Levelling the playing field

ACCC release draft mandatory code governing commercial relationships between news media businesses and digital platforms

The Australian Competition and Consumer Commission (ACCC) has released a draft of the mandatory code to govern commercial relationships between news media businesses and digital platforms for consultation (Draft Code). This comes after the federal government directed the ACCC to fast-track the original plan to develop a voluntary code for digital platforms as a result of the Digital Platforms Inquiry which was finalised in 2019.

Why is the Draft Code necessary?

One of the major issues identified in the Digital Platforms Inquiry was the impact digital platforms had on competition in media and advertising and an associated imbalance of bargaining power. Facebook and Google are considered by the ACCC to be “unavoidable trading partners” when it comes to the distribution of news online and for this reason, news media businesses “have accepted less favourable terms for the inclusion of news on digital platform services than they would otherwise agree to”.

COVID-19 has had a further detrimental impact on traditional news media companies, despite it being reported that there has been a significant upturn in Australians’ consumption of the news during COVID-19. The struggling state of the news led the government to direct the ACCC to fast-track the development of a mandatory code to manage the commercial relationships between media organisations and digital platforms. Although originally the code was set to be voluntary and due to be finalised in November 2020, the ACCC indicated earlier this year that agreement on a voluntary code was unlikely to be reached with digital platforms.

The Draft Code aims to address some of the power imbalances suffered by news media businesses and requires swift implementation because, as the ACCC noted, “a strong and independent media landscape is essential to a well-functioning democracy”.

To whom does the Draft Code apply?

A digital platform corporation must participate in the Draft Code if the Treasurer has made a determination specifying that platform. At this point, the Draft Code would only apply to Facebook and Google, but other digital platforms may be added if a significant power imbalance develops.

A news media business can apply in writing to the Australian Communications and Media Authority (ACMA) if it wishes to participate in the code. The news media business must nominate which of its news sources it would want to be included (for example, news websites, newspapers, television programs or radio programs). There are certain requirements that the news media business must meet in order to be eligible, including that it:

  • predominantly produces ‘core news’ and publishes it online – ‘Core news’ is defined as “journalism on publicly significant issues, journalism that engages Australians in public debate and informs democratic decision making, and journalism relating to community and local events.” (However, this is simply a threshold test and is not the only type of content that is able to be considered under the code when bargaining with the digital platforms);
  • adheres to appropriate professional editorial standards – for example, the Press Council or relevant industry codes;
  • maintains editorial independence from the subjects of its news coverage;
  • operates primarily in Australia for the purposes of serving Australian audiences; and
  • has an annual revenue that exceeds $150,000 in either the most recent financial year or in three out of the five most recent financial years.

How the Draft Code will work

The Draft Code sets out four main sets of requirements.

Bargaining rules

Once a news media business is registered by the ACMA, it may notify Google or Facebook of its intention to bargain. The Draft Code would allow for two or more news media businesses to join together to negotiate with a digital platform.

Once an intention to bargain has been indicated, the parties must bargain in good faith. Broadly speaking, both the digital platform and the news media business may request information from the other party regarding the benefits received from news content being displayed on digital platforms and the costs incurred by the news media business in providing news content to digital platforms. During this phase, the parties are required to attend at least one day of mediation.

Compulsory arbitration rules

If agreement between the digital platform and the news media business is not reached within three months (from the time the news media business has indicated its intention to bargain), the matter becomes subject to compulsory arbitration. This requires each party to submit to the arbitral panel a final offer of remuneration to be paid by the digital platform to the news media business for making its ‘covered news content’ available. According to the Explanatory Materials, ‘covered news content’, includes ‘core news content’ as well as “any other content that is created by a journalist which is relevant to recording, investigating or explaining issues of interest to Australians”, for example, sports and entertainment related news.

