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Google and Facebook challenge news bargaining code in Senate inquiry

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Facebook and Google took Australian media head-on in a Senate inquiry by Australia’s competition watchdog on Friday, 22nd January.

The Australian Competition and Consumer Commission (ACCC) pushed for a new Bill to be passed to force the tech giants to pay news publishers for their content, including any links and snippets hosted on their platforms.

The Australian Government proposed the News Media and Digital Platforms Mandatory Bargaining Code in April last year.

The Bill, which was introduced to Parliament in December, aims “to address bargaining power imbalances between Australian news media businesses and digital platforms.”

News Corp executive Campbell Reid said the Bill was necessary to tackle the “urgent problem” of sustainable journalism in the digital age.

Despite a surge in audience numbers during the COVID-19 lockdowns, the revenue of Australian media outlets has steadily declined over the years with many blaming the market dominance of foreign digital platforms.

“Australia will not be the first country that seeks to hold the digital giants to account and regulate payment for content,” Federal Treasurer Josh Frydenberg told the Australian last year.

“It is only fair that the search ­engines and social media giants pay for the original news content that they use to drive traffic to their sites.”

“We are not seeking to protect traditional media companies from the rigour of competition or technological disruption – rather, to create a level playing field where market power is not misused, companies get a fair go, and there is appropriate compensation for the production of original news content.”

An “unprecedented and distortionary outcome” for Google

In a submission to the Senate Economics Committee this week, Google claimed that the bargaining code was unworkable and created an “unprecedented and distortionary outcome” for the company.

“An obligation to pay for links would break the way search engines and the internet work for everyone,” it wrote.

“The arbitration provisions are untested, one-sided, and at odds with fair commercial agreements. They present unmanageable legal and commercial risk to Google.”

At the Senate hearing, Google Australia and New Zealand managing director Mel Silva said that Google may have no choice but to pull its search engine – of which 95 per cent of all internet traffic in Australia goes through – from the country if legislation is passed.

“The principle of unrestricted linking between websites is fundamental to search and coupled with the unmanageable financial and operational risk,” she said.

“If this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia.”

The removal of Google Search would impact the millions of Australians who use the service every day, and thousands of small businesses that rely on the internet giant’s services to gain exposure.

Google has previously pointed out that the economic value it brings to Australia each year is AU$53 billion.

In 2019, Google Search sent more than 3 billion visits to Australian news websites, with an estimated value of over AU$200 million.

The passing of the Bill would also see Google lose billions of dollars in advertising revenue each year, which makes up the vast majority of its gross revenue in the country.

“Our ability to offer the search service to our users is supported by a business model and that’s not something we have ever denied,” Ms Silva said.

“This code sets an untenable financial and operational precedent for us and any rational business would look at a piece of legislation and evaluation the technical and operational risk and financial risks association with that.”

Independent senator Rex Patrick compared Google’s handling of the situation to China’s treatment of Australia after the country’s inquiry into the origins of COVID-19.

“The Chinese response to that was to threaten our market, to threaten our trade,” Mr Patrick said.

“We’ve got a similar situation here where the Australian Government is leading on a proposal in relation to the Wild West web.”

Facebook slams “unworkable” code

In a similar move to Google, Facebook’s submission to the Senate accused the Bill of being anything but a bargaining code, arguing that it would force the company “to make payments that are detached from true calculations of commercial value.”

“It removes any meaningful influence over our own commercial dealings with publishers,” it wrote.

Facebook Australia public policy vice-president Simon Milner said that Facebook would no longer be able to provide its news service to Australian users if the Code proceeded unchanged.

“The great majority of people who are using Facebook would continue to do so, but we would no longer be able to provide news as part of the Facebook product,” he said.

“We have explained that it is something we had to seriously consider, given the nature of this is unworkable.”

Facebook updated its terms of service last October, which gives it the power to “remove or restrict access to your content, services or information if we determine that doing so is reasonably necessary to avoid or mitigate adverse legal or regulatory impacts to Facebook”.

Experts have since raised concern that removing fact-checked news stories from the social media platform could have serious consequences for the platform’s ongoing fight against misinformation.

Facebook Australia managing director Will Easton said the Code would require the company to make new “commercial arrangements” in Australia.

“Unfortunately, the latest version still fails to acknowledge the commercial and technical realities of how publishers use Facebook and the value we provide to them,” he said.

“It also prevents us from introducing new products unless we roll them out to everyone, which seriously inhibits our ability to bring Facebook News to Australia.”

Both Google and Facebook have said they are willing to negotiate with the Government and news publishers for the use of their content.

Facebook says it is willing to pay up as long as the code “is subject to genuine commercial considerations”, while Google demands “reasonable amendments” that work for all parties.

Australian news media call out tech giants for “bullying tactics”

Free TV chief executive Bridget Fair called the tech giants out for their “bullying tactics” and claims that the companies are evading fair payment for news content.

“What Google and Facebook are both trying to do is to make sure it’s not successful because they don’t want that to become a precedent for other jurisdictions around the world,” Ms Fair said.

“It’s a bullying tactic to try to intimidate news media businesses and the government.

“It’s consistent with the reaction they’ve had the whole way along which is to try to intimidate Australians to stop going down this path to address the impact of these platforms with significant market power.”

Mr Frydenberg commended the legislation, saying it has gone further than any other jurisdiction of its kind since its announcement last year.

“This is the product of three years of work, and it is a very significant development, and it will ensure that our media landscape is more sustainable and more viable than otherwise would have been.”

In a press conference this morning, Prime Minister Scott Morrison said that Australia – and not Google or Facebook – decides what can and cannot be done in the country.

“Let me be clear. Australia makes our rules for things you can do in Australia. That’s done in our Parliament,” Mr Morrison said.

“It’s done by our government and that’s how things work here in Australia and people who want to work with that in Australia, you’re very welcome. But we don’t respond to threats.”

The Senate Committee report is due to be finalised by February 12th, 2021.

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