An Anti-Democratic Exercise of Monopolistic Power

On Thursday morning, in response to the proposed News Media and Digital Platforms Mandatory Bargaining Code in Australia, Facebook (with a "heavy heart") restricted the ability for any news to be shared by Australian users, and for Australian news to be shared by any users. Visiting an Australian news organisation's Facebook page would simply display "No posts yet".

An empty Australian news Facebook page

Attempting to post a link from an Australian news source, no matter where in the world the user is, would result in a popup, stating that "This post can't be shared".

Popup restricting the posting of Australian news

Many people have been quick to label Facebook's actions as irresponsible and potentially harmful. Most of the initial criticism was due to the fact that whatever tool or algorithm Facebook had developed to remove news content had inadvertently removed content from "necessary" Facebook pages. Such as Government Health pages and the Bureau of Meteorology, which provides severe weather warnings. It doesn't stop there, Facebook wiped the pages of many organisations which should not have been caught up in the restrictions. Facebook blamed these issues on the broad definition of "news content" as defined in the proposed code, but quickly reinstated the wrongly blocked pages. They stopped short of apologising, however.

The more legitimate harm that Facebook's actions could cause is aiding in the spread of misinformation. Removing all news content from legitimate news sources but leaving up the unregulated content can do nothing but worsen the situation that Facebook has already been struggling to contain.

A vandalised ad for Facebook

As I mentioned in the first sentence of this post, Facebook took this action in response to the proposed News Media and Digital Platforms Mandatory Bargaining Code. Both Facebook and Google have been strongly opposed to code since it was drafted in the latter half of 2020, and both threatened drastic action if their concerns about the code were not addressed. Their concerns were not addressed. So on Thursday Facebook followed through with their threat.

For the Code

The goal of the proposed code is to address the bargaining imbalance which exists between digital service providers (Facebook and Google) and news organisations. It aims to achieve this by forcing Facebook and Google to negotiate with news organisations for the right to distribute or link to their content. At the moment, whenever you search something on Google, the results you see not only include a link to the page, but also the title, an excerpt from the page, and in the case of some news content, an image.

A Google search result showing scraped content

Google isn't paying anything to the respective organisations to show this content, and the Australian Government, along with the major media outlets, think they should.

Google Search makes money by showing ads alongside the actual search results. At the moment, none of that money is shared with the websites who's pages show up in the search results. The news organisations are only making money when a user actually clicks a link to their website, and gets to look at the news organisation's ads instead.

Facebook engages in similar practices whenever a user shares a link. They scrape the website for the headline, an excerpt, and an image.

A Facebook post showing scraped content

There is a key difference in Facebook's situation though, and that's the fact that it is not Facebook itself which is posting the links - it's its users. The implications of which I will explain later on.

The key assumption here is that people are using the scraped content as a substitute for actually clicking the link and reading the article. In which case all the advertising revenue goes to Facebook or Google and none to the news organisation. You may be sitting there reading this thinking you are one of those people who always reads the actual article and not just the headline and therefore are supporting the news organisations directly, and you could be right. However that's almost missing the point. When you search something on Google and a bunch of news articles show up in the results you read most of the headlines and even some of the excerpts, and you definitely look at the images, but you may only click and read one of the articles. You have just consumed multiple organisation's content, but only the one you clicked on will get paid for it. This is what the code is aiming to address.

Against the Code

So the purpose of the code might actually make a lot of sense, Google and Facebook are directly making money from news organisation's content. So why are both companies so strongly opposed to the law?

It turns out that when you take a closer look at the proposed code things seem to get a bit extreme. Firstly, the code doesn't just cover when Facebook or Google scrape content and reproduce it on their websites, it covers simply linking to the content. No scraping or reproducing needed. It seems a bit of a stretch that looking at a raw URL can be considered consuming content.

The part of the code which defines how content is made available

Making a company pay to share links breaks a fundamental principle of the internet - the ability to link freely. It would really suck if I had to pay every company who's website I've linked to in this article. In fact I would probably just not link at all if that were the case, and you would have no idea if I am actually referencing legitimate sources or just making things up as I go. I would effectively take the same action Facebook has, so maybe their position isn't so extreme after all.

