On the brink: Big Tech fight escalates

Google’s incendiary threat to shut its internet search services in Australia is simply the latest expression – albeit the nuclear option – of a campaign against a proposed law that the company simply does not like.

The appearance of Google Australia managing director Mel Silva before a public hearing of the Senate economics committee on Friday was extraordinary for its velvet glove demonstration of awesome market power.

In threatening to pull search services from Australia, a move that would lead to unknowable but likely dramatic short-term damage to businesses, to the economy and to the government, Google has put a spotlight on the concentrated power its own market dominance.

Even more extraordinary has been the way the threat galvanised senators. On how many issues would South Australian independent Rex Patrick and Liberal firebrand Andrew Bragg be so tightly aligned? Not many I would think.

It has been clear for some time that the political class in Australia is increasingly frustrated with the market power of the Big Tech platforms, and with growing anger at the way that power is exercised.

Mel Silva’s threats to withdraw Google search services has brought that frustration out into the open.

Scott Morrison’s “we don’t respond to threats” entry into the discussion late on Friday was as ironic as it was dramatic. Certainly, it is an escalation. It is not every day that a company can provoke so instant and an angry a response from a Prime Minister as Google managed on Friday.

The Prime Minister is quite right. Australians get to decide how Australia is run.

“That’s done by our parliament, that’s done by our government, and that’s how things work in Australia,” Mr Morrison said. “And people who want to work with that in Australia are very welcome. But we don’t respond to threats.”

No arguments there.

As a private company, Google is equally within its rights to withdraw services from a jurisdiction where it can’t make a business case to successfully operate within the laws of the land. It would leave behind many billions of dollars in revenue on which is pays only a razor thin level of tax, but it can exercise that right if it cannot find a way to make it work.

It is quite a stand-off. The relationship between Big Tech and the federal government is on the brink.

The release on Thursday of the Australian Competition and Consumer Commission’s Digital Advertising Services Inquiry will test the relationship further.

What is happening in Australia, and the process that culminated in last week’s dramatic testimony has been underway for several years, is being closely watched around the world.

Scott Morrison is not exactly the Lone Ranger when it comes to world leaders who are concerned about the threat that Big Tech’s concentrated market power poses.

But the media bargaining code just seems an odd issue for the government to have dug in so deep.

Of all the things that are objectionable about the vertically and horizontally integrated systems of data collection and exploitation, is this the best way to confront that market power?

If the problem is competition and Google and Facebook’s monopoly-like power, how does the forced extraction of revenue derived from that broken system to be handed to traditional media companies help?

If the problem is the impact on journalism, is handing new revenue streams to the concentrated interests of Australia’s big media companies the best way to enable a flourishing public interest journalism sector in Australia?

In the system of the world created by Google and others, it has never been easier or cheaper to launch a publishing company and reach audiences. Deep niche publishing has proliferated, but sustainable commercial models are elusive.

The simple proposition that mainstream Australia will have to bear the aggravation and considerable damage of Google closing search in order that money can be stripped from Google and given to News Corp and Nine does not pass the pub test.

While Australians are supportive of greater regulation of Big Tech – and there is widespread concern about the negative impact of the platforms companies on our institutions – it is far from clear that media and aspect of journalism this Big Tech issue captures the imagination of a wide enough spectrum of the public.

This is especially the case when it’s held up against the concentrated ownership and market power of Australia’s media giants. Are there any Australians outside of the political class who want to die in a ditch in a fight to guarantee revenue for News Corp and Nine? Hmm?

The findings of the ACCC’s Digital Advertising Services Inquiry will likely shine a brighter light the structural integration in the supply chain that is hindering the operation of the market and potentially hindering innovation and ultimately hurting the consumer. This would provide a more explainable route to confronting concentrated market power.

Google has built a system of the world over the past couple of decades that is fundamentally integrated into the way our economy works.

The removal of Google search would be a hammer blow for many businesses. It would spark an unprecedented reorganisation of the digital economy in this country, with winners and losers emerging from the system that replaces it.

There is no denying that many thousands of businesses are extremely concerned – to an existential degree – about the impact.

The unknowable level of drama and damage such a withdrawal of Google search would prompt would be devastating for government. It is a supreme communications challenge to sell the benefits of holding the line.

But if Google were to make good on its threat and withdraw search services from Australia, the supply chains would quickly reorganise. For all the difficulty, it would be replaced with something else.

This government has shown itself capable of maintaining a policy line in the face of extreme pressure from commercial partners. It seems committed to its current course in relation to the media bargaining code.

This is what the brink looks like. Strap in.

Do you know more? Contact James Riley via Email.