Google has threatened to remove its search function in Australia if a proposed new law requiring it to pay news organisations for content is passed.
The proposed law, introduced to the Australian Parliament in December, will force Facebook and Google to negotiate fees with news companies whose stories appear on their platforms.
Under the world-first proposal, if a negotiation breaks down then an independent umpire will step in and decide the fee based on a ‘final offer’ method, which chooses one side’s position as the resolution.
The federal government has introduced a world-first law to make Google and Facebook pay news organisations for their content
Australia’s battle with Big Tech is being keenly watched by governments across the world, not least in London, Washington and Brussels, where concerns have been raised over the ‘advertising duopoly’ of Google and Facebook.
Australian regulators found that for every $100 spent on digital advertising, $53 goes to Google, $28 to Facebook and only $19 goes to others.
Google turns over $4.9billion in Australia, with $4.3billion of that from advertising.
In a hostile public hearing on Friday, Mel Silva, the Managing Director of Google and New Zealand, said Google may be forced to pull its search function out of Australia if the code goes ahead.
‘The principle of unrestricted linking between web sites is fundamental to search and, coupled with the unmanageable financial and operational risk, if this version of the code were to become law, it would give us no real choice but to stop making Google search available in Australia,’ she said.
‘That would be a bad outcome for us but also for the Australian people, media diversity and the small businesses who use our products every day.’
Ms Silva said forcing Google to pay for snippets of news to appear on Google Search poses an ‘untenable’ risk to the business.
She said the company has been unable to work out how much it would be forced to shell out to media companies.
Ms Silva also said news searches only make up 1.25 per cent of Google searches and that paying news companies would be unfair to other companies that appear on Google Search.
In questioning, Senator Rex Patrick compared Google to the Chinese government which has blocked trade with Australia after Scott Morrison called for an inquiry in the origins of coronavirus.
He said: ‘The Chinese response was to threaten our market, to threaten our trade… We’ve got a similar situation here where our government steps out first and the very large organisation that is Google threatens to leave our market, do you think that’s proper conduct for a large international corporation?’
Ms Silva replied: ‘It is the only rational choice if this law were to pass for us.’
Senator Patrick said the code was going to go world-wide. ‘You’re going to pull out of every market are you? Or is this about stopping the precedent?’
Ms Silva scoffed and said the code posed an ‘untenable risk to our Australian operations.’
Greens Senator Hanson-Young accused Google of threatening Australia by suggesting it would leave the market.
Pictured is the Melbourne office of Google
‘Why come here and threaten the Australian people,’ she asked.
Ms Silva replied: ‘We are outlining the worst case scenario, we don’t want that to happen.’
Ms Silva admitted that Google is worried about the precedent the code will set, amid fears other countries could adopt a similar model.
She said Google has never shared full news articles and that it helps publishers by ‘providing them free traffic every day.’
Senator Andrew Bragg accused Google of ‘blackmailing Australian consumers and policymakers’.
It is highly prescriptive micro regulation that speaks to control almost every interaction Facebook could happen these publishers — seeks to control, and it is a — accompanied by heavy penalties. There is no other law like it in Australia
The tech giants face $10million fines if they don’t follow the rules of the proposed code, designed to ensure they pay for news.
How Google dominates the global advertising market and spends billions squeezing out competitors
1) Dominating search engine space
Google, through both its deals placing its search engine above others on devices and through public interest in it, accounts for 80 percent of every internet search in the US.
In 2020, it accounted for 94% of all mobile searches in the US
2) Monetizing its dominance through ads
Google monetizes the amount people use it with ads, which generate around $40billion in revenue every year
3) Spending its billions to cement its dominance with ‘exclusionary deals’
With the money it makes through ads, Google pays companies like Apple, LG and others to block out any of its competitors from having their search engine preferred on devices
Among the deals is one with Apple. Google is the default on Safari on iPhones and it’s also the default on Siri. The deal amounts to up to a fifth of Apple’s worldwide income which last year would have been around $11billion
Instead of paying for news that appears on Google Search, the company is offering to have its ‘news showcase’ feature included, which allows users to read some stories that are otherwise behind paywalls.
The mandatory code aims to combat the bargaining power imbalance between news businesses and digital platforms, brought on by advertisers flocking to the latter.
Facebook is also unhappy with the plan, arguing in its submission to the inquiry that the proposal has already deterred its planned investments in Australian news.
