Google, Facebook: Senate inquiry kicks off into news bargaining code

This is the moment Google made a bold threat to Aussie internet users in a move showing it was ‘prepared to punish the whole of the country’.

Google says it will have no choice but to make Google Search unavailable in Australia if the government succeeds in implementing its new media code, which will force big tech companies to pay for Australian news content.

In a massive escalation of its opposition, Google Australia and New Zealand managing director Mel Silva said the trillion-dollar US firm would no longer allow Australians to use its search engine if the government enacted the news media bargaining code as proposed.

It is the first clear threat from Google in response to the laws.

Speaking at a senate inquiry into the code on Friday, Ms Silva conceded the company had only paid $59m in corporate tax last year, despite a gross revenue of $4.8b.

But she claimed a requirement for the company to pay for links and snippets would make Google Search unviable in Australia.

“The principle of unrestricted linking between websites is fundamental to search and coupled with the unmanageable financial and operational risk,” 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.

This is the moment Google spokeswoman Mel Silva threatened to shut down its search function in Australia. Picture: NCA NewsWire/Gary Ramage

“Now 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.

“Withdrawing our services from Australia is the last thing that I or Google want to have happen, especially when there is another way forward.”

Liberal senator Andrew Bragg demanded more clarification on what specific changes Google was calling for.

“We have nothing to deal with. We’re grappling with your comments this morning, and all we’ve got today is effectively your threats and your blackmail,” he said.

The removal of Google’s search engine in Australia could have a significant impact on internet users and their ability to use the worldwide web.

The Australian Competition and Consumer Commission found Google dominated web search traffic in Australia, estimating it handled 95 per cent of internet search traffic in the country.

Senator Slade Brockman sips his coffee while Mel Silva from Google speaks via video during the senate inquiry into the news media bargaining code. Picture: NCA NewsWire/Gary Ramage

Without Google search, Australian internet users could be forced to use alternatives including Microsoft’s Bing, privacy-focused offering DuckDuckGo and Yahoo!

Greens senator Sarah Hanson-Young accused Google taking a “my way or the highway approach.

She said the tech giant was threatening to block all Australians from using Google Search, despite news searches making up just 1.25 per cent of searches on the platform.

“That’s a hell of a threat,” she told Ms Silva.

“And it doesn’t seem to add up with the facts that you’ve presented yourself about the impact that this would have just on news content in Australia.”

The bill also includes an independent umpire that would choose between offers put forward by each side, if the parties could not agree on a fee for news content.

Ms Silva said the arbitration process had been “chosen specifically to ensure speed and efficiency” but was a model used when there was not much debate over the cost of a fee.

She said Google was “not opposed to paying publishers for value, but the details matter”.

“This is a very one sided and untested approach that’s actually never been used in a mandatory code before without consent of both parties,” she said.

RELATED: Facebook and Google set for senate showdown

Google is expected to fight strongly against the proposed laws, which would require it to pay news publishers for the content it houses on its search engine. Picture: Kenzo Tribouillard/AFP

FACEBOOK RENEWS THREAT TO PULL NEWS FROM PLATFORM

Facebook Australian public policy vice-president Simon Milner also doubled-down on the social network’s threat to remove all news stories from its platform in Australia if the news code was to go ahead as drafted.

Mr Milner would not outline what a news-free Facebook would look like for Australians if it followed through with the threat, however, only that the social network would not close down entirely.

“We clearly have been doing some work to figure out what that (would look like),” he said.

“I can reassure the committee though this is not to mean that Facebook would no longer be available to the millions of people in Australia who love Facebook.”

Facebook first threatened to remove all news stories from the Australian arm of its platform in September, and changed its terms of service in October to ensure it could follow through with this plan.

The new terms state Facebook can “remove or restrict access to your content, services or information if we determine that doing so is reasonably necessary to avoid or mitigate adverse legal or regulatory impacts to Facebook”.

Mr Milner denied Facebook was engaging in blackmail.

“It was absolutely not a threat, it was designed to inform the policy process,” Mr Milner said.

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

“We have explained that it is something we had to seriously consider, given the nature of this is unworkable.”

The potential move raised concerns from experts, who warned the removal of fact-checked news stories could affect its ongoing battle against misinformation.

Facebook has threatened to remove news from its platform.

Mr Milner said while mainstream news content, which accounted for only around 5 per cent of users’ newsfeed, “certainly helps enrich the community” it provided “almost no commercial value to Facebook”.

Senator Patrick said Facebook reducing its tax bill in Australia, while not illegal, was not “morally proper and goes to your social license”.

But he said increased tax revenue from Facebook could allow the government to redirect funds to local news outlets and potentially negate the need for the legislation.

“I think you’re verging on being morally bankrupt in the way in which these tax affairs are conducted. I’ll leave it at that,” Senator Patrick said.

Mr Milner claimed Facebook had also backed away from plans to launch a paid news service in Australia due to ongoing talks about the legislation, and had instead launched it in the UK.

He said the arbitration process would “encourage unreasonable behaviour” by giving publishers “near complete control” of negotiations.

“The draft news targeting law as it stands prevents us from being able to reach viable agreements,” he told the inquiry.

“Rather than increasing investment in us in journalism will have the opposite effect.”

MEDIA PUSH TO MAKE JOURNALISM SUSTAINABLE

News Corp executive Campbell Reid said the laws confronted the “urgent problem” of making journalism viable in the digital age.

