Litigation looms in tech-media deal

ACCC boss Rod Sims has come up with an innovative plan to force the platforms into a final offer arbitration. Picture: AFP

The federal government has endorsed a globally unprecedented attempt to force the big digital platforms to compensate media companies for the content they use through a legislatively backed code of conduct.

Government backing is one thing. The battle now will be to firstly get the changes through parliament and then into operation against the platform’s strident opposition.

The attempt to hold the platforms to account comes as public pressure from governments around the world are trying to contain the massive market power of the likes of Google, Facebook, Amazon and Apple. It’s only the first two which are subject to the proposed new provisions in the Competition and Consumer Act but the others could follow.

They are behemoths in the global market and as such are unused to directions on how to negotiate with anyone — and certainly not people they don’t want to deal with.

The government has backed media companies’ arguments that Google and Facebook should compensate them for their news content used to help drive traffic on their websites.

The debate now is how much they should pay, and already the platforms are making side-deals in an obvious attempt to argue no controls are needed.

The ACCC and Treasurer Josh Frydenberg have seen past that game.

The new competition provisions, just like those used to control Telstra and force it to arbitrate with Optus, are designed to ensure Big Tech pays for the value media content provides.

Google and Facebook have become valuable by scraping up data from wherever they can — whether from what website you are looking at, to what searches you make and where you are travelling as measured by your mobile phone.

This information is used to maximise advertising revenue for the platforms by offering targeted advertisements based on the searches you make.

While maximising advertising revenue, the platforms have little to say about technological advances they have made, because the reality if there have been precious little and instead it’s a question of maximising market power.

Google Australia boss Mel Silva has rejected the concept of making money from news content and instead argues she makes money for the news companies by redirecting traffic from her searches back to the originating websites.

Her argument doesn’t address the question of how many searches people would make on Google without any news content.

ACCC boss Rod Sims has come up with an innovative plan to force the platforms into a final offer arbitration, which means an independent arbiter chosen from a panel will choose either offer and only intervene if public interest demands it be done.

Already it is clear there are grounds for legal challenge and already the weight of lawyers on the different sides of the argument suggests there will be litigation that may prevent the code coming into effect.

Facebook is advised by Britain’s Freshfield and in Australia by King and Wood Mallesons.

Google is advised by Ashurst and News Corporation by Allens.

The good news for the ACCC’s Sims is the fight will be between the two sides, and not big companies attacking him, which is the normal process.

The final offer arbitration is designed to push opposing companies into more realistic positions from the start rather than wildly different offers.

Sims left the government to decide on the ABC’s involvement and it chose to keep it out of the commercial process but to open the ABC to the benefits open to all, like early notice of algorithm changes.

The model left by Sims is a good one. Now it’s over to the competition law mafia to pick holes in the plan in an attempt to block the proposed changes.

These efforts underline the need for the legislatively backed model to even the bargaining position of the two sides.