Government mulls weaker tech giant rules amid fierce Google, Facebook lobbying

The federal government is considering weakening new rules designed to force Google and Facebook to pay news publishers following fierce lobbying and threats from the tech giants to leave the Australian market.

Google and Facebook have aggressively lobbied the government to change core elements of a draft news media bargaining code being created by the Australian Competition and Consumer Commission that both companies have described as "unworkable". The new code will force the tech giants to strike commercial deals with news publishers.

Google and Facebook's lobbying efforts may have paid off.Credit: iStock

Industry sources, who spoke on the condition of anonymity, said the government had approached some publishers including News Corp Australia to gauge their resistance to considering the value of referral traffic they receive from Google and Facebook when negotiating compensation payments.

Among the digital giants' chief complaints is that the code proposes a "one-sided" payment negotiation process that assumes that the tech giants derive value from the existence of news on their platforms, but does not take into account the referral traffic they send publishers.

Treasurer Josh Frydenberg said the government was continuing to consult on the draft code, but would not comment on whether it was considering changing the proposed bargaining process.

"The government remains committed to implementing a code that addresses the bargaining power imbalances identified by the ACCC and ensures a sustainable news media sector," Mr Frydenberg said in a statement.

News Corp was approached for comment.

Any move by the government to water down the code will upset media companies such as News Corp and Nine Entertainment Co, which argue the digital giants have excess market power and profit unfairly from their news content. Nine is the publisher of this masthead.

Google has been asking for a "two-way value exchange" for months while Facebook has hired long-time friends of Prime Minister Scott Morrison, Scott Briggs and David Gazzard, to lobby for changes on its behalf.

In response to the draft code, Facebook has threatened to ban Australians from sharing news content on its platforms if the draft code is legislated, while Google has warned media companies and the government that it will leave Australia altogether.

Such a change, if adopted, would fundamentally alter the negotiating process and has the potential to significantly affect how much money publishers receive for the use of their articles on the platforms.

ACCC chair Rod Sims last month handed his final policy advice on the code to the government, and the Treasury is now working with the parliamentary drafting office to finalise the wording of the code. A bill to legislate the code will be introduced before the end of the year.

Mr Sims has remained tight-lipped about the specifics of his policy advice, but he has stressed the draft code will change following consultation with the digital giants and news outlets. In comments last month he left open the door to the code's "final offer" arbitration process being wound back.

"All I can say at the moment is some form of arbitration is important, but I can't foreshadow what's going to happen beyond that," Mr Sims said in October.

Under the draft code, the tech giants have three months to broker a deal with news organisations before they are forced to enter a binding "final offer" process, at which point an arbitrator will choose one of the parties' proposals.

In a briefing note used to lobby MPs and Senators, Google objected to the final offer process as "completely unreasonable and unprecedented", and argued the code was "silent" on the value the tech giant provides to news organisations.

"The arbitration model set by the draft code is so one-sided as to effectively prescribe the transfer of revenue from Google to Australian news businesses registered under the code without any recognition of the benefit news businesses derive from Google or Google's costs," the document said.

Google claims it directed more than three billion visits to Australian news publishers in 2018, worth about $218 million.

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