Australia to force Google and Facebook to pay news publishers

• A draft mandatory code announced by the Australian government would force Google and Facebook to pay news outlets for using their content.
• The new rules are aimed at addressing “acute bargaining power imbalances” between news groups and Google and Facebook, the ACCC said.
• Google said it was “deeply disappointed and concerned” by the draft code, while Facebook said it would currently reviewing the proposals.

Google and Facebook could be forced to pay Australian news publishers to distribute their content, in a landmark regulatory move from the country’s competition regulator.

The Australia Competition and Consumer Commission was tasked by the government earlier this year with developing a mandatory code for the tech giants to pay for their use of news content. If approved, a draft code announced by the ACCC Friday would allow Australian outlets to secure payments in a matter of months.

It is aimed at addressing “acute bargaining power imbalances” between news groups and Google and Facebook, the ACCC said. Under the rules, if the publishers and digital platforms are unable to agree a deal after three months of formal talks, a “final offer” arbitration process will be? initiated that results in the selection of the “most reasonable” offer in 45 business days.

“Our regulatory changes are designed to create a level playing field and a fair-go,” Australian Treasurer Josh Frydenberg said Friday. “We want the rules in the digital world to reflect the rules in the physical world. We want to ensure consumer protection is enhanced, competition is increased and of course we deliver a sustainable media environment for all Australians for the future.”

The move could see Australia become the first country to force Google and Facebook to pay for news content. It comes after talks between the online platforms, ACCC and media companies failed to result in agreement. The draft code will undergo a month-long consultation before being debated in parliament. If it is passed, it is expected to be reviewed in a year’s time.

It’s not yet clear how much the development will impact Google and Facebook’s revenues. Google parent company Alphabet reported its first revenue decline in history in its second-quarter earnings report Thursday, while Facebook posted an 11% climb in revenues. The two firms have been under the regulatory spotlight of late, with their CEOs appearing alongside the bosses of Amazon and Apple in a congressional antitrust hearing on Wednesday.

Google said it was “deeply disappointed and concerned” by the ACCC’s draft mandatory code.

“The Code discounts the already significant value Google provides to news publishers across the board — including sending billions of clicks to Australian news publishers for free every year worth $218 million,” Mel Silva, managing director of Google Australia and New Zealand, said in a statement Friday.

“It sends a concerning message to businesses and investors that the Australian Government will intervene instead of letting the market work, and undermines Australia’s ambition to become a leading digital economy by 2030. It sets up a perverse disincentive to innovate in the media sector and does nothing to solve the fundamental challenges of creating a business model fit for the digital age.”

William Easton, Facebook’s managing director of Australia and New Zealand, said the company was currently “reviewing the Government’s proposal to understand the impact it will have on the industry, our services and our investment in the news ecosystem in Australia.”

Last month, Google said it would pay some publishers in Australia, Germany and Brazil directly to license their content, as part of a new service expected to launch later this year. It marked a change in tack for the internet giant, which has for years fended off demands from news organizations to pay for the distribution of their work.

France’s competition regulator ruled in April that Google must pay publishing firms and news agencies for reusing their content. Such regulatory pressure has heightened at a time when news outlets are grappling with a sharp decline in advertising expenditure due to the coronavirus pandemic.