Digital inquiry: Wriggle room in regulating Big Tech

The effectiveness of the government’s crackdown on the tech giants comes down to one word. So who used the right term? Was it the tough-talking Josh Frydenberg or the faceless bureaucrats who drafted the weasel words in the government’s formal plan for regulating these companies?

If the digital platforms fail to draw up codes of conduct governing their bargaining with the mainstream media, the government “will” impose a mandatory code — at least that is what the Treasurer told the nation on Thursday.

But that is not what is proposed in the government’s formal written document on the future regulation of the tech giants that was issued just before Frydenberg started talking.

The key word in that document is “may”. The government “may” impose a mandatory code — which falls a long way short of Frydenberg’s statement that the government “will” impose such a code if the tech giants decline to develop their own.

Nobody should be in any doubt that this is the most important recommendation from the inquiry into the digital platforms that was conducted by the Australian Competition & Consumer Commission.

Just last month, ACCC chairman Rod Sims singled out bargaining codes when he addressed a conference in Sydney organised by the business law section of the Law Council of Australia.

“I think the most important recommendation we came up with was the bargaining code, recommendation seven, in relation to the media,” Sims said.

“We think the code is needed because of that imbalance in bargaining position. We think that imbalance leads to market failure and does damage to journalism and needs to be addressed.

“I think the evidence both for the need for the bargaining code and how well it can work is there right now. We have got that evidence right now,” Sims told last month’s conference.

The reason the news media needs a bargaining code is to introduce some balance when dealing with the market power of Facebook, Google and other tech giants that use the content of the mainstream media and pay a pittance — when they pay anything at all.

The news media might like to see itself as big enough and ugly enough to look after itself. But compared to the tech giants, they have as much bargaining power as a dairy farmer trying to extract a living from a milk processor.

In his report, Sims proposed to give the digital platforms nine months to develop a bargaining code with the news media covering crucial matters such as the sharing of news and actions by the platforms that would impede the news media’s opportunities to monetise their content.

If an acceptable code was not submitted within that time, a code would be created by the regulator.

Also covered by such a code would be the sharing of data collected by the platforms and the sharing of value that the digital platforms extract from the content generated by the news media.

The key parts of the ACCC’s plan is that these codes would be enforced by the regulator — and it looks like this part of the scheme will be regulated by a new unit inside the ACCC.

If the Sims plan is implemented as intended, this unit would have new powers to gather information and impose “sufficiently large sanctions for breaches to act as an effective deterrent”.

All this depends, however, on whose vision becomes reality — that of Frydenberg and Scott Morrison, or those who approved the written document that outlines the government’s plan.

The document, titled Regulating in the Digital Age, is weak on this topic. It says if a voluntary code is not forthcoming from the tech giants “the government will develop alternative options to address the concerns raised in the report and this may include the creation of a mandatory code”.

If the government’s intentions are to be gauged by this document, it “may” also choose to do other things — like going to water. It would be perfectly consistent with this document for the government to develop an “alternative option” such as convening an interdepartmental committee to go over the same ground that already has been examined by Sims.

The ACCC’s inquiry made it clear that Facebook and Google are undermining the economic foundations of journalism.

The ACCC’s report called clearly for these organisations to be subjected to a government-mandated bargaining code. Sims considers this his most important recommendation.

So why, if the Treasurer and the Prime Minister have accepted this assessment, did they allow their formal response to give the government an excuse to wriggle out of making such a key change?

This intervention is justified, according to the nation’s competition watchdog, because the tech giants are damaging journalism, which is a public good that affects the community.