Facebook’s Hardball Move in Australia Comes With Risks

SYDNEY—In the clash between Facebook Inc. FB 2.58% and Australia over paying for news, one question remains hard to answer: who won?

Facebook’s hard-edged move to block news on its platform in Australia extracted concessions from the government, which agreed to ease a new law that effectively requires payment in exchange for the social-media company restoring the content to its platform. Yet the dramatic action drew rebukes from users, lawmakers and others around the world who were troubled by Facebook’s willingness to abruptly remove vast amounts of information.

That action could deepen Facebook’s challenges over time and inspire other countries to pass tough rules, say some people who follow internet regulation. In the U.S. and the U.K., lawmakers criticized the news ban. In the European Union, one official urged member countries to pass copyright laws that would strengthen news publishers’ right to compensation. In Canada, one minister said his government would move forward with its own legislation.

“The fact that Facebook took the position they did, some governments view that as a wake-up call and they are likely to be more aggressive in their dealings with Facebook,” said Michael Geist, a law professor at the University of Ottawa in Canada who specializes in internet law. “We’re already starting to see almost a ‘coalition of the willing’ develop.”

The decision to remove news from its platform in Australia was the climax of the social-media giant’s aggressive campaign against the new rules. Facebook said the original law would have required it to pay open-ended subsidies to media outlets. The company warned several months earlier that it could remove news if the Australian law moved forward, but many observers viewed the threat as a bluff.

Australian officials were caught off guard. Australian Treasurer Josh Frydenberg, a key official involved in the effort to pass the law, talked on the morning of Feb. 18 to Facebook Chief Executive Mark Zuckerberg, putting a game of tennis on hold.

Facebook blocked people in Australia from viewing or sharing news articles as lawmakers debated a bill to compel social-media companies to pay for content. The legislation is being watched globally and could offer a model for other countries. Photo: Josh Edelson/Getty Images

“I became aware of it about 10 minutes before doing media interviews,“ said Paul Fletcher, Australia’s communications minister, who arrived at the parliament building that morning to talk to reporters. ”I saw the treasurer about 20 minutes later. We were in his office. He was in his tennis clothes all ready to go out and play.”

The news ban caused an uproar in Australia and affected content from news outlets along with information from local health agencies, the country’s weather service and domestic-violence support groups, among others. Health experts worried the public wouldn’t be able to find reliable information just as Australia began coronavirus vaccinations. Facebook later said blocking that content was inadvertent, but that it targeted an array of material because the law’s definition of news was vague.

“They really tore up the little shred of social license they had left with the public by taking such an extreme action,” said Chris Cooper, executive director at Reset Australia, an advocacy organization focused on the impact of social media on democracy.

In a statement, a Facebook spokesperson said a solution allowing the company to negotiate payment to publishers under fair conditions was always the aim and noted the company’s commitment to supporting journalism in Australia and elsewhere.

“The original legislation failed to recognize the reality of the relationship between publishers and Facebook,” the spokesperson said, noting that the company has signed deals with media outlets since the compromise was reached. “We’re pleased to have an agreement with the government and resume negotiations with publishers where they left off.”

Facebook declined to comment on the broader potential impact of its actions in Australia. News Corp, owner of Wall Street Journal publisher Dow Jones & Co., has a commercial agreement to supply news through Facebook.

Australian officials said they got what they wanted out of the compromise, since the law could still require Facebook to submit to binding arbitration if it can’t reach deals with publishers.

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“We have not changed the fundamental direction of the code,” Mr. Fletcher told the Journal.

Facebook had argued the Australian law was unfair because news makes up only 4% of the content people see in their feeds, and that the platform sends significant traffic to news websites. Facebook decided to remove news once the law passed the lower chamber of Australia’s parliament.

“It wasn’t a decision taken lightly. But when it came, we had to take action quickly because it was legally necessary to do so before the new law came into force,” Nick Clegg, Facebook’s vice president of global affairs and a former British deputy prime minister, wrote in a recent blog post.

Some business groups and computer scientists also raised concerns that the law could impinge the free sharing of links online. Mr. Geist, the law professor, said Facebook shouldn’t have to pay to display links to news stories.

“They don’t post it themselves, their users do,” he said, referring to news content. “Many times, the publishers themselves are doing the posting,” he said.

Alphabet Inc.’s Google, also subject to the Australian law, at one point threatened to shut down its search engine there. The search giant later decided to license content from publishers, including News Corp, which agreed to a three-year deal worth tens of millions of dollars.

The changes won by Facebook include requiring mediation before moving onto final arbitration. Another change requires the treasurer to consider whether a platform has already agreed to commercial deals with publishers before deciding whether the law’s provisions should apply. The government also agreed to require the treasurer to give 30 days’ notice before making a decision.

Mr. Cooper, of Reset Australia, said those changes make it less likely that the law will be used, but he welcomes incentives for tech companies to negotiate with news outlets.

Facebook didn’t take long to return to the bargaining table. Australia’s Seven West Media Ltd. announced a deal with the company on the same day the compromise was reached with the government.

Just hours earlier, Mr. Frydenberg, the treasurer, told reporters: “Facebook has re-friended Australia.”

Write to Mike Cherney at mike.cherney@wsj.com

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