‘It’s a reality’: Google threatens to stop search in Australia due to media code

Google’s threat to cut off search to Australian users and walk away from $4 billion in revenue has sparked warnings the digital giants are not bluffing over laws designed to force them to pay for news.

The $1.8 trillion search giant’s local managing director Melanie Silva told a Senate committee hearing on Friday that Google would shut off search in Australia if the government’s proposed media bargaining code becomes law. Experts said the threat is not idle, with Google likely fearful the code could set a global precedent.

Melanie Silva, Google managing director and vice-president of Australia and New Zealand, says the company will cut off search to Australian users if it is forced to pay for news content.Credit: Alex Ellinghausen

Prime Minister Scott Morrison said Australia would not respond to the threats as news media companies fired back at suggestions their content did not add value to the platforms.

“Australia makes our rules for things you can do in Australia. That’s done in our Parliament. It’s done by our government, and that’s how things work here in Australia,” he said. “People who want to work with that, in Australia, you’re very welcome. But we don’t respond to threats.”

The code aims to force digital platforms to pay media companies for news content, and follows a 12-month review into Google and Facebook by the competition watchdog. The legislation, which was introduced into the House of Representatives in December, comes amid a push by global governments to rein in the power of digital monopolies.

Google’s threats follow similar remarks made by Facebook Australia’s managing director Will Easton in September, who announced plans to remove news articles from the social media’s main app if the media code is passed by Parliament.

Montaka Global fund manager Andrew Macken, whose company owns shares in both Google and Facebook, said he believed they were not empty threats.

“I suspect it is [legitimate],” Mr Macken said. “Google would perhaps rather lose Australia (a relatively small global market) to avoid setting a precedent for its other larger markets.”

Google’s comments marked the first time the digital giant publicly threatened to disable its primary search function to all Australians in its response to the proposed laws.

Hannah Marshall, a partner at Marque Lawyers that specialises in competition law, said the code in its current form left the tech giants with no choice.

“The code now says that Google and Facebook have to pay for the right to supply audience to the news publishers,” Ms Marshall said. “That makes no legal or commercial sense.”

“To avoid the operation of the code, Google and Facebook have no option but to cease linking to news altogether. If Google can’t reliably separate news results from other search results, then logically it may have to pull its entire search service from Australia.”

Concerns about Google’s exit from the market were also shared by Labor’s communications spokeswoman Michelle Rowland.

“[Treasurer] Josh Frydenberg and [Communications Minister] Paul Fletcher need to explain why they can’t find a way to support the media without also disrupting the millions of Australians who use Google Search and Facebook every month,” Ms Rowland said.

Ms Silva assured senators the ultimatum was a “worst-case scenario”. “It’s not a threat. It’s a reality,” she said. “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.”

Ms Silva reiterated Google’s long-running argument the code would “break” Google’s business model by forcing it to pay news outlets to provide links to their news content - a move the trillion-dollar company claims undermines the concept of a free and open internet.

She also revealed that news queries comprised only 1.25 per cent of all Google searches, but under intense questioning from senators, said the company was concerned the proposed Australian code would set an international precedent.

Simon Milner, Facebook’s vice-president for public policy Asia-Pacific, restated the company’s ultimatum - first made in September - that it may resort to blocking news content on its Australian site.

Mr Milner said the move would be “a potential worse case consequence”, adding it was “absolutely not a threat” but designed to inform the policy process.

“The great majority of people who are using Facebook would continue to be able to do so, but we would no longer be able to provide news as part of the Facebook product,” Mr Milner said.

He told the inquiry that having news content on Facebook provided “almost no commercial value to Facebook”.

But Australian media companies disputed the claims of the tech giants and urged the government to legislate immediately. Executives from News Corp Australia, Nine Entertainment Co (owner of this masthead) and Guardian Australia, presented a largely united front at the hearing, arguing the code would help ensure the long-term sustainability of local journalism and disputing claims the tech giants did not receive value from content.

Nine’s chief digital and publishing officer, Chris Janz, said a failure to implement the code would see the tech giants “continue to refuse to pay for the content they’ve used to secure their monopolies or live up to the responsibilities that come with such power”.

Chris Janz, Nine, Chief Digital and Publishing Officer, says tech giants have built effective monopolies on search advertising in Australia.Credit: Alex Ellinghausen

Chairman of Free TV Australia Greg Hywood, who speaks on behalf of Nine, Seven West Media and Network Ten, said it would be a “surprising choice” for Google to withdraw from a market where they generate billions of dollars of revenue “just because they are required to pay for content they can readily afford”.

Mr Frydenberg introduced the bill to legislate the code during the final sitting week of Parliament last year, with a vote expected early this year after the committee delivers its report on February 12.

The code requires Google and Facebook to enter mandatory arbitration with media companies if they cannot reach an agreement over the value of their content within three months.

It also requires the platforms to give the news businesses 14 days’ notice of algorithm changes, and non-discrimination provisions have been put in place to stop the tech giants from taking retaliatory action such as removing content or punishing organisations that participate in the code.

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