Google and Facebook face fines and algorithm transparency under new code

Google and Facebook will have three months to agree to revenue-sharing deals with Australian media companies before independent arbitrators intervene under a new landmark code designed to tackle the market power amassed by the US tech giants.

Draft laws unveiled by the Morrison government and competition watchdog on Friday will impose a raft of conditions on the digital platforms, forcing them to compensate news media businesses for using their content and be more transparent about their data and algorithms.

Treasurer Josh Frydenberg has announced a sweeping new code to force tech giants to compensate news media businesses for their content. Credit: Alex Ellinghausen

The companies will have to provide more detail on the data they collect on users' interactions with news content, come up with a proposal on recognising original content and provide 28 days' notice of changes to algorithms and policies that will affect news content and advertising.

"What we have sought to do with this mandatory code is not protect Australian news media businesses from competition or from disruption that's occurring across this sector," Treasurer Josh Frydenberg said on Friday.

"What we have sought to do is create a level playing field to ensure a fair go for Australian news media businesses and that when they generate original content, they are fairly paid for it."

The companies will have three months to negotiate in good faith and reach an agreement before an arbitrator steps in with a compulsory binding decision based on the companies' proposals.

The arbitrator will settle on a position within 45 days, taking into account the direct and indirect benefits of Australian news content for the digital platforms, the cost of producing the content, and the appropriateness of the burden on digital platforms.

The platforms will face fines of up to $10 million or 10 per cent of annual turnover if they breach the code, under existing consumer law, with a range of smaller penalties for minor infringements.

The code will prohibit the platforms discriminating between news media businesses, ensuring Australian outlets' content is not removed from the platforms or ranked lower than international rivals.

Ahead of the code's release, the businesses have threatened to wind back the availability of Australian news content on their services and downplayed its value for their revenue.

Consultation on the draft code will last until the end of August, with legislation to follow. Mr Frydenberg said deals under the code could be struck within six months of the code coming into effect.

To be eligible for bargaining under the code, media businesses will have to be focused on "core news" reporting on publicly significant issues for Australian audiences, be subject to professional editorial standards and ethics, and have annual revenue exceeding $150,000. The Australian Communications and Media Authority will determine eligibility.

Australian Competition and Consumer Commission chair Rod Sims said the proposed model would prevent "unproductive and drawn-out negotiations" while addressing the bargaining power imbalance, providing fair compensation and protecting the availability of Australian content on the platforms.

"We believe that our final offer arbitration proposal provides a compelling incentive for parties to put forward fair and reasonable proposals, given each has just one chance to make an offer, and only one offer can prevail," Mr Sims said.

While public broadcasters ABC and SBS had expressed an interest in benefiting from revenue-sharing deals with the tech companies, they have been excluded from the key element of the code. However, they will benefit from the other requirements around data and algorithm transparency.

Communications Minister Paul Fletcher said it was important for Australia's democracy to have a sustainable news media ecosystem and the code was focused on businesses whose viability and news production was threatened by advertising revenue losses.

"That is a policy problem that does not arise for Australia's public broadcasters, which have secure government funding, and accordingly the ABC and SBS are not the policy focus when it comes to remuneration aspects of the proposed mandatory code," he said.

Initially, Google and Facebook will be the only tech companies captured by the rules. The two companies have absorbed the vast majority of advertising revenue that used to go to media companies. Under the proposed legislation, the treasurer will be able to include other tech businesses in the bargaining code in the future.

Mr Sims said smaller media businesses could team up to bargain collectively under the code, which allows for either individual or collective bargaining.

Following a NSW Supreme Court ruling that held media companies legally responsible for user comments on their Facebook posts, the code will also require the digital platforms to disable comments on posts.