Australia’s move to tame Facebook and Google is just the start of a global battle

Facebook and Google have become accustomed to an open world of information on which to build their closed ecosystems. Not any more. Australia is proceeding with a new media code that will force platforms to pay for news and bargain with news publishers. While Google has complied, Facebook called the regulators’ bluff by banning Australian news from its platform, before reaching a deal with the Australian government that allows it to avoid the new code, but only if it signs agreements with key publishers.

The new law is a bold move that shows that countries are realising they have more to gain by regulating the digital titans rather than bowing to their might. But it will be ineffective unless regulators around the world address the source of the problem: the dominance of Facebook and Google, and the concentration of power of the old media empires, which together undermine international, national and local journalism.

As a regulatory experiment, Australia’s new law was a success before it even came into force. Facebook’s temporary news ban was poorly implemented. “News” was interpreted broadly, with the Australian weather agency, public health services, domestic violence charities and trade unions all blocked from the platform. These pages are now due to be reinstated, but the action has exposed Facebook’s power as a news source and its willingness to degrade its product and deprive its users of vital news even during a pandemic.

By flexing its muscles, the company brought Australian politicians to heel. The government should have held its nerve. Had the news ban persisted, it would have created the first opening for rival social media firms in the Australian market for almost two decades. One political campaigner who found their Facebook page blocked joked it was time to reactivate their Myspace.

Google took a different approach. While continuing to protest against the new law, which it argues misunderstands the publishing market, the company rushed to complete negotiations with the global conglomerate News Corp and more than 50 other Australian news organisations, including Seven West Media, Nine and Guardian Australia. Google is probably still stinging from its own backfired attempt to withdraw news services in France in 2020, after the French regulator sought to force Google and Facebook to pay for scraping news content. Facebook said it would not pay the so-called “link tax”. When Google responded by no longer displaying news snippets in the country, the French competition authority ordered Google to the negotiating table on the grounds that removing the content could breach competition laws.

In agreeing to the terms of Australia’s regulator, Google may have identified the path of least resistance. Limited payments to publishers, and even Google’s $1bn fund for content featuring in its News Showcase product, would be a good investment if they calmed the vociferous protests of global media companies and forestalled deeper change.

Indeed, the Australian law accepts Google and Facebook’s dominance as an unavoidable fact. Rather than attempting to change the balance of power by breaking up the tech platforms or opening up the market to smaller competitors, the Australian regulator has instead opted to elicit concessions from the two companies, in the form of paying for the news displayed on their platforms. Instead of changing the status quo, the new law has tweaked it.

Those who will benefit most from these tweaks are legacy media barons such as Rupert Murdoch, the owner of News Corp, who is likely eager to cut his pound of flesh from Google. Many smaller publishers will have to fend for themselves. In France, by contrast, Google had to negotiate a framework agreement with an alliance of 300 press titles.

The total value and terms of Google’s deal with News Corp is undisclosed, but it reportedly involves “significant payments” to feature the company’s news coverage in its News Showcase. One might expect that Murdoch will be the first to invest in rival social media news outlets as the tech titans are forced to adapt to the changing regulatory landscape (News Corp is perhaps now regretting its sale of Myspace in 2011 to Justin Timberlake).

Google itself warned of exactly this conflict in a blog from August 2020 addressed to Australian YouTube creators. Raising the spectre of “unfair advantages to large news businesses”, the blog followed an open letter from the managing director for Google Australia, Mel Silva, which warned that the new Australian law would “break Google search” and stated that, if the law was passed, Google “would have no real choice but to stop making Google search available in Australia”. As it happens, this did not come to pass. Google search is still available in Australia and Google struck deals with the “large news business” bogeymen.

But this approach may not work with European and UK regulators. Both already have their own plans in motion, and may be emboldened by Australia’s initial success. The UK government is implementing proposals from the Furman review, commissioned by the Competition and Markets Authority (CMA), including the establishment of a Digital Markets Unit. The CMA itself recommended introducing obligations for data sharing and making companies open up their infrastructures, and suggested that Google and Facebook’s online advertising businesses be broken up if necessary. The EU is pushing forward with the Digital Services Act and the Digital Markets Act, which will carefully limit what is deemed acceptable behaviour by big platforms.

As regulators seek to tame the tech giants, they must resist pressure from other monopolists to tailor new rules in ways that suit them. Instead of laws that channel a fraction of Google and Facebook’s monopoly profits to old media, governments around the world should act together to dismantle the monopolies that threaten open and robust journalism.

• Michelle Meagher is a competition lawyer and author of Competition is Killing Us: How Big Business is Harming Our Society and Planet – and What to do About it