META Meta Platforms Inc

By Mike Cherney 

Media companies in Australia will be able to seek payment from Facebook Inc. and Alphabet Inc.'s Google for news articles that are posted on their platforms, according to new rules, which could set a precedent for other countries seeking to compel tech giants to compensate local publishers.

The new rules, which need to be passed by Australia's Parliament, would require digital platforms to take part in negotiations with media companies over payment, Australia's competition regulator said Friday. If the media companies and the platforms can't reach an agreement during three months of talks, an independent arbitrator would pick a compensation plan from one of the sides. The decision would be binding.

The rules offer a detailed view into how Australian authorities plan to make Facebook and Google pay for content. Other countries, particularly in Europe, have tried to force tech companies to pay publishers, often with little success. In Australia, the effort gained momentum as the economic downturn from the coronavirus pandemic further strained the finances of media companies.

"There is a fundamental bargaining power imbalance between news media businesses and the major digital platforms," said Rod Sims, the chair of the competition regulator, the Australian Competition and Consumer Commission. "News businesses have no option but to deal with the platforms, and have had little ability to negotiate over payment for their content or other issues."

The Australian government, led by conservative Prime Minister Scott Morrison, last year asked the regulator to develop a voluntary code that would govern the relationship between news businesses and digital platforms. But talks over payment stalled and the government then asked the regulator to develop a mandatory code.

Publishers world-wide have long sought compensation from Google and Facebook, which collect ad revenue based on visits to their platforms and increase traffic by including links to news articles. In the past, major technology companies have resisted paying for content, instead donating to news organizations through philanthropic arms. They have also argued that publishers benefit by getting traffic directed to them from their digital platforms.

But in June, Google said it reached agreements to pay certain publishers around the world, though it didn't unveil any deals with American outlets. Last year, Facebook said it would pay some news organizations to license headlines and story summaries for a news service.

On Friday, Google said the draft rules don't fully account for the value of the billions of clicks it sends to Australian publishers for free every year. Using figures from a study done by Deloitte in Europe, Google estimated that value was at about 218 million Australian dollars ($157 million) a year from Google traffic alone.

Friday's proposal "sends a concerning message to businesses and investors that the Australian government will intervene instead of letting the market work, and undermines Australia's ambition to become a leading digital economy," said Mel Silva, managing director for Google Australia & New Zealand. "We urge policy makers to ensure that the final code is grounded in commercial reality."

Facebook said it is reviewing the government's proposal. Previously, it said it was disappointed that the Australian government was planning to require tech companies to pay for news.

The proposed rules mean tech companies won't be able to walk away from negotiations with media companies, said Michael Miller, executive chairman at News Corp's Australia subsidiary, which publishes national and local newspapers across the country. News Corp also owns Dow Jones & Co., the publisher of The Wall Street Journal.

Nine Entertainment Co., which owns papers like the Sydney Morning Herald as well as radio and television assets, welcomed Friday's proposal and said it would lead to significant long-term benefits for the company.

Parliament's passage of the new proposal isn't guaranteed. The government doesn't have a majority in the Senate--the upper house--where laws are passed. The opposition Labor Party said it welcomed the progress in developing the new rules, but expressed concern that the requirement for tech companies to negotiate wouldn't apply to public broadcasters funded by the government.

The rules would initially apply to only Google and Facebook, but other digital platforms could be added later if it is determined that they gain too much influence over Australian media companies, the competition regulator said. The new rules would allow media companies to negotiate individually or collectively with the tech giants.

Friday's proposal would also create new regulations for the tech giants that aren't subject to negotiation. Digital platforms would be required to give media companies 28 days of notice if algorithm changes impact how much traffic will be referred to a publisher's website, or if the changes affect the ranking of news articles behind paywalls.

The platforms would also be required to give media businesses information about the data they collect, including how long users spend on an article and how many articles users read. The competition regulator would enforce the new rules and could levy fines for violations.

A public-comment period on the proposed rules runs until Aug. 28 and final legislation would be introduced in Parliament soon after that.

Write to Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

July 31, 2020 03:58 ET (07:58 GMT)

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