So why does this law only apply to Facebook and Google, and not to Twitter who partakes in the same scraping practices for its links, or even Facebook owned Instagram? Well it's because that's what the Treasurer of Australia has decided. Who this code applies to isn't metrics or rules based, it's simply up to who the Treasurer of Australia thinks it should apply to. The only guidelines the code lays out are what I've added below.

Who the code applies to

This is a lot of power to give to just one Minister, and it has more than just Google and Facebook concerned. Twitter also made a submission to the Australian Parliament, giving reasons why they too oppose the code. You can see all submissions regarding the code, both supporting and opposing, here.

As I mentioned earlier, in Facebook's case, it is not Facebook which is posting links to news content, it's its users. Making Facebook pay for the content which its users post is an uncomfortable precedent to set. Especially when you consider that the users posting these links include the news organisations themselves. So Facebook would essentially be paying news organisations for providing them with a platform to promote themselves. Facebook evidently doesn't see enough value in hosting news content if they also have to pay for it.

According to Facebook, "News makes up less than 4% of the content people see in their News Feed". So it might not be a huge loss to Facebook if they remove news. Although the 4% quoted by Facebook will likely not directly translate into only a 4% loss of revenue, it's extremely hard to tell what the actual effect will be on Facebook and we will only find out over the coming months, assuming Facebook sticks with its decision, which it could easily not. In the same post, Facebook claims it "generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million". I'm no business expert but that seems like a lot of money for the Australian media to miss out on. Facebook also claims to have "delivered A$5.4 million to Australian publishers from revenue share programs, such as In-Stream Ads" not much, but it's worth noting, I guess. Of course the removal of news from Facebook won't mean the people who were clicking the links before will now just not read the news, they may now go directly to the outlet's website, instead of the Facebook page, possibly generating more revenue than if they went through Facebook. But this won't be the case for everyone, and how much of an impact this will have on news organisations is unclear. Founder of New Zealand media company The Spinoff claims 15%-22% of their traffic comes from Facebook.

A little glimpse of how much Facebook traffic can impact an individual story / it fades fast, but typically provides 15%-22% of our traffic on a monthly basis. There will be multiple Australian publishers whose businesses will no longer be viable should this not pass. pic.twitter.com/i8KZ8Sx8IS

— Duncan Greive (@duncangreive) February 17, 2021

It's worth noting that The Spinoff is a digital-only media outlet targeted at a younger audience, so its numbers may not be representative of the media industry as a whole, but I wouldn't be surprised if most media outlets were at least in the same ballpark.

In July 2020, major New Zealand media outlet Stuff made the decision to stop all activity on Facebook. They claim to have done this for ethical reasons, and had previously stopped advertising on Facebook in response to how Facebook handled the terror attack in Christchurch in 2019. They claim this action was a trial, and six months on, Stuff still doesn't post to Facebook, so things must not have gone too poorly. It is important to note a key difference in this situation though, and that is that stuff.co.nz links are still allowed on Facebook, just Stuff themselves doesn't post them. So they will still have a percentage of their traffic coming from Facebook, although likely not as much.

In Germany, where a similar law exists in which Google must pay for use of excerpts of news articles, Google simply removed the excerpts to avoid paying publishers. In response some German publishers decided to allow Google to use their content for free after their traffic plummeted.

Another problem with the proposed code which Facebook made an attempt to illustrate with their great wipe, is the broad definition of news content as defined by the code.

The code's definition of news content

"Content that reports, investigates or explains current issues or events of interest to Australians" sure seems like an extremely broad and ambiguous definition of news, and to hammer their point home Facebook seems to have taken a broad interpretation too. Google has also expressed concern about the definition of news. In their "More Information" section of their open letter they respond to the question "Why can’t you just remove news from Google Search?" with "In this proposed law, “news” is defined vaguely and broadly—way beyond what most of us would consider “news”. There seems to be no clear or obvious distinction between news and non-news content, and the way that Google works, there is no algorithm that could navigate such a vague and broad definition." - and judging by Facebook's attempt, they may have been right.

