Media
February 11, 2021

Who owns the news?

This article was co-authored with Alex Buchanan.

The Australian government recently introduced a new legislative bill, which requires Facebook and Google to compensate Australian news outlets when displaying that outlets news. The mandatory code of conduct has been drafted by the Australian Competition and Consumer Commission (ACCC), with the intent to even out the playing field between large tech giants and news organisations.

The ACCC is Australia's national regulatory body, responsible for monitoring fair trading and competition in Australia. Its intervention suggests that it is no longer possible for the free market to regulate the relationship between local news media and global tech platforms. Rather, the proposed new bill reflects the need for change within competition law, to balance the concentration of power in Australian media. The ACCC sympathises that while participation on these platforms is voluntary, news outlets are now concerned that if they do not participate, their revenue will curtail. In an industry already financially struggling, the view appears to be that the power that these platforms hold has diminished smaller organizations' freedom of choice and created a power imbalance, that promotes anti-competitive behaviour.

The ACCC have reported that more than 80% of digital advertising goes to Facebook, Google and Youtube. These platforms argue that this revenue is not because of news media, but because of the appeal of advertising to a large audience. While this argument is true, it fails to address the fact that news media helps to drive audience traffic onto Facebook and Google. This is the position that the ACCC hold. From this perspective, the ACCC see it as fair that news outlets obtain relative compensation, as Facebook and Google benefit from the advertising gained indirectly through the increased audience that is driven by news. While Google and Facebook have established commercial arrangements with some publishers where they pay for content, they feel that this code goes too far.  It would provide a regulatory fallback to commercial negotiations that they fear may result in less than good faith negotiations from publishers.  

Google suggested in response to a parliamentary enquiry that the proposed scheme would be unworkable and untenable for it and that the result may be that its search engine ceases to be available in Australia. Google also ran an experiment with about 1% of its users where news site results were buried.  Some speculate that this experiment was seeking to establish the value of Google to news sites and therefore that it should not have to pay for news content.

Facebook has responded indicating that the new code would impact on Australians.  It has suggested that it may need to remove the ability for Australians to post news content if the code proceeds.  The 3 mains concerns Facebook has set out in relation to the code are the code:

  1. effectively mandates a commercial agreement with every single publisher in Australia which would be a challenge;
  2. contains binding arbitration in relation to price -this would undermine any good faith negotiations; and
  3. requires non differentiation that would prevent Facebook from offering commercial terms to certain publishers and enable agreement on terms to change the display of their content.

We want a sustainable media environment and key to that is to seek payment for original journalistic content - Josh Frydenberg, Australian Treasurer

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Which direction will New Zealand go?

Due to New Zealand having a similar market to Australia, it is unsurprising that New Zealand media are seeing the same decline in revenue and increased dependence on these platforms. While New Zealand media outlets have benefited from the exposure that Facebook and Google have provided, they too find it difficult to match strength in a competitive market against platforms that draw significantly larger audiences.

The attention that is given to Facebook and Google has meant that most of the advertising that would have once gone to news outlets, now goes to Facebook and Google. In 2016, 37.3% of New Zealand’s advertising revenue went to Google, 16.4% went to Facebook, and third in the ranks was NZME / Fairfax, who obtained 11.7%.

Looking to the developments in Australia, it is fair to question why the New Zealand Commerce Commission has not proposed similar changes for New Zealand. However, while the Commerce Commission may wish to consider following Australia in their approach, we are not limited in our choice. If the overall intent is to try to re-balance things it then becomes a question of what is it that needs to be re-balanced.  An imbalance on the ability to compete? A use of copyright material without paying the appropriate royalty and an inability to agree this because of an imbalance in bargaining position.  Or simply a perceived unfairness as overseas platforms are argued to not have to pay the same levels of tax because of the manner in which they are structured and/or operate.  

Various jurisdictions in Europe have recently made their own attempts at “rebalance” addressing different aspects of what is not seen as fair.  It would be appropriate for New Zealand to look at these too and see what has been learned and through this help determine whether intervention is effective or necessary.

Overseas developments

  • The Spanish government attempted to regulate Facebook and Google’s market power through copyright law. This approach has been mainly unsuccessful, as these platforms have used their power to reject levies imposed and withdraw from local news in those jurisdictions altogether.
  • The French government initially introduced changes in copyright law. This meant that the first few sentences of news media content were subject to copyright, requiring Facebook and Google to pay to display the introductory snippets of news media. However, this was circumvented by Google by removing the first few sentences from their search results. More recently, The French Competition Authority have proposed to switch their approach to regulation through competition law.
  • Very recently, the Competition and Markets Authority in the UK have come out with a proposal to establish a new tech regulator, which will monitor the competition between large platforms and outlets. This regime intends to acknowledge the contribution that Facebook and Google provide, while also recognizing the impact that their monopoly has on innovation and creativity for smaller organisations.
  • ActionAid International, along with other organisations globally, have called for Facebook and Google to pay a “global minimum rate of tax”. The drive comes from the belief that large overseas companies should be required to pay the applicable tax rate in the countries they operate within.

Concluding thoughts

Recent overseas developments in the law show that many countries are grappling with a need to change the current media landscape or risk losing a valuable service. It would appear that it is difficult to address the perceived imbalance through copyright law.

The proposed laws introduced by Australia and France are yet to come into force, so it will be very interesting to observe whether a competition law approach succeeds in its intention. ACCC chairman Rod Sims believes that competition law is more fit for purpose than changes to copyright law, as the core issue sits around power imbalances and unequal market influence. It is unknown whether New Zealand should, or would choose to take any of the approaches adopted else where. What is clear though, is that the world waits in anticipation to see whether France and Australia will ignite a change that ripples outward.

Sources

Facebook (Australia) press release

Wired

Seattle Times

The Balance - Small Business

Google Terms of Service

Auckland University of Technology

The Guardian - April 2020

The Guardian - October 2020

The Guardian - November 2020

BBC News (online) - October 2020

ABC News - January 2021

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