The architect of a law passed last year to address the massive imbalance in bargaining power between Australia’s news media businesses and tech platforms like Google and Facebook explains why it was so successful.

The Tinbergen Rule, named after one of the first two Nobel laureates in economics, says in effect that each policy instrument must be targeted at achieving one policy objective. It can have side benefits, but to be effective each policy instrument needs to stay true to the single objective for which it was designed. All policymakers should be aware of and adhere to this rule.

The news media bargaining code (NMBC), passed by the Australian parliament in February 2021, despite threats to remove Google Search from Australia and to take all news and more off Facebook, is a great example of this.

The NMBC’s objective was to address the massive imbalance in bargaining power between Australia’s news media businesses and the platforms. Google and Facebook need to have news on their platform to maximise user attention and so enhance the advertising revenue on which they depend, but they do not need the content of any particular news business. On the other hand, each media business needs to be on each of the platforms. 

This imbalance, or market failure, means commercial deals cannot be done to achieve fair payment for the benefit the platforms gain from news media content on their platforms. The outcome is that less journalism can be afforded. Journalism benefits society in many ways, even for those who do not access it, as it holds the powerful to account, provides a journal of record and is a forum for ideas. While not all market failures need to be addressed, this one needed to be and was with the NMBC.

Prior to the Australian NMBC being passed, the news media businesses were unable to negotiate with the platforms for any payment for their content; with it they could require the platforms to negotiate and trigger arbitration if those negotiations did not yield an appropriate result. The threat of arbitration evens up the bargaining power as all parties wish to avoid having an arbitrator determine commercial arrangements; it is much better to have this rather than a take-it-or-leave-it offer from a monopoly, but even better to settle a commercial arrangement.

Australia’s NMBC has been extremely successful in achieving its stated objective. From not being able to engage with the platforms, the Australian news media businesses that have deals under the NMBC are comfortable with them, and these deals are yielding over A$200m per annum to the news businesses. Further, the platforms have likely done deals with media businesses employing well over 95% of Australian journalists.

The NMBC has, however, been criticised for the fact the deals reached were not transparent; that it favours the incumbents and so has not promoted media diversity; and that no platform has been designated under the NMBC and there have been no arbitrated outcomes. 

Transparency was not an objective of Australia’s NMBC. Not only would the commercial deals not be transparent if the bargaining power had been equal in the first place, but any arbitrated outcomes under the NMBC were required under the legislation to be kept confidential. The reason for this was that making the commercial or arbitrated deals transparent may see different deals done or achieved to the detriment of the news businesses.

In relation to diversity, the objective of the NMBC was to allow commercial negotiations for payment for existing content; how could the platforms be required to pay for content not yet created? The NMBC was only one of nine recommendations from the Australian Competition and Consumer Commission’s 2019 digital platform inquiry affecting media. Others, such as government grants to support media and allowing tax deductibility for donations to the media, would benefit media diversity.

Designation and arbitrated outcomes were not the objective of the NMBC. The hope was that the threat of arbitration would see commercial deals achieved. These were, however, achieved with the threat of designation.

There are, however, two issues that need to be addressed. First, Google has done deals with virtually all media companies but has drawn the line at a very small number that it argues should not qualify under the NMBC because they do not produce public interest journalism. Those media businesses without a deal strongly object to being left out. The Australian treasurer has recently launched a review of the NMBC as required under its legislation, and the issue of whether the criteria dealing with which media businesses should be eligible will be addressed in this. The Australian treasury will assess whether all that should have got a deal did in fact get one and, if not, why not.

More concerning is that Facebook has done many fewer deals than Google, including not having done deals with the SBS, Australia’s multicultural media business, or The Conversation, which allows collaboration between Australian academics and journalists to publish research-based news. Both would qualify under any NMBC criteria.

A key question, then, now or following the treasury review, is whether Facebook should be designated under the NMBC. Unless Facebook does more deals, then this would appear appropriate.

Rod Sims was chair of the Australian Competition and Consumer Commission until March 2022.