Google and Facebook will face forced arbitration and a $10 million fine if they fail to reach an agreement on revenue-sharing with media companies within three months, under a new federal government draft code of conduct.
But the new bargaining powers will not apply to smaller media companies with revenue under $150,000 annually, or to the public broadcasters. The code will also require the tech giants to be more transparent with these media companies about their algorithms and data.
The Australian Competition and Consumer Commission (ACCC) released the draft code of conduct governing bargaining between tech giants such as Google and Facebook and Australian news media companies on Friday morning, with Treasurer Josh Frydenberg, Communications Minister Paul Fletcher and ACCC chair Rod Sims delivering back-to-back press conferences.
The draft mandatory code, which will be enforced through amendments to the Competition and Consumer Act this year, outlines how Google and Facebook will be required to enter into binding “final offer” arbitration if they do not reach an agreement to share revenue with media companies for their news content posted on their platforms within three months.
After this time, independent arbitrators will choose between the final offers of both parties and the decision will be binding under law, with fines of either $10 million or 10 per cent of the tech companies’ Australian revenue, whichever is more. With revenues measured in the billions, the potential sanctions are large.
The code also requires the tech companies to provide 28 days’ notice of any relevant algorithm changes to how news content is presented, to not discriminate in the presentation of news content and to allow companies to turn off comments on their content.
The code of conduct was a key recommendation from the competition watchdog’s landmark 18-month inquiry into the digital platforms. After initial attempts to produce a non-legislative code failed to progress, the government earlier this year ordered the ACCC to begin consulting on mandatory rules.
The draft code will now be open for consultation for all of August, with the government planning to introduce the legislative changes by the end of the year.
Mr Frydenberg said the code is “world-leading” and that the announcement will draw the attention of governments and regulators around the world.
“We want Google and Facebook to continue to provide these services to the Australian community which are so much loved and sued by Australians, but we want it to be on our terms, in accordance with our laws and we want it to be fair. This is what has motivated us with this mandatory code,” Mr Frydenberg told the media.
“It’s about a fair go for Australian news businesses and ensuring we have increased competition and increased consumer protection and a sustainable media landscape. Nothing less than the future of the Australian media landscape is at stake with these changes.”
Under the draft rules, the Treasurer will determine what platforms are subject to the code, starting with Google and Facebook, while the Australian Communications and Media Authority will decide which news companies are eligible, based on whether they produce “core news”, adhere to appropriate professional editorial standards, maintain independence, operate in Australia and generate annual revenue of more than $150,000.
If eligible, a media company can then notify the digital platform of their intention to reach a revenue share deal. The negotiation and mediation process will then kick off for how to share revenue, which could be a flat yearly sum or a portion of the revenue generated on a piece of content.
If an agreement isn’t reached after three months, an independent arbitrator can be selected by the two parties from an ACMA-appointed panel. After 10 days, both parties will have to submit their final offers to the arbitrators and will then have another five days to comment on the other offer.
The arbitrator will then have up to 45 days to select which offer is most reasonable, taking into consideration the cost of producing the journalism and whether the decision would put in place an undue financial burden on the digital platforms.
This means that a revenue sharing deal should be determined within six months of the process being kicked off by a media company.
“News content brings significant benefits to the digital platforms, far beyond the limited direct revenue generated from advertising shown against a news item. News media business should be paid a fair amount in return for those benefits,” Mr Sims said.
“We believe that our final offer arbitration proposal provides a compelling incentive for parties to put forward fair and reasonable proposals, given each has just one chance to make an offer, and only one offer can prevail.”
The news companies can either enter into negotiations individually or as a collective, such as a group of regional publishers.
If Google and Facebook do not enter into these negotiations in good faith, under the draft code and legislation, the ACCC will be able to take legal action that could lead to a fine of $10 million or 10 percent of the tech companies’ Australian revenue.
The draft code also includes minimum standards to govern other issues, which will apply to all media companies, not just those able to enter into the bargaining process.
This outlines that the tech companies will have to provide 28 days’ notice of algorithm changes that will materially affect referral traffic to news or the ranking of news behind paywalls and substantial changes to the display and presentation of news and advertising.
Google and Facebook would also have to provide clear information on the availability of user data to news companies, make a proposal on how to recognise original content, and allow companies to more flexibly moderate user comments and prevent their content being included on any individual service.
Under exceptional circumstances, such as to prevent COVID-19 misinformation, tech companies will still be able to introduce “urgent algorithm changes” without giving this notice.
Australia isn’t the first country to attempt to make Google and Facebook pay for the news posted on their platforms, but it would be the first country to do so successfully, and the federal government has acknowledged it is facing an uphill battle.
Other countries that have attempted to do so, such as France and Spain, have seen the tech companies threaten to simply pull out of those areas or block local news content, and submissions to the competition watchdog in Australia flagged the potential for this here.
But Mr Fletcher said that non-discrimination requirements in the draft legislation would see the tech titans facing similar fines if they attempt to do this. These requirements state that Google or Facebook can’t give priority to news companies that haven’t secured a revenue sharing deal.
“Discrimination in this content will be considered to occur if the news content of a registered news business is disadvantaged i comparison to other news content in terms of the crawling, indexing, ranking, display, presentation or other process undertaken by the digital platform on any service provided by the digital platform, on the basis of the registered news business’ participation in the code,” the draft legislation stated.
“The non-discrimination requirements apply in relation to all news content instead of only core news content or covered news content. This is to ensure the integrity of the non-discrimination requirements and that other forms of news (such as foreign news or citizen journalism content) are not used as replacement content.”
The communications minister said this provision would prevent the tech companies from retaliating for news companies seeking a revenue-sharing deal. He said that Google and Facebook had been closely involved in the consultation process, but would be seeing the draft code for the first time on Friday when it was released publicly.
“Google and Facebook were extensively involved in the discussions with the ACCC, they made submissions and they’ve certainly met with me and met with many others within government. We’re running a comprehensive public policy process here where all the stakeholders have had every opportunity to put their views and perspectives and they’re not going to have another very important opportunity,” Mr Fletcher told the media.
“What the code is saying to the digital platforms is that the news media businesses are in a position where you are their unavoidable business partner and so therefore there’s a requirement backed by law under the code that you must enter into bargaining with the news media businesses when they indicate a desire to do so.”