February 2021

News Media and Digital Platforms Mandatory Bargaining Code Bill 2020 - Second Reading

This is an important piece of legislation. Indeed, it is an historic piece of legislation and it's one that much of the world is watching quite closely. The issues that we're seeking to grapple with here in this parliament are issues that the whole world is grappling with, and these are really about the ubiquity, dominance and indispensability of big tech in our lives these days and how government must respond to regulate elements of big tech's behaviour to ensure that they continue to provide public benefit but also protect the public from harm. This is just one element of the public policy challenge we all face, but it's quite an important one.

The Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 responds to the key findings of the Digital Platforms Inquiry. As members here would know, the main thrust of the conclusions of that inquiry was that a bargaining power imbalance exists between digital platforms and Australian news media businesses. That's a commonsense conclusion that I think any ordinary person in the street would quite readily recognise to be the case.

It's an interesting story, because these digital platforms have almost emerged from nowhere. Fifteen years ago, or less even, companies such as Facebook, Google and, indeed, Amazon were scrappy start-ups. They were the disrupters of traditional industries and businesses. But these days such companies, not only in size, market capitalisation and corporate power but in terms of their dominance in our lives, are the behemoths of today.

It wouldn't surprise you to know that, as a Liberal, I believe, generally speaking, in the principle of noninterference in functioning marketplaces and particularly that commercial organisations should be left to compete on fair terms and reach commercial deals at arm's length and without government interference. Provided they are not violating any laws or causing any harm to consumers, the private sector and the commercial world should, by and large, be left to their own devices. But there are certain situations well recognised in competition law where markets do not function perfectly, particularly because of a monopolistic market structure, an oligopolistic market structure, where there is an asymmetry of information, where the barriers to entry are high, where competition might be limited because of the dominance of a few key sectoral players. It's well recognised on both sides of politics that in that sort of case, in the case of a demonstrated market failure or suboptimal market functioning, there is a role for government intervention. I think that's very much the point we've reached today.

Digital platform entities such as Google, Facebook and Amazon are really the railroads and utilities of our day. What railroads and utilities were to the early 20th century, these platforms are to the early 21st century. They are the medium not only through which we communicate but through which we conduct commerce, consume entertainment and consume news and journalism. In many senses, they're an indispensable part of our everyday lives. That's particularly true in advanced economies, such as Australia, but I think it's also true in much of the Western world and, increasingly, in the developing world as well.

The traditional news media has come under a number of competitive pressures in recent years. News media traditionally relied upon classified advertising to form the backbone of its revenue and the backbone of its business model, and classified advertising really underwrote newsrooms, journalism, printing costs and everything else. In many instances, for print journalism, as much as 90 per cent of their revenue came from classifieds, and classified advertising has been disrupted. It's been disrupted in a number of ways. If you look for a job in Australia these days, you might go to Seek. If you're looking to buy a car, you might go to carsales. If you're looking to trade something second hand, you might go to Gumtree. All of these verticals have been taken from traditional print media. And they haven't necessarily all gone to Google or Facebook or Amazon, the big tech companies; they've gone to many other well-established and successful technology companies that have taken a chunk of this business and found a way to make money from it.

The news media here is not unique, in any respect. If you think of the music industry, this was disrupted from the late 1990s onwards first by Napster and then by entities like iTunes, where the consumption of songs was unbundled from albums and record producers so that people could purchase or listen to individual songs and it became disaggregated. So people now, by and large, listen to music on demand through platforms like Spotify and iTunes. Music has been through this sort of disruption.

At the moment, credit cards are going through a disruption with the buy-now pay-later industry. We see a generational divide here in Australia and elsewhere, where younger consumers tend to steer clear of traditional credit products, particularly for daily and discretionary consumption. They're increasingly using products like Afterpay and Zip, which are buy-now pay-later products. These are disrupting the credit card model, which has been a huge profit source for the big four banks in Australia over a number of years.

Today we've got broadcast and cable TV being disrupted by on-demand and streaming services, be it Netflix, be it Stan, be it Disney—any number of things. I have, at least, three or four going in my home, as I'm sure many of you do. There are any number of sectors being transformed by the digital disruption that these platforms allow to happen, and, in many respects, I think this disruption is a good thing. It's improving value for consumers. It's giving consumers greater choice. In many respects, it's allowing people who would otherwise not be able to reach a marketplace to find a marketplace for whatever it is they're producing. It's lowering barriers to entry to many businesses. We need to recognise, as in the history of much of our modern economy, that things change, and when things change it can be threatening and disruptive to people. But, generally speaking, over the course of our modern history, it's been for the betterment of consumers and citizens.

