As a Science honours student, Andy’s column ‘Next Week in the Future’ examines current issues in science and tech, to keep you informed for when these topics come up during conversation. 

For the past month, every time a Google search runs a little slow on my computer, I think, “Oh my god, they’ve taken it away.”

That’s what Google has threatened to do over the news media bargaining code written by the Australian Competition and Consumer Commission (ACCC) and currently being considered by parliament as a bill. Should the bill become law, “[Google] would have no real choice but to stop making Google Search available in Australia,” wrote Google Australia’s Managing Director, Mel Silva. This is the same bill that drove Facebook to wipe all news content (even the Betoota) from Australian Facebook feeds early on Thursday. What about this code could spook these tech giants enough to strip part of their product from millions of users? Let’s take a look.

First released in July last year, the code is an attempt to fix a purported imbalance in bargaining power between Australian companies that produce news and digital platforms that host news content, particularly Google and Facebook, which will be the first tech companies to be bound by the code. It empowers news companies to negotiate with tech companies for payment in return for the right to host their news stories. The premise is that platforms like Google and Facebook profit from the ability to show you news articles in your Google searches and Facebook feed. This is done through the data they get from you, or the money they get by showing you ads – and the companies creating that news aren’t getting their cut.

How true these premises are is debatable, to say the least, but setting that aside for the moment, let’s see what the code entails.

The ACCC frames it as a solution that encourages news companies and digital platforms to negotiate in good faith, with minimal government intervention. However, the code includes a failsafe if news companies don’t like the outcome of their negotiations – if negotiations don’t end after three months, they’re allowed to initiate an arbitration stage.

At that point, the code calls for an uncommon form of arbitration, which the ACCC calls ‘final offer arbitration’, and Google disparagingly calls ‘baseball arbitration’. (Why they think a reference to baseball would be effective in Australia is beyond me)

Once arbitration is triggered, both parties submit a ‘final offer’ – a sum of money that the digital platform will pay for the news company’s content for the next two years. An arbitrator, appointed by a government body, gets to choose the offer they consider more reasonable, and that offer becomes enforced by law.

Google has strongly rejected this mode of arbitration. In a blog post from September 2020, Silva argues that final-offer arbitration doesn’t work when the value of the ‘product’ being provided by one party to another is in dispute. To Silva, the value that Google derives from news companies has been exaggerated. According to her, Google only makes about $10 million a year in revenue from Google searches for news articles.

But Australia’s largest news companies have different ideas. Nine Entertainment (which merged with Fairfax Media in 2018 – remember them?) thinks Google and Facebook should pay out 10 percent of their Australian revenue to news companies – a cool $600 million per year. Rupert Murdoch’s News Corp thinks that figure should be closer to $1 billion.

The ACCC claims that the drastic nature of final-offer arbitration would incentivise parties to reach an agreement without arbitration. But, considering that the code would give news companies the right to initiate arbitration without the digital platform’s consent, it appears that news companies have everything to gain and digital platforms have everything to lose. So it makes sense that Google and Facebook would be willing to go as far as to restrict access to their platforms in Australia.

While Facebook has actually carried out that threat, Google is pushing their own alternative to the ACCC code – a new initiative called Google News Showcase. The premise of Showcase – which launched in Australia early this month – is that Google will pay news outlets monthly fees to curate ‘story panels’. If you use Google News (let’s not kid ourselves – I didn’t know it existed until I had to download it to research this story), you can tap on ‘Newsstand’ to check them out.

Worldwide, Google is investing $1 billion USD ($1.3 billion AUD) into Showcase, which has launched in countries such as the UK, Canada, and Japan. It’s not clear how much Google is planning to pay Australian outlets, but obviously it’s a lot less than Murdoch thinks it should.

Google seems to think it’s a fairer deal. And, yes, there’s reason to agree the ACCC code is poorly-conceived. As former prime minister Kevin Rudd put it, “I always get a bit suspicious when the Murdoch media get really excited about something.” But an initiative that’s proprietary to Google – which it could cancel at any time (Remember Google Glass?) – is not an appropriate substitute for a legally binding code that compels tech companies like Google to pay their fair share (Google pays a paltry amount of tax in Australia compared to its revenue). Keep in mind that Showcase exists in countries other than Australia – it’s a business venture that benefits Google, which it would probably be running in Australia even if no code had been proposed.

Despite this, Nine  and News Corp  have signed on to News Showcase – the former for a $30 million per year payment, the latter for an undisclosed amount.

We’re not going to stop hearing about the code – it is likely to become law, as it has Labor’s support – but hopefully the saga is a bit clearer now. At least we can be sure of getting news from Google for now, even if we’re not going to get it from Facebook.