Let’s Make A Deal: Facebook and Australia

Australia passes its code that requires Google and Facebook to strike deals with the nation’s news media to correct the imbalance in bargaining power. This happened only after Facebook pulled the plug on its News feature and provisions in the bill were loosened as part of a compromise.

After imposing a news ban in Australia, Facebook reached agreement with the government in Canberra on changes to its controversial bill that would require the social media platform and Google to pay Australian media for linking to their content. With these modifications added to the bill, the Parliament passed the bill on 25 February.

As introduced in December, the “Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021” “establishes a mandatory code of conduct to help support the sustainability of the Australian news media sector by addressing bargaining power imbalances between digital platforms and Australian news businesses” per the first explanatory memorandum on the bill. However, in response to Facebook’s ban, the government in Australia apparently softened some of the language. Notably, the government would now have to give a platform 30 days’ notice before it can designate it as a digital platform service, a title that triggers the provisions of the bill, including mandatory arbitration  if the platform and Australian media cannot reach a satisfactory monetary deal. Previously, there was no 30 day period. Moreover, designated platforms can now differentiate between Australian media companies, meaning they can pay different rates in a commercial agreement. Under the original bill, this was not the case. Another new feature is the requirement that the platform and news media company negotiate in “good faith” for three months. If no agreement is reached, then it will be mediation, and only after that does not work is arbitration required.  

Presumably, had these changes been problematic for Google, there would have been prominent public indication of this. But this has not been the case, signifying Google is fine with the changes.

Moreover, it bears note that this legislation comes after the center-right government, the Liberal–National Coalition, tried to negotiate a voluntary agreement with Google and Facebook, but talks fell apart. In late July 2020, the Australia Consumer & Competition Commission (ACCC) released for public consultation a draft of “a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook.” In publishing the draft, the ACCC explained

The code would commence following the introduction and passage of relevant legislation in the Australian Parliament. The ACCC released an exposure draft of this legislation on 31 July 2020, with consultation on the draft due to conclude on 28 August 2020. Final legislation is expected to be introduced to Parliament shortly after conclusion of this consultation process.

Nonetheless, let us turn to the events that led up to enactment of the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021.

Earlier this month, the Senate Economics Legislation Committee issued its report on the legislation, which summarizes the arguments for and against and the government’s responses.

On 17 February, Facebook Australia & New Zealand Managing Director William Easton turned up the pressure on the Australian government by declaring a ban on users in Australian sharing and viewing Australian media content. Easton made this announcement a day after the Liberal-National Coalition led by Prime Minister Scott Morrison unveiled proposed amendments to the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021. In its press release, Facebook explained:

In response to Australia’s proposed new Media Bargaining law, Facebook will restrict publishers and people in Australia from sharing or viewing Australian and international news content. 

Easton summarized the implications:

For Australian publishers this means:

• They are restricted from sharing or posting any content on Facebook Pages
• Admins will still be able to access other features from their Facebook Page, including Page insights and Creator Studio   
• We will continue to provide access to all other standard Facebook services, including data tools and CrowdTangle

For international publishers this means:

• They can continue to publish news content on Facebook, but links and posts can’t be viewed or shared by Australian audiences

For our Australian community this means: 

• They cannot view or share Australian or international news content on Facebook or content from Australian and international news Pages 

For our international community this means:

• They cannot view or share Australian news content on Facebook or content from Australian news Pages 

Facebook justified the ban in a number of ways, only some of which will be quoted here. Nonetheless, the platform looked to leave no possible policy rationale unturned:

• The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content. It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.
• In fact, and as we have made clear to the Australian government for many months, the value exchange between Facebook and publishers runs in favor of the publishers — which is the reverse of what the legislation would require the arbitrator to assume. Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million. 
• For Facebook, the business gain from news is minimal. News makes up less than 4% of the content people see in their News Feed. Journalism is important to a democratic society, which is why we build dedicated, free tools to support news organisations around the world in innovating their content for online audiences.
• Over the last three years we’ve worked with the Australian Government to find a solution that recognizes the realities of how our services work. We’ve long worked toward rules that would encourage innovation and collaboration between digital platforms and news organisations. Unfortunately this legislation does not do that. Instead it seeks to penalise Facebook for content it didn’t take or ask for. 
• We were prepared to launch Facebook News in Australia and significantly increase our investments with local publishers, however, we were only prepared to do this with the right rules in place. This legislation sets a precedent where the government decides who enters into these news content agreements, and ultimately, how much the party that already receives value from the free service gets paid. We will now prioritise investments to other countries, as part of our plans to invest in new licensing news programs and experiences. 
• Others have also raised concern. Independent experts and analysts around the world have consistently outlined problems with the proposed legislation. While the government has made some changes, the proposed law fundamentally fails to understand how our services work.

