Everything about the relationship between the news media industry and Big Tech changed earlier this year because of what happened in Australia. The ripple effect through the rest of the world means that, at some point, Big Tech platforms will pay news media companies for content — and they will pay in amounts that are boggling to the bottom line.
One man was at the centre of it all: Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC).
INMA’s Robert Whitehead sat down with Sims in a Nine studio in Sydney for a 21-minute video interview featured on the final day of the INMA World Congress of News Media. Whitehead also talked with Damien Geradin, an ad tech expert and partner at Geradin Partners in Belgium.
Whitehead listed Australia’s News Media Bargaining Code as one of his country’s outstanding contributions to the world (on the same list with penicillium, global WiFi, black-box flight recorders, and compulstory voting).
Whitehead asked Sims how he feels about the outcome of the Australian code.
“I am very happy with how it came out,” Sims said. “I think it will achieve its objective completely. It was all about rebalancing a bargaining imbalance, which caused a market failure. We think it was a necessary step to ensure that journalism gets paid for what it should be paid for, which is the content it supplies that benefits the Google and Facebook platforms.”
The details of the Australian deal
In brief, the law forces commercial negotiations between Big Tech and media using antitrust measures such as:
- Final-offer arbitration if all other negotiations fail.
- The “all-in” approach means tech companies must reach deals with all media or face tough penalties.
- Collective bargaining is allowed for media companies.
It has delivered:
- Lump sum annual payments.
- 10 times the value of other deals.
- 5 times the value of France’s copyright-based deals.
The commission focused on the media bargaining code when the Commonwealth government asked it to conduct a broad inquiry into at competition, consumer, advertising, and media issues. The News Media Bargaining Code originated as one of 23 recommendations that arose from the inquiry. It had a faster endpoint than many of the others and had a built-in deadline the others didn’t.
Why arbitration/antitrust vs copyright?
The copyright route many countries have chosen doesn’t offer a mechanism to determine how much is paid, and copyright law in Australia is complicated, Sims explained.
“We had a big debate whether the abuse of dominance provision, which is a core antitrust provision in all countries in the world, does enough when you have a massive bargaining power imbalance,” Sims said. “We decided with the Hilmer Review in the ‘90s that it didn’t.”
The ACCC “decided that we needed an ex-ante mechanism rather than pursuing the platforms after the event to see whether they’ve breached the law.” You can then have a negotiate-arbitrate regime, which Sims sees as powerful. “That goes directly to the problem we identified: Facebook and Google are using journalism without paying for it.” It’s a monopoly, take-it-or-leave-it situation.
The code has two fundamental underpinnings:
- The requirement that the platforms have to deal with all media, not pick and choose.
Neither Facebook nor Google liked the arbitration, which evens up both bargaining power and control. Baseball, or final offer arbitration, was important to the code because the questions of value were so complex.
The Australian law does not designate Facebook or Google unless they misbehave. The threat of arbitration evens up the bargaining power imbalance. The threat of designation was an impetus to doing deals media companies are happy with. Whitehead also asked about collective bargaining for smaller publishers that is no longer part of the code.
Sims explained how existing law already provides for the process if necessary. “It’s not hard to do collective bargaining in Australia,” he said, “because the ACCC can authorise anti-competitive behaviour. The law is already there that allows us to do that.”
What does Australian regulation mean for the rest of the world?
Sims does not believe the unique role Australian regulators occupy should be an impediment to legislation elsewhere. While it made it easier to come up with this solution because “we regulate infrastructure,” he said, “we are the competition enforcer.” But the infrastructure role is done via the negotiate-arbitrate process, he added. “Abuse of dominance provisions are not going to get you a good outcome, we’ve learned …. I think what we do is readily transferable.”
Neither does Sims believe it is necessary for other countries to replicate inquiries. Now that these have been done, the issues and problems journalism faces are well known. Media companies are not in an equal bargaining position with Big Tech platforms.
“Media companies are not in any position to negotiate with Google and Facebook,” he said.
In the tech sector, Whitehead said, the argument is that legacy media companies are being protected by the code when they failed to adapt. “There’s nothing to do with protection here,” Sims said. “Journalism is fundamental to society …. Yes, they will move more to subscription … but some do need the ability to bargain.”
Was it an overreach to expect the platforms to give notice of algorithm changes, Whitehead asked?
“We had in mind a giving of notice for deliberate changes that would affect news. Google turned that into ‘big business running the algorithm,’” Sims said. The situation was similar on the “clicking-for-links” issue, Sims said. “We had in mind that it would be a lump-sum, up-front payment that would be negotiated among the parties,” he said. “We never intended there to be payment for links.”
Things have become clearer with multiple drafts of the code.
Whitehead asked if Sims had advice for countries following Australia’s lead in regulating Big Tech: “There’s a lot to be done,” Sims said. “The issues are extremely important and all encompassing …. You’ve got a mix of issues you have to deal with in a multi-faceted way. We are dealing with just about every competition regulator in the world to try to deal with this in a cohesive way.”
The key to the Australian code: the backstop
The most important piece of the Australian code is the backstop it provides, said Damien Geradin, a Belgian attorney who specialises in ad tech. Geradin, who co-authored the INMA report Understanding Ad Tech and Its Challenges for News Publishers last month, continued the conversation with Whitehead.
“Without a backstop, negotiations can go on forever,” he said.
The French negotiation, for example, focused on copyright. Google said it wouldn’t pay and, without a backstop, negotiations failed. “A pure copyright route without a backstop … isn’t likely to work,” he said. There is agreement that a mandatory final arbitration process must be in place to land an outcome. “Otherwise, what happened in France is likely to happen in other member states, which is that negotiations go on but with no outcome for news publishers.”
Sims did an excellent job at explaining the “audacity but also the effectiveness of the mandatory bargaining code adopted by Australia, which is really a unique idea, although it’s getting really popular around the world,” Geradin said. News publishers in Canada and the UK are fast on Australia’s heels.
In Australia, there was actually a change in the law, which Geradin said is necessary for enforcement.
What’s at stake?
Ad tech is complicated, not transparent, and “news publishers have had a rough deal.”
“The online ad business is about US$400 billion,” Geradin explained. “From that, Google takes US$145 billion already — just Google Search. Then you have walled gardens — Facebook, Twitter, YouTube. Just Facebook takes US$70 billion. From this huge market, there’s very little left on the open Web in which news publishers operate. Maybe 10%-15%. News publishers compete with all the other publishers [news and otherwise]. News publishers potentially have access to a tiny fraction of the global ad market.”
“Google has to deal with these lawsuits and investigations,” Geradin said. “I don’t tink it has reached a point where it will have to make concessions. But the pressure is increasing and will come to a point — like Microsoft a decade ago — where basically you’re in a corner. With Google, this is something that is likely to happen in the next couple of years.”
Which is exactly what happened in Australia. Google and Facebook were cornered.
“Final offer arbitration forces you to be reasonable because if you’re unreasonable, the arbitrator takes the other offer,” Geradin said. “So since for them reasonable means zero — and that’s always been their position — final offer arbitration put them in a corner.”
So does this all lead to peace, rainbows, and unicorns? No, Geradin predicted.
“I don’t see peace in the future,” he said. “In the long-run, news publishers and platforms are competitors. They compete for the attention of advertising dollars so I think the tension will remain, at least on the advertising side. On the content side, well, you’ve got opposite interests. They don’t want to pay. You want to be paid. So I think you will always need some sort of referee and, indeed, I think the final offer arbitration system is a good mechanism that will not bring peace but at least a dispute settlement system.”