Google and Facebook can’t be trusted to do right thing

Google and Facebook are awesome companies. For many people, their platforms are the internet. Last year they raked in $US136bn and $US55bn respectively, mostly in ad revenue. The tech titans are more like countries than companies, and governments treat them with due deference. Politicians admire their reach, especially the social media platforms that give them a channel straight to voters. Given tech titans operate in an ever-changing realm, they have been largely left alone, trusted to do the right thing. What makes the digital platforms truly amazing is they essentially sell content — text, images, videos, podcasts — that they don’t even produce. Seems like wizardry, and it is, as you try to think of an analogy for their operations.

Imagine you produced the milk: bought cows, fed them, milked them, carted the product to market. Then, rather than paying you for the milk that lured customers into their stores, where they spend away, the supermarket giant gave your milk away for free at the checkout. The giant cashes in on the customer but you, the farmer, didn’t get a cent. What a grift! Audacious as it is, there comes a point when the monopoly power of these giant utilities harms, rather than helps, the economic wellbeing, liberty and viability of communities, individuals and small businesses.

This newspaper, published by News Corp Australia, is a small producer by comparison. Google and Facebook are unavoidable trading partners; their algorithms chose us, they have built a business by getting between us and our subscribers. Throughout capitalism, successful and innovative companies have changed the course of industries, entire regions and history itself. Big can be beautiful but it tends to squash the competition as whales gobble the minnows. Governments have busted trusts or monopolies — in oil, railways, telephony — to foster free markets and boundless competition for the common weal. This is the arena the Morrison government bravely, albeit tentatively, stepped into on Thursday, outlining its response to the landmark Australian Competition & Consumer Commission’s digital platforms inquiry report in July after considerable consultation. While there may not be any votes in it for Scott Morrison, the Prime Minister understands this is a matter of principle that cannot be left unattended. He and his ministers rightly put on stout game faces and talked tough. “The companies are on notice. The government is not messing around,” Josh Frydenberg said. We welcome the movement in this area, especially as it is a regulation frontier many nations are contemplating. There’s still a gap, however, between the measures outlined on Thursday and imbalances of market power. In reality Google and Facebook have another year of profiteering.

In broad terms, the government has sensibly accepted the ACCC’s analysis and its advice for how to regulate in the digital age. “The government’s role is not to protect domestic businesses from digital competition,” it said in a press release. “But rather to ensure the proper functioning of markets and a fair approach to regulation that ensures the rules of the physical world apply equally to the digital world.” Sure, but digital is the new physical. For some, it is the only sphere. No one is seeking “protection” from “competition”; the whole racket is rigged. The tech titans need to act ethically, fairly and pay the creators of the content from which they make enormous profits. Unfortunately, the government rejected the ACCC’s call for a mandatory take-down scheme for copyright breaches. The ACCC will have a special unit to monitor and report on the state of competition and consumer protection in these markets; first up it will look into the supply of online ads and ad-tech services. The competition watchdog will oversee the crafting of a voluntary code of conduct — over commercial arrangements and algorithm changes — between the tech titans and media companies; we think legislation is needed now, rather than an extension of the “trust us” ethos until May. Mr Morrison said he would impose a code by next November if the parties could not settle revenue-sharing themselves. In principle, we don’t want onerous regulation, which kills innovation and adds costs. But the game has moved on, and quickly, with authorities around the world imposing heavy fines for anti-competitive behaviour. Google has been hit with penalties worth €8bn by European authorities, including for abusive practices in how it brokered online ads for websites like newspapers, blogs and travel aggregators. The fines do little to dent Google’s dominance; European Competition Commissioner Margrethe Vestager says she would have been bolder “if I knew then what I know now”. If only. A review of privacy settings will cheer some users. In truth, the data horse has bolted; for Google and Facebook, users are a product, as is “fake news” for the latter.

The pace of change and the power of today’s digital robber barons have exposed the creakiness of our legal institutions. Certainly, the business models of the tech giants are opaque and hard to define due to an ingenious shapeshifting ability and omnipresence. Legislators, even after the ACCC’s deep dive into the platforms, are finding it a challenge to understand what they are dealing with. The issues go way beyond a changing of the guard in the news business; this is not old media simply seeking to survive via reparations from the new digital gods. Rather, Google and Facebook are redefining liberal democracy and capitalism itself. Catching their tails, as they create a new global order and leave a trail of wreckage, is a test of imagination and will for nation-states.