Has Rod Sims cracked the digital code?

ompetition tsar Rod Sims is not the first to try to find a way to force Facebook and Google to pay for the value they get from journalism on their platforms.

And the draft of a compulsory code of conduct – which is a negotiate-arbitrate model – is far from the finish line in the battle to reel in the power of big tech.

In its decision, the independent arbitrator must consider: direct value of news content, how much money is directly made from ads around news content; indirect value, the value to the platforms of actually have the content there – a much harder prospect to measure; the cost of producing news; and whether the payment amount would place an undue burden on Facebook or Google.

He says it is the ACCC's job to correct the imbalance in bargaining power, which is the core issue, rather than the regulator or government setting the price digital platforms should pay media companies.

Rod Sims believes the code of conduct will see meaningful payments made to media organisations. Edwina Pickles.

If Google had no news in any of its search results and rivals with tiny market share by comparison, such as Microsoft's Bing, and DuckDuckGo had all that news instead (and paid for it), what value and users would Google lose.

That's the value the code of conduct is trying to provide.

Sims and the government want to curb a major imbalance in bargaining power between Facebook and Google, and local media companies, with the primary goal of fair financial compensation for the value created for the digital giants by having journalism on their platforms.

"What this was all about was the imbalance in bargaining power, the market failure that comes from that, and underpayment for news having a detrimental effect on Australian society.

When you've got this level of imbalance in bargaining power, forcing negotiation, forcing mediation will get you so far.

The code will give digital platforms and media companies the opportunity to agree to a deal.

Google and Facebook will have armies of lawyers combing through the draft code of conduct.

Don't expect the code of conduct to be the end of Google and Facebook's efforts to not pay for news content.

Google Australia head of policy Lucinda Longcroft says the ACCC code is not grounded in commercial reality and continues the tech giant's line that there is no market power imbalance.

That creates incentives for both digital platforms, like ourselves and the news media industry, to negotiate and to develop ways to provide our services better in improved and innovative ways for Australians in the future.

In its submission on the drafting of the code, Google used similar language to label regulation forcing it to pay for news as a "link tax" – what the Spanish effort to rein in Google's power of news colloquially became known as.

Sims says the ACCC has learned from the experiences of Spain, France and Germany in coming up with its model, in that it's related to Google Search and Facebook News Feed, the core products of the two US giants.

ACCC chair Rod Sims unveiled the new code that will force Google and Facebook to pay for news content. Edwina Pickles.

"We do not accept that the current value exchange with NMBs associated with search results reflects an imbalance in bargaining power.".

Though Google News and Google Search are different products, the US tech giant is stating its decisions hurt small and medium publishers in Spain, yet it does not have more power in bargaining with media companies over search results, an area of its business where it is hugely dominant the world over.

"A fundamental feature of the search engine business model is non-monetary value exchange between the search engine, publishers, and users," Google says in response to being asked how to address the power imbalance between it and media companies.

indexing, or displaying links and snippets – the fact we don’t pay for these activities is not a result of any bargaining power imbalance.

"To the extent that there is a bargaining power imbalance between NMBs [news media businesses] and Google, the bargaining framework should seek to correct that imbalance by creating negotiating conditions that would exist between two arms’ length parties with equal bargaining power.

"It should not create a framework that creates a bargaining power imbalance or that requires Google to act against its commercial interests (for example, by requiring us to make payments for inputs that don’t generate economic value).".

If Google and Facebook ran newsrooms, employed and paid thousands of journalists across Australia, then a code of conduct would not be necessary.

Instead, the code seeks to remunerate the creators of journalism for the value Google and Facebook get from having it on their platforms.