2.1
The committee accepted and published 55 submissions to the inquiry. The views expressed in both the submissions and public hearing testimonies were quite diverse.
2.2
This chapter will examine:
critique of the bill; and
Australian Competition and Consumer Commission (ACCC) and Treasury responses to that critique.
2.3
Finally, this chapter will provide the committee’s views on the bill and its recommendations.
Support for the bill
2.4
Major support for the bill was found in those media organisations that are likely to benefit from the new arrangements and the fact that it addresses the bargaining power imbalance identified by the ACCC. However, support for the bill was not exclusive to those organisations.
2.5
Nine Media commented:
Over the past two decades Google and Facebook have built businesses of almost unimaginable scale and dominance. Together they're valued at more than the entire Australian Stock Exchange. They're well north of the GDP of our entire nation and they hold effective monopolies in search and social media. They're the gatekeepers to the broader internet.
As the Treasurer said last month, they collect 81 cents in every digital advertising dollar in Australia. Their market credibility, business models and substantial valuations have been built on having free and unfettered access to quality journalism and content, content that is created by and funded by others... Without strong regulatory intervention, the sustainability of our diverse local media sector is at risk...
2.6
News Corporation commented:
…organisations providing that real news have never been more fragile. The code you are considering can play a vital role in securing the future of real news for all Australians. There may well be opportunities to improve the code, but we can't allow refinements to undermine its core intention to provide a framework that creates an environment for successful commercial negotiations between media companies and tech platforms. Resorting to the powers of the deadlock-breaking procedures of the code is certainly the last port of call, not the first.
…
The coming code has been a catalyst for discussions that have already had a positive impact not only in Australia but around the world. News supports the code and urges that it be legislated as soon as possible. We are genuinely open-minded if there are clear opportunities to enhance it, but we are staunchly opposed to attempting to undermine it either in spirit or in its effectiveness.
2.7
Australian Associated Press (AAP) commented:
AAP supports the passage of the bill in its current form, as it assists retail media—that is, news media who have a direct-to-consumer news model—at a time when the industry is in a state of deep and prolonged crisis. AAP has been the collateral damage of that crisis, culminating in its near closure in March last year…
The bill will provide a lifeline to consumer facing news media services.
2.8
Guardian Australia argued that the bill:
…will provide the necessary dynamics to facilitate commercial agreements with Google and Facebook, which will result in us employing more journalists in Australia… covering issues of national importance and that's obviously the intent. We believe that the code will facilitate commercial agreements for smaller publishers as well, indeed anyone earning as little as $150,000 a year, which will contribute to ensuring that more news sources emerge to add to Australia's very concentrated media landscape.
A dominant theme of those objecting to the code is the notion that forcing platforms to pay for the benefit they receive from publisher content will somehow undermine the principles of an open internet… opponents of the code are defending an open internet that ceased to exist years ago and, instead, has become dominated by a small number of very, very large US tech companies.
2.9
Free TV, the peak industry body representing commercial television broadcasters, commented:
We're here to support a very simple proposition, and that proposition is that the digital platforms that benefit from valuable news content should pay a fair price for that content. Free TV broadcasters spend over $360 million annually in producing high-quality news and current affairs content. This investment supports the employment of local journalists from Broome to Byron and from Townsville to Tasmania. Commercial television broadcasters produce 486 hours of news and current affairs content every week.
We believe that in a well-functioning democracy there is a responsibility that falls on the businesses that become gateways between the community and information. This is a responsibility well understood by commercial TV broadcasters. For decades, as an influential media platform, we have operated under a regulatory compact that requires us to pay broadcast licence fees, pay spectrum fees and meet stringent content obligations. Our community now expects similar regulation for businesses of the size and influence of Google and Facebook. This legislation puts forward the entirely reasonable proposition that, as gateway businesses that are collecting data and monetising news content, Facebook and Google must pay a fair price for the quality of news content that they use…
Free TV strongly supports the news media bargaining code, and we urge this committee to recommend its passage…
2.10
The Australian Broadcasting Corporation (ABC) was also supportive of the bill:
The inclusion of the ABC in the remuneration arrangements under the code has the potential to provide a major boost to coverage of regional Australia and also strengthen the ABC's emergency coverage. This is particularly important at a time when there has been a withdrawal of some local commercial media. The ABC, with 48 locations outside the capital cities, has the track record and capability to deliver the benefits flowing from the code and ensure that revenue generated from taxpayer funded journalism goes back into services for the community.
