September 15, 2021
Google and Facebook don’t want to pay for news. They are fighting on every front to defend their digital empires from legislatures and regulators around the world.
There are many theatres of battle in this contest between sovereign governments and the Platforms, not just paying for the news they monetize. There’s privacy abuses, online disinformation, and market power over digital advertising and the treasure trove of data underpinning it.
Google and Facebook know they’ll be regulated eventually. But they want it on their terms which don’t include putting limitations on their market power over advertising and consumer data or paying for news. From their jurisdictional Alamo in Silicon Valley where they remain taxed but unregulated, the Platforms play the long game.
The first challenge to Google and Facebook emerged in the European Union (EU), the obvious staging ground for legislatures governing a market of 450 million citizens and holding a keen sense of cultural sovereignty.
In 2014 the Spanish government ordered Google to compensate news organizations for using news snippets in their Search product. In response Google flamboyantly pulled its Google News service from Spanish market and it’s still not available in that country. A similar German effort also failed.
Yet different tactics often bring different results. The EU competition authorities and justice ministries turned to slapping the Platforms with lawsuits.
It got results. In 2017 the EU fined Facebook $US 122 million for misleading the public and governments over the impact of its $14 billion acquisition of WhatsApp in 2014.
The EU gave Google a hiding as well with three fines totalling $US 10 billion to punish abuses of market power in online advertising, search engine results, and its Android operating system.
On taxation, EU governments were irked by the Platforms’ avoidance of corporate income taxes thanks to domiciling in the United States and exploiting offshore tax havens. So in 2018 Great Britain passed a Digital Services Tax of 2% of revenue earned in the UK by companies like Google and Facebook on the grounds that the digital giants should pay the government for monetizing its citizens’ personal data (Canada recently legislated a 3% tax to come into force in 2022).
Perhaps mindful of the Spanish failure in 2014 to force the platforms to compensate news organizations, it was not until 2019 that the EU returned to this fight by passing framework legislation enabling member states to force Google and Facebook to offer richer licensing agreements with news publishers for their content.
France did so in 2019. But its approach, based on the notion of copyright in news content, played into Google’s hands over hair-splitting arguments about whether news headlines and snippets are “content.”
The needle really moved in 2020 when the Australian competition authority made sweeping recommendations to Prime Minister Scott Morrison. His Conservative government indicated they were receptive to a making the Platforms pay for news.
A coalition of Australian news publishers and television broadcasters —-including billionaire Newscorp CEO Rupert Murdoch— persuaded Morrison’s government to dispense with the copyright approach and get to the heart of the matter: the unequal bargaining power over compensation for news content creates an unacceptable market externality: the impoverishment of newsgathering.
I will do a deeper dive into the Australian model in our next and final blog in this series, but the crux of the legislation legalizes collective bargaining by groups of news companies with each of Facebook and Google, significantly with the leverage of binding arbitration if a deal isn’t reached.
It is binding arbitration that changes the publisher-Platform content from a might-makes-right contest to one based on reason, even if a precise formula for valuing content — which would likely produce a bottom-line payment to publishers in excess of what the Zuckerberg and Google CEO Sundar Pichai were offering to pay —would ultimately be left for an arbitrator to decide.
Faced with legislation, Facebook tried Google’s Spanish power play: in February 2021 CEO Mark Zuckerberg pulled the plug on Facebook’s news content for its 12 million Australian users. But Australian PM Morrison didn’t blink. Zuckerberg folded. The blackout had lasted a week.
After the Zuckerberg blackout failed, the prospect of arbitration was so daunting that by May both Facebook and Google struck deals with different bargaining groups of news companies.
As of today, the Australian legislation is the high-water mark of the sovereign legislatures’ regulation of the Platforms.
Back on the Platforms’ home turf, the American government has lagged: perhaps because the Big Tech companies Google, Amazon, Facebook, Apple and Microsoft represent 15% of the stock market’s capitalization, or perhaps because of the usual Congressional paralysis. The Platforms don’t lack for political enemies on either side of the aisle.
Political paralysis or not, Congress could hardly ignore the Cambridge Analytica scandal. When Facebook’s data-gathering prowess was made available to Cambridge Analytica, the right-wing political consultants used Facebook’s data profiles on 87 million Americans and Britons to feed political actors in the 2016 US Election won by Donald Trump and the UK’s “Leave” forces in the Brexit referendum of the same year.
The fall out of the Analytica scandal in Washington was that in 2018 CEO Zuckerberg had to prostate himself before Congress and the Federal Trade Commission (FTC) fined him $5 billion.
Meanwhile the FTC also filed an anti-trust suit against Facebook for its earlier take-overs of Instagram and WhatsApp that had consolidated the social media market in Zuckerberg’s hands. That suit was recently booted by a circuit judge but has been re-filed by the Biden administration.
Google is also the subject of a raft of anti-trust suits from 48 US states against its market consolidation in Search and display advertising.
But other than legal sparring and big fines, there is no apparent prospect of US Congress regulating the Platforms.
Here in Canada the agitation for a fair deal between Publishers and Platforms goes back years, but it didn’t advance as a significant political issue until the federal Liberals committed to it after the 2019 election.
The charge is being lead by publishers belonging to News Media Canada with vocal support from Unifor and the Friends of Canadian Broadcasting.
It looked like Heritage Minister Steven Guilbeault might table a Platform Bill in the Spring of 2021, probably modelled on Australia.
But Guilbeault’s timetable was derailed by the Conservative Party’s successful filibuster of the Netflix Bill C-10.
The consequence of the filibuster, combined with the impending dissolution of Parliament in advance of the September election, meant that publishers reasonably concluded an Australian-style Platform Bill was at best another year or two away.
Google and Facebook, which had just lost an important battle in Australia, smelled the publishers’ desperation and quickly struck deals with a handful of breakaway publishers from the Newsmedia coalition. The deals do not compensate publishers for any content —including Google’s Search and Facebook’s News Feed —except stories which the Platforms’ agree to post in their special news tabs. The Globe and Mail signed on, however the major two newspaper chains Torstar and Postmedia did not.
The deals are a big win for the Platforms who are surely desperate to recover from the blow they suffered in Australia before US Congress gets any ideas.
Still, the contest in Canada between the Platforms and media companies is far from over.
The Liberals’ campaign for re-election includes a Platform Bill. The Conservatives’ election platform supports some form of it.
If that political support remains in place after an election, the next question will be what shape a Platform Bill would take. More on that in our next blog.