Stiglitz backs Australia’s Big Tech media code

Denham Sadler
National Affairs Editor

Former World Bank chief economist and Nobel laureate Professor Joseph Stiglitz has thrown his support behind Australia’s proposed mandatory news bargaining code for big tech companies, but said the government should be ready to tax the social media companies as a “plan B”.

The government is expected to introduce legislation to Parliament next week outlining a mandatory bargaining code between Google and Facebook and large media companies, requiring them to enter revenue-sharing deals for the use of news content.

Speaking on an Australia Institute webinar on Thursday, Professor Stiglitz, who is the president of the Initiative for Policy Dialogue at Columbia University, said policies like these are needed to address the overwhelming market power of these tech companies.

“We like markets to work well – we want competition, and we want transparency. Unfortunately, one of the side effects of some aspects of innovation can be market power. This is probably the worst we’ve ever had, and that’s because there are a couple of characteristics of the new technologies that lead to a real concentration of market power,” Professor Stiglitz said on the webinar.

Joseph Stiglitz
Joseph Stiglitz: Backing the Australian Government in its Big Tech bargaining. Photo: World Economic Forum

“We have now seen the utter failure of self-regulation, and that means we have to go on to what’s next, and that’s why what you’re doing in Australia is so important, it’s the beginning of exploration of what’s next.”

The code was a key recommendation from the Australian Competition and Consumer Commission’s 18-month inquiry into digital platforms. The draft version required Facebook and Google to enter into final offer arbitration with news media companies for a revenue-sharing agreement if a deal isn’t reached within three months.

An independent arbitrator would then select one of the final offers, and this would be binding under law.

The draft code has been slammed by Facebook and Google, and many among the local tech community, and politicians in Canberra have faced heavy lobbying from the tech firms and large news organisations.

In response to a draft version of the mandatory code, Facebook quickly threatened to block all Australian news content from its platform. Professor Stiglitz said the government needs to be ready for this to actually happen and should look at implementing a digital tax if it does.

“If they choose to execute that threat, which is not inconceivable, then you have to go to Plan B, which is to impose a tax on the social media companies and use that tax directly to fund the real news production,” he said.

“If Facebook’s response is to not carry news, and we want people to have news, and they impair the quality of the mechanisms people have to interact, then you have this monopoly and there’s no easy way of getting rid of the monopoly, so the alternative is we’ll tax you.

“[The threat] itself is testimony to their market power. What kind of platform would weaken the quality of what it does? If you were in a competitive market you wouldn’t say you’re not going to carry news. The fact is they have such market power they can get away with that kind of threat.”

Columbia University director of Technology, Media and Communications Anya Schiffrin, who also spoke on the Australia Institute webinar, said the rest of the world is watching what Australia is doing with the news bargaining code.

‘We need huge structural shifts, we need to get the big tech companies to apy for news and that’s going to require legislation. What Australia is trying to do is really capturing attention all around the world,” Ms Schiffrin said.

“There’s a huge hope that what Australia is doing will work and that maybe other countries will copy it. You’re very brave to go out on your own and you’re being watched closely.”

A common argument against the proposed code is that it will merely serve to subsidise a “failing” business model in the media industry. But both Ms Schiffrin and Professor Stiglitz said there’s nothing inherently wrong with this.

“I don’t think there’s anything wrong with subsidising a failed business model. There are so many good things that don’t make any money, and if we have rich societies that can afford to fund these things then I think we should,” Ms Schiffrin said.

“It’s important that it’s in the public interest, that it’s adding to society and that it’s useful, but requiring things to make money, I don’t think that’s all that important.”

Professor Stiglitz also said this isn’t a reason to not support the code.

“If we relied on the market for the production of basic research we would not have discovered DNA, and we wouldn’t have been able to respond to COVID-19. Many parts of our society are these public goods that have to be publicly provided,” he said.

Governments should also look at breaking up big tech companies like Facebook to reduce their market power, he said.

“I think we should have taken pre-emptive measures to not allow Facebook to buy Instagram. That was a mistake. Some people would say you could force Facebook to divest Instagram, and there are a few cases like that where you can break it up, or prevent Facebook from vertically integrating,” Professor Stiglitz said.

Do you know more? Contact James Riley via Email.

1 Comment
  1. Geoff 3 years ago

    This reminds me of when Colin Powell trashed his own reputation by pushing the WMD in Iraq falsehood.

    Stiglitz trashes his own reputation my pushing this ‘you stole our news’ falsehood.

    Oh and suggesting we apply taxes on these companies for not linking to the news websites because they have decided its uneconomic? Lets tax successful companies that make clear business decisions and give the money to failing alt-right news media. Its mind boggling.

    How about we spend some energy taxing these digital companies for the money they make in Australia and pay little tax on – that would be a social benefit to ALL of Australia.

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