2.11
The Special Broadcasting Service (SBS) was also supportive:
SBS supports a bargaining code to ensure that fair, impartial, balanced, accurate and trustworthy news and current affairs is readily accessible to and shareable by all Australians by being well represented on digital platforms. Digital platforms are an important way for SBS to reach audiences and provide them with access to news and current affairs in the public interest. However, the digital platforms also control what content is seen by Australian audiences, which is why this legislation is so important.
2.12
The Media, Entertainment and Arts Alliance (MEAA), a union with members across the arts, entertainment, sports, outdoor, music and events industries, was also supportive:
At a time of rampant misinformation and disinformation, the public interest in supporting a robust and diverse media industry is greater than ever. That is why we support the implementation of a mandatory news media bargaining code as one element of a policy solution for this urgent problem. We strongly support a system to recoup some revenue from digital platforms operating in Australia as a contribution towards the production costs of the journalistic material they carry.
Critique of the bill
Responses from Google and Facebook
2.13
Google and Facebook were not supportive of the bill. A summary of their positions is below.
Google
2.14
Google provided a summary of its concerns:
In its current form the code remains unworkable and, if it became law, would hurt small publishers, small businesses and the millions of Australians that use our services every day. There is a way forward that allows Google to pay publishers for value without breaking Google search and our business here in Australia.
There are three concerns, which I will touch on shortly, but the most critical of these is the requirement to pay for links and snippets in search. This provision in the code would set an untenable precedent for our business and the digital economy. It's not compatible with how search engines work or how the internet works.
2.15
Google’s three main concerns were:
First, rather than payments for links and snippets, the code could designate News Showcase and allow Google to reach commercial agreements to pay publishers for value, in addition to the valuable traffic that we send them through search. News Showcase launched in 2020. It has a global budget of $1.3 billion over three years, and it pays news publishers for their editorial judgement, curating panels of news that would appear daily in Google services. It also pays to grant users access to selected stories behind the paywall, not linked to search. Google can pay a wide and diverse range of news publishers, including smaller and regional publishers, and we've already reached News Showcase agreements with 450 publications globally, including seven in Australia.
Secondly, the code's final offer arbitration model, with biased criteria, presents unmanageable financial and operational risks for Google. If this were replaced with standard commercial arbitration based on comparable deals, this would both incentivise good-faith negotiations and ensure that we are held accountable by a robust dispute resolution process.
Finally, the algorithm notification provision could be adjusted to require only reasonable notice about significant actionable changes to Google's algorithm. This would make sure that publishers are able to respond to changes that affect them.
Facebook
2.16
Facebook summarised its views:
…we are keen to strike commercial deals with many Australian news publishers which will substantially increase investment in the news ecosystem and in journalism... However, the draft news bargaining law as it stands prevents us from being able to reach viable agreements; therefore, rather than increasing investment in news in journalism, it will have the opposite effect…
The law would compel us to enter into agreements with all news publishers in Australia without any regard for the true commercial value for our business. It gives publishers near complete control of these negotiations and will encourage unreasonable behaviour like ambit claims and bargaining in non-commercial ways. The likely outcomes for us are entirely uncapped and unknowable.
This highly prescriptive micro-regulation seeks to control almost every interaction Facebook would have with news publishers and it is accompanied by very heavy penalties. There is no other law like it in Australia. We recognise changes were made to the law as proposed by the ACCC. However, the draft still fundamentally fails to acknowledge the commercial and technical realities of how publishers use Facebook and the value we provide to them.
2.17
Both Google and Facebook suggested to the committee that should this bill become law, they would need to significantly adjust to satisfy their commercial interests. In reference to Search services, Google stated:
We have had to conclude, after looking at the legislation in detail: we do not see a way, with the financial and operational risks, that we could continue to offer a service to Australia.
