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Hitting it out of the park: The ACCC’s draft News Media and Digital Platforms Mandatory Bargaining Code

05 August 2020

#Technology, Media & Telecommunications

Hitting it out of the park: The ACCC’s draft News Media and Digital Platforms Mandatory Bargaining Code

The ACCC’s newly released proposed Mandatory Bargaining Code seeks to address concerns that Google and Facebook do not adequately compensate Australia’s traditional media companies for use of their content and the implications that this has for public interest journalism in Australia.

The core provision of the proposed Mandatory Bargaining Code is an arbitration model that has been termed "baseball" arbitration, based on its use in professional sports negotiations. The question is, does the proposed code hit it out of the park?

Why a mandatory bargaining code?

In December 2019, in response to a recommendation in the Final Report from the Australian Competition & Consumer Commission’s (ACCC) Digital Platforms Inquiry, the Australian Government directed the ACCC to work with Google, Facebook and Australian media companies to develop a voluntary code to address bargaining imbalances between those parties. Those imbalances arise because media businesses perceive they need to have their content made available by these platforms, but the platforms themselves do not need the content of any particular publisher. That voluntary code was to be implemented by November 2020. The Government added a caveat that if negotiations did not progress, it would develop other options, including potentially a mandatory code.[1]  

The ACCC reported to the Government in April 2020 that it did not believe agreement on a voluntary code would be reached. Rather than allow negotiations on that code to drag out, and also reflecting increased financial pressure faced by Australia’s traditional media companies from the COVID-19 crisis, the Government ordered the ACCC to develop a mandatory code on 20 April 2020.[2]

Who, and what, will the Code apply to?

The ACCC released an exposure draft of the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 (draft Code) on 31 July 2020.

The draft Code, if it becomes law, will introduce a new Part IVBA in the Competition and Consumer Act 2010 (Cth) (CCA). Under the proposed Part IVBA:

Platforms and digital services

  • The Treasurer may designate both digital platforms, and digital platform services, to which Part IVBA applies. Initially, it is proposed that only Google and Facebook will be designated as digital platforms, though other platforms may be added in future. The services that are likely to be designated are, for Google, Google Search, Google News and Google Discover and, in relation to Facebook, Facebook News Feed, Instagram and Facebook News Tab (though noting this last service is not yet available in Australia). Presumably the designation instrument will also provide that similar or rebranded versions of these Google and Facebook services are also designated. Once a platform is designated, it must participate in the Code in relation to its designated services (and in some cases a broader range of its services).

Media companies and the news

  • Media companies may opt in to Part IVBA of the CCA via a registration process to be established by the Australian Communications & Media Authority (ACMA). Media companies may only register in relation to “news businesses”. A news business is one, or a combination, of a newspaper, magazine, TV or radio program, website and streaming or similar service, provided it is “news content” and online. The ACMA will only register a media company and associated news business or businesses where these meet a number of specific criteria, including that a content test is met. That content test is likely to be a relatively controversial element of the registration process, as to satisfy this test the news business must publish online content that is predominantly “core news content”, that is, content that:
    • is created by a journalist (noting that no definition of journalist is given in the draft Code); and
    • records, investigates or explains issues that are of public significance to Australians, are relevant to issues of public debate and democratic decision-making or relate to community and local events.

The exposure draft of the Explanatory Memorandum for the draft Code does not provide significant guidance as to what will fall within the definition of core news content. For example, it is noted that core news content may include “editorial” and “opinion pieces” provided these are written (or, presumably, spoken) by a journalist. Will this mean that, for example, current affairs TV programs that are made available online for streaming will be core news content – at least where these are hosted by a “journalist”? 

Covered news content

  • Once registration of a news business corporation and its associated news business(es) by the ACMA occurs, the Code provisions will generally apply to “covered news content” of each such news business. This is a broader concept than “core news content” as it also includes any other journalist created content that is relevant in recording, investigating or explaining issues of interest to Australians.

