Digital platforms need to play by the rules

Facebook CEO Mark Zuckerberg testifies before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law on Capitol Hill in Washington, DC on July 29, 2020.

For many Australians, Google and Facebook have become part of their daily lives. More than 17 million Australians use Facebook and 98 per cent of online searches from a mobile device are using Google. For the digital platforms, this has become incredibly lucrative. Australia’s online advertising market is worth almost $9 billion a year. For every $100 spent on online advertising, $47 goes to Google, $24 to Facebook and $29 to the other participants. As the technology has developed so too has the power, wealth and influence of these digital platform but our regulatory framework has not kept up with these changes. As a result, there is now a significant bargaining power imbalance between Australian news media businesses that produce original content and the digital platforms.

This is why the Government tasked the ACCC to undertake a detailed world-leading study over a period of some 18 months to examine the impact of online search engines, social media and digital content aggregators (digital platforms) on competition in the media and advertising services markets.

Their recommendation was for a code to govern the commercial relationships between digital platforms and the Australian news media businesses. A concept paper was issued in May of this year and a draft mandatory code was released today following extensive consultation with the parties.

While the ACCC initially recommended a voluntary code approach, it became apparent a number of months ago that insufficient progress was being made by the parties, particularly with respect to payment for content.

For this reason we announced in April this year that we would move down the path of a mandatory code to govern issues such as access to user data, appropriate notice of changes to algorithms used by the digital platforms for the ranking and the presentation of media content, as well as, of course, payment for content.

This draft mandatory code is not designed to protect Australian news media businesses from competition, or from disruption that is occurring across the sector. Instead, the draft code creates a level playing field to ensure a fair go for Australian news media businesses such that when they generate original content, they are appropriately remunerated for it.

We want Google and Facebook to continue to provide these widely used services to the Australian community. But we want it to be on our terms. We want it to be in accordance with our law. And we want it to be fair. And that is what has motivated us in moving to a mandatory code.

Under the proposed code, I, as Treasurer, will be able to determine that a digital platform is subject to the code, having regard to ACCC advice about whether a significant bargaining power imbalance exists.

ACMA, the Australian Communications and Media Authority, will assess the eligibility of Australian news media businesses to participate in the code against a set of criteria set out in the draft code.

That criteria includes that the news media business predominantly produce core news, such as journalism on matters of public importance, or local and community events, and publish this online.

That these businesses adhere to appropriate professional editorial standards, that they maintain

editorial independence from the subject of their news coverage and that they operate primarily in Australia for the purpose of serving Australian audiences.

The proposed code will require designated digital platforms to negotiate in good faith about the payment of remuneration to Australian news media businesses. These news media businesses will be able to negotiate either individually or collectively.

Importantly, the bargaining arrangements relating to the payment of remuneration will not be available to public broadcasters as they are principally funded by the government and not through advertising revenue. Public broadcasters will, however, benefit for the minimum standards for non-remuneration matters set out in the draft mandatory code.

Under the bargaining arrangements set out in the draft mandatory code, if the parties cannot agree on remuneration after three months of negotiation, they can seek to have the matter to go to binding final offer arbitration, with a decision required in 45 days.

Parties will have the freedom to agree to their own arbitrators, but if they cannot agree, then ACMA will oversee a list of arbitrators and will appoint a panel of three arbitrators to settle the outcome. In arbitration, both parties will each submit a final remuneration offer to be arbitrated. And in determining which offer to accept, the panel will be required to take into account the direct and indirect benefits of Australian news to digital platforms, the costs incurred by news media businesses in producing news, and whether an unfair burden would be imposed on the digital platform by virtue of that agreement.

The arbitrator may only reject both parties’ offers if each offer raises significant public interest

concerns. In this circumstance, the panel may seek to adjust one of the offers.

The draft mandatory code also establishes a range of minimum standards. These include providing news media businesses with information about news related data. Providing advance notice of at least 28 days of algorithm changes, affecting news ranking, the display of news content and advertising with news content. Developing a proposal for the recognition of original news content and open communication requirements, including by requiring digital platforms to establish a contact point for news media businesses.

Importantly, the draft mandatory code prohibits digital platforms from discriminating against

Australian news media businesses that are covered by the code. As appropriate, there are

substantial penalties for breaches. The ACCC will be responsible for enforcing the code, and will be able to issue infringement notices with smaller fines for minor code breaches. The maximum penalties though, however, are in line with those available under the Australian Consumer Law, with maximum penalties applying for breaches of up to $10 million per breach, or three times the benefit obtained or 10 per cent of annual turnover, whichever is greater.

Consultation on the draft mandatory code will conclude on 28 August and final legislation is

expected to be introduced to Parliament shortly thereafter. The code, when finalised, will ensure disagreements about payment for content are resolved quickly. According to the ACCC, agreements on remuneration could potentially be reached within six months of the code coming into effect if arbitration is required.

There will be a review of the code within two years of its passage through Parliament.

The draft mandatory code represents a world leading framework that will level the playing field between news media businesses and digital platforms. It will increase competition, strengthen consumer protection and ensure the sustainability of public interest journalism. Nothing less than the future of the Australian media landscape is at stake.

Josh Frydenberg is the Federal Treasurer.