An Unstoppable Force Meets an Australian Object
Facebook stopped allowing the sharing of news in Australia, after the government put forward
a law requiring the firm to negotiate with news publishers over the terms of content distribution. The firm also stopped letting Australian publishers be shared anywhere in the world on Facebook. Facebook also did their usual ‘move fast and break things,’ accidentally censoring
much of the South Pacific, but the result is that when you try to post Australian news, this is the message you get.
There’s a lot of noise about this law, as one might expect. Pro-Facebook libertarians are saying it’s a “link tax” written by Luddites, and some prominent fancy people are even saying it will break the internet, while news publishers are saying it’s about time for this kind of law. This law does matters, because unlike Europe’s constant noisy pretend attempts to address big tech, this is the first time we’re really seeing a nation actually attempt to force the platforms do something they don’t want to do. And fortunately, we don’t have to trust any of these people in the debate, and we can read
the law itself, or read
the explanatory document the Australian legislature provides to explain it.
As longtime readers know, I’ve been paying close attention to Australia’s antitrust policies
for years, because the Australian Competition and Consumer Commission head Rod Sims has been on the leading edge of investigating the privacy, data practices, and market power of big tech platforms. This law comes out of the Digital Markets Inquiry launched in 2017; it is one of the first recommendations by the ACCC on addressing big tech, but it certainly
isn’t the last one. (Here, for instance, is the ACCC’s
groundbreaking report on the complex adtech supply chain released late last month, which built on the Texas AG antitrust case against Google. We can expect Australia to lead in this realm as well.)
The law is designed to target a specific problem, which is the death of newspapers resulting from the monopolization of the Australian advertising market. Australia has lost 15% of its newspapers since 2008, and dozens of small cities now have no newspaper coverage. This graph from the
ACCC digital platform inquiry shows part of the monopoly problem driving the collapse.
What Does This Australian Law Do?
The law says that if you are a dominant digital platform, then you have an obligation to engage in good faith bargaining with news outlets whose content you distribute over the terms of that distribution. The law only applies if there is a bargaining imbalance with media outlets. So this isn’t a tax, it is an anti-monopoly law.
Much of the bill has to do with designating who gets to be a news publisher. The bill says pure opinion stuff doesn't count, and neither does pure sports and entertainment. Media outlets have to register with the government to get bargaining rights. The bill mandates that digital platforms tell media outlets in advance what data they collect and when they are going to change important algorithms on which those outlets rely, like if they are going to change referral traffic in a way that would eliminate more than 20% of the audience and revenue. That’s totally reasonable, basically saying Facebook has to give you two weeks notice if it is going to destroy your business.
The law also has non-discrimination and anti-retaliation provisions, to make sure that dominant digital platforms don’t use fear to bully publishers. Platforms have to treat non-news entities like news entities in how they distribute content, and they can’t retaliate if a news entity chooses to register and demand bargaining rights.
Once you are a news outlet, you get certain rights. Platforms have to tell news outlets about the data they collect - they don't have to share the data, but they have to explain what they are collecting. And during bargaining, parties have to give information to one another showing how they make money, so there’s no opaque hiding of how one uses data to profit. This is a transparency measure to force big tech to show how they price and allocate advertising (which is something Facebook constantly seems to be using to defraud advertisers.)
News outlets and platforms can negotiate however they want, for a short period of time. The platform can pay based on traffic or simply cover a percentage of news gathering costs. But only, and this is the key point, if there is a bargaining imbalance, aka if the platform is taking all the ad revenue. If a digital platform doesn’t have bargaining power against media outlets, aka it’s not dominant, then there is no requirement for any sort of negotiations.
What happens if negotiations fail? If a dominant digital platform and media outlet can't reach a deal, then an arbitrator steps in. The arbitrator must consider the the value that both the platform and news outlet provide, as well as the bargaining imbalance between them, meaning that if, as Facebook claims, media outlets offer zero value to platforms, then it can simply prove this in arbitration and pay nothing. The arbitrator doesn’t micro-manage the process, but does ‘baseball style’ arbitration, meaning both sides give an offer, and the arbitrator picks one of them. This kind of arbitration is both faster and less intrusive that standard government regulation, and creates the incentive for both sides to offer non-extreme proposals they can live with, for fear the arbitrator will simply pick the other side if they suggest something outlandish.
The idea behind the law is to mimic a healthy market, where there is transparency of data and a robust set of buyers and sellers instead of a few dominant platforms. As the legislature notes, "This allows the panel, in making their determination, to consider the outcome of a hypothetical scenario where commercial negotiations take place in the absence of the bargaining power imbalance." A better solution would be to create a real market, to break up these firms, like Newscorp recommended and the ACCC rejected (so much for Murdoch bogeyman). But Australia rejected that approach, probably because it’s a small country without the leverage to force a break-up.
This law wouldn’t work as written in America, because we wouldn’t want publishers to register with the government, but it’s a fairly reasonable conceptualization of how to organize an anti-monopoly provision in a small country without the ability to break up the foreign tech behemoths its citizens use.
In other words, despite what Facebook’s PR armies are saying, it isn’t a link tax, it is an anti-monopoly law that Facebook is opposing because the law will undermine the firm’s ability to monopolize the ad market and force transparency in how the firm gathers and manages its vast data horde. In some ways, it is an existential threat to the company (which I think might be hiding some things about its business model, considering its revenue is growing at 20-30% a year even though its user base in the U.S. and Europe where it makes most of its money is flat).
Facebook’s response to this law was to flex some serious muscles, and block the sharing of news in Australia on its platform. Doing so was a disaster, at least PR-wise, because it revealed how much power Facebook really has. The social media monopolist lost credibility globally, with Canadian and UK politicians
attacking the firm as a bad faith actor. Facebook even lost American support; as late as last month, the United States Trade Representative was supporting the company
against Australia’s law, but the American government seems to have switched course, and is
now neutral. It’s now only a matter of time before Facebook is broken up and regulated.
The details of this law are interesting, but the real point of what Australia is doing is to that it is asserting the rule of law against a monopolist. In response, Facebook is saying, we are more powerful than your democratic officials.