A proposed law, introduced to Parliament in December, will force Facebook and Google to negotiate fees with news companies whose stories appear on their platforms.
Under the world-first proposal, if a negotiation breaks down then an independent umpire will step in and decide the fee based on a ‘final offer’ method, which chooses one side’s position as the resolution.
The federal government has introduced a world-first law to make Google and Facebook pay news organisations for their content
In a public hearing on Friday, Mel Silva, the Managing Director of Google and New Zealand, said Google may be forced to pull its search function out of Australia if the code goes ahead.
‘The principle of unrestricted linking between web sites is fundamental to search and, coupled with the unmanageable financial and operational risk, if 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 said.
‘That would be a bad outcome for us but also for the Australian people, media diversity and the small businesses who use our products every day.’
Ms Silva said paying for snipets of news to appear on Google Search poses an ‘untenable’ risk to the business.
She said the company has been unable to work out how much it would be forced to shell out to media companies.
In questioning, South Australian Senator Rex Patrick compared Google to the Chinese government which has blocked trade with Australia after Scott Morrison called for an inquiry in the origins of coronavirus.
‘The Chinese response was to threaten our market, to threaten our trade… We’ve got a similar situation here where our government steps out first and the very large organisation that is Google threatens to leave our market, do you think that’s proper conduct for a large international corporation?’
Ms Silva replied: ‘It is the only rational choice if this law were to pass for us.’
Senator Patrick said the code was going to go world-wide. ‘You’re going to pull out of every market are you? Or is this about stopping the precedent?’
Ms Silva scoffed and said the code posed an ‘untenable risk to our Australian operations.’
Australia’s battle with Big Tech is being keenly watched by governments across the world, not least in London, Washington and Brussels, where concerns have been raised over the ‘advertising duopoly’ of Google and Facebook.
Australian regulators found that for every $100 spent on digital advertising, $53 goes to Google, $28 to Facebook and only $19 goes to others.
The tech giants face $10million fines if they don’t follow the rules of the proposed code, designed to ensure they pay for news.
Pictured is the Melbourne office of Google
Instead of paying for news that appears on Google Search, the company is offering to have its ‘news showcase’ feature included, which allows users to read some stories that are otherwise behind paywalls.
The mandatory code aims to combat the bargaining power imbalance between news businesses and digital platforms, brought on by advertisers flocking to the latter.
Facebook is also unhappy with the plan, arguing in its submission to the inquiry that the proposal has already deterred its planned investments in Australian news.
‘The bill is not, as its name suggests, a bargaining code: it removes the potential for genuine bargaining by forcing Facebook to make payments that are detached from true calculations of commercial value and by incentivising news publishers to make unreasonable ambit claims and bargain in non-commercial ways,’ the company said.
‘It removes any meaningful influence over our own commercial dealings with publishers.’
Representatives from News Corporation, Australian Associated Press, Nine, Guardian Australia, the ABC and SBS will also appear at Friday’s hearing.
How Google dominates the global advertising market and spends billions squeezing out competitors
1) Dominating search engine space
Google, through both its deals placing its search engine above others on devices and through public interest in it, accounts for 80 percent of every internet search in the US.
In 2020, it accounted for 94% of all mobile searches in the US
2) Monetizing its dominance through ads
Google monetizes the amount people use it with ads, which generate around $40billion in revenue every year
3) Spending its billions to cement its dominance with ‘exclusionary deals’
With the money it makes through ads, Google pays companies like Apple, LG and others to block out any of its competitors from having their search engine preferred on devices
Among the deals is one with Apple. Google is the default on Safari on iPhones and it’s also the default on Siri. The deal amounts to up to a fifth of Apple’s worldwide income which last year would have been around $11billion