Australian government introduces world-first laws to force Facebook and Google to pay media companies for the content they use

The federal government will on Wednesday introduce a world-first law to make Google and Facebook to pay news organisations for their content. 

The law will force the multi-billion dollar Silicon Valley giants to negotiate fees with news companies whose stories appear on their platforms.  

If a negotiation breaks down, then an independent umpire will step in and decide the fee based on a 'final offer' method, which chooses one side's position as the resolution. 

The Labor Opposition has hinted it will support the law - which will be voted on in the New Year - after the government agreed to include public broadcasters SBS and the ABC.

The battle with Big Tech will be keenly watched by governments across the world, not least in London, Washington and Brussels, where concerns have been raised over the 'advertising duopoly' of Google and Facebook. 

Australian regulators found that for every $100 spent on digital advertising, $53 goes to Google, $28 to Facebook and $19 to others. 

The federal government will on Wednesday introduce a world-first law to make Google and Facebook pay news organisations for their content 

'This is a huge reform. This is a world first, and the world is watching what happens here in Australia,' Treasurer Josh Frydenberg told reporters in Canberra.

The treasurer described the payments as a two-way value exchange where money can only go from the platforms to news outlets.

But the deals will take into account the benefit news outlets get from having a bigger audience when their content is on Google or Facebook.   

Mr Frydenberg and Communications Minister Paul Fletcher have drawn up the law after a three-year inquiry by Australia's competition regulator, the ACCC.

The inquiry found Google and Facebook have 'an imbalance in bargaining power' when dealing with news companies. 

For every $100 spend on digital advertising, Google collects $53, Facebook $27, while everyone else must fight over the remaining $19.   

The Code will initially apply to Facebook NewsFeed and Google Search - but other services such as Instagram and YouTube can be added if a bargaining power imbalance arises.

What would the proposed law do? 

The code will support the media by: 

• encouraging the parties to undertake commercial negotiations outside the Code;

• enabling digital platforms to publish standard offers, which provides smaller news media businesses with an efficient pathway to finalising agreements with digital platforms;

• establishing a negotiation framework under the Code that allows both parties to bargain in good faith and reach binding agreements;

• ensuring that an independent arbiter is able to determine the level of remuneration that should be paid under a fair and balanced final offer arbitration model should the parties be unable to reach agreement; and

• setting clear and workable minimum standards for digital platforms including requiring 14 days advance notice of deliberate algorithm changes that impact news media businesses. 

Earlier in the year Google, threatened to charge Australians for using its search engine, while Facebook warned it would block users from sharing news stories if the law was passed.

But Mr Frydenberg revealed he had constructive conversations with the Australian heads of the companies on Tuesday and suggested they will accept the law. 

In addition to payment for content, the measures would also force transparency around the closely guarded algorithms that tech firms use to rank content. 

The code will require Google and Facebook to give publishers 14 days notice of any algorithm changes that are likely to have a significant impact on their traffic.  

Regulators said that Facebook and Google not only benefit financially from showing the news stories, but also boost their status as news providers in Australia and collect user data which is used to improve their services. 

Facebook also profits from the 'like' and 'share' buttons on other websites, which allow its servers to track people's activity and send them tailored ads.   

Facebook earlier this year said it would 'stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram' if the proposal becomes law.   

In a statement, Facebook's Australia and New Zealand managing director Will Easton said the proposed overhaul 'misunderstands the dynamics of the internet'.

'Most perplexing, it would force Facebook to pay news organisations for content that the publishers voluntarily place on our platforms and at a price that ignores the financial value we bring publishers,' he said.

'Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram. 

'This is not our first choice - it is our last. But it is the only way to protect against an outcome that defies logic and will hurt, not help, the long-term vibrancy of Australia's news and media sector.'

Mr Easton also accused Australian regulators of having 'ignored important facts' during a lengthy consultation process.

The regulator 'presumes that Facebook benefits most in its relationship with publishers, when in fact the reverse is true,' he said. 

Anyone using Google earlier this year was confronted with a yellow exclamation mark with a link to an open letter to Australians' from the company's managing director in Australia

'News represents a fraction of what people see in their news feed and is not a significant source of revenue for us.'

Mr Easton said Facebook sent 2.3billion clicks to Australian websites in the first five months of 2020 at an estimated value of A$200 million. 

It had also been preparing to bring Facebook News to Australia, he said - a feature launched in the US last year where the tech giant pays publishers for news.

'Instead, we are left with a choice of either removing news entirely or accepting a system that lets publishers charge us for as much content as they want at a price with no clear limits,' he added.

'Unfortunately, no business can operate that way.'

Earlier this year Google greeted its users in Australia with a strongly-worded letter from its managing director in Australia Mel Silva. 

'We need to let you know about new government regulation that will hurt how Australians use Google Search and YouTube,' Ms Silva's letter said.

'A proposed law, the News Media Bargaining Code, would force us to provide you with a dramatically worse Google Search and YouTube, could lead to your data being handed over to big news businesses, and would put the free services you use at risk in Australia.'

The government responded by denying the code requires any data to be handed over to third parties. 

A day after suggesting they could stop offering free searches, Google backtracked and said it would not be charging users. 

'We did not say that the proposed law would require us to charge Australians for Search and YouTube - we do not intend to charge users for our free services,' a spokesman in Australia said.

'What we did say is that Search and YouTube, both of which are free services, are at risk in Australia.' 

Mr Frydenberg said the proposed laws would 'create a more sustainable media landscape and see payment for original content.'

'Australia makes laws that advance our national interest. We don't respond to coercion or heavy handed threats wherever they come from,' he said.

Rod Sims, head of the Australian Competition and Consumer Commission said Facebook's threat was 'ill-timed and misconceived'. 

The new law would simply ensure that embattled news firms 'can get a seat at the table for negotiations with Facebook and Google', Mr Sims said. 

'Facebook already pays some media for news content,' he said. 'The code simply aims to bring fairness and transparency.'   

Facebook and Google have strongly opposed any move forcing them to share advertising revenue