Nasty Side Effects if Australia Forces News Aggregators to Pay for Content

The Australian government released a draft mandatory code of conduct that would force tech companies like Google and Facebook to pay news publishers for displaying their stories, following in the misguided footsteps of multiple European countries that have attempted similar regulations. Originally, the Australian Competition and Consumer Commission (ACCC) was working with Google and Facebook on a voluntary code of conduct. With the COVID-19 pandemic putting financial pressure on the media, along with many other industries, the government ordered the ACCC to create a mandatory code, with a draft version released on July 31.

The purpose of the code, according to Treasurer of Australia Josh Frydenberg, is to “create a level playing field” between media companies and the digital platforms they rely on to spread their content in the modern Internet-enabled world. This echoes previous efforts in Belgium, Germany, Spain, and France to force Google to pay copyright fees to news publishers it links to in its Google News service, referred to as a “link tax.” These efforts have revealed the fatal flaws and backward logic of making news aggregators pay for showing news stories to their users.

News publishers in Europe have been lobbying for a link tax for years, though success inevitably came with nasty side effects. In Belgium, six years of back-and-forth between publishers and Google over the proposed link tax led Google to de-index Belgian articles from its Google News to avoid incurring copyright fees. The two sides finally reached an agreement in 2012: The publishers would cease all litigation and collaborate with Google on ways to make money with their content.

A year later, the German legislature passed a link tax. This time, Google responded by changing Google News from an opt-out to an opt-in system in Germany and stopped displaying news snippets and preview images in the country. As a result, traffic from Google search results for articles published by Germany’s largest publishers, Axel Springer, decreased by 40 percent and traffic from Google News decreased by 80 percent, causing Springer to opt back in to Google News.

A very similar series of events took place in Spain. In 2014, the Spanish government passed its own link tax. Google decided to stop offering Google News in Spain, though users could still access Spanish news articles through its main search engine. The following year, a study by the Spanish Association Periodical Publishers revealed, not surprisingly, that, in the months after the link tax went into effect, traffic to Spanish publishers fell by over six percent, and traffic to smaller publishers fell 14 percent.

The European Parliament included a link tax in its Copyright Directive, which passed in 2019 despite Google’s warnings that the tax may lead it to stop offering Google News in the EU as it did in Spain. When France implemented the directive, Google announced it would stop displaying news snippets and preview images, as it did in Germany, unless publishers agreed to provide them for free. In an attempt to avoid Germany and Spain’s fate, in April France’s Competition Authority ordered Google to reinstate snippets, negotiate with news publishers on a price for linking to their content, and pay publishers retroactively for all the content it linked to since the law went into effect. This is largely unprecedented, where a government mandates that a company sell a particular good or service, rather than letting companies choose what they want to provide to consumers.

Recent history has demonstrated that link taxes and similar efforts, like Australia’s new mandatory code of conduct, benefit no one: not news aggregators, not consumers, and not even the news publishers that advocate for them. Research by Harvard’s Nieman Lab found that attempts to make news aggregators pay for content reduce overall news consumption and traffic for news publishers when those aggregators stop providing or start limiting their services. Publishers see decreased revenue, and this disproportionately impacts small publishers, consumers get less variety in the types of news they read, and innovation suffers in multiple sectors. This could easily be the case in Australia: Google and Facebook have both expressed that their businesses would remain healthy without the revenue they get from news content in Australia, signaling that they could easily stop providing their online news services in the country.

Like France, Australia is attempting to avoid these consequences. They’re threatening competition investigations if news aggregators decline to continue offering their services in the country and pay for news content. France and Australia want to have their cake and eat it too, and they’re willing to overstep their boundaries to do it. They want foreign tech companies to subsidize their domestic news industry, as it’s hard to imagine them going after Google, Facebook, and other major news aggregators if they were domestic companies. Moreover, it is not a competition violation for a company to refuse to sell in a particular market as long as it does not collude with other companies to do so. These countries can’t change the incentives for news aggregators by introducing a new cost and then expect these aggregators not to respond by changing the way they operate.

Adapting to an online, search- and social media-driven world has posed a challenge for news publishers, but blaming publishers’ recent struggles on tech companies ignores the bigger picture of how digital disruption impacted journalism. The media has also transformed and become more diverse and more accessible thanks to the Internet. Online news is vast and impossible to effectively navigate without aggregators like Bing, Google, and Facebook. Aggregators drive traffic to news publishers and enable consumers to access a wider variety of news. Yes, they also earn money, but all that does is create a win-win-win scenario: a win for publishers, a win for consumers, and a win for the aggregators themselves. It doesn’t make sense to change this system, and attempting to force a change without negative consequences would be a massive overreach.