Google has threatened to make its Google Search engine unavailable in Australia as the stand-off between the competition watchdog and the big technology companies worsens.
Google Australia and New Zealand managing director Mel Silva said a new code which would see Google pay publishers would leave the digital giant with “no real choice but to stop making Google Search available in Australia”, during a Senate Economics committee hearing on the proposal.
Under the media bargaining code, digital platforms including Facebook and Google would pay media companies for news content.
Silva said unrestricted linking between websites is a fundamental part of Google’s business and forcing Google to recompense publishers for showing snippets of content would lead to “unmanageable financial and operational risk”.
“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,” she said.
“The free service we offer to Australian users, and our business model has been built on the ability to link freely between websites. This is a key building block of the internet. Withdrawing our services from Australia is the last thing that Google wants to have happen.”
Silva said Google would prefer to reach commercial agreements to pay publishers for value provided, rather than payments for links or snippets shown.
However, Senator Rex Patrick claimed Google’s argument was akin to vehicle manufacturers complaining about new speed restrictions limiting the use of their cars.
Silva rejected the accusation, and warned that forcing Google to pay publishers “for appearing purely in our organic search results section” would set a “dangerous precedent”.
How exactly does the code work?
Treasurer Josh Frydenberg and Communications Minister Paul Fletcher revealed the news media bargaining code in December, with Frydenberg describing it as a “huge reform” and a “world first”.
Under the code, there would be a two-way value exchange in the arbitration process which would allow Google and Facebook to offset the money they pay publishers with the amount of value publishers receive through the tech giants’ referrals.
Google claims it has directed more than 3 billion visits to Australian news sites in 2018, valued at $218 million in referral traffic.
However Frydenberg said the code would ultimately benefit publishers and any payments would only flow one way: from the tech giants to the publishers.
Google and Facebook will also need to give publishers two weeks advance notice of any significant changes to their algorithms.
What does Google and Facebook want?
Neither Facebook nor Google are impressed with the code, with Facebook Australian managing director Will Easton on Thursday describing it as a law like no other.
Facebook has also recently threatened to pull Australians’ ability to share news content on its platforms if the code isn’t drastically reshaped.
“Unfortunately, the latest version still fails to acknowledge the commercial and technical realities of how publishers use Facebook and the value we provide to them,” Easton said in a blog post on Thursday.
“Ultimately the legislation does not provide solutions that will help the news industry over the long-term.”
He said the issue with the current code is its arbitration model which is “untested and unpredictable”.
Under the proposed code, arbitration between the tech giants and publishers must take place if they’re not able to reach an agreement over the payments.
He said government modelling shows at least three-quarters of bargaining processes will be pushed to a binding arbitration.
“This fails to achieve the original goal of encouraging genuine bargaining between both parties. Beyond that, it allows an estimated 100 to 200 broadly-defined eligible news organisations to make deals as individual mastheads and digital channels,” Easton said.
“This could expose Facebook to more than 1,000 standalone commercial arrangements depending on how publishers use our service.”
The United States has also criticised the code, warning it runs counter to the US-Australia free trade agreement and that it is “fundamentally imbalanced”.
In a submission to the inquiry, US trade representatives said the laws could have “harmful outcomes”.
“In the view of the United States, it would be preferable to pursue additional market study and consultation to identify a specific market failure that might be addressed first though a voluntary code, and if demonstrably ineffective, through Australia’s regulatory rule-making process where stakeholders can participate by weighing in on options and providing evidence in support of or opposition to specific proposals,” the submission states.
The committee will deliver its report on 12 February with a vote on the bill to legislate the code to occur soon after.