Australian rugby boss John O'Neill has laid down the law to the Melbourne Rebels, reminding them they must follow the rules on player recruitment, and labelling as "ungrateful" some in the Victorian fold.

Amid reports the Rebels were preparing to ignore a new Australian Rugby Union protocol that no team announce the signing of a rival franchise's players until the end of the Super 14 this year, O'Neill has told the new outfit they have no choice but to toe the line.

But the ARU chief has also signalled he is open to a compromise on the rule, which is designed to prevent the Rebels pillaging the playing stocks of the Brumbies, NSW Waratahs, Queensland and Western Force.

The Force's signing of big names such as Nathan Sharpe during the 2005 season caused anger among rivals.

"Say it is Rocky Elsom, say it is Berrick Barnes (the Rebels have hired).

"How would you feel if you were the Waratahs or the Brumbies? Our responsibility is to look after all of Australian rugby, not just Melbourne," O'Neill told AAP on Monday.

He defended the rule, which some have criticised for being tough to enforce and for making it difficult for Melbourne to recruit their allowance of 10 overseas players for their start in 2011.

"I think it's a bit disingenuous," he said of the latter argument.

"I could equally say you've got the benefit, a concession which none of the other provinces have, of signing 10 players.

"You go and sign three or four really marquee foreign players and that will have a significant impact on Australian players going to that province.

" ... (The rule) creates something of a fairer environment, it still won't stop negotiations and winks and nods going on but it is a form of protection."

O'Neill said he was not concerned the Rebels would flaunt the protocol because they had joined Super rugby by invitation and were bound by a participation agreement.

But a compromise was still possible after ARU officials heard the concerns of new Rebels boss Brian Waldron and coaches Rod Macqueen and Damien Hill last week.

"We haven't excluded further conversations with Melbourne to see whether we can continue to help them but I don't think anyone should underestimate just how much help the ARU's given Melbourne already," he said.

"The entity putting the most money in and with the most risk in all this is the ARU."

That, he said, included a $3 million grant and $1.3 million loan and the waiving of any licence fee.

All of which O'Neill said had made some elements within the Victorian rugby set-up, who had fuelled reports critical of the ARU, ungrateful.

"All this propaganda that we were anti the VRU is under-substantiated," he said.

" ... You can keep throwing bricks through our window ... we successfully won the bid, SANZAR awarded the licence to the ARU and it was up to the ARU to successfully establish a team in Melbourne.

"The absence of any form of thank you to the ARU is noticeable."

Melbourne officials did not immediately return AAP's call for a response.

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