This is not the first public tussle between Canberra and one of the two social media platforms in which a platform tried to generate leverage. However, in August 2020, Google merely warned Australians the government’s legislation would force the company not to offer certain features[1], a claim strenuously disputed by the ACCC Chair Rod Sims. Google thereafter ratcheted up the pressure, most notably during January testimony before the Australian Senate Economics Legislation Committee, the Managing Director of Google Australia and New Zealand Melanie Silva said “[i]f this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia.” She added “[i]t’s not a threat…[i]t’s a reality.” Earlier this month, there were reports that Google was experimenting with blocking or deprioritizing search results in Australia. And yet, Google has gone on to strike voluntary deals with almost all the major Australian media outlets to the satisfaction of the government. But, then this may not be surprising given Google’s decision to abide by a French appeals court’s decision about France’s law requiring platforms to negotiate with and pay French media (see here for more detail and analysis.)

Getting back to Facebook, as mentioned, the decision to pull the plug on sharing news in Australia followed an announcement by Treasurer Josh Frydenberg MP and Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher MP of amendments to the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021. In their press release, Frydenberg and Fletcher said the government would introduce “technical amendments…that will enhance the way it operates and strengthen its ability to foster more sustainable public interest journalism in Australia.” They claimed “[t]hese improvements will:

• streamline the requirements for digital platforms to give advanced notice of algorithm changes to make them more workable;
• clarify the arbitration criteria so that it considers the reasonable costs of both the digital platform and news media business and amend the legislation to remove any doubt that arbitrated remuneration is to be in the form of lump-sum payments;
• clarify the role of the ACCC, ensuring its focus is on providing factual information to assist the arbitrator; and
• adjust the effect of anti-avoidance provisions so that they take effect from the commencement of the Code and ensuring the government’s policy intent of not interfering with existing contractual rights under the code is achieved.

Frydenberg and Fletcher stated “[t]he Code will be reviewed by Treasury within one year of its commencement to ensure it is delivering outcomes that are consistent with the Government’s policy intent.”

On 17 February, the House of Representatives approved the Liberal-National Coalition’s proposed amendments and issued a supplementary explanatory memorandum to further explain the changes. The same day Facebook implemented the aforementioned ban. Interestingly, the Australian government does not seem to have engaged in incendiary rhetoric and instead it opted to keep negotiating with Facebook. Fletcher offered some equivocal remarks in a radio interview. Nonetheless, the ban affected vaccine rollout as a number of Australian states saw their health departments’ Facebook pages go dark.

After Facebook and the government had reached agreement, in a 23 February press release, Treasurer Josh Frydenberg MP and Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher MP announced “further amendments to the News Media and Digital Platforms Mandatory Bargaining Code.” Frydenberg and Fletcher

These amendments will provide further clarity to digital platforms and news media businesses about the way the Code is intended to operate and strengthen the framework for ensuring news media businesses are fairly remunerated. These amendments will make it clear that:

• a decision to designate a platform under the Code must take into account whether a digital platform has made a significant contribution to the sustainability of the Australian news industry through reaching commercial agreements with news media businesses;
• a digital platform will be notified of the Government’s intention to designate prior to any final decision – noting that a final decision on whether or not to designate a digital platform would be made no sooner than one month from the date of notification;
• non-differentiation provisions will not be triggered because commercial agreements resulted in different remuneration amounts or commercial outcomes that arose in the course of usual business practices; and
• final offer arbitration is a last resort where commercial deals cannot be reached by requiring mediation, in good faith, to occur prior to arbitration for no longer than two months.

They further claimed:

• Importantly, the amendments will strengthen the hand of regional and small publishers in obtaining appropriate remuneration for the use of their content by the digital platforms.
• The Explanatory Memorandum will confirm that the Code only applies to the extent a digital platform is making covered news content available through those services.
• These amendments also add further impetus for parties to engage in commercial negotiations outside the Code – a central feature of the framework that the Government is putting in place to foster more sustainable public interest journalism in Australia.

