US asks Australia to scrap plan to make social media pay for news

US trade representatives have asked Australia to develop a voluntary code and suspend the proposed laws.

The US government has asked Australia to scrap proposed laws that will make it the first country in the world to force Facebook Inc and Alphabet Inc’s Google to pay for news sourced from local media outlets.

In a submission asking the government to “suspend” the plans, Assistant US Trade Representatives Daniel Bahar and Karl Ehlers, suggested Australia instead “further study the markets, and if appropriate, develop a voluntary code”.

Under the proposed legislation, which has broad political support in Australia and is currently before a Senate committee, Google and Facebook will be subject to mandatory price arbitration if a commercial agreement on payments to Australian media cannot be reached.

“The US Government is concerned that an attempt, through legislation, to regulate the competitive positions of specific players … to the clear detriment of two US firms, may result in harmful outcomes,” said the document, under the letterhead of the Executive Office of the President.

Such a move could also “raise concerns with respect to Australia’s international trade obligations,” it said.

Exploitation by digital platforms

The Australian government announced the legislation last month after an investigation found the technology giants held too much market power in the media industry, a situation it said posed a potential threat to a well-functioning democracy.

Traditional media companies have long complained their content is being exploited by digital platforms without due compensation. The Australian government has said it is trying to level the playing field as once-dominant publishers lose advertising revenue to Google and Facebook. In May, for example, Rupert Murdoch’s News Corp. announced plans to cut jobs and close or stop printing more than 100 local and regional newspapers in Australia.

Asked for a response to the US submission, Australian Treasurer Josh Frydenberg said in a statement the government “is committed to proceeding with a mandatory code” that would address “the bargaining power imbalances with digital platforms and media companies”.

The code followed an 18-month review by the Australian Competition and Consumer Commission (ACCC) Chairman and “extensive consultation” that included the views of both Google and Facebook, he added.

The ACCC inquiry found that for every 100 Australian dollars ($76.8) of online advertising spent, 53 Australian dollars ($40.7) goes to Google, 28 Australian dollars ($21.5) to Facebook and 19 Australian dollars ($14.5) to other media companies.

Following intense but unsuccessful lobbying of the Australian government from both tech giants to scrap the proposed laws, which they deem unfair, Google and Facebook have suggested they may be forced to limit their offerings in the country.

Facebook had taken a harder line and has threatened to block Australians from sharing any news on its sites if the law is passed. The different responses have made Australia a test case as watchdogs worldwide seek to rein in the vast advertising power of the digital giants.