FACEBOOK/GOOGLE v. AUSTRALIA

Showdown Down Under?

By Marco Schmidt

August 9, 2021

Introduction

Earlier this year, it appeared that Australia was going to set an impressive precedent by regulating major digital platforms like Facebook and Google. Both platforms were flexing their muscles in the light of the “News Media Bargain Code” that the government eventually ended up passing into law. The Code now allows Australian news outlets with a revenue over 150,000$ to apply to enter into negotiations with Big Tech platforms about a remuneration for their content that is shared on said platforms. In addition, it is also possible to force platforms into an arbitration process with local news outlets in case the earlier negotiations were not successful.  How did Australia get to this point, what has happened in response and which developments can be expected in the near future?

Status Quo

After an inquiry conducted by the Australian Competition & Consumer Commission (ACCC), it was clear that Google and Facebook were both dominating the media and advertising markets. Out of every 100$ spent on online advertising, Google takes more than half, Facebook another quarter. Google and Facebook should initially be the only companies to which the Code is applicable, with the option of adding other platforms that prove to be dominant market players at a later point in time. Its goal is to ensure remuneration of news outlets for content  they generate that ends up being distributed via Facebook or Google. Content from different news media outlets is gathered on said platforms, keeping consumers rather on Facebook than actually visiting the website of, for example, a local newspaper. As a consequence, such outlets incur substantial financial losses as consumers read news articles (or brief summaries) on one of the major platforms, where, at the same time, revenue through advertising is created.

Consequences

While Google reached licensing agreements with major news companies like Rupert Murdoch’s News Corp (after threatening to shut down its search engine), presumably to avoid being forced into an arbitration procedure foreseen in the Code, Facebook gave proof of its potent position in the market. Arguing that its platform actually was a factor to increase traffic on websites of other news outlets, Facebook decided to ban domestic and international news altogether. Accidentally, the pages of the Australian Department of Fire and Emergency Service and other educational pages were blocked, causing severe criticism, especially in the light of wildfires and Covid.

There is also some evidence that misinformation flourished after trustworthy news outlets were banned. The ban was only upheld for a few days as Facebook and the Australian government reached an agreement, in particular regarding the arbitration clause which will become effective after a period of two months of mediation between platforms and other publishers. Yet, it showed clearly that platforms would fight tooth and nail against such kinds of regulations.

Criticism

That deal was subject to criticism from the Australian opposition, accusing the government of caving in and creating a situation in which the code would hardly be applied to big platforms as they could conclude their own agreements with other players. Therefore, the so-called “blanket deals” would certainly not benefit smaller players in the Australian news media market. Primarily companies of the size of News Corp could strike their own deals to get remunerated. The intended “significant contributions to the sustainability of the Australian news industry” would merely help a few. A publisher with a turnover below the threshold of $150,000 per year cannot even apply to be paid for content under the code, which overall raises another difficult point: Does the Code prevent any anticompetitive behavior or is its purpose a mere transfer of wealth from the platforms to traditional news outlets?

Anti-competitive behavior?

The ACCC and therefore the Australian government have mainly focused on the increasing concentration in the markets. While a quarter of traditional newspaper jobs disappeared, the digital media sector exploded, with Google and Facebook taking 80% of the growth in digital advertising in the period between 2016 and 2019. At the same time, the ACCC still conducts inquiries and is working on determining whether the platforms actually engage in anticompetitive behavior. This in fact does underline the suspicion that the Code is mainly driven by protectionist motives rather than reaction to certain anti-competitive behavior. Because, in all fairness, this development can be monitored in many different countries, traditional news outlets like newspapers lose significant market shares as people nowadays search for information mostly online. It is therefore rather questionable if Big Tech platforms are actually engaging in anti-competitive actions and if the Australian legislation is the adequate response.

International

What happened in Australia also raises the question if legislators elsewhere are inspired by the Code. Australian Senator Rex Patrick put it rather bluntly after Google threatened to pull out of the market: “It’s going to go worldwide. Are you going to pull out of every market, are you?”. And indeed, similar legislation is supposedly prepared in Canada and New Zealand.

In the United States, around the same time, the “Journalism Competition and Preservation Act” was introduced by Senator Amy Klobuchar (and supported, in an unlikely alliance, by Republican Senate Minority Leader Mitch McConnell) which is also supposed to help local news businesses to strengthen their negotiating position with Big Tech platforms. And considering that Facebook and Google are both based in the U.S., it does not seem likely that they engage in such drastic tactics like temporarily shutting down services on their home turf.

The EU is working on its Digital Markets and Digital Service Acts and first agreements with French publishers have already been signed by Google. It seems that tighter regulation around the globe is just a matter of time and that, at the moment, forcing Big Tech to remunerate other news outlets is the most common approach.

Conclusion

Regulation is gaining more traction all over the place but it is uncertain if the Australian News Media Bargain Code will become a role model for legislation in other places. There are several weaknesses to the Code and after all, it is not clear if paying publishers for their content will really alter the high levels of market concentration. One has to recognize on the other hand that the Australian government sought confrontation with platforms and had them prove the very point the government was trying to make: Big Tech has become extremely powerful and intends to maintain the status quo. Indeed, a smart move and a case from which legislators in other nations will be able to learn from before getting into other “showdowns” with Big Tech.

Marco Schmidt just finished his law degree at the University of Trier, Germany. He is particularly interested in matters of antitrust law and is going to pursue a LL.M. in Law and Economics at the University of Utrecht, the Netherlands. Being a German native, he is also fluent in English and Spanish.