US government intervenes as MPs consider rules forcing Google, Facebook to pay for news

US officials told parliamentarians examining the bill that the reforms could lead to long term negative consequences for American and Australian companies, and Australian consumers.

They urged the MPs to reconsider the proposed laws, which follow findings from the competition regulator that tech giants held a bargaining power advantage over news publishers.

"The US government is concerned that an attempt, through legislation, to regulate the competitive positions of specific players in a fast-evolving digital market, to the clear detriment of two US firms, may result in harmful outcomes," they said.

US trade representatives Daniel Bahar and Karl Ehlers wrote to Senator Alex Gallacher, chair of the committee considering the proposals, urging changes to the bill.

"Given the United States' significant outstanding concerns, we urge Australia not to rush the passage of this legislative proposal," the officials said.

They said the proposal gave the government broad discretion to decide what companies would be subject to the "highly prescriptive and burdensome" new rules.

The bill targeted Google and Facebook and would apply to companies without establishing a violation of law or a market failure, the officials said.

While the code would account for the benefit news businesses gained in being carried on Google and Facebook, it remained unbalanced in favour of publishers, their submission said.

The code should address the costs to the tech giants in storing, processing and transmitting news content, and in developing software to index and rank it, it said.

In the submission, the US government called the Australian Competition and Consumer Commission's proposal for a mandatory bargaining code of conduct "an unusual and highly intrusive intervention in the commercial arrangements between specific participants in the digital marketplace".

US officials said Australia should instead consider a voluntary code of conduct to address the problems identified by the ACCC.

Facebook told MPs it provided Australian media publishers traffic valued at $394 million through 4.7 billion referrals to their websites from January to November 2020.

It also said news was a negligible source of the company's revenue.

Facebook said it had invested in helping publishers gain more value from their content posted on the social media website, and spent on programs benefiting news organisations.

"Digital advertising services like Facebook have grown the market for advertising in Australia, increased the relevance and effectiveness of advertising, and generated economic benefits for small business and consumers by significantly lowering costs," Facebook said in its submission.

It told MPs the challenges for media organisations pre-existed Facebook's popularity in Australia and said policymakers should consider the concentration in the nation's media market as a barrier for small- to medium-sized publishers.

The world-first news code would let media companies bargain with Google and Facebook over payment for news content on their platforms.

It follows the ACCC's findings in 2019 that a power imbalance existed between news media businesses and digital platforms.

"The inability of news media businesses to individually negotiate terms over the use of their content by digital platforms is likely indicative of the imbalance in bargaining power," the watchdog found.

In April 2020 the government asked the competition regulator to develop a draft bargaining code addressing the bargaining power imbalance.

The federal government said it would not be bullied when Facebook said in September it was considering banning local news articles from its platform if the draft bargaining code became law.