Facebook in Australia: “READY, FIRE, AIM”

Over the course of the past week or so, Facebook has managed what some thought impossible; pushing Google off the front pages as the “bad actor” when it comes to behemoth internet platforms thumbing their nose at a sovereign government, indeed at an entire nation, and instead putting itself in the spotlight. This took a degree of clumsiness that only Facebook could manage.

First There Was Google

For months, Google has been in the cross-hairs of the Australian government’s News Media Bargaining Code. The Code, in its original iteration, required that major internet platforms that use news content from Australian media sources (specifically Google and Facebook because of their dominant market share) compensate the content providers through contractual arrangements, failing which a government arbitrator would impose a settlement based on a “final arbitration” model (where each side makes a final offer and the arbitrator selects one of them). It’s not just about payment for news. The Code will also require the platforms to inform news providers in advance of any changes to algorithm settings that may materially affect referral traffic to news, as well as any substantial changes to the display of news and advertising directly associated with news, plus a requirement to share audience data. In other words, a peek behind the algorithmic curtain.

Google dug in, claimed the proposals were unworkable, unfair and would “break the internet”. It threatened to withdraw its online search engine from Australia and to delist Australian news services, while encouraging Australians to bombard their government with complaints about the new Code. In the past, Google has had similar encounters with governments in Europe (Germany, Spain, France) where it resisted reaching agreements to pay publishers for use of news content after publishers had been granted additional rights to the content to enable negotiations. In Germany, Google was able bring the publishers to heel by blocking access to their content on Google News unless they renounced claims to payment. In Spain, Google simply shut down Google News.

Google in France

More recently, in France they faced a determined government that took a stand and used its competition authority to require that Google enter meaningful consultations with publishers over payment for content. Google dragged its feet but finally reached an agreement with one of the major French publishing groups. It may not be out of the woods yet, however, as other publishers not included in the initial agreement have complained to the French competition authority that Google did not bargain in good faith (it has a tendency to approach negotiations on a “take it or leave it basis”), and apparently the Authority has concluded that there is merit to the complaint. The Australian Code will prevent the platforms from abusing their market power through “take it or leave it” offers by holding the arbitration stick in reserve.

Payment for News

Neither Google nor Facebook has refused to pay for access to news content, but they want to do it on their terms. Google has its Google News Initiative that involves some payment for content from selected partners. This was rolled out in some countries after pressure mounted to require quasi-monopoly online platforms that dominate advertising revenues to recognize the contribution of bona fide journalism to public discourse by providing some payment for content. Google tried to use its News Initiative as a lever in Australia by signing contracts with some small media players but making the contracts conditional on the News Media Bargaining Code not seeing the light of day. That didn’t work, and Google has now reached agreements with most of the major media players in Australia. Magically, the “unworkable” Australian proposals suddenly became workable when Microsoft inserted itself into the debate by announcing that it would be more than willing to abide by the Code and in fact, urged the US Government to adopt something similar.  

Facebook too has paid for news. In 2019 it reached a deal with major US publishers to pay for headlines for its news feed, and recently reached a similar deal in the UK to license news stories. For Facebook the motivation was largely to insulate itself from growing criticism that it has become a platform for fake news, alternate facts and conspiracy theories, becoming a closed-loop echo chamber for those who subscribe to such theories. However, Facebook has consistently maintained that it derives no value from news content and should not have to pay to access it. The head of public policy for Facebook Canada, Kevin Chan, claimed that the value of news to Facebook was “zero”.  

Is News of Value to Facebook?

Facebook’s position is that it does news media a service by allowing them to post content on Facebook, which in turn drives readers to the media outlets. Facebook’s VP of Global Affairs, Nick Clegg (a former Deputy Prime Minister of the UK, by the way) wrote that the company had directed 5.1 billion referrals to Australian media in 2020, worth over A$400 million. Yet news does provide “sticky” content that keeps users on Facebook longer—and thus exposed to more advertising which is the source of 98% of Facebook’s revenue. A Canadian researcher, Prof. Jean-Hugues Roy of the University of Quebec at Montreal, who analyzed 1.9 million Facebook posts in 2020 found that almost 20 percent were from media pages. These posts generated 7.3 percent of the total interactions in the sample. Based on that percentage and Facebook’s revenues in Canada he concluded that “Mark Zuckerberg’s company made $210 million thanks to Canadian journalism in 2020.” By way of contrast, Kevin Chan stated that Facebook had contributed $10 million to various news projects in Canada over the past four years. I am tempted to say, “big deal”.

