Australian New Media Bargaining Code and Facebook “unfriending and blocking” News Readers

Australia’s Facebook users recently missed their morning news bulletin when the social media giant “unfriended and blocked” them from accessing news content on its website. This move comes at a tense boiling point surrounding Australia’s New Media Bargaining Code (“the Code”), introduced by government late last year. The Code mandates digital platforms, like Facebook and Google, to enter commercial agreements with news companies before sharing their news content on platforms like Facebook newsfeed and Google searches. While the government aims to help news publishers to get their fair share, the issue aligns with public concerns about these digital platforms’ rising market control and demands to regulate them. Proponents on both sides have argued about trade secrecy of news-ranking algorithms, anti-competitive advertising, communications decency, and fact-checking.

The Background
In late 2017, an inquiry by the Australian Consumer and Competition Commission (ACCC) found a bargaining imbalance where large digital platforms have “substantial market power” in online advertising. The report indicated that digital platforms use outsourced news to gain “consumer attention and consumer data in order to sell advertising opportunities.” In 2020, on the Australian Government’s behest, the ACCC released the draft Code for public consultation.

The Code
The Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021 proposed changes to Australia’s Competition and Consumer Act 2010 provisions which affect digital platforms. The Code requires digital platforms to enter commercial agreements with news companies before sharing their news items online and resolve any impasse through arbitration. Section 52S of the Code requires digital platforms to notify news companies in advance about changes to their news referral algorithm. Non-compliance would invite penalties up to $10 million.

Both sides
The Australian Government wants to balance the traditional news media’s “uneven bargaining position” with digital platforms and loss of advertising revenue. In 2019, Google and Facebook earned 81% of online advertising revenue. The Australian Government believes that digital platforms have built their advertising market power by using outsourced news items on their websites.

In response, while Facebook threatened to block its news viewing and sharing service, Google ran a campaign against the draft Code and issued an open letter about “supporting Australian journalism”. Their major concerns surround the risk that sharing algorithm changes with the news publishers could allow some entities “to appear higher in rankings… disadvantaging all other creators.” They also complained about possible disproportionate revenue sharing demands from news organizations and claim that the Code is at odds with the principle of “free and open web”, risking freedom of information.

Cutting through the Clutter
As digital platforms speed up the digitization of news content and increase its accessibility, users are increasingly using services like Facebook Newsfeed to access news articles from traditional media companies. While some platforms, like YouTube, offer revenue sharing arrangements with video content creators, articles from news publishers’ websites have no such system. Online platforms use these articles to collect viewership data for targeted advertising. Critics have raised anti-competitive discrimination concerns about Facebook and Google monopolizing digital advertising to preferentially promote and advertise their own products and services.

Nevertheless, the Code’s ability to resolve the advertising revenue gap and monopoly of digital platforms remains unclear.  Advertisers prefer online promotions, especially on big social media platforms, because of their high viewership. The argument that Google and Facebook’s large userbase and consequent online advertisement income is only from sharing news items from other media organizations seems untenable. Both companies attract viewership using various internet-related services, such as social networking, private messaging, personal content sharing, web searches, and cloud storage, which make them desirable for advertising.

The Code is currently silent about calculating the quantum of financial payment to news companies during negotiations. Would they receive a percentage of online advertising revenue or a fixed rate for each click on their articles? Without clear standards for calculating revenue sharing, digital platforms can justify unfair pay structures. If a stalemate goes to arbitration, only then would an arbitrator, under Section 52ZZ, apply specific criteria: namely, the ways in which digital platforms benefit from making content from news companies available, the reasonable costs which news companies and digital platforms incur, and preventing an undue burden on digital platforms.

Current Status
The Australian Parliament tabled the Code in December 2020 and, after both Houses considered the Bill, Parliament passed it on February 25, 2021. Facebook, in protest, blocked its news sharing services. Facebook later restored its news pages upon reaching an agreement with the Australian Government that included giving digital platforms two months to negotiate a deal with news companies before triggering mandatory arbitration.

Ripples in other countries, including Canada
Digital platforms are anxious about other countries introducing similar regulations. Facebook already  pays licensing fees to news outlets in the United States and recently agreed to do the same in the United Kingdom. The Media and Internet Concentration in Canada, 1984-2019 report remarks that “the digital duopolies’ [read Facebook and Google] combined share of the online advertising market reached 80%.” Steven Guilbeault, Canada’s Heritage Minister, recently opined that Canada should introduce similar regulations. Facebook responded sharply, with its Canada Public Policy Head, Kevin Chan, saying “…we’re unable to accommodate” such payments.

Looking Forward
Undoubtedly, digital platforms imminently need to maintain fair competition, advertisement verification, unbiased news feed algorithms, journalistic support and independence, and equal online advertising opportunities. While digital platforms should not monopolize internet freedom and access to information, or avoid paying news creators their fair share, they need clear revenue-sharing and anti-competition standards. No government can correct the disquietude on Facebook and Google’s rising monopoly or strong market control by forcing commercial, revenue-sharing deals with news outlets. Counterintuitively, increased regulation, such as this Code, would create entry barriers for nascent digital news-sharing platforms who might lack the fiscal bandwidth to enter commercial arrangements with large news publishers. Governments should also focus on promoting competition by supporting agile, smaller digital service providers and social media companies.

Gurbir Sidhu is an IPilogue Contributing Editor and LLM candidate at Osgoode Professional Development.

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