2.18
Facebook explained that while it would still be available in Australia as a social network site, it would no longer be willing to provide news links:
We've explained, we think, in order to inform the policymaking process, a potential worst-case consequence of the law as is it stands.
…this does not mean that Facebook would no longer be available for the millions of people in Australia who love Facebook and for the many small businesses, including in regional Australia, that make use of Facebook. The great majority of people who are using Facebook would continue to be able to do so, but we would no longer be able to provide news as part of the Facebook product.
Further critique
Legislation unworkable or unforeseen outcomes
2.19
Several submitters claimed the legislation would either be unworkable or that it could produce perverse or unwanted outcomes. For example, GoAutoMedia commented:
We appreciate that the ACCC and the Coalition are wanting to act in the best interests of preserving high quality journalism in this country and want to assist news organisations and journalists faced with declining advertising revenue and (now exacerbated by the pandemic) but care needs to be taken how any action at a high-level might do more serious damage to the lower level of small publishers.
Strengthens the existing market players
2.20
In a similar vein, concerns were expressed that the bill’s provisions would strengthen the already existing large media players. The Bundaberg Regional Council commented:
The bill appears to favour large traditional media enterprises and risks stifling smaller and innovative alternative publishers.
Since the withdrawal from many regional markets by News Corp and Nine, numerous small publishers have emerged, many of whom use digital platforms to extend their reach and engagement. It's not clear they need this bill or that they will gain from its provisions any way.
2.21
Similarly, the Country Press Association stated:
Whilst the bill generally works well… the current digital platforms legislation rewards the large companies and their digital-only syndicated-content models at the expense of smaller media businesses with true local news that is expensive to produce. This can only lead to reduced diversity of media in Australia...
This legislation offers a once in a lifetime opportunity to ensure the protection of independent and diverse journalism. The legislation needs to enhance media diversity and create financial support for Australia's small to medium regional and suburban news publishers and not result in providing significant funding, and ultimately further market share, to News Corp and Nine.
Designation under the Code
2.22
Submitters also expressed concern around the process for designation of a digital platform under the Code. The Internet Association commented:
The Code grants unfettered discretionary powers to the Treasurer without proscribing clear standards or principles for designating which companies the Code will apply to. This broad discretionary power raises particular concerns because the Code validates the government’s ability to expropriate revenue from selected foreign companies and raises significant national treatment concerns.
Possible violation of international treaties and trade agreements
2.23
The committee received a number of submissions from overseas, including the United States (US) Government, noting the potential violation of international treaties and trade agreements.
2.24
The US Chamber of Commerce observed:
[the Code of Conduct]…explicitly targets and discriminates against US companies. Further, the arbitration process established under the code fails to strike the balance appropriate to any arbitration process, and the requirements to reveal changes in algorithms are not justifiable. As a result, the proposal violates the non-discrimination obligations to which Australia has undertaken in the Australia-United States Free Trade Agreement and the World Trade Organization's General Agreement on Trade in Services.
We therefore respectfully repeat our request that Australia revisit the Code and revise it in a manner consistent with Australia's international obligations, and we stand ready to work with you in that effort.
Undermines internet freedom and openness
2.25
The committee received submissions from two high-profiles internet innovators who both expressed concerns about the legislation undermining the freedom and democratic openness that the internet was founded on.
2.26
Mr Vint Cerf, one of the original co-designers of the TCP/IP protocols and current Google employee, commented:
…having now reviewed the form under which this legislation has been introduced to Australia’s Parliament, I am concerned that this Bill in its current form would undermine the basic framework upon which the internet was built, and on which the modern economy thrives.
2.27
Sir Tim Berners-Lee, also an internet pioneer, commented specifically about the use of hypertext links:
I firmly believe that constraints on the use of hypertext links are not the correct way to achieve this goal. It would undermine the fundamental principle of the ability to link freely on the web and is inconsistent with how the web has been able to operate over the past three decades. If this precedent were followed elsewhere it could make the web unworkable around the world. I therefore respectfully urge the committee to remove this mechanism from the code.
