Facebook & Google Threaten Australia Over the News Media Bargaining Code

The way Aussies use Google is at risk.

These are the words that tech giants are using to apply incredible pressure on the Australian Government to discard a proposed media law.

The News Media Bargaining Code as it’s been labelled gives publishers the ability to request payment for their news content from the tech companies.

If the law goes through, then Facebook and Google would have to pay for news content. As retaliation, Facebook would prevent users in Australia to share both local or international news.

For its part, Google announced that it would stop making its search engine available in Australia. This would be the nuclear option.

Australian Prime Minister Scott Morrison said that threats from the tech giants are pointless, “Australia makes our rules for things you can do in Australia. That’s done in our Parliament. It’s done by our Government, and that’s things work here in Australia,” he explained.

However, Australians shouldn’t take these threats lightly. It’s entirely possible that Google would risk losing the Australian market (which isn’t that big) to avoid setting a precedent for larger markets.

Google is currently tinkering with its search algorithm for about 1% of Australian users where it buries news sites from the results page. The ABC claims that one of their users wasn’t able to reach their website through the search engine. Belinda Barnet, an authority on media regulation at Swinburne University accused Google of throwing their weight around.

The aim of the Code, which is backed by all the major media companies, is to make the relationship between tech platforms and media networks equal.

Google Australia’s Managing Director Mel Silva warned about the severe negative consequences of the Code. Google published an alarming open letter to Australians

In the letter, Google warns that Australians will have “a dramatically worse Google Search and YouTube” if the law passes. The free digital services people take for granted would be put at risk. Also, search data of Facebook and Google users could be given to major “news media businesses.”

Let’s first unpack the contents of the News Media Bargaining Code and its purpose. The ACCC has uploaded a copy of the draft legislation on its website.

While there is a need to address the unfair elements of the online advertising market, this Code isn’t the answer. At least, not in its current form.

Finally, we’ll go over a better way to move forward and find a solution.  

What is the News Media Bargaining Code?

In July the Federal Government instructed the competition watchdog, the Australian Competition and Consumer Commission, to draft a binding code to oversee business relations between the tech giants and domestic media companies.

The News Media Bargaining Code is meant to address the imbalance to protect “the ability and incentives for Australian news businesses to produce content.”

The Code will start with Google and Facebook but isn’t necessarily limited to these two platforms.

Why is the ACCC starting with these two companies? After all, Twitter is also a popular digital platform that directs traffic to websites.

They don’t say explicitly. But it’s safe to assume that the revenue Google and Facebook generate is the main reason.

The Code doesn’t stipulate how much news media companies should earn from these digital companies. Rather, it lays out a negotiation method. Negotiations last 3 months which must include at least one day for mediation.

If no deal is reached, then both parties move to mandatory arbitration appointed by the Australian Communications and Media Authority (AMCA). The panel will pick a deal which will be binding. Under the Code, if Google can’t reach an agreement with a media outlet, an Australian judge would determine how much the tech company should pay.

This is a grave financial risk that Google doesn’t want to take.

It’s telling that only the news business organisations can initiate arbitration, not the digital platforms. This is an example of an almost punitive nature of the code.

Facebook services that will be under consideration include:

  • Facebook News Feed (including Facebook Groups and Facebook Pages)
  • Facebook News Tab
  • Instagram

The scope of Google services that are subject includes:

  • Google News
  • Google Search
  • Google Discover

As you can see, WhatsApp (owned by Facebook) is off the table. However, other digital services can become subject to arbitration should both parties agree.

Why is the News Media Bargaining Code Being Introduced?

The COVID-19 pandemic has wreaked havoc on small regional and rural newspapers, which saw hundreds of journalists lose their jobs.

The risk of Australian media outlets going out of business is one of the main arguments in favour of the code.

The Australian Competition and Consumer Commission wants to protect local media businesses from what it believes are threats posed by Google and Facebook. The ACCC believes that the tech platforms’ supremacy of the online advertising market will destroy Australian media companies.

The ACCC chair Rod Sims explains that they want Australians to enjoy Google and Facebook, but “we want it to be on our terms.”

Therefore, the code aims to “create a level playing field.”

What the Australian Competition and Consumer Commission Says

This is how the Commission explains the need for a new law:

This Bill establishes a mandatory code of conduct to address bargaining power imbalances between digital platforms and Australian news businesses.”

Therefore, ACCC has identified an unfair advantage that Google and Facebook have over Australian news businesses. What’s more, it is this “power imbalance” that is taking away the ability and motivation of Australian news media corporations to produce content.

It goes on to claim that both Google and Facebook benefit from the fact that they offer Australian news to their users. The sheer size of the digital platforms makes them inevitable “trading partners” for Australian news outlets.