The panel must accept one of the final offers, unless it is considered that each final offer is not in the public interest. When deciding which final offer to accept, the panel must consider a number of factors including the direct or indirect monetary or other benefit the digital platform would receive, the cost of producing the news content and whether the remuneration amount would place an undue burden on the digital platform.

The bargaining parties must comply with the panel’s determination within 30 days or else become subject to a civil penalty.

Minimum standards

Once a news media business has been registered by the ACMA, the digital platforms must comply with certain minimum standards with respect to that news media business’s ‘covered news content’. These minimum standards apply regardless of whether the news media business has indicated its intention to bargain with the digital platform.

According to the ACCC, these standards relate to digital platforms having to give notice to news media businesses in relation to algorithm changes that are “likely to affect referral traffic to news, algorithm changes designed to affect ranking of news behind paywalls, and substantial changes to the display and presentation of news, and advertising directly associated with the news”. Digital platforms are also required to give news media businesses data it collects in relation to users’ interaction with news content.

Digital platforms must also provide flexible comment moderation tools, including the ability for the news media business to ‘turn off’ comments on the content it posts to the relevant digital platform, which under current defamation laws is a crucial way in which news media businesses can limit their exposure for defamatory comments of third parties.

Non-discrimination requirements

The digital platforms are prevented from discriminating against a registered news media business in relation to it relying on its rights under the code. Examples of such discrimination could include a news media business being “disadvantaged in comparison to other news content in terms of the crawling, indexing, ranking, display, presentation or other process undertaken by the digital platform…on the basis of the registered news business’ participation in the code”.1

Enforcement and implementation

Contraventions of the code amount to civil penalties, the maximum being the greater of:

  • $10 million;
  • if the court can determine the total value of the benefits that have been obtained – three times that total value;
  • if the court cannot determine the total value of the benefits obtained – 10% of the annual turnover of the body corporate during the 12 month period ending at the end of the month in which the act or omission occurred.

Minor breaches would not attract the maximum penalty. The ACCC could also issue an infringement notice, with the penalty amount being 600 penalty units.

Consultation on the Draft Code is due to conclude on 28 August 2020. The final legislation is expected to be introduced to Parliament shortly thereafter.

Consequences of the code

On 17 August 2020, Google published an open letter claiming that the Draft Code would “force” Google to provide its users with “a dramatically worse Google Search and YouTube, could lead to [users’] data being handed over to big news businesses, and would put the free services at risk in Australia.” The ACCC responded by stating that Google’s open letter contained “misinformation” and that Google will not be required to charge Australians for use of its free services, nor will it be required to share additional user data with news businesses, unless it chooses to do so.

Both Facebook and Google have previously released statements expressing a desire to work with the ACCC on a code but claim that they do not actually derive a significant benefit from news content being hosted on their respective platforms. They have both previously encouraged the ACCC to look at “both sides of the value equation”. Facebook also pointed to the millions of dollars it had invested in Australian publishers in the wake of COVID-19, while Google announced in June 2020 that it would be paying certain Australian media groups through a licensing program.

In these circumstances, the ACCC has aimed to ensure that the legislation is framed in anticipation of any legal challenge.2 If the Draft Code is successfully implemented, it will likely be used as an example for other countries in their management of commercial relationships between digital platforms and media companies.

1. Explanatory Materials, Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 (Cth) 1.100, 20.
Dempster, Quentin, “ACCC Expecting Google And Facebook Lawsuits As Australia’s Newspapers Declared ‘Terminal’” The New Daily (2020) https://thenewdaily.com.au/news/national/2020/04/27/google-facebook-accc-legal-action/

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© ADDISONS. No part of this document may in any form or by any means be reproduced, stored in a retrieval system or transmitted without prior written consent.
This document is for general information only and cannot be relied upon as legal advice.

Liability limited by a scheme approved under Professional Standards Legislation.
© ADDISONS. No part of this document may in any form or by any means be reproduced, stored in a retrieval system or transmitted without prior written consent. This document is for general information only and cannot be relied upon as legal advice.