The battle Down Under

With the appointment of Tony Abbott as an official trade adviser to the UK, Ray Snoddy looks at the ongoing battle between the Australian government and the tech giants

When the UK needs advice on trade in a post-EU world, it turns to Australia and former Liberal Prime Minister Tony Abbott – for good or ill.

So is Australia also the place to turn to in a search for a template on how to deal with the tech giants of California – or not?

At the very least a ferocious little war of threat and counter-threat is being fought out ‘Down Under’ between Australian regulators and legislators and online players such as Facebook and Google.

The main casus belli is the old familiar one – how to persuade, or force, the multi-billion pound digital platforms to pay a fair price for the intellectual property expensively assembled by the established media that they effortlessly transmit to their hundreds of millions of users around the world.

The current state of play can be simply stated. The implications and likely outcome are much less so.

The Australian Competition and Consumer Commission has recommended that the tech companies should be ordered to negotiate a fee for showing links to publisher’s news content on their platforms. They should also have to give news publishers 28 days notice of any material change to ranking algorithms.

In a rather heavy-handed response, Facebook has threatened to withdraw news content from its platform in Australia.

Cue political pandemonium, with the Australian Prime Minister, Scott Morrison saying he does not respond well to coercion and threats and Australian treasurer Josh Frydenberg insisting the Australian Government was committed to the reforms and “won’t be bullied, no matter how big the international company is, no matter how powerful they are, no matter how valuable they are.”

The Nine television network, one of the media supporters of the proposals, was cutting in its response to the news ban threat.

“We find it a strange response as it is a demonstration of Facebook’s use of its monopoly power while failing to recognise the importance of reliable news content to balance the fake news that proliferates on its platform,” Nine said.
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There are obvious problems if the Australian Government sticks to its guns and legislates, while Facebook – with Google hinting that the end of free search could be a consequence of Australian government action – also carries out its threat. The outcome could easily be that existing media could end up earning less money from the digital players, compared with the little they receive now, and would almost certainly face lower reach.

In the real world, consumers would also be hit. University of Canberra research shows that 39% of Australians use Facebook for general news, a percentage that rises to 49% for the latest information on Covid-19.

And as Tim Burrowes, founder of the Australian media news website Mumbrella, notes, the proposed Australian legislation does not address all of the key issues.

Many people use social and search sites to check a single fact, and they can do that from the headline snippets of news without ever having to go on to read full articles provided by newspaper publishers.

On Google, quick rewrites or lifts from other people’s exclusive stories by the likes of, for example, Mail Online, can give them not just the kudos but also the traffic. Neither issue is tackled.

Unintended consequences of the Australian initiative include leaving the Facebook field free and unchallenged for purveyors of fake news and conspiracy theories, while at the same time enhancing a more traditional monopoly in Australia, the dominance of the Murdoch press.

At the same time, Facebook is letting it be known that it sees this as no big deal, that it doesn’t make much money anyway from the transmission of news, and its business model, based largely on putting family and friends together, would march on relatively unscathed.

The noisy threats from Facebook however suggest otherwise – that it is hoping to stamp on the Australian initiative at the outset and stop it spreading around the world.

If Australia is allowed to get away with it, who knows what might happen, Facebook obviously believes.

The Australian action does suggest how difficult it is likely to be for a single nation state to take on trillion dollar American companies deeply embedded in populations throughout the world.

If action is taken against the tech giants, it is almost a truism that it will have to be taken at the international level, whether it is the European Union or the OECD nations acting collectively.

Otherwise the likes of Australia can be bullied, however loudly Prime Ministers cry out against “coercion.”

It’s difficult to prove, but there is a sense of an international consensus emerging that the tech giants are far too powerful and not at all reluctant to impose their monopolies and that something must be done.

The view is equally widespread that they do not pay a fair share of tax, or take sufficient responsibility for what appears on their sites, while at the same time being deeply implicated in the emergence of so many ruinous populist governments.

The most serious charge against social media is that it may have compromised the operations of traditional Western democracies.

It’s unlikely that Australia, or any other country however feisty, can even begin to address such fundamental issues and almost certainly not on a piecemeal basis.

Even the UK’s modest little effort to do something about one of the abuses, with the introduction of a two per cent digital advertising sales tax, has turned out to be problematic.

Chancellor Rishi Sunak introduced the tax, actually designed by his predecessor Philip Hammond, with a flourish.

Then the inevitable happened. Google decided to pass on the cost of the digital service tax to advertisers, adding £120 million to the annual costs of marketeers while leaving the search engine group’s profits untroubled.

Here, Facebook appears to be the good guy, absorbing the tax.

Indeed earlier this year, Facebook chief executive Mark Zuckerberg said for the first time that he supported OECD proposals for a global digital tax in the interests “of a stable and reliable system going forward.”

Yet little in the world of digital taxation is certain. Last month, the Mail on Sunday said that Sunak was already planning to jettison the tax because the £500 million a year it would raise was peanuts compared with the damage that would be done to the prospects for a vital Anglo-American trade deal.

The story was immediately denied by the Treasury but in the world of not just U-turns but revolving doors, who can possibly say? What will Tony Abbott think?

Meanwhile all we can do is watch in fascination to see how the current Australian Prime Minister gets on in the unequal unarmed combat with Facebook and Google.