Two bills coming out of California are bringing up issues that reach further than the American state’s borders.

“Google has sold itself as the interface between people and the world’s knowledge,” said Blayne Haggart, an associate political science professor at Ontario’s Brock University in The Washington Post. “Keeping people from accessing news through Google,” The Post said, would be what Haggart described as “almost an act of war against a country” because “the free access of information is so important to a functioning society.”

Matt Pearce, a journalist and president of Media Guild of the West, had this to say about the California Journalism Protection Act and the Media Tax Credit Bill in a San Francisco Chronicle opinion piece: “You don’t need an MBA to figure out that commandeering endless free labour from journalists and other content creators has been the deal of the century for Google.”

A look at the proposed legislation

California, which has lost more than 100 news organisations in the past decade, has long been contemplating the California Journalism Protection Act, which passed the state assembly in 2023, according to The Sacramento Bee.

Sponsored by Democrat Assemblymember Buffy Wicks, the legislation would “compel content aggregators like Google to share profits from news-related content with the journalism outlets that produced the content in the first place,” The Bee reported.

The bill would require tech giants to pay a percentage of advertising revenue to media companies for linking to their content, according to the Associated Press. The amount would be decided by a panel of three judges through an arbitration process.

News organisations, which would be required to report annually to prove that 70% of the money had been spent on journalism, couldn’t be penalised with lower rankings for applying for the quarterly payments, according to The Washington Post.

“The reporting requirement addresses some concerns the revenue would benefit hedge funds that buy up local news organisations and turn them into low-quality content machines,” said Jaffer Zaidi in Google’s April 12 blog, The Keyword.

The Media Tax Credit Bill (SB1327), was introduced in January but failed to make it to the state senate floor in May. It made the state chamber of commerce’s “Job Killer List.” It would have imposed a 7.25% tax on Big Tech platforms when they sold user information to advertisers — called data extraction transactions — according to The Verge. The funds would have gone to news publications operating in the state.

Big Tech’s response

“If [the CJP]A were enacted, a study from the University of Houston estimates Google would owe California newsrooms US$1.4 billion annually, which outpaces the US$300 million Google provides annually in grants and newsroom investments [globally],” noted KQED. Alphabet reported revenue of US$307.4 billion in 2023, according to CNN. 

“As we’ve shared when other countries have considered similar proposals, the uncapped financial exposure created by (the Act) would be unworkable (and) in its current form would create a level of business uncertainty that no company could accept,” Google said in its blog post. 

Google announced April 12 that it would conduct a “short-term test for a small percentage of [California] users … to measure the impact of legislation on our product experience,” and would also “pause new investments in the California news industry, including the partnership initiative with news organisations and its licensing programme,” the AP reported. This is a similar response to what Google did in Spain, Australia, Canada, and New Zealand.

Likewise, Meta has said it will block all news links on its social platforms if the CJPA is passed into law, according to The Washington Post. A Meta spokesperson said in May 2023 that the company would be “forced to remove news from Facebook and Instagram rather than pay into a slush fund that primarily benefits big, out-of-state media companies under the guise of aiding California publishers.”

Google makes the argument in its blog that the CJPA is a link tax that would require it to pay for “simply connecting Californians to news articles. ... If passed, CJPA may result in significant changes to the services we can offer Californians and the traffic we can provide to California publishers.

“To avoid an outcome where all parties lose and the California news industry is left worse off, we urge lawmakers to take a different approach,” Google’s post continued. “We’ve been engaging with California publishers and lawmakers throughout the legislative process and have proposed reasonable and balanced alternatives to the CJPA. ... Looking ahead, we will continue our efforts to work with lawmakers on alternative paths that will allow us to continue linking to news and supporting the news ecosystem in California.”

Finding the right legislative rules

California State Congressman Ro Khanna, also a Democrat, told The Bee the federal government is “behind the times and can’t effectively regulate new economic powers of the information age with 19th-century tools.”

“The best the Federal Trade Commission can do is uphold today’s antitrust laws, which were first created to combat industrial monopolies more than a century ago,” according to The Bee. The algorithm is “the backbone of the enterprise and may prove far more difficult to regulate.”

That doesn’t mean no effort has been made. At the federal level, Minnesota Senator Amy Klobuchar has proposed legislation “to ban rideshare companies and other Internet sales outlets from using algorithms to collude and set higher prices.” 

The Bee argues Google goes beyond collusion and exercises a different kind of dominant market power. If it leaves links from California news Web sites out of search results, there is no advertising revenue to share with journalism outlets.

News industry response 

Peter Doucette, an INMA blogger and senior managing director/global consulting practice lead at Mather Economics, told INMA:

“Google’s position on this legislation, with its aggressive approach, creates an imbalance in the value exchanges between the news industry and tech companies. This situation is concerning as Google has long profited from monetising publisher traffic and dominating the digital advertising marketplace.

“Publishers, already at risk, are further alarmed by Google’s shift towards AI-generated search results, a move that could lead to a significant decrease in traffic and revenue for news Web sites.”

The California News Publishers Association (CNPA) and the News/Media Alliance (NMA, which represents 2,200 news organisations across the United States) addressed a letter to the California attorney general calling for an investigation of Google’s actions for several potential violations of the law, The Bee reported.

Those laws include the state’s Unfair Competition Law, where the organisations are suggesting the law should be applied to screen out some California journalism unfair competition, and its Civil Rights Act, where the CNPA is alleging that Google is harming the state’s ethnic newspapers by leaving out their content.

NMA also sent letters to the Justice Department and the Federal Trade Commission asking for an investigation into the move, The Washington Post reported.

“These actions by Google show why a bill is necessary. It’s seriously concerning that one company can essentially cut off the free flow of information to Californians,” Brittney Barsotti, general counsel for the CNPA, told The Washington Post.

More than 350 news publishers — from the Los Angeles Times to the Spanish-language newsroom El Sol — signed an April 18 letter supporting the bill, although other news organisations and the California Chamber of Commerce oppose it.

“It is unclear the extent or impact of Google’s test or for how long it has or will go on. We’ve received some accounts of being unable to find content on Google,” Barsotti told INMA. “Those accounts mostly came from Southern California and the Bay Area.

“Some members have experienced fluctuations in traffic. Most notably, multiple members have reported drops in traffic by 30% since the operationalising of Google’s answers by AI tool a couple weeks ago.”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .