Google’s Latest “Stoush” with Australia: What’s the Lesson from Germany’s Failed Effort?

Later this week, on February 12, the Australian Senate is scheduled to present its report reviewing important draft legislation, the tongue-twisting “Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill, 2020”. This legislation, when enacted, will implement the News Media Bargaining Code developed by the country’s  competition regulator, the Australian Competition and Consumer Commission (ACCC). Assuming the final law retains all or most of the provisions of the draft bill, it will require Google and Facebook—and only Google and Facebook by the way—to license Australian news content that they use in their search or social media offerings. In other words, the platforms will have to compensate Australian news content providers when they present the providers’ content. “News content provider” is defined in the legislation according to several professional and revenue criteria, but essentially the definition includes all major Australian news entities, both publishing and broadcasting. Why does the code apply to only Google and Facebook? It has to do with scale, dominance and market power. As I discussed in a blog on this topic two weeks ago, and in earlier blogs, Google and the Australian government have been engaged in real “stoush”, a big-time arm wrestle, over this legislation.

The Australian News Media Bargaining Code

Google has said the Code is unworkable and is threatening to pull out of Australia, or at least to shut down its search function, rather than comply with the legislation if it is enacted without amendment. Google says it doesn’t object to paying content providers for use of their content, but wants to do it on the company’s terms, through its “Google News Initiative”. (Last fall Google announced it was prepared to start paying news sources, but then suspended its offer after the ACCC refused to drop its code. Now, under pressure from the new legislation, it has decided to re-activate the program).

From the perspective of the ACCC, the Google News Initiative puts most of the cards into Google’s hands, and therefore the Code contains a requirement for binding arbitration if a voluntary agreement cannot be reached between the platforms and publishers. Google doesn’t like arbitration, and particularly objects to the form of arbitration proposed in the Australian legislation. Known as “final offer” arbitration, it requires the arbitrator (which will be ACMA—the Australian Communications and Media Authority) to select a final offer from one of the two sides. If the platforms refuse to negotiate, they could be subject to heavy fines of $10 million or 10% of annual turnover.  They could also be fined if they fail to comply with an arbitration decision or take retaliatory action against news media companies. Clearly, there are some real teeth in this legislation.

For Google (and Facebook), the only way to opt out of the legislation–other than by withdrawing their services entirely from Australia or, in the case of Google, closing down its search function—would be to remove all Australian news content from their services. Google has already started to test the latter option by blocking access to Australian news content for some users in Australia. Meanwhile, rival Microsoft has stepped up indicating that while it is not subject to the Code, it would willingly comply with it. The US company is eager to fill any gap left by Google. Google’s withdrawal from online search in Australia would be a boon for Microsoft’s Bing which currently has only about 5 percent of the Australian market.

Because of this competitive factor, and because of the importance of Australia as a leading OECD country and also the expressed determination of the Australian government to follow through with the legislation, I think that a compromise will be found in the end. But be under no apprehensions. Google plays hardball as was demonstrated a few years ago when Germany tried to grasp the same nettle, although using a different approach to that taken in Australia.

What Happened in Germany

Back in 2013 Germany passed legislation that gave publishers an ancillary right (Leistungsschutzrecht) to their news content (for one year) to enable them to negotiate with major internet platforms (read Google). The “publishers right” was considered necessary because, as it was phrased in an EU study on this topic, “Although print publishers have long been able to claim copyright indirectly from the contributions of their journalists, historically, copyright has not been a key part of their business model.” The intent was to create a “neighbouring right” similar to that enjoyed by investors in broadcasts, sound recordings and films. This would relieve publishers of the need to rely on the rights created and granted by journalists and photographers they employed in order to prove ownership of copyright in each work of journalistic output they published. This new right sits alongside, and is in addition to, regular copyright protection. I wrote about the push for a publishers’ right back in 2016 when the EU was considering bringing it into the EU Copyright Directive, a step that has now been taken.