Facebook Blocks News in Oz

So as we see, Facebook, like Google, is prepared in extremis to throw some dollars toward media providers, but does not like being required to do so. Negotiations with media content providers in Australia had been going nowhere, similar to the situation with Google, until the Australian government rolled out its big gun, the Media Code with its binding arbitration mechanism. Google decided that a strategic retreat was the best option, resumed negotiations with the major news providers, and disappeared off the front pages. They were helped by Facebook’s next move, which firmly planted a bullet in its own foot by threatening, and then following through with, a blockage of all Australian media content. It wasn’t as if Facebook’s engineers executed the move with much care. No. In addition to major news sources, they blocked public health information related to COVID-19 vaccinations, the website of the Australian Council of Trades Unions, information relating to women’s health, food banks, emergency services, cancer clinics, charities…. It couldn’t have been worse. Nick Clegg offered the lame excuse that;

“we had to take action quickly because it was legally necessary to do so before the new law came into force, and so we erred on the side of over-enforcement. In doing so, some content was blocked inadvertently”.

A Classic Backfire

An under-statement. The piling on began immediately. The former chief executive of Facebook Australia, now heading an NGO dealing with digital threats to democracy, described Facebook’s actions as a “shameless demonstration of corporate might”. Other descriptions ranged from “heavy-handed” and “reckless, arrogant and dangerous”, to “corporate bullying” and “unfriending Australia”. The blockage of responsible news sources left open the field for the alternate facts crowd. Facebook has been widely criticized for tolerating abusive content and misinformation on its platform but has argued that it lacks the means to monitor and control such content. Yet, in the blink of an eye it managed to take down just about every legitimate source of essential news in Australia. For a company that has been under constant scrutiny for various abuses, from failing to protect the privacy of users to allowing promotion of conspiracy theories to monopolistic practices, it could not have been a more perfect public relations and reputational disaster. It made (Sir) Nick Clegg’s political achievement of taking the Liberal Democrats in the UK from 57 seats to 8 look like a success.

The Compromise

Facebook back-pedalled, unblocked what should not have been blocked and entered into talks with the Australian government resulting in a compromise, of sorts. Like any good compromise, both sides can claim victory. The government agreed to amend the legislation to provide exemptions from application of the Code if companies subject to it (like Facebook and Google, based on market dominance) have already struck content deals. They also agreed to provide for a one month notice period (to allow for the completion of deals) if the Code is to be applied. Once the Code is triggered, there will be a longer mediation period before arbitration takes place, and platforms will be allowed to differentiate their offers depending on what kind and size of media company they are dealing with. The Code, with these amendments, has now been passed into law. At the same time Facebook announced that it would be restoring news feeds in Australia, that it had secured a content deal with one major Australian media conglomerate, Seven West Media, and was in discussions with others.

Who Won? Not Facebook.

So who won? Overall, certainly not Facebook, although they have likely managed to wriggle out from having the Code applied to them because they will have “voluntarily” reached content deals with media providers. This, of course, was the intent of the legislation all along. If it does not have to be applied, because the market is now working, that is so much the better. And, by the way, the Code is now law and will remain on the books as a back-stop. The outcome is probably even better for smaller players on the Australian media scene given the domination of Australian media by conglomerates such as News Corp. since the platforms are now allowed and encouraged to make differentiated offers. The requirements for disclosure of algorithmic information did not change significantly as the legislation worked its way through the Parliamentary process.

Facebook is claiming that it can still block news coverage, which is true, but this is a hollow victory since it was the blockage of news that caused it such huge reputational damage and ultimately led to the compromise by which Facebook will pay for content in order to avoid becoming subject to the Code. Facebook can still block content—if it wants to shoot itself in the foot yet again. It could also exit the Australian market. The Code does not stop that either, but neither of these things is going to happen.

Wider Implications

Not only was Facebook forced to accept reality in Australia, it will now be even more under the gun elsewhere as other governments, notably Canada and the UK, and possibly even the US, will move to ensure that it reaches fairer revenue sharing deals with media organizations. They will draw important lessons from what happened in Australia, as will the platforms. As Canada’s Heritage Minister Steven Guilbeault said in a radio interview on CBC, if Canada ever needed a reason to deal with the platforms, “Facebook just handed it to us on a silver platter”. The Australian experience has demonstrated that it takes determined and robust government action, backed up by application of competition law to deal with market dominance, to bring the platforms to the table. But it can be done.

Facebook was already headed for a fall before all this happened. It has just propelled itself closer to the cliff edge as governments around the world, and particularly in its home jurisdiction of the United States, will be looking ever more carefully at the company’s business practices and their impact on society, democracy and individual freedoms. Whatever “victory” Facebook salvaged from its antics in Australia, it was pyrrhic in the extreme. That’s what you get when your policy consists of “Ready, Fire, Aim”.

© Hugh Stephens 2021. All Rights Reserved.

This post has been updated with respect to the research conducted by Prof. Roy mentioned in paragraph 7.