Australia's porn industry began a court challenge to the country's film ratings yesterday in a test case which family groups said could lead to explicit sex movies being sold openly in shops and petrol stations.

Pornographic movies can only be sold legally in two Australian territories, including the capital Canberra, and generated an estimated A$500 million ($393 million) last year, mainly through mail orders.

While it is legal to own or watch sexually-explicit movies at home anywhere in Australia, sales are banned in the country's six states.

Australia's censors rate films from G, which are open to anyone, to R for violent or disturbing films suitable only for adults, and X for sexually-explicit films with heavily restricted distribution.

Now pornography company AdultShop.com Limited has asked the Federal Court to overturn the X category used by censors, arguing community tastes had changed since standards were drafted in 1984.

"The Office of Film and Literature Classification is required to take into account current community standards in relation to explicit erotic films," AdultShop Chief Executive Officer Malcolm Day told Reuters.

AdultShop operates 28 retail stores throughout Australia and New Zealand and is valued at around A$9 million. The company sold A$42 million worth of adult products last year.

Day denied the court action was aimed at boosting business, although he described the company's current worth as "dismal", blaming state restrictions.

A survey for the company last September by ACNielsen found 70 per cent of Australian adults were not offended by explicit erotic films and 76 per cent thought they should be available on a restricted basis.

"At the end of the day we're in business, but we're not the only company selling adult films. As a result of the restrictions 95 per cent of films are sold uncontrolled on the black market," Mr Day said.

The company decided on court action after censors gave an X rating to the comedy Viva Erotica about a failed Hong Kong director who decides to make a softcore film starring his girlfriend Miss Mango to pay his bills.

"The OFLC's decision to classify 'Viva Erotica' X18+ was based upon the film containing depictions of actual sexual activity between consenting adults and did not address whether or not the content within the film was likely to cause offence," Mr Day said.

As the case opened, the classification board said it would begin public forums over the next six months to gauge whether people agreed with current ratings.

Anti-porn activists said any move to weaken standards could see porn become more easily available in video stores and shops.

"There is a demand for pornography. We would be of the view that that's regrettable, but that's a different debate. People can access X-rated material in Australia very easily at the moment," the Australian Family Association's Angela Conway told Australian Broadcasting Corp. radio.

But Day won support from respected prime-time film reviewer Margaret Pomerantz, who said non-violent pornography should not be solely singled out for draconian restrictions.

"It can make people happy. It can improve people's sex lives," she told a community forum in Sydney.

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