Google didn’t want to negotiate payment for what was referred to at the time as “news snippets”, and as usual was a tough negotiator. At first Google dragged its feet, so an umbrella group of German publishers sued it for ignoring the law. Google then removed all German publishers from Google News, resulting in a huge loss of traffic to major news websites. For leading German publisher Axel Springer, this amounted to a decline in visits to its websites of 80 percent. Google announced that it would allow publishers to opt back in to Google News only if they waived their right to compensation. Faced with this ultimatum, the publishers caved in and Google emerged triumphant, wielding its market force like a club. It similarly played tough in Spain when a similar law was passed, simply shutting down Google News in that country.

EU Takes the Lead

Since then, a law similar to Germany’s Leistungsschutzrecht has been enacted by the EU, as Article 15 of the Copyright Directive (although the EU Directive confers two years of protection as opposed to the one year of protection in the original German law). It is the platform for passage of national laws to implement a publishers’ right. France is the first EU member state to have done so, although more will follow. In taking the lead, France was the first to tangle with Google under the new rules, as I wrote back in April of last year (here). France implemented the Directive by means of its Competition Authority, requiring Google to negotiate, much as Australia is doing.

Why German Publishers Failed to Tame Google

Dr. Heidi Tworek of the University of British Columbia, a scholar who specializes in the history of German media, has recently argued that people have forgotten about what happened in Germany in 2013 when they look at recent developments in France and Australia, and potentially in Canada, when it comes to requiring Google to pay for news content.  “Levelling the Digital Playing Field”, the report released last October by News Media Canada, the industry group representing the Canadian news publishers, leans heavily to the Australian model in its advocacy, while noting France’s rights-based approach. The German experiment is not mentioned. Tworek points out that the struggle between news providers and news disseminators is not a new phenomenon. She refers back to the 1920s when there was a push in Germany to create a new right for publishers to protect them from the incursions of radio into their hitherto exclusive news domain. The issue was framed as one of “who owns the news” but the attempt to create a special news right foundered, just as the attempts by German publishers in 2013 were unsuccessful.

The Impact of the German Example

While German publishers did not succeed in their attempt in 2013 to force Google to share revenues generated through news content, I would argue that regulators and legislators have not forgotten what happened in Germany a few years back (although I am sure none of them are aware of the earlier history of trying to regulate news content on radio unless they have read any of Professor Tworek’s articles on the subject.) The problem in Germany in 2013 was that Google was permitted to use its market power to bend the publishing industry to its will. It was able to dominate and split the industry by offering to allow some publishers back on to its platform if they renounced their right to payment, while punishing others for exercising their rights.  Simply providing publishers with an ancillary right to the content they produced was not sufficient to empower them to stand up to the market dominance of Google. Neither France nor Australia have made that mistake. They have put the full muscle of their Competition authorities behind the confrontation with Google, leaving the platform with only a couple of options; find a solution (as they have done in France), or exit the market in full or in part (by removing all news content).

Google cannot play the game it played in Germany by splitting the industry. “Divide and rule” will no longer work. The Australian code has a non-discrimination provision ensuring that the platforms cannot choose to negotiate with some content providers, but not others. There is also the requirement for binding arbitration.  If Google follows one of the extreme options of either leaving the market, or the news segment of the market, it will create a vacuum that its competitors Bing, Yahoo and others will be only too happy to fill.

Levelling the Playing Field

The example of what happened in Germany tells us that the playing field has to be levelled if there is to be a rebalancing between the publishers and major internet platforms, of which Google is the prime example. That can only be done by dealing directly with the issue of dominance and market power as part of the solution.

Developments in Canada

This holds lessons for Canada where the Heritage Minister, Steven Guilbeault confirmed in late January that a bill for online news compensation is in the works, and is expected to be presented to Parliament in the spring. Canada has apparently not yet decided what approach it will take (the French approach, or that of Australia or a “made in Canada” solution) but Guilbeault has been in touch with ACCC’s Chair Rod Sims, and Canada is closely following how the Google-Australia “stoush” is playing out. It has been reported that Guilbeault favours a binding arbitration model, as was advocated by News Media Canada in its report.

One thing is certain. If history holds any lessons for regulators when it comes to dealing with the giant international internet platforms, it is that they are too big for local content industries to be able to deal with directly without government support. Government muscle in the form of limiting market power and anti-competitive behaviour is required. The real lesson to be learned from the German example is not that Google cannot be brought to heel; it is that this has to be done using the right tools.

© Hugh Stephens 2021. All Rights Reserved.