The Bill for a mandatory code to address perceived bargaining power imbalances between digital platforms and Australian news media businesses represents a regulator-platform battle with uncertain consequences

On Wednesday 9 December the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 was introduced to Parliament, giving new impetus to the world’s regulatory turn against large digital platforms.  The intent of this law is to force major digital platforms –Google and Facebook – to pay Australian media companies for use of news content.

The News Media and Digital Platforms Mandatory Bargaining Code results from a long, hotly contested process between the Australian Competition and Consumer Commission (ACCC), the Australian Government and Google and Facebook.

In July 2017, the ACCC in its Digital Platforms Inquiry recommended a voluntary code to address bargaining power imbalances between major digital platforms (Google and Facebook) and media businesses. Agreeing with the ACCC’s finding that these platforms were “unavoidable trading partners” for news publishers, in December 2019 the Government directed the ACCC to work with both the news and digital platform businesses to develop a voluntary code.

In April 2020, after the ACCC advised that the businesses were “unlikely to reach voluntary agreement” and COVID-19 exacerbated the pressures faced by Australian media sector, the Government directed the ACCC to draft a mandatory code.

In July 2020 the ACCC released draft legislation (News media bargaining code – Draft legislation). After significant consultation and some major amendments, the Government has now introduced the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill to Parliament. Bill 2020 is expected to be referred to a Senate committee before a final vote in Parliament around February or March 2021.

The Proposed News Media Bargaining Code

The News Media and Digital Platforms Mandatory Bargaining Code Bill that has been introduced to Parliament reflects many changes in response to strong feedback provided by Google, Facebook and other stakeholders on the ACCC’s draft legislation. In particular, the Code incorporates to some extent the three major changes asked for by Google:

  • The arbitrator must consider how digital platform services benefit registered news businesses in determining how much platforms should pay for news content: If a platform responsible for a designated digital platform service and a registered news business cannot successfully negotiate between themselves on how much the platform should pay the news business to distribute their news content, the Code sets up a mechanism for the dispute to be referred to an arbitrator. In the Bill introduced to Parliament, the arbitrator is now required to consider the benefit to news business of that platform making available its news content, as well as the benefit of the news businesses’ content to the platform (Code s52ZZ(1)(b)).

    Google had argued in response to the ACCC’s draft version that the Code needed to “take account of the value both sides bring to the table”. Requiring the arbitrator to consider the value the platform brings shifts the entire arbitration framework from being solely focused on one party to having to consider both sides.
  • The proposed Code limits when responsible digital platforms must give notice of algorithm changes to registered news businesses: Incorporating another of Google’s requests, the News Media and Digital Platforms Mandatory Bargaining Code Bill limits the type of changes about which the platforms responsible for the designated digital platform services must notify registered news businesses.

    The platforms will only need to notify news businesses of changes about content distribution that are likely to significantly affect either referral traffic to news businesses’ news content (whether free or paywalled), or advertising distribution directly associated with registered news business’ news content (ss52S, 52T, 52U). The notification requirement will now only be triggered if the platform has had a “dominant purpose…to bring about an identified alteration” with that change. The platforms will also only be required to give news businesses 14 days’ notice – down from 28 days – before making the changes.
  • The Code clarifies that the platforms will not have to give actual data on user interactions to the news businesses: Google publicly argued that under the ACCC’s draft version there was a risk that digital platforms would have to give potentially personalised data to news businesses about how consumers use Google’s services. The Bill clarifies that the requirement that responsible digital platforms are not required to give the actual data to registered news businesses on user interactions with news content. Instead the platforms will only need to give lists and explanations of the type of data (s52R).

These edits demonstrate that the Government has not simply adopted all of the suggestions made by the ACCC but has taken a somewhat more balanced approach to implementing the proposed changes. Despite changes made by the Government in response.. against the interests of established stakeholders.