Algorithms
2.28
Submitters also commented on access to algorithms and the reporting requirements when those algorithms are changed. For example, Atlassian stated:
We also raise a question as to whether ‘algorithmic transparency’ is necessary to accomplish the Government’s regulatory goals. No other types of web site on the Internet receive transparency reports from Google and Facebook and this requirement would be another badge of peculiar ‘government-favoured’ status for NMB web sites.
Responses to critique
2.29
The ACCC and Treasury, in their evidence to the committee, effectively
re-butted many of the assertions made by those critical of the bill.
2.30
In arguing for the necessity of the bill, the ACCC suggested that public interest journalism could be distinguished from other forms of content made available in the digital ecosystem due to the critical role it performs in a democratic society.
2.31
The ACCC explained that, at its heart, the bill provides a code with mandatory arbitration in order to produce a dynamic that drives commercial agreements and overcomes identified bargaining power imbalances between media organisations and large internet platforms. That mandatory arbitration is, in effect, the ‘big stick’ in the background should the soft-speaking fail:
Senator BRAGG: Effectively what you've said today is that if there wasn't a code place there would be no serious opportunity to have a balanced discussion and ultimately a deal, because there is no need for the major platforms to negotiate because of their immense market power. Is that right?
Mr Sims: That's absolutely right, yes.
Senator BRAGG: So your point is you need the code to drive the parties to the table…
Mr Sims: Absolutely correct again, yes.
2.32
Treasury made similar comments, emphasising that the mandatory arbitration aspect of the Code may never be invoked, yet its presence provides the impetus for agreements to be reached:
One of the interesting things is the actual provision of a code in itself changes the market dynamics without the code necessarily being invoked. We've seen that, for example, in the sugar industry. The existence of the code and the existence of elements of mandatory arbitration have actually driven commercial outcomes without the arbitration mechanisms being sparked.
2.33
The ACCC argued that the Code includes the provision for collective bargaining by news media businesses in order to assist smaller news media businesses, including regional and community media, to bargain for fair deals under the Code.
2.34
The ACCC also rejected the argument that the proposed code will ‘break’ search or destroy a free and open internet, pointing out that paid search ads did not ‘destroy’ search.
2.35
Responding to Google and Facebook’s assertion that the Code is ‘unworkable’, the ACCC stated:
It is workable; it allows for a process of negotiation, and I have every belief that both parties, news media businesses and platforms, will want to do commercial deals. And then you've got arbitration there, which is what really gives strength to the bargaining position of the news media businesses. So I think it's workable. We’ve seen these sort[s] of things work in the past where you’ve got negotiate-arbitrate regimes. I think this is just something Google and Facebook don't want.
2.36
This sentiment was echoed by Treasury:
There is ongoing discussion with the parties in terms of the issues they've raised before this committee. Some of them are very technical in nature. There has been open dialogue with those parties. A lot of the concerns particularly relate to how things will work in practice, given that having a code in this sector is new. There are technical things to work through, but, on balance, the government does believe that this is workable.
2.37
The ACCC also argued that Australia’s arbitration approach is better than the copyright approach being pursued in France:
The other most perhaps advanced regime is in Europe where you’ve got a copyright regime, which was mentioned earlier today, and deals have been done in France in relation to that. Those deals were done under a copyright law that definitely covered search. So there's no doubt the law under which those deals were done involves search. In the end, they did commercial deals that I think largely involved Showcase, but it was with a law pursuant to search. It's similar to what we're doing here. But we think a negotiate/arbitrate framework is much better than trying to do it under copyright.
2.38
The committee noted the concerns expressed by the US Government and US Chamber of Commerce. To these, Treasury responded:
Concerns have been raised by US interested parties. As submitted to this committee and submitted to the government previously, we've had detailed discussions with those stakeholders and have addressed quite a lot of their concerns.
…
I note that the covering letter to this committee had as an attachment a previous submission they have provided. Many of the issues in that previous submission have been addressed through the course of the discussions, and we are looking at any issues that are outstanding. We have had quite extensive discussions with the US trade authorities, and part of it is explaining our system of governance and how our legal system works. In their system, because it is much more legal based, they rely on a case going before the courts and then actions happening. We have explained to them in a great deal of detail about how it works here in terms of having a code, wanting commercial parties to come together, the ACCC's inquiry and all those sorts of things. We have talked them through that, tried to address their concerns and explained the government's policy position to them. It's fair to say those conversations are ongoing, subject to explaining the final version of the code…
2.39
In response to concerns about the sharing of algorithm information, Treasury stated that the Code does not provide for the transfer of intellectual property from one party to another:
Senator BRAGG: Will the code require digital platforms to reveal how algorithms work?
