• Hal Crawford

Google brings cannon to gun fight

Updated: Aug 20

With less than a fortnight to go before the gates close on new laws governing the financial relationship between the Australian news industry and digital platforms Google and Facebook, Google has decided to take off the gloves.

On Monday morning, Google Australia MD Mel Silva published as “open letter to Australians” in which she warned that the search giant’s “free services” were “at risk” through the mandatory bargaining code created by consumer watchdog the ACCC.


Any Australian visiting the Google homepage, or using YouTube or a Youtube app - that is, just about everyone - has been greeted with a yellow exclamation mark and a link to the 446-word open letter. True to Silva’s style, the letter socks it to the reader, warning that “the way Aussies search every day”, “search data” and “free services” are all under threat.


Unfortunately in adopting the same kind of street fighting tactics as its desperate news opponents, the search giant has partly legitimised the entire sorry legislative adventure.


To understand what has driven Google to use its bullhorn to involve general users in an industry stoush, you first have to understand how the draft legislation has been designed to force platforms to pay news companies.


I have argued that the ACCC’s project has been misguided from the outset. It was born from the idea that Facebook and Google are using news content to bolster their platforms without adequately compensating news publishers. According to the story, they are able to get away with this because market dominance means they can dictate terms. But the narrative misrepresents the industry’s problems and panders to those who prefer clear delusion over murky reality.


The problem for the ACCC was always going to be how to determine the value the platforms derived from news content. This was said by the news industry to be very high and by the platforms to be very low. There has been crazy talk. A billion dollars a year was owing, according to some in the media. Facebook declared it could walk away from news without serious harm to its business. Google said that news sites should be paying, not vice versa.


The legislation as it is drafted avoids the difficulty of determining the value of news by forcing platforms to negotiate a deal with certified news organisations within three months. When that fails - as it clearly will in many cases - it moves to compulsory arbitration. Both parties must submit their final offer within 45 days of arbitration beginning. An appointed qualified arbitrator - or panel of three arbitrators - will then determine the most appropriate of the two final offers, and choose one. The arbitrator must consider:

  • The direct and indirect value to the platform of news content

  • The cost of making news content

  • Whether the fees involved would put undue stress on the digital platform

This is all the really difficult work, coming right at the end. The concept of the “indirect value” of news to the platforms is the crucial and problematic part, because it is so vague and could equally apply to any content, not just news.


The idea that the cost of making news should be considered in arbitration feels like an economic and natural justice travesty. Economic, because it’s a reward for inefficiency. Natural justice, because what say do the platforms have in how much a third party spends to make content?


What is diabolical about the process from a platform point of view is that in submitting an offer, you have essentially agreed to the legitimacy of the process. By the time you have quantified the value, somehow or other, you’re locked in. At that moment, it is only a question of how much.


Unless the platforms challenge the entire process, they are locked in a vice.


So we get to Silva’s open letter. There are a number of problems with it:

  • In posting the link on google.com, Youtube and apps, making it appear as a pop-up for people signed into the G-suite etc, Google has demonstrated the phenomenal reach and market power the ACCC is acting against.

  • The letter warns of a “dramatically worse Google Search and Youtube”. It’s hard to see how the legislation would do this. The “dramatically” is a mistake because it’s an exaggeration, and the platforms should be leaving the drama to the news guys, who are experienced at being shameless.

  • Silva’s wording, despite protests to the contrary, clearly implies a risk to the “freeness” of search and Youtube for all Australians. This threat is not real.

So Google begins to play the story game, the one where you talk directly to the public. The news industry has been doing it for years, claiming that Google, Facebook and others “steal content”, ignoring the profound causes of demise and carrying on like a wronged preacher.


Google is world-beating company. It’s rich and powerful and in financial terms dwarfs the mightiest news empire. But it’s not a media company, and waging story wars is media business. Here Google has already conceded the high ground.


At the beginning of the whole ACCC process, there seemed to me to be only two options: either the funds moving from platforms to news would be small, or the new rules would be unfair and therefore would not survive a legal challenge.


There is, however, one possibility I had not considered previously: that the platforms give up. It is open to both Facebook and Google, in light of the legislative vice that has been constructed by the ACCC, to shrug, mitigate some of the worse provisions of data and algorithm sharing, admit to the mythical “indirect value”, and submit offers that appear reasonable during final arbitration with the big news companies.


That approach may be pragmatic but it would be wrong. As Silva says in her letter, the proposed law is bad, not as she claims because users are going to be affected, but because it singles out two successful companies and arbitrarily forces them to pay money to a small group of Australian businesses. If the government believes those businesses provide a vital service, then it should move to directly support news, rather than introduce legislation that will not stand up to legal scrutiny.


Documents:

Open Letter from Google

Youtube letter from Google

Response from the ACCC

Draft news media and digital platforms mandatory bargaining code


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