Credit: Shutterstock.com

Facebook and Google will be forced to pay media companies in Australia for news content they use as the COVID-19 crisis causes a collapse in advertising revenue.

Federal Treasurer Josh Frydenberg has asked the antitrust regulator to develop a mandatory code of conduct to force the digital media giants to share advertising revenue and correct what the regulator says is an imbalance in bargaining power.

"Facebook and Google have each become unavoidable trading partners for Australian news media businesses in reaching audiences online," Frydenberg said in a statement.

The move follows a report last year by the Australian Consumer and Competition Commission, which found the companies wield too much influence over Australia's news and advertising markets, stifling competition and depriving consumers of control over their personal information.

Responding to last December's report, the government had told the digital media giants to negotiate a voluntary code of conduct with the ACCC by November of this year.

But this week the government said it would make the code mandatory and brought forward its completion to July.

"The Australian media sector was already under significant pressure; that has now been exacerbated by a sharp decline in advertising revenue driven by coronavirus," Frydenberg said.

"At the same time, while discussions between the parties have been taking place, progress on a voluntary code has been limited, according to recent advice provided by the ACCC following a request by the government for an update.

"The ACCC considers it is unlikely that any voluntary agreement would be reached with respect to the key issue of payment for content."

The mandatory code will cover the sharing of data, the ranking and display of news content, and the monetization and sharing of revenue generated from news. It will also establish an enforcement, penalty and binding dispute resolution regime.

"We're disappointed by the government's announcement, especially as we've worked hard to meet their agreed deadline," Will Easton, managing director of Facebook Australia and New Zealand, said in a statement.

The company pointed to the A$5 million (US$3.15 million) it committed a year ago to spend on journalist training and project funding.

Google also said it had been consulting with news organizations. "We have sought to work constructively with industry, the ACCC and government to develop a Code of Conduct, and we will continue to do so in the revised process set out by the government today," the company said in a statement.

However, news organizations welcomed the move.

"For two decades, Google and Facebook have built trillion-dollar businesses by using other people's content and refusing to pay for it," Newscorp Australia chief executive Michael Miller said on LinkedIn. "Their massive failure to recognize and remunerate creators and copyright owners has put at risk the original reporting that keeps communities informed."

In its December report, the ACCC also found that of every $100 spent by advertisers on online advertising (excluding classified advertising), $47 went to Google and $24 went to Facebook.

Along with recommending the digital giants share their advertising revenue, the ACCC also recommended the platforms be required to gain "specific, unambiguous and informed" consent from individuals for their data being collected, to notify consumers when their information is being collected, and to enable the erasure of personal information.

READ MORE:

Facebook and Google Face Crackdown in Australia as Regulators Propose Limiting Their Market Power

Australia Could Launch Cases Against Google and Facebook, Says Former Regulator