Google in Australia: Dangle the Carrot, then Yank it Away

Last week I praised Google for its News Showcase initiative in which it announced it would be paying US$1 billion (over three years) to news content providers to create a new product on Google highlighting news features. These features would be drawn from and created by news sources that agree to contractual arrangements with Google. The countries to be included in News Showcase, according to Google’s announcement, are Argentina, Australia, Brazil, Canada, Germany and the UK (in alphabetical order).

The reaction from publishers was decidedly mixed. Some welcomed the opening, looking forward to talks with Google while others criticized the move as keeping all the cards in Google’s hands by dictating terms and conditions. The initial line up of partners was, with some exceptions, not particularly impressive in terms of name recognition. In fact, part of Google’s approach may have been to sign up smaller players and play them off against their larger traditional media competitors.

In the case of Canada, only two small virtually unknown pure-play digital outlets were listed, Narcity Media and Village Media. Having announced that Canada was to be part of the new arrangement, Google promptly suspended implementation of Showcase in Canada until more media partners were signed up. Noteworthy is the fact that no mainstream media, who have been complaining vociferously to the Canadian government about the need for action to help them corral a portion of the revenues that giant digital platforms generate off the back of their news content, have agreed to terms with Google. The Canadian government, in announcing its legislative priorities for the coming Parliamentary session, noted that it intended to ensure that “web giants” share revenue more fairly with Canadian creators and media. So Google responded, sort of, and then pulled back.

Its tactics were even more blatant in Australia where the government has proposed a “News Media Bargaining Code” that would require Google (and others in a similar position, such as Facebook) to reach agreement with news providers within a defined period. The Code, if adopted, will be administered by Australia’s competition authority, the Australian Competition and Consumer Commission (ACCC). In the current draft, an arbitrator would determine the direct and indirect value of news content to the platforms, the cost of producing it, and evaluate the impact of payment on the platforms. Both Google and Facebook have objected strongly to the proposed Code. Google has threatened that if it is implemented in its current form, Australians may lose access to Google Search, a response that Australia’s Treasurer Josh Frydenberg has characterized as “bullying”.

Google has now moved beyond bullying to what many would call blackmail by announcing that it has no choice but to suspend implementation of the agreements that it had reached with five smaller but respected Australian news providers (as in Canada, none of the major industry players have signed on), because of the ACCC’s proposed code. This is a thinly veiled attempt to increase the pressure on the Australian government and the ACCC, which has said that it will be bringing forth amendments and final recommendations after receiving and evaluating public input. During the public consultation phase Google, through Youtube, encouraged Australians (and others) to swamp the Australian regulator with complaints about the proposals. Putting on the table, and then withdrawing, offers to share revenues with Australian media is yet another pressure tactic. As the Chairman of the ACCC is reported to have remarked (drily), “We note that the timing of these offers appears to coincide with increased Government scrutiny both in Australia and overseas”. Truer words were never spoken.

What is not yet clear is the position of the US government in all this. Will they champion Google in its fight with the Australian regulator? Google would love to be able to enlist the US government on its side, and invoke the Australia-US Free Trade Agreement as an obstacle to implementation of the ACCC’s code, but so far there is no indication that a broadly based competition regulation would be discriminatory and thus violate the Agreement, even if the immediate targets happen to be US companies. Both Google and Facebook are under increasing scrutiny back in the US by both Congress and the Trump Administration for anti-competitive activities, so it is unlikely that the US government will be unreserved and uncritical champions for them.

That said, the Trump Administration has pushed back strongly on efforts by some EU countries and Canada to subject the internet giants (Google, Amazon, Facebook, Apple) to more domestic taxation based on revenues generated in those countries. The tax issue was punted to the OECD to develop an internationally agreed code but in June the US ended its participation in the negotiations, following the standard playbook for this Administration—taking unilateral action. Presumably, the concern is less about the impact on the companies and more on the impact on US tax revenues. Nonetheless, taxation and anti-trust are two separate issues. Australian media reports indicate that the US Trade Representative’s Office submitted a brief to the ACCC, but the focus was on caution and taking time to fully assess the implications of the Code.

The next step will be the release of policy recommendations by the ACCC following its consultations. Maybe there will be some tweaks that will mollify Google. Or maybe Google will continue to try to change Australia’s policy approach with further “carrot and stick” tactics. It has not been reluctant to wave the big stick (threats to cut off access to search), which did not go down well. Now it has produced the carrot, but after dangling it and allowing a nibble, it has yanked it away. What will its next move be? Stick or carrot?

© Hugh Stephens, 2020. All Rights Reserved.