Both Facebook and Google are more important to Australian news businesses than the other way around. If, for example, Google stops indexing publications, then those companies run the risk of being out business. As a result, they were forced to agree to unfavourable business deals with these digital platforms.

The way forward, according to the Commission, is to improve the bargaining position of Australian news businesses. This is important for two reasons:

  • The public benefits from the production and circulation of news
  • A strong independent media is necessary for a healthy democracy

I think that everyone can agree that these two goals are very important. So, the stated goal is not only to protect media companies in these difficult times. It is also to strengthen our democracy.

However, the way the Commission discusses the unequal relationship raises red flags. Now, just to be clear, I’m not defending Facebook or Google.

But, it pays to look at the terms that both digital platforms offer to users:

  • Google allows your website content to show up in its search results and News feature without charge. The search engine sends traffic to your website for free.
  • Facebook, for its part, lets users share content with their network. The platform also doesn’t invoice users for any website traffic it sends.

These are some great terms for a business relationship with a “power imbalance.” The traffic comes when readers and the media businesses themselves include links on the digital platforms. And they don’t have to pay for this feature.

Also, news content doesn’t generate a large revenue stream for Facebook or Google. Google News doesn’t display ads, and news articles seldom show up in monetisable search results.

Putting aside the impact of the lockdown worldwide and the slump in the global economy, media businesses need to be honest with themselves about why they’re unsustainable. And they have to go beyond only blaming digital platforms.

Not the First Time Australia Has Gone After the Tech Giants

Interestingly, the ACCC has been gunning for Google for some time now. The Commission is suing Google for deceiving millions of users about tracking them on non-Google web properties back in 2016.

The ACCC alleges that Google didn’t do enough to inform users about their tracking activities.

It also says that Google and Facebook earned around $6 billion from the Australian digital advertising market in 2018. A number that the companies claim is inaccurate.

According to Google, the company generated roughly $10 million in revenue from potential news-related searches in Australia.

The search engine is emphatic that news media benefit from Google sending 3.4 billion visits for free in 2018.

Google claims that “a lot of people (Australians and beyond) click from Google through to Australian news websites, which gives publishers the chance to make money by showing them ads or turning them into paying subscribers.”

If Facebook goes through with its threat, then the user experience will suffer. The quality of content on both Facebook and Instagram in Australia will decrease without news sources.

Posting links to interesting stories will be impossible. If the social media platform follows through, then it’ll have to impose a complete ban on news outlets.

News Media Bargaining Code: Problems

While the legislators may have good intentions, the code will create some unfair (and perhaps absurd) unintended consequences. The danger of unintended consequences is always present when introducing new regulations. However, they are unavoidable when the legislation is not carefully drafted.

Changes to the Algorithm

The code introduces a list of “minimum standards” that digital platforms need to meet. One of the most controversial requirements obliges the digital platforms to give notifications of any changes to the algorithm well in advance.

Facebook and Google will have to give news businesses 28 days’ notice of changes that will impact either the ranking of paywalled content or referral traffic to the news:

“The notice must describe the change and effect on referral traffic in a way that is readily comprehensible and must describe how a registered news business can minimise the effects of the change on the ranking of its news content.”

This requirement is meant to allow news businesses to adapt and make sure that their content is prominent.

It also, of course, protects the corporations’ agreed-upon revenue.

There’s also a section on ranking and display of paywalled content.

News business corporations are entitled to 28 days’ notice on changes affecting the ranking and display of paywalled news. The explanation has to be clear and “readily comprehensible.”

As a result, media businesses can decide how to optimise their paywalled content.

If you’re reading this in disbelief, I don’t blame you. This requirement is shockingly unfair to virtually everyone else. The news media organisations, many of them large corporations, get priceless insider information on future intentions and projects of Google and Facebook.

Suffocating Small Businesses

The eligibility requirements expose the underlying threat the code poses to small businesses.

Only news businesses that employ journalists and earn more than $150,000 annually in revenue are eligible to bargain.

So, a freelance reporter focusing on local news doesn’t make the cut. Or an investigative journalist writing on corruption is prevented from generating revenue from their content. Even though the content is of public interest!

In other words, a small ambitious team of journalists that wants to produce relevant content can’t compete with the large established news business corporations. If one of the stated goals is to protect the Australian media industry, then it fails spectacularly.

What it does is give larger news organisations an unfair advantage, and in the process suffocating smaller content producers. 

Who is Eligible?

The code is written in a way that allows for loopholes. Apart from the $150,000 requirement, an eligible corporation must also produce “core news content”, “maintain editorial independence from the subjects of their news coverage”, and “operate primarily in Australia for the purpose of serving Australian audiences.”

