Facebook pulled news in Australia. Here's why that matters everywhere

Imagine waking up on a regular day only to find that engineers in Silicon Valley had flicked a switch while you were sleeping and now news has vanished from your social media. Old posts containing news stories are gone and brand pages for outlets such as CNET are blank.

Millions of Australians don't need to imagine. At around 6 a.m. Down Under time on Thursday, Facebook announced it was pulling news from its platform in the country. The reason? An upcoming piece of legislation called the News Media Bargaining Code that would force it, alongside Google, to pay publishers like Rupert Murdoch's News Corp. for the news content Australians see in their Facebook feed. 

Watch this: Facebook's news blackout explained

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Thanks to Facebook's decision, people and publications in Australia can no longer post news stories. In fact, users can't even see news stories. Posts from international publishers like the New York Times don't appear in Australian feeds at all. 

The implementation has been chaotic. Facebook has accidentally blocked various government pages, including two official health agencies amid the pandemic. Some publications are blank not just in Australia, but around the world. Many of my US colleagues can't see the posts on CNET's Facebook page.

In justifying the move, Facebook criticized Australia's News Media Bargaining Code. With news making up around 4% of engagement time on Facebook and Australian publishers getting AU$407 million ($315 million) worth of clicks from Facebook last year, the social media giant says the media code is unworkable. "For Facebook, the business gain from news is minimal," wrote William Easton, managing director for Facebook Australia and New Zealand. Instead of paying up, Facebook is doubling down.

It's the exact opposite route taken by Google, the other tech giant targeted by Australia's bill. Google threatened to pull search out of Australia last month, but cooler heads have since prevailed. This week, after it became clear the bill would become law, Google has done deals with News Corp. and Nine Entertainment, the two biggest companies to lobby for the Code. Details of the News Corp. deal are scarce, but the agreement with Nine is reported to be worth over AU$30 million a year. 

The implications will be global. This spat is sure to be a dress rehearsal for confrontations between big tech and governments in other, bigger countries. A member of the European parliament told CNET last week he wants to introduce measures similar to Australia's News Media Bargaining Code into upcoming EU legislation. A Canadian minister said his government should follow Australia's example and force big tech to pay publishers. "Canadian officials are watching what's happening in Australia very closely," one analyst noted.

But though the global desire to clamp down on big tech is strong, there are reasons to temper excitement over the Australian precedent. Bad regulation can be worse than no regulation, and crunching Google and Facebook could leave media companies worse off.

Big tech vs. big media

There are two main reasons other countries could follow Australia's precedent: To bolster public-service journalism, or simply to legislate against big tech for the sake of winning political points. Australia's government, led by the right-wing Liberal party, has given Facebook and Google a squeeze. But does that help a struggling media industry? That remains to be seen.

If Australia's media bill becomes law, which looks highly likely, Facebook and Google will have 90 days to negotiate with publishers over how much they should pay for news content. If no agreement is reached, government-appointed arbitrators will decide what payment is fair. The arbitration element has been a sticking point, with both Google and Facebook reasonably figuring it'd end up with them paying unfairly large amounts.

The intent of the bill is to equalize the bargaining power between troubled news publishers and flourishing tech companies. So far, the result has been to siphon millions from Google to giants like News Corp. while simultaneously depriving smaller, independent outlets of Facebook traffic. 

This isn't much of a surprise. Back in September a group of 10 small Australian publishers wrote to Australia's competition watchdog, the architect of the media code, outlining concerns that the new law would disadvantage them. A company like News Corp. can bargain for big bucks and, if Facebook or Google pull news services, would still be supported by the TV channels, radio stations and newspapers it owns. Independent outlets will benefit less from the law and don't have much of a safety net if news is pulled from Facebook's feed or Google's search.

Case in point, the CEO of Junkee, a youth publication, told a senate hearing that 75% of the site's traffic comes from Google and Facebook. Now Facebook's half of that equation is gone. Junkee is one of many small publications scrambling to regroup following Facebook's exit. Meanwhile, Google has this week agreed to pay Nine Entertainment and Seven West, two media behemoths with multiple newspapers and networks in both TV and radio, over AU$30 million per year. 

Google's deal with News Corp. is its latest to be cut. Curated stories from The Wall Street Journal, The Times and The Australian will appear in Google's News Showcase, for which News Corp. will get paid a "significant" fee. 

It may look like Australia is the little country that could, leading the charge for public-service journalism against big tech. But seeing a right-wing government funnel money into News Corp. should at least raise an eyebrow. There are big money agreements being announced, but how much will fund journalism and how much will simply fatten bottom lines?

Never ending story

After a dizzying period of growth, tech giants are on the cusp of being knocked down a peg by governments around the globe. The EU is readying two landmark legislations, the Digital Services Act and the Digital Markets Act, which will make Facebook and Google responsible for illegal content on their platforms, and target tech companies with stricter anti-competition measures. Meanwhile, the US Department of Justice opened a landmark antitrust case against Google last October. 

That's unlikely to be the end of it. Misinformation and hateful content spreads through Facebook too often, something President Joe Biden wants to fix, while Google and Apple have both been accused of unfair practice within their respective mobile app stores.

In other words, regulating and legislating big tech is inevitable. But details matter and it's possible for governments, in their enthusiasm to clamp down on Silicon Valley, to make a situation worse. 

Australia's new law may end well. Maybe the AU$30 million paid to the country's media giants will lead to a significant uptake of journalists. Maybe Facebook will work out a deal to return news to Australia and independent outlets will be better off than ever. 

But that's not what's happened so far. So far, small publishers have had the worst of both worlds: Google is paying huge licensing fees to the industry giants while Facebook's axing of news content makes it harder for the little guys to compete.