Australia will make Facebook and Google pay media organisations for content

Though Facebook and Google generate significant income through online advertising, most of their content is actually created by other, smaller websites. Now the Australian government is taking steps to force tech giants to pay for that work.

The Australian government has ordered the Australian Competition and Consumer Commission (ACCC) to develop a mandatory code of conduct for dealings between tech giants and local media companies. According to Australia's ABC News, the code will cover issues such as ranking news content, data sharing, and sharing advertising revenue.

"It's only fair that those that generate content get paid for it," said Australian Treasurer Josh Frydenberg. "This will help to create a level playing field."

Australia's need for a code of conduct was highlighted by a 2019 report from the ACCC. The report estimated $71 of every $100 spent on online ads goes to Facebook and Google, leaving just $29 to be shared amongst all other websites. Further, over 80 percent of all online advertising growth had gone to the two tech giants since 2016.

In response to the report, the Australian government initially ordered Facebook and Google to negotiate with local media companies to develop a voluntary code of conduct by November.

However, the government announced on Monday that the code of conduct will now be mandatory, enforced with penalties and binding dispute resolution processes. The code will also be written up by the ACCC, after local media companies complained Facebook and Google were reluctant to negotiate a voluntary agreement.

The Australian government's switch to a mandatory code was also motivated the economic impact of the coronavirus pandemic, which has worsened the already poor state of Australian media's finances.

"Media companies are facing significant financial pressure and COVID-19 has led to a sharp downturn in advertising revenue across the whole sector," said Frydenberg. A draft of the mandatory code is due for release in July.

Facebook has disputed the ACCC's allegation it was dragging its feet on developing the code, and noted the Australian government has acted before the original November deadline.

"We’re disappointed by the government's announcement, especially as we’ve worked hard to meet their agreed deadline," Will Easton, managing director at Facebook Australia and New Zealand, told AdNews. Easton also pointed toward recent investments Facebook has made in the global news industry amidst the coronavirus pandemic.

Even so, some businesses simply can't afford to wait. Drops in advertising have already prompted some local newspapers to halt publication, while Australian media companies' shares have plummeted.

As companies around the globe face the same struggles, there's no doubt other countries will be watching closely to see how Australia's new rules play out.