To become eligible, a news business corporation must “nominate one or more of its news sources” that mainly produce ‘core news.’

The Bill uses a hypothetical to illustrate what they mean by “core news content”:

Tom’s News Network (TNN) is a business that produces several news websites. The websites focus on political news reporting (considered ‘core’ news in the code), but also feature some sports reporting and entertainment news.

TNN applies to be registered by the AMCA to participate in the code, nominating all its news sources and a news business corporation. The AMCA finds that each source is predominantly ‘core news’ and TNN meets all the other criteria. The ACMA registers TNN.

The minimum standards that the responsible digital platform corporation must meet in the code apply in relation to all of the covered news content TNN produces, not just its political news and court reporting.

This is to allow the news business to get a better understanding of how its stories are performing on the digital platform.

So, examples of “core news content” include court reporting or political news. Issues that are relevant to the wider society. 

Here’s the loophole. The code applies to the entire TNN news content and not just its “core news content.” For instance, sports or entertainment news would also be covered. Nothing is stopping a media organisation from generating revenue for any type of content.

Therefore, an Australian entertainment website can expand into political or economic stories long enough to become eligible.   

Data Sharing

Both Google and Facebook have warned about the risks to privacy the code poses. They claim that the proposed law will force them to hand over user data to media businesses. This aspect of the code is baffling.

News businesses already possess the same user data as Facebook or Google. They don’t need the digital platforms to tell them whether someone clicked on an article or how much time they spent reading it.

User Comments

There is a section in the Bill that is important for free speech in Australia. The code gives news business corporations the ability to:

  • Remove or filter user comments
  • Disable entirely the making of user comments
  • Block user comments by particular users and accounts

This outlandish proposition allows the media businesses to tamper with the comments section of their news content on Facebook. Not to sound too dramatic, but this infringes on the freedom of speech of Facebook users.

The Bottom Line

The ACCC wants Facebook and Google to pay for the value that news companies bring to the digital platforms.

But, this is approach is misguided.

This is because determining the value of content is difficult. In digital advertising, the actual content doesn’t play a central role in creating revenue as it did before.

Content used to attract the target audience and so it was easier to determine value. For example, ads for running shoes in a fitness magazine.

Today ads target an audience based on customer preferences and behaviour. Brands develop detailed customer profiles to optimise their ads. Sure, the content a user consumes is a data point, but only one of many.

So, the real commercial value for digital advertisers is the audience and not the content itself.

This is referred to as “programmatic advertising.” An automatic bidding frenzy starts as soon as someone visits a website. An ad is shown to a website user based on their user profile.

Therefore, if the ACCC wants to make a real difference, it should regulate the digital advertising model. Namely, the way companies like Facebook and Google trade data profiles. This has a better chance of levelling the playing field and addressing ad revenue.

I’m not arguing against government policies designed to help the media. It’s just that the News Media Bargaining Code isn’t about collective bargaining.

Summary

The tech giants are fighting the News Media Bargaining Code because it could set a worldwide precedent.

The funny thing is that this comes after Google agreed to pay French publishers for news content.

Under this agreement signed in January 2021, Google will pay French media companies whenever they re-use their content. Google can also buy content published behind paywalls, giving users access to content they otherwise wouldn’t be able to see unless they paid.

French media organisations will also take part in News Showcase, Google’s latest licensing program to provide readers with “enriched content.” We don’t know how much money Google will give to French publishers.

However, Google has set aside $1 billion over three years to pay media organisations for content displayed on News Showcase.

So how come Google is willing to pay French media networks but is fighting to do the same in Australia?

Well, the French agreement is less demanding than the News Media Bargaining Code. For example, Google can display short media snippets for free and it doesn’t outline an automated arbitration model.

Google believes that the Australia arbitration model doesn’t take into account the benefits that publishers get from tech companies and would be biased towards the publishers.

Also, let’s not forget that the Australian government is requesting relevant advanced notice of deliberate algorithm changes.

Google is ready to give Australian publishers the same deal they made in France –  publishers who operate through the News Showcase will get paid. This way their content would appear in organic search results and the Showcase.

Instead, the News Media Bargaining Code forces Google to pay when displaying previews of media content and also when sharing links to the content.

This flies in the face of how search engines operate.

Google is ready to pay Australian news publishers if they work within the News Showcase program “reasonable amendments to the arbitration model” are made.

There is an interesting debate to be had whether the tech giants should be taxed by non-American countries. If the Australian Government wants to extract money from major digital platforms and fund socially responsible businesses, like the media, then that’s fine.

But it should be honest about what it’s doing.