It's a fact: Google is threatening to stop searching in Australia because of the media code
The threat of Google to cut off Australian users' quest and walk away from $4 billion in revenue has prompted an alert that digital giants are not bluffing over legislation intended to force them to pay for news.
Mel Silva, the local managing director of the $1.8 trillion search company, told a Senate committee hearing on Friday that if the government's new media negotiating code becomes law, Google will shut down search in Australia. The threat is not idle, experts said, with Google possibly fearful that the code might set a global precedent.
Australia will not respond to the attacks, Prime Minister Scott Morrison said, as news media firms fired back at claims that their advertising did not add value to the networks.
Our rules are set by Australia for things you can do in Australia. In our Parliament, that is over. Our government is doing it, and that's how things work here in Australia,' he said. People who want to work with it are really welcome in Australia. But we are not responding to attacks.'
The code seeks to compel digital outlets to pay media companies for news material, which follows the competition watchdog's 12-month analysis of Google and Facebook. The legislation that was introduced in the House of Representatives in December falls in the midst of a drive to rein in the influence of digital monopolies by global governments.
The threats from Google follow similar remarks made in September by Facebook Australia's managing director, Will Easton, who revealed plans to delete news stories from the key social media app if Parliament passes the media code.
Andrew Macken, director of the Montaka Global Fund, whose company owns shares in both Google and Facebook, said he believed that they were not hollow threats.
"Mr Macken said, "I suspect it is [legitimate]. "To avoid setting a precedent for its other larger markets, Google might rather lose Australia (a relatively small global market)."
In its response to the proposed legislation, Google's comments represented the first time the digital giant threatened publicly to disable its primary search feature for all Australians.
Hannah Marshall, a partner at Marque Lawyers who specializes in competition law, said the code left the tech giants with no alternative in its current form.
Ms Marshall said, "The code now says that Google and Facebook have to pay for the right to supply news publishers with an audience." "That doesn't make any legal or business sense."
Google and Facebook have no choice but to stop linking to news entirely to prevent the execution of the code. If Google can not distinguish news outcomes from other search results efficiently, then it will logically have to withdraw its entire search service from Australia.
Michelle Rowland, Labor's communications spokesperson, also expressed fears about Google's withdrawal from the market.
"[Treasurer] Josh Frydenberg and [Communications Minister] Paul Fletcher need to explain why, without disrupting the millions of Australians who use Google Search and Facebook every month, they can't find a way to support the media," Ms Rowland said.
Ms Silva told senators that a "worst-case scenario" was the ultimatum. "That's not a menace. It is a reality,' she said. "If it were to become law, this version of the code would give us no real choice but to stop making Google Search available in Australia."
Ms Silva repeated Google's long-running argument that the code would "break" the business model of Google by requiring it to pay news outlets to provide access to their news material - a step that contradicts the idea of a free and accessible internet by trillion-dollar business claims.
She also disclosed that news queries accounted for just 1.25 percent of all Google searches, but said the company was worried that the proposed Australian code would set an international precedent under intense questioning from senators.
The company's ultimatum - first made in September - was reaffirmed by Simon Milner, Facebook's vice president for public policy Asia-Pacific, that it could resort to blocking news content on its Australian site.
Mr Milner said that the move would be "a possible consequence of a worse case," adding that it was "absolutely not a threat," but intended to educate the policy process.
"The vast majority of people who use Facebook will continue to be able to do so, but as part of the Facebook product, we will no longer be able to provide news," Mr Milner said.
He told the inquiry that providing news coverage on Facebook provided Facebook with "almost no commercial value."
Yet Australian media firms denied the tech giants' statements and urged the government to quickly legislate. At the hearing, News Corp Australia, Nine Entertainment Co (owner of this masthead) and Guardian Australia executives mounted a predominantly unified front, arguing that the code would help ensure local journalism's long-term survival and disputing arguments that the tech giants did not derive value from content.
A failure to enforce the code will see the tech giants "continue to refuse to pay for the content they have used to secure their monopolies or live up to the responsibilities that come with such power," Nine's chief digital and publishing officer, Chris Janz, said.
Greg Hywood, Chairman of Free TV Australia, speaking on behalf of Nine, Seven West Media and Network Ten, said it would be a "surprising choice" for Google to withdraw from a market where billions of dollars of revenue are produced "just because they are required to pay for content that they can easily afford."
During Parliament's final sitting week last year, Mr Frydenberg introduced the bill to legislate the code, with a vote scheduled earlier this year after the committee delivers its report on February 12.
The code allows Google and Facebook to enter into compulsory arbitration with media organizations if, within three months, they are unable to reach an agreement on the value of their content.
It also allows the platforms to inform news companies of algorithm changes for 14 days, and guidelines on non-discrimination have been placed in place to discourage tech firms from taking retaliatory steps such as deleting content or punishing organizations that participate in the code.