Facebook and Australia both claim victory as they end their spat

The social network coughs up, but wriggles out of the obligations it had feared most


AFTER UNFRIENDING each other last week, Facebook and Australia are pals again. On February 23rd the world’s largest social network announced that it would reverse its decision to switch off the sharing of news on its site in Australia, as well as the sharing of Australian news sources globally. For its part, the Australian government said it would amend its proposed News Media and Digital Platforms Mandatory Bargaining Code, which had so upset Facebook.

Both sides claim victory. The government points to the fact that news will soon be restored to the platform, and that Facebook has agreed to make payments to Australian media companies. Yet the last-minute amendments will allow Facebook and other tech companies to avoid the code’s most exacting terms if they are deemed to be contributing enough. The upshot is that big tech will be able to sidestep regulation if it is willing to pay off its media critics—an outcome that suits both parties, if not necessarily consumers.

The central idea of the code, which Australia’s parliament passed into law on February 25th, is that tech platforms benefit unfairly from content created by others. Companies like Google and Facebook make money from ads, which sit alongside links to news articles, among other things. The publishers of those articles say they deserve a share of the ad revenue.

The tech platforms retort that, on the contrary, publishers benefit from the traffic referrals they get when their content is shared online. If publishers disagree, they are under no obligation to post their stories to social networks or have them listed by search engines. Paying for link-sharing threatens freedom of speech—and, more worrying to tech bosses, their entire business model. If Google or Facebook must pay for displaying links to news, what is to stop them being forced to pay for the billions of other pieces of content they link to?

Australia’s code looks particularly fearsome. If an online platform and a media company are unable to reach a deal, an official arbiter will make a binding decision. Rather than splitting the difference between bids, it will choose between each side’s final offer. If it sides with the newsmen, platforms could be on the hook for hefty sums.

The concessions made by Australia’s government remove these risks, for a price. The high-stakes arbitration mechanism will be preceded by a two-month mediation period, giving platforms a chance to strike more palatable deals. Non-differentiation provisions, which would have forced platforms to pay all media companies on an equal basis, have been scrapped. Most important, the decision on whether the code should apply to a tech platform at all must now take into account whether the platform “has made a significant contribution to the sustainability of the Australian news industry through reaching commercial agreements with news media businesses”. In other words, if they dish out enough money, Facebook and others can avoid being subject to the code altogether.

Tech platforms are already making such payments, in a bid to ward off regulation. Last year Google launched its “News Showcase”, under which it plans to distribute $1bn over three years to publishing companies around the world. Facebook’s “News Tab” shares advertising revenues in a similar way (The Economist is a participant). Currently operating in America and Britain, it is to be launched in more countries. On February 24th Facebook announced that it too would dole out $1bn for journalism over the next three years.

The question is whether this will be enough to placate other governments. Canada is drafting its own code on the matter, expected to be published later this year. Last week Steven Guilbeault, the minister in charge, said: “I suspect that soon we will have five, ten, 15 countries adopting similar rules…Is Facebook going to cut ties with Germany, with France?” Britain is also drawing up new rules, as is the European Union. Microsoft, whose unloved search engine, Bing, stands to benefit from anything that hurts Google, is working with publishers’ associations in Europe to put together a blueprint for an arbitration mechanism.

Discretionary pay-offs to old media companies look as if they will become part of tech firms’ business in more and more countries. That is something the tech platforms, not short of money, can live with. The bigger risk would be any law that imposed a systematic obligation to pay for the content around which their business is built, or regulated the way in which that content is presented. They have managed to ward off this threat for now, by getting out their wallets.

Editor’s note: this article has been updated to include the code’s passing by Australia’s parliament

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