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On 20 April 2020, the Government announced it directed the ACCC to develop a mandatory code of conduct to address bargaining power imbalances between digital platforms and media companies (the Code).1

The possibility of a mandatory code has been under contemplation for some time.

In its final report following the Digital Platform Inquiry (DPI Report), the ACCC concluded that the dominance of the platforms as gateways in reaching audiences online, meant that Facebook and Google had become critical and unavoidable trading partners for Australian news media businesses. This had, resulted in an imbalance in bargaining power. It found that these digital platforms were able to share Australian news content for free online and reap its financial benefits through advertising revenue, with the ability and incentive to favour their own related businesses and businesses with which they have an existing relationship.

In its response to the DPI Report, the Government had initially hoped that the digital platforms would develop a voluntary code as part of the objectives of promoting competition, enhancing consumer protection and supporting a sustainable Australian media landscape in the digital age.1  However, the voluntary process progressed too slowly. As a result of this, and the sharp decline in media advertising revenue due to the impact of COVID-19 (which has seen the Government extend a lifeline to media businesses by by providing spectrum tax waivers, a $50 million Public Interest News gathering program, the suspension of content quotas and a review of Australian content worth almost $100 million2), the Government determined more immediate action was required and instructed the ACCC to develop a mandatory code instead.

The Code will define news content that would be covered and will encompass services beyond Google search and Facebook’s main platform, such as Instagram and Twitter. The Code is expected to tip the scales in favour of media organisations, allowing them to benefit from the sharing of their content on platforms. It will address, among other things, the sharing of data, ranking of news content online and, most importantly, the sharing of revenue generated from news posted on Facebook, Google and other digital outlets.1

Implications of a mandatory code

The change from a voluntary code to a mandatory one is significant. The decision to impose mandatory codes is not one that the Government makes lightly, unless there is clear evidence that self-regulation is not a viable option. Once a mandatory code is in place, it imposes binding obligations on all participants specified in the code – i.e., a breach of the code becomes a breach of the Competition and Consumer Act 2010 (Cth) (CCA). In cases of a breach, any person who ‘suffers loss or damage’ can bring an action for non-compliance, and the CCA offers a range of remedies available to aggrieved parties, including penalties, injunctions to either prevent or require a particular conduct, damages, and other compensatory orders. Additionally, the ACCC also has the power to issue infringement notices or public warning notices (if they believe that there has been a breach of a code) and has the power to conduct investigations in cases of suspected non-compliance.

It will be interesting to see how the platforms will respond to this development in the context of their broader strategy to global regulatory action and whether it will encourage them to engage proactively or instead change the way they operate in Australia. The latter could have detrimental consequences to both media and consumers. In 2014, Google News shut its Spanish operations when Spain introduced laws requiring aggregators to pay publishers for linking their content. Google Spain had taken the position that “Google News makes no money” as no advertising is shown on the site, and the approach of the Spanish government’s new laws was “not sustainable”.3 The shutdown of Google Spain saw many publishers experience double-digit drops in web-traffic.4 In France, Google also took steps to avoid “paying for links” in response to changes to copyright laws that required compensation for media companies when their content is used in websites.

The ACCC is likely to be aware of these tactics and will therefore factor them in when trying to design an effective code. Given the ACCC’s reputation and investment in this area, it is unlikely that that it would allow digital platforms to simply walk away. The ACCC Chief Rod Sims has said that the fines for not complying with the Code will be large enough to make sure Facebook and Google do not simply ignore it.

A draft mandatory code will be released for consultation by the ACCC before the end of July, with a final Code to be settled soon after. In the meantime, submissions on the ACCC’s discussion paper for its inquiry into ad tech, ad agency and display services have just closed. This inquiry will consider the transparency of pricing which should help inform the detail of the Code requirements.

 

This article was prepared with the assistance of consultant Justine Tan and Shirley Liang.

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