"Baseball" arbitration

The most important element of the draft Code is the negotiation and arbitration model. A media company (or a representative company on behalf of a group of such companies), once registered as a news business corporation, may trigger the negotiation process with a platform, in relation to the media company’s registered news business or businesses and all of the platform’s digital platform services (that is, not only the designated services). The matters that may be negotiated are not limited by the draft Code and instead the relevant media company may specify the matters that it wishes to negotiate, the only qualification being that these must relate to the registered news business’ covered news content made available on the relevant digital platform service or services.  The parties are then required under the draft Code to negotiate in good faith. An obligation to negotiate in good faith does not require a party to change its commercial position, meaning that imposing this obligation is unlikely to result in either any media company or Google or Facebook compromising on the key issue of what media companies should be paid for making their content available.

A dispute about pricing is the only issue that may be sent to arbitration if the parties do not reach agreement within 3 months of commencing negotiation. The “final offer” arbitration model that has been adopted for the draft Code is often referred to as “baseball arbitration”, as it was adopted in the 1970s in the United States to resolve pay disputes between Major League Baseball players and management, though it is also utilised in many other areas. 

Under this model, as provided for in the draft Code, the arbitrator (or panel of 3 arbitrators) must decide between the alternative final offers, as put forward by the 2 parties, of how much the registered news business should be paid for making available its covered news content to a designated digital platform service for one year. The decision of the arbitrator (or panel) is binding.

In selecting one of the final offers put forward, the arbitrator (or panel) must balance the costs to the registered news business of producing its covered news content against the benefit the relevant platform service receives from being able to access that content. The arbitrator (or panel) is required to consider the following:

  • The direct and indirect benefits that the designated digital platform service receives from the news business’ covered news content.
  • The costs to the news business of producing that covered news content.
  • Whether a particular remuneration amount would place an undue burden on the commercial interests of the designated digital platform service. It is not clear what would be considered an undue burden in this context, as the term is undefined, and the Explanatory Memorandum is silent as to the meaning intended.

Interestingly, the factors an arbitrator or panel may consider do not include the benefit that a news business currently receives from its covered news content being made available on the designated digital platform service – both Google and Facebook have long argued that news organisations receive a significant benefit from platforms directing users to their news content and, for this reason, should have no entitlement to be paid by the platforms.

The arbitrator or panel has only 45 business days to make a decision, which the ACCC believes is an appropriate time frame for this arbitration model and also reflects the underlying intention of the draft Code that disputes in relation to remuneration are resolved quickly. Notwithstanding the ACCC’s view, this is a very short time frame for deciding such complex questions.

The only circumstances where an alternative remuneration amount to that proposed in one of the final offers may be selected is where each final offer is not in the public interest because it is highly likely to result in “serious detriment” (another undefined term) to either the provision of covered news content in Australia or Australian consumers. In such a case, the arbitrator (or panel) will then take one of the final offers and adjust it so that it is in the public interest. 

Studies have shown that using this arbitration model enhances the chances that parties will reach a settlement, as this model is designed to limit ambit claims (which an arbitrator is therefore unlikely to select).[3]  Time will tell if that is the case here.

Although the draft Code applies to the national broadcasters, neither the ABC nor SBS will be able negotiate for payment or trigger the arbitration process. The ACCC Chair has wisely excused himself from a debate as to whether this is appropriate, stating that the decision to adopt this approach was made by the Government.[4] Although the Government’s rationale that the ABC and SBS are largely publicly funded and therefore should not seek additional revenue sources is understood, critics of the approach have argued allowing the ABC and SBS to benefit from the arbitration provisions, thereby potentially receiving additional revenue, would enable a lightening of the burden on taxpayers in meeting the costs of both public broadcasters.

