AUSTRALIA’S MOVES ON DIGITAL PLATFORMS AND COMPETITION

On 24 September, GFMD hosted a webinar focusing on the Australian Competition and Consumer Commission’s (ACCC) recent review of digital platforms. During the webinar, Holly Raiche – Chair of the Policy Committee of Internet Australia (the Australian chapter of the Internet Society) and Executive Team Member of the At-Large Advisory Committee (ALAC) of the Internet Corporation for Assigned Names and Numbers (ICANN) – joined GFMD’s Executive Director, Mira Milosevic, to discuss the review.

In addition, Holly discussed some of the new and ongoing developments as it relates to implementing the recommendations from the report (and the subsequent response from the platforms), providing insights and recommendations for EU regulation as well.

A full recording of the webinar is available here.

You can read more about this topic below:


Introduction and Context

From 2012 to 2018, following a period of growing disquiet within the Australian Government and opposition around the issues facing news media with regard to digital platforms and the Internet, the Australian Senate established a Select Committee on the Future of Public Interest Journalism. While working to establish a greater understanding of what effect digital platforms were having on the news industry, the committee illustrated the pressure that a 24/7 news cycle puts on news organisations and individual journalists and the negative impact it can have on the news industry as a whole, as can be seen in Fig. 1 below.

The committee was particularly concerned with loss of advertising revenue to the news media industry following the transition to online news dissemination.

With this in mind, in late 2017, the ACCC agreed to hold an inquiry into the state of news media in Australia and the impact of digital platforms. The terms of reference for this inquiry stated that the following matters must be taken into account:

  1. The extent to which platform service providers are exercising market power in commercial dealings with the creators of journalistic content and advertisers.
  2. The impact of platform service providers on the level of choice and quality of news and journalistic content to consumers.
  3. The impact of platform service providers on media and advertising markets.
  4. The impact of longer-term trends, including innovation and technological change, on competition in media and advertising markets.
  5. The impact of information asymmetry between platform service providers, advertisers, and consumers and the effect of competition in media and advertising markets.

The 2018 preliminary report outlined the impact of declining advertising revenue on the media industry. While this revenue remained steady in radio and some other areas, the impact on print media was much more significant. Advertising expenditure in print media by major advertising agencies in Australia dropped from approximately AU$16 billion in 2007 to AU$8 billion in 2017. In that space of time, approximately AU $8 billion was gradually allocated to digital platforms and online media, as can be seen in the figure below:

The Australian Government expressed significant concern around the impact of advertising revenue and its movement from print news to digital platforms.

The Government’s Response

Following the release of the report in 2019, the Australian government recommended that platforms provide and agree to codes of conduct to govern their relationship with media. Overseen by the Australian Communications and Media Authority (ACMA), news media organisations and digital platforms would work together to negotiate the terms of this voluntary code.

The Code of Conduct – Draft Legislation

Following this, the ACCC stressed that it was necessary to intervene to address the significant imbalance of bargaining power in the relationship between platforms and media, with special consideration given to the public benefit provided by the production and dissemination of news and the “importance of strong independent media in a well-functioning democracy.”

The draft legislation was divided into four distinct sections:

  • Bargaining rules: These require both parties to produces an intention to bargain in good faith and to develop offers for news media to be rewarded for the production and dissemination of content.
  • Compulsory arbitration rules: If parties cannot come to a negotiated agreement on payment for news on the designated platform, there will be a binding arbitration that will review the final offers of both parties and make a judgement on what the final outcome will be.
  • Minimum standards: Designated platforms must provide news organisations with advance notification of algorithmic changes and information about the availability of user data.
  • Non-discrimination by digital platforms: Platforms cannot discriminate between news businesses.

Market Power

On the issue of competition, one of the critical findings of the report was the severely unequal level of bargaining power. The ACCC noted that Google has “substantial market power” in the supply of search advertising services and Facebook has “substantial market power” in the supply of display advertising services. This is of particular significance as, in the Australian Competition and Consumer Commission Act, there is a section that says that corporations with substantial market power in a market must not engage in conduct with the effect or likely effect of substantially lessening competition in a market. Through use of the term “substantial market power,” the ACCC highlighted a real competition issue with regards to platforms and their impact on media in Australia.

Valuation of News Content

The valuation of content is central to how bargaining will be carried out. In order to effectively and fairly value news content, the ACCC has proposed using the costs of news production, with particular emphasis on journalists’ salaries, as a core indicator of the value of content. This has been met with a degree of criticism, with individuals noting that news media should be valued in terms of its contribution as a public good, as opposed to just a cost figure. There has also been criticism of that suggestion, most notably as it is not possible to provide an accurate or fair valuation of a “public good.” As it is not possible to conclusively determine the value of a public good, in the context of bargaining between media organisations and platforms, news content will most likely be valued based on concrete notions such as journalist salaries.

Concerns

As well as uncertainty around how to value news content in this context, there is concern that the ACCC’s recommendations will facilitate the propping up of news organisations with finances gained from negotiations with platforms, rather than the production of news content itself. Considering the significant media concentration in Australia, there is potential for platforms’ payments for content to support existing media empires and further concentration rather than uphold the long-term viability of public interest journalism. This is amplified by fears that economic actors’ involvement in the bargaining and negotiation between platforms and news media organisations will lead to a disregard for the cultural impact and value of news media. The bargaining code will be undertaken by news organisations, and their existing structures (including major corporations) and the platforms, shining light on the question of how to ensure fair consideration is given to the values of culture in these negotiations.

International Implications

While Australia may not be a particularly large market (in terms of population) and thus may not hold significant bargaining power over these major international platforms, the country is in a position of relative power with the potential to set an international precedent for forcing platforms to pay for news media content. Ideally, if platforms are willing to pay for news content in Australia, it would replace the financial void left by the decline in advertising revenue as a result of the switch to online media and a similar trend will be followed internationally. Moreover, countries around the world are watching how the platforms react, which has so far included significant pushback from both Google and Facebook as well as threats to end access to their services in Australia.


A full recording of the webinar with Holly Raiche can be found here