Facebook calls out 'discriminatory' Australian proposed code, says news is 'highly substitutable'

Facebook has called out the "discriminatory" code of conduct being drawn up in Australia that plans to force it to share advertising revenue with publishers, threatening that news content is "highly substitutable".

The technology giant submitted a fiery 58-page response to the government's plans to introduce a mandatory code of conduct, to be prepared by the Australian Competition and Consumer Commission (ACCC), that would force Facebook and Google to 'pay' Australian media companies for publishing their news—in the form of shared ad revenue.

The government's treasurer Josh Frydenberg said at the time its decision to proceed with a mandatory code came after "no meaningful progress" had been made on voluntary discussions about the value exchange of news carried by tech companies. 

In its response, Facebook said it has been "long-standing supporters of a code of conduct that sets a framework for the relationship between digital platforms and news publishers in Australia", and that it had held consultations with 20 Australian publishers during the voluntary period to establish a "reasonable framework".

The mandatory code of conduct, which at its core includes plans to force Facebook and Google to establish revenue sharing model for news, has turned the debate sour.

Facebook called it "discriminatory" to focus the initial version of the code on two US companies, adding that it is "not healthy nor sustainable to expect that two private companies are solely responsible for supporting a public good and solving the challenges faced by the Australian media industry".

It went on to suggest that singling out two companies "will inevitably give an unfair advantage to Facebook's competitors in the technology sector, including rivals from countries that propagate different and undesirable visions for the Internet." Facebook specifically called out Apple and TikTok as "two major competitors" that have entered as distributors of online news in Australia, in addition to existing digital distributors of news such as MSN 18 (Microsoft News), Twitter, LinkedIn, Snap, Bing and others.

When it comes to the core issue of payment, Facebook said it "fundamentally...does not support the imposition of monetary penalties as a means of governing commercial relationships".

"The imposition of penalties is very unlikely to meet the objective of facilitating genuine commercial relationships and agreements and may in fact impede the creation of relevant commercial arrangements designed to bring value to publishers, consumers and Facebook," it said.

"Dispute resolution frameworks that incentivise contentious or uncooperative behaviour, resulting in an over reliance on dispute resolution, will ultimately undermine solutions that support sustainable journalism."

As well as criticising the proposed code, Facebook did not hold back on calling out the news industry.

The chairman of one of Australia's biggest media companies, Nine Entertainment, has argued that the tech giants should pay 10% of their advertising revenue in Australia—estimated by the government at some AU$6 billion (US$3.9 billion) per year—to the news industry. The figure came from the ACCC's report, which determined that 10% of the tech firms' revenues came from advertising on news content.

Facebook branded this an "ambitious claim" that is "not supported by any apparent, independent, economic evidence or empirical analysis". Google Australia managing director and VP Mel Silva also called these figures "inaccurate", and said "it’s important that we have a discussion based on facts".

Google said both the direct and indirect economic value it gets from news in search is "very small", a sentiment shared by Facebook, which said news represents a "very small fraction" of the content in the average Facebook users’ News Feed, because Facebook is "primarily a service used to connect with family and friends".

In the submission, dated June 5, Facebook even went so far as to suggest that it would not incur any significant impact if it were to remove news completely.

"If there were no news content available on Facebook in Australia, we are confident the impact on Facebook’s community metrics and revenues in Australia would not be significant, because news content is highly substitutable and most users do not come to Facebook with the intention of viewing news," it said.

"But the absence of news on Facebook would mean publishers miss out on the commercial benefits of reaching a wide and diverse audience, and social value would be diminished because news would be harder to access for millions of Australians. Given the social value and benefit to news publishers, we would strongly prefer to continue enabling news publishers’ content to be available on our platform," it added.

When it comes to the value it provides to publishers, it claimed that Facebook’s News Feed generated approximately 2.3 billion organic referrals to Australian news publisher domains from January through May 2020, which it estimates to be worth AU$195.8 million (US$135 million) to Australian publishers. Publishers that participated in revenue share programs, such as its In-Stream Video advertising program, from January to May 2020, earned approximately AU$2.1 million (US$1.5 million), while Australia-based news publishers generated approximately 27 million organic views in News Feed on tagged branded content posts from January through May 2020.

"These are just some aspects of the value that flows to Australian news businesses from Facebook that we have been able to quantify to date," Facebook said.

It concluded: "Facebook hopes this process will yield a balanced, pragmatic, realistic code that does not encourage media concentration or reduce diversity and plurality in the Australian media sector. If the ACCC can act in an evidence-based way, this code could give Australian news publishers, digital platforms and, ultimately, Australian consumers, confidence in the way ahead. While Facebook does not agree with the Final Report’s finding that we possess unequal bargaining power compared to some of the largest media companies in Australia and the world, we recognise that there is merit in setting regulatory frameworks to give all Australian media organisations and Australian consumers confidence that we are contributing appropriately in the Australian news ecosystem."