‘The bill is not, as its name suggests, a bargaining code: it removes the potential for genuine bargaining by forcing Facebook to make payments that are detached from true calculations of commercial value and by incentivising news publishers to make unreasonable ambit claims and bargain in non-commercial ways,’ the company said.
‘It removes any meaningful influence over our own commercial dealings with publishers.’
Representatives from News Corporation, Australian Associated Press, Nine, Guardian Australia, the ABC and SBS will also appear at Friday’s hearing.
Mr Frydenberg and Communications Minister Paul Fletcher have drawn up the law after a three-year inquiry by Australia’s competition regulator, the ACCC.
The inquiry found Google and Facebook have ‘an imbalance in bargaining power’ when dealing with news companies.
The Code will initially apply to Facebook NewsFeed and Google Search – but other services such as Instagram and YouTube can be added if a bargaining power imbalance arises.
Earlier in the year Google, threatened to charge Australians for using its search engine, while Facebook warned it would block users from sharing news stories if the law was passed.
But Mr Frydenberg revealed he had constructive conversations with the Australian heads of the companies on Tuesday and suggested they will accept the law.
In addition to payment for content, the measures would also force transparency around the closely guarded algorithms that tech firms use to rank content.
The code will require Google and Facebook to give publishers 14 days notice of any algorithm changes that are likely to have a significant impact on their traffic.
What is the bargaining code and why is it needed?
WHY IS IT NEEDED?
Google and Facebook derive a benefit from the ability to make Australian news content available to their users.
Australian news businesses have had to accept commercial deals with the platforms that are less favourable than they would otherwise agree to.
Intervention is needed to address this imbalance because of the public benefit of news and the importance of a strong independent media in a well-functioning democracy.
For every $100 spend on advertising, $53 goes to Google, $28 goes to Facebook and $19 goes to other media.
WHAT IS THE CODE?
The government wants good faith commercial deals to be struck outside the code.
But if the platforms and news organisations are unable or unwilling to reach an agreement ‘final offer arbitration’ will take place.
The arbiters will take into account the benefits traditional news media businesses get by having eyeballs on their product.
The digital platforms will also need to adhere to a series of minimum standards.
WHO IS INCLUDED?
* Facebook and Google.
* ABC, SBS and Australian commercial news media organisations.
Google’s history of clashes with governments for breaching competition laws and thwarting rivals
November 23, 2020: An influential group of publishers and adtech firms demanded Google’s domination of the UK’s £14billion online advertising market must be the primary target of a blockbuster antitrust probe when Britain leaves the EU
October 2020: DoJ in US sues Google over claims it uses its power unfairly to preserve a monopoly and shut out any search engine competitors
March, 20 2019 – Google fined £1.27bn for breaching EU competition laws
July, 18 2018 – EU antitrust regulators hand down a $5 billion (£3.8bn / €4.3bn) fine to Google after a three-year long investigation.
June 27, 2017 – EU fines Google $2.84 billion (£2.1bn / €2.42bn) for thwarting rivals of shopping comparison websites.
July 14, 2016 – EU sets out another charge against Google’s shopping service. It also accuses the company of preventing third parties using its Adsense product from displaying search advertisements from Google’s competitors – a third case against the company.
April 20, 2016 – EU sends a charge sheet to Google outlining the company’s anti-competitive practices with regard to Android smartphone makers and apps makers.
April 15, 2015 – EU charges Google with blocking competitors of its shopping service.
Sept 2014 – Joaquin Almunia says he will not be able to wrap up the Google case before his mandate ends in October.
May 2014 – Joaquin Almunia, European Competition Commissioner at that time, says feedback from complainants will be crucial to determining whether he accepts Google’s concessions.
Feb 5, 2014 – Google improves its concessions related to online search.
2013 – Lobbying group FairSearch files a complaint about Google’s Android business practices to the European Commission.
April 25, 2013 – EU seeks feedback from rivals and users to Google’s concessions.
April 3, 2013 – Google offers concessions related to online search and its AdSense advertising network to address EU competition concerns, without admitting wrongdoing.
Nov 30, 2010 – European Commission opens investigation into allegations that Google has abused its dominant position in online searches following 18 complaints.
Nov 3, 2009 – British price comparison site Foundem complains about Google’s online search to the European Commission.