He said the revenue of Australian media outlets had steadily declined despite their audiences increasing.

News Corp Australia, the Australian Associated Press, Guardian Australia and Nine all confirmed they had held unsuccessful negotiations with Google and Facebook.

Mr Reid said while Google had voiced concerns over the legislation it had failed to outline what elements needed to be fixed.

News Corp Australia’s Campbell Reid said Google has threatened to ‘punish the whole of the country’ by pulling its services from Australia. Picture: NCA NewsWire/Gary Ramage

“The ball’s in their court to tell us what specifically needs to be changed,” he said.

“There’s always the next problem, particularly with Google. So we can solve this problem that now, (but) there’s another issue.

“We have to wonder: are they intending to negotiate to a conclusion?”

Mr Reid said negotiations over payments were hampered by a bargaining imbalance between tech giants and news producers.

“One of the massive problems we face with Google is their entire machine is a black box. How do you negotiate when they hold literally all the information?” he said.

“They know more about our businesses than we know ourselves when it comes to being online.

“Search engines like Google are of immense value to people in making choices and accessing information. That’s the good part.

“The bad part about it is the situation we’ve been in: the commercialised monopoly. Now in a genuine monopoly statement, they’re prepared to punish the whole of the country.”

GOOGLE ADMITS TO HIDING SITES IN ‘EXPERIMENT’

Earlier this month, Google admitted to hiding some news sites and stories from Australians.

Ms Silva said the measure was part of Google’s “scenario planning” to help avoid the “worst case scenario” of withdrawing its service to Australians entirely.

“We’ve had this code since December 8, (and) we’ve seen various versions of it since July,” she told the inquiry.

“There are a number of scenarios that we’ve been planning for at Google.

“We’ve also been planning for how we would operationalise, and comply with a workable code because that is a significant shift in our operations getting deals done compliance regulations. All of this we have planned for.”

She said the experiments had only affected 1 per cent of users, and the timing had been “forced upon us” by the government.

She did not confirm whether users had been prevented from accessing the ABC.

Independent senator Rex Patrick has previously lashed Google for being “disingenuous” over the tests, describing them as a warning shot to the federal government.

He said Google was mimicking China’s strongarming of Australia over its call for an independent inquiry into the origins of COVID-19.

Crossbench senator Rex Patrick has been critical of Google’s stance on the media code. Picture: Sam Mooy/Getty Images

“The Chinese response to that was to threaten our market, to threaten our trade,” he told Ms Silva.

“We’ve got a similar situation here where the Australian Government is leading on a proposal in relation to the Wild West web.

“Our government steps out first, and the very large organisation that is Google threatens to leave our market.

“Do you think that’s the proper conduct for a large international corporation like Google?”

Ms Silva claimed Google was simply assessing the impact of legislation, which posed an “untenable risk” to the company’s Australian operations.

“You’re going to pull out of every market, are you? Or is this all about stopping the precedent?” Mr Patrick replied.

GOOGLE COULD LOSE BILLIONS BY CUTTING OFF AUSTRALIA

If Google was to follow through with its threat to remove its search engine from Australian users, the company would cut off billions of dollars in advertising revenue every year.

Google Australia raked in $4.3 billion in advertising revenue in 2019 — the vast majority of its $4.8 billion in gross revenue in the country.

And Ms Silva told the Senate inquiry “the vast majority of our advertising business is search — showing an ad when someone types a query”.

Asked by Senator Hanson-Young about whether Google would remove search from Australia — and give up this revenue — to avoid setting an international precedent to pay for the news it uses, Ms Silva said it was a “worst-case scenario” that it would have to take as a “rational” business.

“Our ability to offer the search service to our users is supported by a business model and that’s not something we have ever denied,” Ms Silva said.

“This code sets an untenable financial and operational precedent for us and any rational business would look at a piece of legislation and evaluation the technical and operational risk and financial risks association with that.”

GOOGLE’S ‘THREATENING BEHAVIOUR’ SLAMMED

Australia appears on track to test the tech companies’ threats, as Prime Minister Scott Morrison said the federal government would not change its path based on the demands of the US firms.

“Let me be clear. 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.

“And people who want to work with that, in Australia, you’re very welcome, but we don’t respond to threats.”

Australia Institute’s Centre for Responsible Technology director Peter Lewis said Google’s threat to pull its biggest service from use by Australians was “chilling” and an obvious effort to scare Australian politicians.

“Google’s testimony today is part of a pattern of threatening behaviour that is chilling for anyone who values our democracy,” Mr Lewis said.

“Our elected representatives must stand firm against this bullying and support a viable media to act as a counterweight to the power of big tech: the eyes of the world are watching.”

‘THREAT TO DEMOCRACY’: TECH GIANTS’ MEDIA MONOPOLY

The legislation was introduced to parliament in December after an 18-month review process by the Australian Competition and Consumer Commission.

The review found democracy faced a potential threat from the market power wielded by tech giants over the media industry.

Google rejected the government’s mandatory bargaining code in December, but claimed it remained committed to creating a functional code.

Ms Silva said Google “felt heard” during “effective and constructive conversations” with Treasury and acknowledged changes made by the government to alleviate its concerns.

But she said “more fundamental issues” with the legislation had not been resolved.