Ms Quinn: No. Explicitly, the code does not provide for the transfer of intellectual property from one party to another. This was a concern raised around the drafting of the earlier code, and it's been very carefully considered to make it absolutely crystal clear that there is no intention for intellectual property to be transferred from one party to another, and that's quite an important feature, to ensure that's really clear. Similarly, there is no transfer of data around privacy data or anything like that, which was also a concern raised by stakeholders.
Senator BRAGG: So, basically, the code does not require digital platforms to share user data with Australian news businesses?
Ms Quinn: Absolutely not.
Committee comment
2.40
The committee is pleased to see the many interested parties contributing to the debate on this ground-breaking legislation. Their contributions demonstrate how important this issue is. The committee agrees that public interest journalism is more than just an ordinary consumer product that has been undermined or ‘disrupted’ by new technology; rather public interest journalism is a cornerstone of democracy and its survival is imperative in a society increasingly vulnerable to misleading information that can so easily be spread on the internet.
2.41
The committee wishes to acknowledge the detailed work done by the ACCC in the preparation of the legislation and the extensive consultation process they conducted that included both Google and Facebook.
2.42
While the evidence received demonstrated some polarised views on the bill, there is significant support for the bill’s aims. Further, while some submitters have questioned the methods and recommended additional refinements, there is a strong view that large multinational technology companies—in this case Google and Facebook—should not remain outside sensible regulations that protect the public interest.
2.43
Media organisations and other groups, regardless of their philosophical underpinnings, still see the need for this bill. Indeed, the progressive
think-tank, the Australia Institute, commented:
I'm from the progressive side of politics. It's not normal for me to backing in legislation from a conservative government with the support of News Limited but you've got to look at the bigger picture. There's a bit of polarisation. There are some people on the progressive side of politics who will be saying if it's going to support News Limited it's obviously not in the public interest. But I think that on this occasion we just need to look at the bigger picture, like you are, to see how we can accommodate this transformative technology and ensure that it doesn't do damage to what's always made Australia great.
Review of the legislation
2.44
The innovative nature of the bill reflects the growing international recognition that public interest journalism is a public benefit that is being undermined by the internet and that new legislative frameworks are required. As noted in chapter one, France and other countries are also introducing legislation with the same aims, albeit with different mechanisms.
2.45
The committee notes that the bill was subject to an extensive and thorough consultation process. For example, the Guardian Australia noted:
This is a pretty complex market that we're all operating in and this is world-leading legislation as far as we are concerned. So I think extensive consultation, while frustrating at times, is probably appropriate. But again I would just make the point: While this legislation is world leading, from Australia, the regulatory pressure on Google and Facebook is building around the world.
2.46
The committee notes that even supporters of the bill, felt that further amendments were possible to improve the law. Free TV recommended a series of amendments, as did SBS, the ABC, the MEAA and Solstice Media, amongst others.
2.47
Treasury also acknowledged that, despite the many and varied consultations and legal advice, that as is commonly the case for all legislation: ‘there are legal risks associated to the bill, both domestic and international.’ Treasury also noted that the government, in developing the bill, had considered its domestic and international law obligations.
2.48
The committee accepts that there remains the possibility that not all risks have been taken into account, and that further refinement may be needed to the arbitration mechanism and other parts of the Code so that they work in an optimum manner. Accordingly, the committee strongly supports the 12 month review mechanism built into the legislation.
Final comments
2.49
Despite the concerns raised by various submitters and witnesses, the committee is confident that the bill will deliver on its intended outcomes. Its provisions will provide the basis for a more equitable relationship between the media and Google/Facebook and, through this, help safeguard public interest journalism in Australia. Accordingly, the committee recommends that the bill be passed.
2.50
The committee recommends that the bill be passed.
Senator Slade Brockman
Chair
Liberal Senator for Western Australia