The job of deciding which news organisations get the privilege of forced deals with Facebook and Google lies with the Australian Communications and Media Authority. They have to decide whether the applying news organisation passes four tests: the revenue test (revenue >$150,000 in the last year), the content test, the Australian audience test, and the professional standards test. The criteria for passing is quite complicated and I've put the relevant sections of the code here. It is easy to see how this could create an uneven playing ground in the Australian media industry. It would be even harder for smaller outlets who didn't manage to pass the tests to compete with large outlets who are getting huge cheques from both Google and Facebook.

This also raises the question of who would you rather have control over what news sources you see: Google and Facebook, or the Australian Government.

Another section of the code could also give a competitive advantage to the news organisations who get a deal. This section mandates that Facebook and Google must inform the registered news organisations whenever they make a "significant" alteration to how their discovery/ranking/curation algorithm works 14 days in advance.

Section about changes to algorithm

The law never actually defines what "alteration" here means, but it gives a bunch of examples that go beyond ranking. For example, anything that affects a particular "class of content", such as deciding whether or not to make all videos auto-play, is an alteration. Basically, this law would prevent Facebook or Google from deploying just about any non-trivial change to its product without first doing a detailed analysis of how it would affect the Australian news industry, in order to determine whether a notification is required. News outlets who don't have a deal of course get no notification of any impending changes.

Another issue Facebook and Google have with the proposed code is the uncertainty which arises from being forced into commercial agreements with whoever the ACMA approves to get a deal. The two parties are initially allowed to negotiate freely but if no agreement is reached the two parties must both submit a "final offer". These final offers cannot be changed once submitted. The ACMA must then appoint an independent arbiter who must decide which final offer they deem more fair. The final offer chosen becomes legally binding. The Australian Government estimates that at least 75 percent of negotiations will go to binding arbitration. Facebook claims this could expose them "to more than 1,000 standalone commercial arrangements". Google has a whole blog post explaining why they think this process is unfair. I'm sure I could go a lot deeper into researching whether Google is correct here or not but arbitration and negotiation of commercial agreements is not my area of expertise. Binding arbitration does seem like the extreme option here though.

Finally, Facebook's third "leading issue" with the code, is the non-differentiation clause which they claim prevents them from "offering commercial terms to certain publishers and changing how we display their content regardless of whether we agree a deal. This means that if one publisher is out, all Australian publishers need to be out." This is the reason they removed every news source. Not just the ones which would likely get a deal.

Facebook Wasn't Bluffing, Was Google?

Google has started to play ball with the new code, or at least that's what everyone seems to believe. The only evidence for this claim seems to be the fact that they removed the link to their threat to stop providing Search in Australia from their homepage and that they have struck a deal with News Corp which covers a "wide range" of Google products. However their statement doesn't mention Search, which is the product which this proposed code is set to apply to.

Some news about Google News Showcase. Learn more: https://t.co/3k8WZePdae pic.twitter.com/iJaUKuCLbM

— Google News (@googlenews) February 17, 2021

Google's apparent change of mind also comes after Microsoft said they would be more than happy to ensure their search engine Bing would be compliant with the new code. So potentially the threat of losing market share to Microsoft was too much for Google to take. Although Google's threat was to remove Google Search from Australia completely so surely they factored in the fact that other search engines would just take their place.

I have yet to find evidence that Google is now on board with paying publishers for their content to appear in Google Search. Since the 10th of February they have been announcing deals with publishers to appear in their News Showcase product (this time there's no mention of a "wide range" of products, so no Search, just News Showcase).

Today, we’re excited to announce that Junkee Media will be joining Google News Showcase, a new licensing program which proudly supports original, trusted journalism. More here → https://t.co/B5g30yqJ8F. pic.twitter.com/3oHXC9ZTRu

— googledownunder (@googledownunder) February 17, 2021

They have also stated this product would be compliant with the proposed code. I have not been able to find anything about them being willing to make Google Search compliant with the code. In fact at the bottom of the announcement page, they still have a section expressing their concerns about "being asked to pay for all links and snippets". The only conclusion I can think of here is that Google is trying to get a deal with the Australian Government where News Showcase is compliant with the law but Google Search isn't and doesn't have to be.

