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No Google search? No news on Facebook? A new Australian law means it really could happen here

The extraordinary adventure that is Australia’s attempt to make Facebook and Google pay for news has reached its climax, writes Hal Crawford, and it’s still possible the world’s smallest continent will end up with one of the world’s worst internet experiences as a result: no Google search and no news on Facebook.

The “News Media and Digital Platforms Mandatory Bargaining Code” – the law that will force Google and Facebook to pay news providers for the content they link to – was yesterday tabled in Canberra. It included some significant changes to the originally proposed law that will avoid an immediate Google and Facebook withdrawal from the Australian market. Google’s demands, in particular, have been met in the form of modifications to the requirements to inform news companies of algorithm changes ahead of time. Crucially, the law has also recognised there is value in the traffic that Google and Facebook send to news publishers.

Whether this will have a material impact when the time comes for negotiations remains to be seen. The code is still basically the same in that it sets up a bargaining vice that will eventually result in money flowing from digital platforms to news companies.

Today, less than 24 hours after the Australian law was tabled, Facebook has joined Google in the sights of the US government with antitrust suits launched at federal and state levels. The news may distract the company’s leadership, and potentially tone down the defiance both digital giants show in the Australian situation.

Remind me, why is everyone angry?

News companies have long complained that Facebook and Google have taken all the advertising money without contributing anything valuable like actual news. Instead, they say the digital giants have used free news content to make their platforms attractive and informative. In Australia, a market where news companies wield outsize political influence, politicians have listened and made a bargaining code which is legally binding. Facebook and Google must by law strike deals with news companies that will see money flow from the former to the latter.

The digital giants are irate because 1)  just two companies have been singled out, 2) they don’t understand why they have a responsibility to pay for news, and 3) paying for links fundamentally undermines the way they operate all over the world. It is this last point that, despite concessions, may yet see the giants take a stand in Australia that would have big reverberations in New Zealand.

Will they come to a deal?

The concessions in the code tabled in parliament yesterday are fine-tuned to bring Facebook and Google back from the brink. By recognising that there is value in the traffic sent to news publishers, the code opens the door for robust negotiations in which a better outcome for the platforms is possible. The crunch point will come when the first negotiation fails and is sent to the independent arbitrator, as is set out in the new law. It is at the point the arbitrator hands down their first decision that the digital platforms will know how badly the situation will affect their profits and how much of a damaging precedent has been set globally.

As yet, Facebook and Google have not responded officially to the final law which was kept under wraps until today. Tellingly, News Corp publications had advance knowledge of what was in the final law and have used the concessions to argue that pulling out of the market is no longer possible for Google and Facebook.

The issue for New Zealand

What happens in Australia matters to New Zealand because much of the regional infrastructure of the digital giants is shared. If employees were sacked and Facebook pulled out of Australia because there’s no market there for Facebook news, or if the worst happens and Google no longer offers search in Australia, then at best New Zealand will see a degradation of product performance and a lack of representation globally.

Whether that happens comes down to which faction inside the digital giants wins out: there are the pragmatists who see paying a small amount of “protection money” to news companies is inevitable one way or the other, and there are idealists who believe the Australian news code is a pathogen that could have a market-distorting impact all over the world.

A history lesson, and an opinion

In 2019, competition watchdog the ACCC found both Facebook and Google enjoyed “substantial market power” in Australia. After lobbying from news media, led by News Corp, the Australian government agreed that both companies were probably not paying for the news content linked to on their platforms because their market dominance allowed them to set the terms of engagement. Following this logic, it instructed the ACCC to reset those terms of engagement, which led to a draft law proposed earlier this year.

That is the best face you can put on the situation. It skims over the break in the chain of reason: the idea that Facebook and Google were not paying because of their market dominance, rather than for some other reason. It also ignores the fact that in the history of search engines and social media networks, payment has not flowed from the linker to the linkee, regardless of the competitive environment and relative power of both parties. To pay is to create a different kind of entity, much more like a portal than an index.

The method in the madness

You will not see the situation characterised as above anywhere in the Australian media. A lot of smart people have decided to not look too closely at the detail of a code that promises to transfer much-needed money to news organisations, from two companies who can obviously afford it.

The view among Australian media is that:

  1. Google and Facebook are making huge amounts of money through advertising
  2. The news media used to make huge amounts of money through advertising
  3. Google and Facebook don’t make any news but they do link to news
  4. The news media makes news and it’s expensive
  5. News is good
  6. Therefore Google and Facebook should pay news media for linking to news

The first five points are uncontroversial. The sixth point does not follow. If Google and Facebook should be paying for news links they would already be paying for news links with their market power manifesting in unfair pricing. Presumably, in that world, they would also be paying other content makers for linking to their content. But that’s a world that doesn’t make fiscal sense, because people want to be linked to, and to pay them for something they want would bankrupt any organisation. It gets the most basic issues of supply and demand wrong. The only way out of this economic contradiction is to argue that there is something unique about news content that sets aside supply and demand. I haven’t seen a good argument to that effect.

While finding a way to support news in the face of market failure is commendable, targeting legislation at two companies based on their momentary wealth and market power is a bad idea.

Next steps

The tabled code is not yet law because it hasn’t passed through the two houses of the Australian parliament. That will only be a matter of time, however, because the inclusion of public broadcasters the ABC and SBS in the code has shored up Greens’ support, and therefore it will pass easily through the Senate. Facebook and Google are no doubt double-checking every paragraph in the finalised law as I write these words, and we will see in the coming days whether they respond immediately or wait for the first brutal negotiation.

Sydney-based Hal Crawford is the former head of news at Mediaworks.




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