Mandatory news media bargaining code – is the model right?

Background

In April 2020, the Commonwealth Government directed the Australian Competition and Consumer Commission (ACCC) to create a mandatory news media bargaining code, designed to establish a mandatory framework for negotiating and agreeing payments to news content creators by the digital platforms (specifically Facebook and Google) that display and link to that news content (Code). 

The framework was considered necessary to address the perceived fundamental power imbalance perceived between news content creators and the digital platforms, which was a key finding from the ACCC’s landmark Digital Platforms Inquiry published in July 2019.

The ACCC released its draft Code for public consultation on 31 July 2020, and it has unsurprisingly been the subject of strong industry reaction.  Content creators are generally supportive, while the likes of Facebook and Google have been strongly opposed.

The ACCC recently confirmed that it still intends to have the final version to the Commonwealth Government this year (and we understand the Government hopes still to legislate it this year).  With such a landmark framework potentially only weeks away, it is timely to consider whether the regime it creates really solves the problem it sets out to create.

So what does the Code do?

The key features of the draft Code (which, we acknowledge, may change before the presentation of the final version) are:

• only Google and Facebook have so far been identified as digital platform operators subject to the code;
• news media organisations can participate in the code if they:
  • produce ‘core news’ that is published online (journalism that is on publicly significant issues, journalism that engages Australians in public debate and informs democratic decision making, and journalism relating to community and local events);
  • adhere to appropriate professional editorial standards (which may be set out, for example, in media industry codes or standards set by the Press Council);
  • are editorially independent (designed to exclude advertorial content or self-published materials like corporate or government publications or union publications);
  • operate in Australia to serve Australian audiences; and
  • have an annual revenue of greater than $150,000, in either the most recent financial year or in three out of the five most recent financial years.
• once registered, eligible news media businesses can then engage in negotiations (individually or collectively) with the digital platforms for payment for news content.  The negotiations are subject to a ‘negotiate-arbitrate’ model, whereby fixed timelines apply to commercial negotiations, after which the parties submit to mandatory and binding arbitration process, the outcome of which is effectively a price for content, set for the next 12 months; and
• additionally, the digital platforms are required to provide advance notice of changes to their algorithms where that impacts on the ranking of news, appropriately recognise original news content, and provide various data points regarding user interaction with news content. 

It is particularly these latter aspects which have been criticised by Google and Facebook.  They say that these requirements are unworkable technically and commercially and may cause them to cripple their services or cease offering news content in Australia.

Is this the right model to fix the problem?

It is important to note at the outset that there is little doubt that fair payment for original news content is an important outcome.  Everyone agrees that there should be no ‘free ride’ on another’s articulation or production of news.  The question in our minds is whether this model is the right solution to the free ride problem.

Payment for content is not a new issue.  Copyright has been used around the world historically in many circumstances, together with bespoke regimes around database rights, cable TV retransmission, EPG positioning, music royalties and so on.

However, the Code has eschewed these historical precedents and instead been structured around a ‘negotiate/arbitrate’ model.  We have seen negotiate / arbitrate models in other industries – telecommunications in this country being a prime example – and there is a clear risk that the model will entrench industry divisions, and lock parties into a cycle of endless negotiation and arbitration (particularly given each arbitration finding is effective for 12 months only).

By contrast, collecting society models that operate for the benefit of copyright owners in the creative industries provide for remuneration to be flowed back to owners without such structured and endlessly repeated negotiations.  No doubt, the collecting society model is not perfect, but nor is the proposal under the Code. 

There are a couple of key reasons for this.

First, it is important to note that the Code only applies to news media entities with already substantial revenues.  The $150,000 threshold as part of the requirement to be a registered media business means businesses under that threshold cannot be registered and cannot collectively bargain.  The small end of town then misses out when they need protection the most and would be in fact better protected under a collecting society model like that which is used for collecting music royalties from cafes etc. 

Put another way, large media organisations with significant revenues that have already developed business models which involve some form of remuneration through paywalls and access controls receive protection under the Code, but smaller organisations and individual journalists are left out. 

This begs the question – which small news media company wants to arbitrate with several internet giants, the ACCC and an arbitration panel every year?  They certainly want a solution to the free ride problem, but not at that cost.

We also wonder whether the assumptions about journalism are right.  The internet was and is partly all about the democratization of news – everyone could express an opinion and be a journalist.  These modern day journalists similarly do not have revenues significant enough to participate in the Code, and so are left out.  It is only the traditional journalist employed by a large established news organisation whose work falls under this regime.  While partly addressing bargaining power, and forcing the digital platforms to the table, it does not solve the free-ride problem on this front either.

Second, why is such formality required?

The ACCC has not discussed in detail its decision to opt for the arbitration outcome.  It has not elucidated its reasoning for eschewing any approach based on substantial taking (as from copyright) or a collection agency model.  By rejecting the adaptation of analogous situations in the media historically, where money has been paid for reproduction or derivation of original source material (copyright or not), we are left with a process-driven outcome which is likely to be time consuming, subjective and argumentative.  While the collective bargaining option may lead in time to the establishment of large negotiating blocs on behalf of the media, it would appear to also set up the possibility of multiple, ongoing negotiations across the industry, distracting from core business and again creating incentives to ignore or exploit the smaller players in the sector. 

Finally, the ancillary requirements on the platform providers to provide advance notice of algorithmic changes, and to provide certain consumer-related data, are no doubt intended to provide transparency into a notoriously opaque process – the creation of search results and rankings.  According to the platform providers, this is unworkable and a deal-breaker.  If it drives them away from the process, this is not a win for consumers.

In light of these issues, there is no doubt that if implemented the Code would create significant structural changes in the way the content providers and platform operators interact.  There would necessarily be significantly more engagement through a very rigid and time-consuming negotiation and arbitration process.  It may also lead to changes to what services are provided in Australia.  The brunt of the impact will be felt by the platform providers that engage in this process with all registered media content providers, and despite the financial thresholds and the potential for collective bargaining, this will certainly be an involved process for them.  Given the alternatives, it raises the question of whether this is really a flanking offensive against apparent market power of internet giants rather than a full frontal attack from a competition perspective.  That was certainly a key theme arising from the Digital Platforms Inquiry from which the Code was ultimately borne.  If it is the market power that is the real concern, then we would suggest that the proper approach would be to bring a competition law case rather than implement this process heavy, annual renegotiation model.  But given what is happening in the United States and France right now in relation to the internet giants, perhaps that is on the cards too.

No doubt there is no perfect model, but we doubt that this is the best available.  We eagerly await the revised Code and will report on progress in future editions.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.