In a revision to its 17 February post, Facebook stated:

We’re pleased that we’ve been able to reach an agreement with the Australian government and appreciate the constructive discussions we’ve had with Treasurer Frydenberg and Minister Fletcher over the past week. We have consistently supported a framework that would encourage innovation and collaboration between online platforms and publishers. After further discussions, we are satisfied that the Australian government has agreed to a number of changes and guarantees that address our core concerns about allowing commercial deals that recognize the value our platform provides to publishers relative to the value we receive from them. As a result of these changes, we can now work to further our investment in public interest journalism and restore news on Facebook for Australians in the coming days.

Thereafter the Parliament set to work on making the second round of amendments, but in the Senate. During debate in the Senate on 24 February, a Senator part of the ruling Liberal-National Coalition explained the intent of the amendments when questioned by the opposition:

The aim of these amendments, obviously, is to provide more clarity to the digital platforms and to the news media businesses about the way the code is intended to operate and to strengthen the framework for ensuring news media businesses are fairly remunerated. It’s all about clarification. These amendments were done on the advice of Treasury and after hearing submissions that were made to the committee that was scrutinising this bill.

The same Senator further explained:

These amendments will make clear that a decision to designate a platform under the code must take into account whether a digital platform has made a significant contribution to the sustainability of the Australian news industry through reaching commercial agreements with news media businesses. A digital platform will be notified of the government’s intention to designate prior to any final decision, noting that a final decision on whether or not to designate a digital platform would be made no sooner than one month from the date of notification. Non differentiation provisions will not be triggered because commercial agreements result in different remuneration amounts or commercial outcomes that arose in the course of usual business practices. Final offer arbitration is a last resort when commercial deals cannot be reached, by requiring mediation in good faith to occur prior to arbitration for no longer than two months.

Another supplemental explanatory memorandum explained the changes.

Finally, an interesting postscript. Even after the Australian Parliament pushed through changes Facebook demanded, it continued to advocate against the notion that the platform has any responsibility for declining advertising revenues for media around the world and the related decline of media around the world. Former British Deputy Prime Minister Nick Clegg (who is now Facebook’s Vice President of Global Affairs) argued in uncharacteristically strong terms in a post titled “The Real Story of What Happened With News on Facebook in Australia.” Just a little bit will do:

The assertions — repeated widely in recent days — that Facebook steals or takes original journalism for its own benefit always were and remain false. We neither take nor ask for the content for which we were being asked to pay a potentially exorbitant price. In fact, news links are a small part of the experience most users have on Facebook. Fewer than one post in every 25 in your News Feed will contain a link to a news story, and many users say they would like to see even less news and political content. (emphasis in the original.)

It seems clear that Facebook is trying to sway people around the world to its viewpoint, especially those living in nations inclined to follow the European Union and Australia’s lead like a Canadian Minister said Ottawa is thinking of doing.

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

Photo by David Clode on Unsplash

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[1] Interestingly, it appears Google has taken down the August letter. Two separate links take one to revised statements issued this year (here and here.) Hmm, I wonder why Google would do that? Nonetheless, one can still read the YouTube open letter to Australians issued the same day and get the flavor of what assertions Google was making and the tactics it was using. Moreover, I quoted from length in my newsletter and on my blog in late August, and here are the claims I highlighted:

• 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.
• You’ve always relied on Google Search and YouTube to show you what’s most relevant and helpful to you. We could no longer guarantee that under this law. The law would force us to give an unfair advantage to one group of businesses – news media businesses – over everyone else who has a website, YouTube channel or small business. News media businesses alone would be given information that would help them artificially inflate their ranking over everyone else, even when someone else provides a better result. We’ve always treated all website owners fairly when it comes to information we share about ranking. The proposed changes are not fair and they mean that Google Search results and YouTube will be worse for you.
• You trust us with your data and our job is to keep it safe. Under this law, Google has to tell news media businesses “how they can gain access” to data about your use of our products. There’s no way of knowing if any data handed over would be protected, or how it might be used by news media businesses.
• We deeply believe in the importance of news to society. We partner closely with Australian news media businesses — we already pay them millions of dollars and send them billions of free clicks every year. We’ve offered to pay more to license content. But rather than encouraging these types of partnerships, the law is set up to give big media companies special treatment and to encourage them to make enormous and unreasonable demands that would put our free services at risk.