Beyond these changes, the Government’s Bill has also changed the ACCC’s draft version in the following ways:

  • The Code will initially not cover Instagram and YouTube: Treasurer Frydenberg has said the Code will initially only apply to Facebook NewsFeed and Google Search, excluding Instagram and YouTube as designated digital platform services. This, however can be changed at a later date through a determination if, in Frydenberg’s words, “there is sufficient evidence to establish that [Instagram, YouTube, or any other digital platform service] give rise for a bargaining power imbalance” (s52E).
  • ABC and SBS will be included in the Code’s payments mechanism: The national broadcasters will now be allowed to participate in the Code’s remuneration-related arbitration mechanism, which requires the responsible digital platforms to negotiate a payment sum to give to registered news businesses in order to distribute their news content (Code s52ZZ(1)(b)).
  • Agreements can be entered outside the Code: The framework contained in the Bill recognises that agreements can be entered into outside of the Code. Where a registered news business reaches an agreement with a responsible digital platform, it can agree to not bargain or pursue compulsory arbitration under the Code (s52ZZM).
  • Clarifications: The Bill also adds and clarifies certain provisions, such as:
    • Setting up a “standard offer” framework that enables the responsible digital platforms to make remuneration-related offers to multiple registered news businesses outside of the Code’s framework (Division 9).
    • Clarifying the requirement that responsible digital platforms do not “differentiate” between registered news businesses due to their requests to bargain within the Code’s framework, to start the arbitration process for that negotiation, to be paid remuneration for their content, or to be part of a “standard offer” agreement (s52ZC).
    • Expanding the definition of core news content that a business must produce to be considered a registered news business under the Code, and be entitled to its benefits (ss52A, s52N).
    • Expanding when a digital platform service will be seen as making available and distributing covered news content in a way that the Code covers (ss52B, 52D).
    • Setting up a more detailed framework for the Australian Communications and Media Authority (ACMA) to revoke the endorsement of a registered news business corporation if it does not meet the required content, Australian audience, professional standards or revenue tests, the required connection between the corporation and its news business, or if the corporation gives ACMA false or misleading information (ss52H, I). It also requires a registered news business to notify ACMA if it no longer meets any requirements for the content, Australian audience, professional standards or revenue tests or the connection between the corporation and its news business (s52J).

The News Media and Digital Platforms Mandatory Bargaining Code is still a significant regulatory intervention and again demonstrates the ability of the ACCC to drive major policy reforms

Despite the changes made by the government in response to concerns about the ACCC’s initial draft, yesterday’s introduction of the Bill to Parliament represents another success by the ACCC in creating the platform for and then seeing major regulatory reform implemented against the interests established stakeholders.

Starting with the findings communicated in its Digital Platforms Inquiry (see our article - Digital reform unfolds - ACCC releases Final Report on Digital Platforms Inquiry) the ACCC pushed the  Government to “create a level playing field” between digital platforms and news publishers. A News Media Bargaining Code – along with further digital platform-related inquiries and investigations – was a key recommendation to address this perceived imbalance (see our article - ACCC releases Digital Platforms Services Inquiry Interim Report on Online Private Messaging).

The platforms responded to the proposal forcefully, mindful of the impact on their businesses in Australia and the potential for this proposal to become a precedent copied across the globe. Google launched an “open letter to Australians”, claiming the ACCC’s July draft of the 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.”

Facebook also reacted strongly. It said that if the News Media Bargaining Code was implemented, “we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram”. This would not be an unparalleled response. Google shut down its Google News service in Spain, after a law mandated that platforms pay to use news content.

The ACCC called Facebook’s threat “ill-timed and misconceived” (Statement on Facebook). It did not go so far to say the Code should or would penalise or prohibit such an exit. However, both the ACCC and the Government have maintained a hard line throughout the process, and the Code represents a significant change to the negotiation dynamic between digital platforms and news media companies.  It is also notable that while other industry codes in the Competition and Consumer Act 2010 (Cth)(CCA) limit the penalties that companies can face to some degree, the News Media and Digital Platforms Mandatory Bargaining Code exposes contravening companies to the standard penalties for contraventions of the CCA: up to 10% of a group company’s annual turnover.

What next for Digital Platforms? It’s unclear…

There is significant uncertainty as to how Google, Facebook and indeed news media companies and other content creators in Australia will react to this Code. The Government’s somewhat cautious implementation, compared to the ACCC’s proposal, implies it is acutely aware of this. However, implementation of a mandatory code of this nature in any form is a significant step.

The immediate focus will be on whether Facebook or Google will follow through on threats to no longer distribute news in Australia or to change the nature of the services that are supplied to Australian customers, for example by rolling out global updates less frequently or not implementing them at all.

Beyond the platforms, the Code will have a broader impact on registered news media businesses.  The Code will provide a platform for compulsory arbitration and is intended to provide a new revenue stream, which could lead to greater content creation.  However, the digital platforms have consistently raised concerns that by providing greater transparency of their proprietary algorithms, the Code could lead to increased gaming of those algorithms and result in content from traditional news organisations being prioritised over emerging or less official sources.