Fair shake of the (digital) sauce bottle – Australia’s news media bargaining code

Google and Facebook versus the Australian Government

It has been a dramatic month for social media in Australia, with Facebook unexpectedly blocking all news content and some government and emergency department accounts. Facebook was displaying its objection to Australia’s then proposed news media and digital platforms mandatory bargaining code (‘news media bargaining code’ or ‘Code’), which is now in effect with the enacting of the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Act 2021 (Cth).[1] Google and Facebook have been actively challenging the Code, calling it ‘unworkable’, with Google at one point threatening to leave Australia if the law was passed.

Google has now negotiated deals with top Australian news outlets to pay them for their content, seemingly taking the heat off Google for now (or perhaps Facebook’s overnight ‘news’ blackout was responsible for that). Following last minute amendments made to the Code by the Senate (which includes providing 30 days’ notice before a platform or service is ‘designated’ by the Minister), Facebook has since restored the Facebook ‘newsfeed’.

The Minister will determine which digital platform corporations and services are captured by the Code, although Google and Facebook were always the primary targets, and Australian media companies must apply (and meet certain criteria) to be registered to participate in the Code.

ACCC digital platforms inquiry

The news media bargaining code flows from the Australian Competition & Consumer Commission (ACCC) digital platform inquiry. The ACCC digital platforms inquiry quantified the impact of digital platforms on the supply of news content, stating:

‘Each month, approximately 19.2 million Australians use Google Search, 17.3 million access Facebook, 17.6 million watch YouTube (which is owned by Google) and 11.2 million access Instagram (which is owned by Facebook). Given Australia’s current population of 25 million, with 21 million over the age of 13, it is clear that a large majority of the population are regular users of these platforms.’[2]

This world-first media law reform seeks to provide Australian media companies with more bargaining power. The ACCC digital platform inquiry reported that:

‘There is a fundamental bargaining power imbalance between media businesses and Google and Facebook that results in media businesses accepting terms of service that are less favourable.’[3]

‘The critical factor creating this imbalance is that for many media businesses, Google and Facebook are “must have”’ platforms’ … ‘media businesses cannot afford not to be on the Google and Facebook platforms and therefore, Google and Facebook have become unavoidable trading partners for many media businesses.’[4]

To level the playing field, the new media law in Australia establishes a mandatory code of conduct. Australian media companies can now require corporations responsible for designated digital platform services to provide advance notice of changes in algorithms and explanatory information on user data, as well as mandatory bargaining and final offer arbitration rules if a commercial agreement cannot be made outside of the Code. At the heart of the Code is achieving payment to media businesses for their news content.

Advance warning of changes to algorithms a general requirement

A key area of concern raised by media businesses to the ACCC at the outset of its inquiries into digital platforms was the lack of transparency surrounding algorithms, how results are displayed on the digital platforms, or when changes to algorithms will occur. Australian media companies want access to this information so that they may make more informed business decisions and maximise their ability to monetise their news content. As an example, an algorithm may be used by Google to rank news results within its ‘Top Stories’.

Digital platforms had fundamental concerns with the requirement to provide notice about changes to algorithms. One such concern included advanced warning providing other businesses with a commercial advantage and/or possibly disadvantaging the platform making the change; and that it would be impossible to provide advanced notice of algorithm changes that were made in an automatic manner, such as through artificial intelligence.

Consequently, the requirement in the news media bargaining code to provide notice before making a change to an algorithm has been an issue of hot debate. To address concerns raised by Google, some limitations on this requirement were included, namely a ‘dominant purpose’ test and that the algorithm change must likely have a ‘significant effect’ on referral traffic to the news content. Changes to algorithms as part of routine maintenance and efficiency updates do not need to be notified, and the Code does not require information to be divulged if it would reveal a trade secret.

Bargaining and final offer arbitration

Getting news businesses and digital platforms to the negotiating table is a key focus of the news media bargaining code. Increasing Australian media companies’ bargaining power is the fundamental concern that the ACCC sought to rectify in the new Australian media law. It is in this context that the Code gives registered news businesses the power to notify a corporation responsible for a designated digital platform service that it wishes to bargain in relation to its news content. Those parties must then negotiate in good faith regarding the issues. If agreement cannot be reached within 3 months, the parties are obliged to then enter mediation.

If the bargaining issue relates to payment for news content and mediation of the issue is unsuccessful, the registered news business can instigate the arbitration process. An arbitration panel would then decide the remuneration to be paid for the news content, which may or may not be based on a final offer made by one of the parties, and the parties must comply with that decision. It goes without saying that digital platforms will want to avoid this arbitration process and being told how much they must pay for news content.

Where digital platforms enter into agreements outside of the Code to pay registered news businesses for news content, the rules regarding bargaining and arbitration will not apply to the parties. News businesses and digital platform corporations can also agree to not apply the general requirements and the bargaining and arbitration rules under the Code (unless arbitration has already commenced).

But will it work?

Traditional media’s declining revenue is not solely attributed to Google and Facebook. News businesses used to enjoy advertising revenue from classifieds, which have transformed into bespoke services (think carsales.com.au). Without government intervention, it is very unlikely that the likes of Google and Facebook would have considered paying for the rights to use news content.

Of course, the news media bargaining code only applies when the Minister determines that a digital platform service and corporation are ‘designated’. In the determination process, the Minister must consider whether there is a significant bargaining power imbalance and whether the corporation has made a significant contribution to sustaining the Australian news industry (including agreements to pay for news content). The Government may therefore hope that the mere threat of being designated and required to comply with the Code is enough to get digital platform corporations to voluntarily ‘do the right thing’.

The rest of the world will no doubt be watching Australia as the concerns that the Code seeks to address are not novel to Australia. Other jurisdictions, including Canada, the UK, US, and EU have been undertaking various inquiries about how to address tensions in the relationships between digital platforms and businesses. Of course, Google and Facebook will be more than aware that this chess game in Australia has the potential to provide a precedent for other markets to follow.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2021

 

[1]      The Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Act 2021 (Cth), assented to on 2 March 2021, amends the Competition and Consumer Act 2010 (Cth).

[2]      Australian Competition & Consumer Commission, Digital Platforms Inquiry – Final Report (June 2019) p.6.

[3]      Ibid p.206.

[4]      Ibid p.253.

Key contacts
Lucinda Watson
Special Counsel