Other obligations of Google and Facebook

The proposed Part IVBA of the CCA also includes minimum obligations that each digital platform service must provide to each registered news business. These obligations are:

  • Information must be provided on the types of data that a digital service collects about the news business’ users as a result of engagement with covered news content, which must be updated annually.
  • Planned changes to algorithms must be notified, where any of these:
    • will be likely to have a significant effect on the ranking of covered news content;
    • are intended to have any effect on the ranking or display of content behind a paywall; or
    • will be likely to have a significant effect on the display and presentation of covered news content or associated advertising.
  • A tool that enables moderation of user comments must be provided (including to enable the news business to prevent such comments being made). Although this is not made clear in the Explanatory Memorandum, presumably the intention is at least in part to ensure that news businesses have a greater opportunity to limit their risks of attracting liability for defamation claims (see, for example, Dylan Voller’s defamation case against various media companies, discussed here).
  • A proposal must be developed to “recognise” original covered news content when ranking and displaying news content and to update this annually. This is a curious requirement – there is no definition of what constitutes “original” news content, no obligation imposed on platforms to prioritise it in rankings and no obligation imposed on platforms to actually implement any proposal that is developed. If, as is expected, the intention behind imposing this obligation is to ensure that platforms prioritise the ranking of news content by the original publisher of that content, and also acknowledge that original publisher in some way that is recognisable to consumers, it is hoped that more robust drafting is adopted in the final form of the legislation.

The draft Code includes a non-discrimination provision, which is intended to ensure that Google and Facebook treat news media businesses equally, irrespective of whether or not they are registered under the new Part IVBA and irrespective of the deal struck with a particular business.

Penalties for non-compliance

The penalties for non-compliance will potentially be high. For example, the ACCC would be able to extract penalties at the same level as for other breaches of the CCA, including for breaches of the Australian Consumer Law. News businesses will be able to directly take action for breaches.

Will the Code achieve its intended aim?

Internationally, there have been a number of attempts to make Google and Facebook pay for the use of journalistic content. To date these have not been successful. One well known example is the current French proposal, which relies on the European Union’s copyright directive to require Google to pay for the use of snippets of news articles from French media companies. Google reverted to only showing headlines of articles to avoid paying such fees, resulting in the French competition regulator ordering Google to negotiate with French publishers. Those negotiations are currently ongoing.

So, will the ACCC succeed where many others have failed? There are 2 primary reasons why the ACCC believes that the mandatory code, when enacted, will achieve its intended outcomes. The first is the short time frame that applies for both negotiation and arbitration in relation to payments, as discussed above. The second is that the mandatory code payment regime is proposed to apply across all the primary services that Google and Facebook offer. The ACCC Chair has stated his view that if Google does not negotiate under the Code, when enacted, it would need to shut down both Google search and YouTube in Australia, which would be unlikely to happen.[5] Nonetheless both Google and Facebook have expressed disquiet with a mandatory code. Even before the draft Code was released for public comment, Facebook stated that if news was not available on its platforms, this would not impact on its business in Australia.[6] On release of the draft Code, Google said that it was “disappointed” with its terms.[7]

The unequal bargaining position between the digital platforms, Google and Facebook, and Australian media companies, has created a market failure. As the share of advertising revenues received by traditional media companies has dwindled and the share received by those platforms has increased, Australian media companies have become less able to fund the production of the public interest journalism that is necessary to contribute to healthy democratic debate. To the extent the draft Code will assist in addressing this market failure by ensuring that traditional media companies receive fair remuneration for their news content, it is to be welcomed.

We suspect though that we are only in the first innings.

Authors: Ian Robertson AO & Angela Flannery

[1] See: https://treasury.gov.au/sites/default/files/2019-12/Government-Response-p2019-41708.pdf
[2] See media release here: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/accc-mandatory-code-conduct-govern-commercial
[3] See discussion in https://sussmanadr.com/wp-content/uploads/2019/04/Baseball-arbitration-NYSBA-Sussman-3-2019.pdf
[4] See for example as discussed here: https://www.smh.com.au/politics/federal/abc-sbs-exclusion-from-tech-giants-payments-a-government-decision-20200731-p55hfh.html
[5] See Australian Financial Review, ACCC corners Google, Facebook  Tony Boyd, 1 August 2020
[6] See commentary here:  https://www.theguardian.com/media/2020/jun/15/facebook-says-it-doesnt-need-news-stories-for-its-business-and-wont-pay-to-share-them-in-australia
[7] See commentary here: https://www.abc.net.au/news/2020-07-31/draft-mandatory-code-conduct-facebook-google-pay-for-news/12510776

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