If this is the case, it seems strange that Facebook wouldn't seek the same kind of deal (and maybe they are trying to). They have almost the exact same product as Google News Showcase, called Facebook News, which has already launched in the U.S. and U.K. and they seemed to be prepared to launch in Australia.

The narrative that Google and Facebook just don't want to pay media outlets and that's why they are removing or threatening to remove services from Australia completely is false. Both companies have been (not happily) willing to abide by similar regulations imposed by the EU which is part of the Directive on Copyright in the Digital Single Market. Google responded to France enforcing this directive by removing the excerpts shown under news articles, but has since ended up entering into agreements with publishers. There is a lot more to this situation than Facebook just being its greedy and evil self.

What Now?

As of writing this, the Australian Government has the votes to pass this law, and has shown every indication that they will do just that, with or without Facebook allowing news. Whether Facebook will have a change of heart depends on whether they strike a deal with the Government to have facebook.com excluded but Facebook News included in the code. If they don't agree on a deal, whether news is gone forever from Facebook depends on how things go for Facebook without the news. If they notice a massive drop in users I imagine they could be willing to abide by the new law. If not, then no news on Facebook seems to be their way forward. Whether they would still launch Facebook News in Australia - I have no idea.

Roughly the same thing goes for Google, if they reach their deal to have Search excluded from the code, they will continue signing publishers to News Showcase under the new code and Australians will be able to Google Search freely and not have to use Bing. If they don't reach a deal, it's still entirely possible Google removes Search from Australia.

These "positive" outcomes of the companies reaching a deal with the Australian Government may seem like a good outcome, but ignores the fact that this code is still law. When the next Australian Government comes in, with a new Treasurer, they may have different opinions about whether facebook.com or Google Search should be subject to it, and they would have all the power to make them comply.

Whatever the outcome here, it could have a big impact on the laws other countries attempt to pass so solve the same issue. If the companies comply with the strict Australian code, you can expect other countries to try the same thing. On the day of writing this Reuters reported that bipartisan members of Congress in the United States will introduce a similar bill. However, it appears that the bill will have the purpose of giving more power to smaller news organisations, not the giants - a large number of which already have deals in place in the United States. There is also no sign the bill will have the same problematic clauses which have caused such outrage from the two companies.

At Least They're Trying

Australia's attempt to stand up to the large tech companies which have been minimally taxed and regulated is a positive sign. Other countries looking to get a hold on Facebook and Google can, and should, learn from the actions of the Australian Government.

Australia's intentions are pure, they want their local media outlets to be fairly compensated for the value they provide Facebook and Google. However, the code they have drafted is biased towards larger publications and shows an obvious misunderstanding of how Facebook and Google operate. Perhaps a workable solution could be an effective tax, which could then be used to fund Australia's media industry. Similar to how harmful products such as tobacco are taxed highly and part of the tax revenue gained is used to help fund harm reduction services (although probably not enough).

The misunderstanding of how Facebook and Google operate isn't unique to Australia. In 2018, U.S. legislators made it painfully obvious they too have no idea about how Facebook operates. One Senator (who was chair of the Senate Republican High-Tech Task Force) even asked Mark Zuckerberg how Facebook sustains its business model if users don't pay for its service. To which Zuckerberg replied "Senator, we run ads".

I wrote this post because I thought the media coverage of this situation was unfair. In the image of the search results I included earlier almost every result is framed negatively towards Facebook. In most cases the only reason they give for Facebook's action is their unwillingness to to comply with the new code. Sometimes they mention the fact that Facebook is unhappy with the code covering just linking content, but don't go deeply into the issue. It was hard to find any mainstream source which accurately explained Facebook and Google's side of the story. One of the best pieces I read was by Hal Crawford, former Chief News Officer at MediaWorks. One of the worst pieces was by current Stuff Editor in Chief Patrick Crewdson, where he labeled Facebook's action an "anti-democratic exercise of monopolistic power".

Made with 💜 in Tāmaki Makaurau, Aotearoa. © Jono Davis.