Let’s hit Cyber-barons with Australia’s big stick.

Photo: AP

Andrea Vance is right. The Prime Minister won’t be ditching her Facebook account any time soon.

Writing in the Sunday Star Times, Vance noted that Facebook is her medium of choice “because it allows her to directly engage with a precise and captive audience [where] she is not constrained by troublesome questions from traditional media.” She went on to say Jacinda Ardern won’t be deleting her account “because it wouldn’t be expedient, especially in an election year.”

It is also odds-on that, for the same reason, the Government will not be joining its Australian counterpart in finally coming down hard on the unrecompensed appropriation of news content that attracts billions of dollars in advertising revenue to Facebook and Google.

On Friday, the Australian Treasurer Josh Frydenberg announced the much-anticipated mandatory code that will make the social media giants pay for news. Legislation to enact the code will pass through the federal Parliament before the end of the year.

When Frydenberg and the chair of the Australian Competition and Consumer Commission Rod Sims announced in April that they would get tough on Facebook and Google, the response on this side of the Tasman was muted. Our government went no further than saying ‘we’re looking at it’ but characterised it as ‘a longer-term measure’.

The Australians released a draft code and draft legislation last week but have given only a month for submissions before submitting it to Parliament.

Google’s predictable response was to refuse to rule out axing its Google News product in Australia. This was the tactic it employed when Spain threatened to rein in the platform. The Australian noted that the move could allow misinformation to thrive unchallenged on its platform and allow rival tech companies to swoop in and steal market share.

Frydenberg told a press conference in Melbourne that the government wanted Facebook and Google to continue to operate in Australia “but we want it on our terms”. He is determined to level the “very unequal” bargaining position between news media and the social media platforms that take $71 out of every $100 spent in online advertising in Australia.

The code allows for a fixed period of negotiation (and allows the media companies to bargain collectively), followed by mediation if required. If mediation fails, an independent arbitrator will fix fees for news content. The code prohibits platforms from discriminating against Australian news media businesses covered by the code and imposes heavy fines for breaches. The maximum penalty is $A10 million per breach, or three times the benefit gained, or 10 per cent of annual turnover, whichever is the greater.

The Australian Communications and Media Authority will determine which media will be eligible to participate and criteria are included in the draft code. News media businesses with annual revenue in excess of $A150,000 can participate in the code if:

  • They predominantly produce ‘core news’, and publish this online.
  • They adhere to appropriate professional editorial standards.
  • They maintain editorial independence from the subjects of their news coverage.
  • They operate primarily in Australia for the purpose of serving Australian audiences.

The draft code defines ‘core news’ as journalism on publicly significant issues, journalism that engages Australians in public debate and informs democratic decision making, and journalism relating to community and local events. Although they would qualify on these grounds, public broadcasters cannot receive payments under the scheme as they are government-funded.

While news media participation is voluntary, the same does not apply to the social media giants. Digital platforms must participate in the code if the Treasurer makes a determination specifying that the code would apply to them. There are additional requirements forcing the platforms to reveal in advance any changes to algorithms affecting the news companies.

The Australian Government has announced that the code would initially apply only to Facebook and Google. However, there is also futureproofing: Other digital platforms may be added to the code if they hold a significant bargaining power imbalance with Australian news media businesses.

New Zealand news media are in the same position as their Australian counterparts.  Foreign social media companies siphon off a minimum of three-quarters – some say 90 per cent – of the $1.26 billion spent on digital advertising in this country. Among those digital advertisers is the New Zealand Labour Party. Last week the New Zealand Herald reported that Wellington marketing agency Aro Digital calculated Labour spent $92,000 from May 12 to July 27 on Facebook and its sidekick Instagram. In the same period National spent about $25,000.

The fact that this occurred during the advertising boycott of Facebook by corporate giants like Coca Cola (and Stuff newspapers) over hate speech suggests that political parties will swallow anything up to and including dead rats if it reaches potential supporters.

They are in the same deeply conflicted position as many of us: We know Mark Zuckerberg heads an Evil Empire but we continue to use his platforms because we know they are effective ways to reach target groups – whether they are family, friends or potential voters. It is the same reason we use Google to search the Internet and Amazon to buy books. And why this was written on a Mac…and may be being read on a iPhone

It’s fair to say we are the captives of the tech titans, unable to break free because the cost of doing so is too high. That is why news media, for example, have allowed the virtual theft of their intellectual property. The opportunity cost of preventing search or share is prohibitive.

Why is that the case?

It prevails because the four chief executives of Big Tech – Jeff Bezos of Amazon; Mark Zuckerberg of Facebook; Tim Cook of Apple; and Sundar Pichai of Alphabet (the parent company of Google) – preside over empires that have effectively smothered their respective market sectors.

Last week the Big Four appeared before the antitrust subcommittee of the House Judiciary Committee of the US Congress – where one labelled them “Cyber-barons” – to face serious questions about the tactics and market dominance that have made them “the emperors of the online economy”.

Their answers to those questions were masterpieces of retrograde amnesia. Little wonder, perhaps, when we consider that the subcommittee chair, David Cicilline, accused them of having “the power to pick winners and losers, shake down small businesses and enrich themselves while choking off competitors.”

Peter Griffin, writing on the ITP Techblog (a New Zealand IT industry initiative edited by Paul Brislen), described the hearing as lacking focus but crystallising the main concerns of Democrats and Republicans about the influence of the Big Four on the lives of billions of people.

That lack of focus was a function of format rather than determination on the part of the subcommittee. The four CEOs were beamed in from the west coast via pandemic-induced videoconferencing and each of the 13 members of the subcommittee had only five minutes in which to grill each chief executive.

The New York Times coverage of the hearing indicated, however, that some of those questions were devastating. Representative Pramila Jayapal, a Democrat from Washington, asked whether Facebook had ever threatened to squash smaller competitors by copying their products if they wouldn’t let Facebook acquire them. She tabled previously undisclosed messages in which Zuckerberg issued thinly veiled threats to Kevin Systrom, the co-founder of Instagram, about what would happen to his company if he refused to sell. Zuckerberg, according to the NY Times, “dodged and weaved, trying to explain away the emails without admitting the obvious”.

Yelp, which publish crowd-sourced reviews about businesses and operates an online reservation service, has publicly complained for years about Google. Asked to explain whether it was anticompetitive for Google to threaten to delist Yelp if it didn’t allow the company’s search engine to use its listings in its featured snippets, CEO Sundar Pichai said he was “happy to engage and understand the specifics” at a later date.

When Jeff Bezos was asked about a recent Wall Street Journal report that Amazon had set up a venture capital fund to invest in start-ups, only to then introduce its own versions of those start-ups’ products, the world’s richest man replied: “I don’t know the specifics of that situation.” And Apple’s CEO Tim Cook apparently had no knowledge of emails that indicated his company was willing to fast-track a company through its App Store when it touts a “no favourites” policy.

The Big Tech response to serious allegations was so circumspect that one New York Times writer accused them of gaslighting.

Democrats and Republicans have different reasons for cracking down on the tech giants – social media in particular. Democrats see the antitrust implications while the other side of the House sees liberal bias. However, the tide may be turning against the tech giants.

Congress cannot impose antitrust penalties. That is the province of the courts. However, it can pave the way with updated laws. And it will be following a lead already set in Europe where at least half a dozen new laws and regulations that will go to the core of how the tech giants operate are being drafted. Britain, too, is drafting a law to constrain Facebook and Google over dealings with competitors.

Australia is joining that campaign. New Zealand should do likewise and the most obvious – and effective – way is to adopt its Mandatory Code in the same timeframe as Canberra.

 

 

 

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