Australian Government Targets Web Giants

This week, the Australian parliament is poised to pass a landmark media law that would require Internet firms such as Google and Facebook to pay news publishers for displaying their content, putting an end to what some have considered a free ride.

The legislation being considered includes a code of conduct that would allow media companies to bargain individually or collectively with digital platforms for news content to be shown. The code is intended to address what’s somewhat euphemistically referred to as “bargaining power imbalances” between the two sides. The proposed rules would initially apply specifically to Facebook and Google, although other digital platforms could be added later.

Google has lobbied against the law, threatened to leave Australia and tried extensive use of its own platform. But the company has had to come to terms with the government as the bill passed the House of Representatives on Wednesday. The government now believes it has the votes it needs in the Senate. With all avenues closed, Google has suddenly made deals with local media companies.

Australia’s Seven West Media became the first major media group in the country to sign a licensing deal with Google, under which the online giant would pay a lump sum amount for showing news from the outlet on its search pages. Another deal with News Corp was also announced this week in a three-year arrangement that includes content from The Wall Street Journal, Barron’s, MarketWatch and The New York Post.

With their global presence, Google and Facebook are likely to be under pressure to start paying for news content in other countries. Last month, Google agreed to pay news publications in France for using their online content in a landmark agreement that could soon be replicated elsewhere in Europe under new copyright laws. France is the only EU country so far to have translated the Directive on Copyright in the Digital Single Market into national law, but other bloc members are expected to follow before an implementation deadline of 7 June 2021. The EU is also likely to propose legislation forcing big tech companies to pay for the content they use.

On Thursday, Facebook decided to black out news content from its social network in Australia. The company said it will “stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram”, and added that the decision was its “last choice”. Facebook’s move is in sharp contrast to the approach taken by Google.

Reacting to the decision, Australian Treasurer Josh Frydenberg said that “Facebook’s actions were unnecessary, were heavy-handed, and will damage its reputation in Australia”. Not for the first time, Facebook is in the centre of a developing PR disaster. The fallout for the company is already being seen around the globe, with a growing perception that Facebook is using unhelpfully aggressive tactics to preserve a broken business model.

Media companies have long complained that they’re unfairly compensated for content that generates ad revenue for the likes of Google and Facebook. Despite years of claims from content owners that major Internet companies are piggybacking on the work of others, tech companies have largely ignored such complaints, until now. Google’s rush to pay up in Australia shows how regulation — or even just the threat of it — can dramatically change the behaviour of a global tech company not used to being regulated. The different responses from the two web players — while Facebook is taking an aggressive approach, Google is striking private deals to stay active — provide a window into how they might operate in the future.

Australia’s new law is a prime example of how the wishes of big web companies are increasingly being pitted against those of national governments. It’s hard to predict the outcome in any specific country as this plays out around the world, but it’s clear that governments see it as their sovereign right to make decisions about the laws they pass for their country. Like most people, governments react badly to being threatened.

We’re at a point in history where the big web players should be fully and constructively engaged with governments worldwide. Governments need to embed the most advanced digital services into the way their countries run, to accelerate the digitalization of their economies, and to achieve efficiency gains that help to improve sustainability. The way Chinese society depends so heavily on Tencent’s WeChat service is an example of what’s possible here.

There’s plenty of debate about whether the new regulation in Australia is a good idea or whether it risks breaking the whole Internet paradigm. Whatever your view is on that, the fact that relationships between some of the web players and governments are getting worse — with more antagonism and less trust — is a costly failure.