should end. Australian commercial radio is experiencing "a little local difficulty", a cash-for-comment scandal involving secret sponsorship deals worth millions of dollars for its two broadcasting icons, Alan Jones and John Laws. More "Smashy and Grab" than "Smashy and Nicey", allegedly.

An Australian Broadcasting Authority (ABA) inquiry into Sydney's highest-rating talk radio station, 2UE, has found 60 breaches of broadcasting codes by Jones and Laws failing to reveal personal deals with sponsors mentioned on air, and 30 breaches of adverts not distinguished from editorial.

Denouncing the inquiry as "much ado about nothing", Jones tells listeners the report "holds no weight of law". He is correct. There is nothing in existing legislation or industry codes of practice that prohibits personal sponsorships.

A concerted media campaign against Jones and Laws appears genuinely to have shocked both men. Many people make lots of money from broadcasting - as Laws himself says, "I have never denied that I am a commercial being" - so what's the agenda here? One journalist told me, "We're talking entrenched corrupt behaviour unchecked since the start of commercial radio."

Jones and Laws have perfected the peculiarly Australian blend of hard news, hard sell and "community service" broadcasting. Such is their power that if they move stations, advertisers and listeners follow. Alan Jones, 56, is Australia's highest-rated breakfast show presenter, best known internationally for his previous career as the Australian Rugby Union coach. A recent profile of him said: "His words can swing voters, crush hopes and send share prices tumbling... Jones is arguably one of the most influential - and feared - figures in Australia."

John Laws CBE, 64, dominates the morning shift. His smooth greeting - "Hello world, this is John Laws" - is no idle boast from the man who claims the world's largest radio audience for his programme, syndicated to 70 stations.

For years there were rumblings about secret "arrangements" influencing radio commentary. During the Nineties, Laws and Jones were both signing sponsorship deals with major corporations. These contracts were neither illegal nor prohibited under industry codes, but listeners were not aware of them. Given that advertising revenues support 60-100 per cent of the electronic media, does the audience have the right, as they say in the US, "to know by whom it is being persuaded"? Under the Australian system, it's often impossible to determine who is paying which piper. All we know, now, is that enormous sums can change hands.

In 1994, ABC's Media Watch programme accused Jones of "blatant bias" and suggested strongly that 2UE was breaching broadcasting codes. Neither the press nor the ABA reacted.

In 1998 Media Watch revealed one of Laws's contracts offering promotional services including on-air plugs and editorial support in return for large monthly payments. Still there was little response.

In July 1999 Media Watch tried again, revealing details of a contract allegedly worth A$1.2m (£500,000) with the Australian Bankers' Association for Laws to stop his scathing attacks on the banks and to give them "positive comment, over and above paid advertisements". This time the programme hit the target. The next day the ABA announced an inquiry into 2UE.

The inquiry investigated A$3m (£1.2m) of Laws's deals and A$1.5m (£600k) of Jones's. Both men insisted their on-air support for the companies involved was unaffected by financial considerations.

Moreover, unlike Britain and the US, Australia's commercial radio codes of practice are purely voluntary. The industry relies on self-regulation and the ABA has no power to penalise individual presenters. All it could do was impose additional conditions on 2UE's licence and threaten to withdraw the licence if these new criteria are breached.

Isn't this just a beating with a rather small feather, as many commentators allege? "Not at all," says Sydney Morning Herald writer David Marr. "For Australia, which has no tradition of this kind of scrutiny, this report is quite revolutionary. The ABA has taken the first step in a process that will ultimately outlaw 'plugola'."

But Alan Jones hits back: "On every instance in the inquiry, which went back to 1993, it was found that the material I had used was factual and newsworthy and that the opinions were 'genuinely held'."

So has the inquiry made a difference? Have listeners, advertisers or government ministers deserted 2UE? In the days after the ABA findings are published, Laws interviews Opposition leader Kim Beazley and Jones interviews Prime Minister John Howard. No boycotts there then. The Prime Minister's office says it is his duty to communicate to the people and Jones's programme is an important way to reach them. It's business as usual.