In this new world there is a place for quality print journalism and, increasingly, consumers are prepared to pay for quality print journalism. Generally speaking, that hasn't been the model throughout the world because classifieds and advertising revenue underwrote it and consumers didn't really need to pay much for the product. But we've seen around the world that traditional print businesses have been able to adapt and pivot and innovate and find a new way to monetise what they're producing. You see it with The New York Times, for instance, which has now built a very successful subscription model in which users pay for the content and quite happily do so. The New York Times continues to employ journalists and continues to produce good-quality journalism. The Financial Times and The Economist are the same. The challenge here is that you do need to change your business model and you do need to find a way to change consumers' behaviours and monetise the product that you're producing. But I do still believe, fundamentally, that there is a demand amongst the Australian public for quality print journalism.

Through all this legislation it's important to note that we are not seeking to protect print journalism from competition. I don't think that would be the right thing to do. We're not seeking to restrain innovation. Again, I don't think that would be the right thing to do. We're not seeking to prevent disruption, disruptive as it might be. As I said, overwhelmingly, that's been a force for good for consumers and for citizens. But what we are seeking to do with this legislation is level the playing field—I think that's the best way to describe it—for commercial deals to be reached between the digital tech platforms and news media organisations.

It's clear, and I think people know this, that there is a two-way value exchange that goes between digital platforms and the news media. Digital platforms get value from being able to host news media content, so if people want to find some news they'll use the digital platform to search for whatever it might be. It might be traffic congestion on a road near their home. It might be a local development. It might be opening hours or a new restaurant that's opened. Often the digital platforms gain value from their ubiquity that this allows them to provide that they become a one-stop shop, if you like, for people searching for information. But the news organisations also extract value from this, because it's a lead generation service—and businesses find this as well. People who might find an article, for instance, in TheSydney Morning Herald through Google will click through to that link. The Sydney Morning Herald has their eyeballs, so to speak, and is able to show them advertising. It's able to put the article behind a paywall, if it wants to. It's able to encourage consumers to subscribe to the SMH and any number of things, so there is a benefit that the digital platforms give to the news media. I think the experience so far of the imbalance of bargaining power that exists between news media outlets, particularly the smaller ones in Australia—small by global standards—and the digital platforms means that this value is not being realised, that people are not able to reach commercial deals to allow them to extract or exploit this inherent value.

I don't think this is an easy area of public policy, but I believe in this instance we've struck the right balance. What we're seeking to do through this legislation is to establish a code of conduct for news media businesses and for digital platforms. What the legislation will allow is for the Treasurer to determine that a digital platform is subject to the code, which means it will be bound by the code, on advice from the ACCC and Treasury that a significant bargaining power imbalance exists. The Australian Communications and Media Authority, or ACMA, will be able to assess the eligibility of Australian news media businesses to participate in this code, and then the legislation puts in place a framework that encourages commercial agreements to be reached between these entities—between the digital platforms and the news media businesses. Not only does the framework allow commercial agreements to be reached between these entities outside the legislation; it in fact encourages entities to do so because of some of the consequences if an agreement is not reached. If an agreement is reached on commercial terms by these organisations and consenting parties and not corrupted by a bargaining power imbalance, those agreements can stand. I've been encouraged in recent days to see that, according to media reports, deals have been reached between Google and Seven West and I believe with Nine and Fairfax as well, which is exactly what we'd like to see happen—commercial deals reached between entities on the basis of fair market principles.

The legislation also puts in place a series of safeguards that if no agreement is reached—and it's our view that if no agreement can be reached it's probably due to the imbalance of bargaining power between the sides—then a party can seek to trigger the code and that will trigger a number of things. It will trigger minimum standard obligations about how a digital platform must treat the news media business. It triggers a requirement for the parties to engage in good faith bargaining to reach an agreement and it also contains a provision for final offer arbitration, which would allow an independent party to force the parties to accept certain terms on the basis of final offer arbitration or baseball arbitration.

It will be the ACCC, the Australian Competition and Consumer Commission, that will be responsible for enforcing the code, and the operation will be reviewed by Treasury after one year. Recent changes announced just yesterday by the Treasurer and the minister for communications go some way to alleviating some of the concerns that digital platforms have about their own business model, particularly a lessened requirement for advance notice of algorithm changes which I accept is a legitimate interest they have.

As I said, I think this is quite a difficult area of public policy, or certainly not an easy area of public policy. Jurisdictions around the world are grappling with these questions about digital platforms, which, in many respects, have transformed people's lives for the better by allowing them to be better connected; by allowing them to share information more readily; by allowing them to access markets, if they're producers, more readily; and by allowing them to know what's going on around the world more readily. How do we ensure that those sorts of benefits are maintained but that some of the harm that we've seen that's come from the ubiquity and dominance of these platforms is mitigated or constrained?

This is one element, of course: the commercial harm that's being caused to a particular sector of the economy—but one that has an outsized importance in our democracy because, as the previous speaker, the member for Kingsford Smith, said, the fourth estate has a critical role in holding power to account and scrutinising the actions of the executive and the legislature too, which improves the quality of our decision-making and our democracy. But another element is making sure that platforms are not doing things like hosting content that causes deeply divisive social harm, be it incitement, be it violent or abhorrent material, or be it propagating falsehoods and misinformation or being used as a vector for foreign interference by big state actors.

With all that in mind, I commend this legislation to the House.