Tech Giants vs Regulators

INTERNATIONAL/ ECONOMY/ GOVERNANCE

Topic:

• GS-2: Effect of policies and politics of developed and developing countries on India’s interests
• GS-2:  Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

Tech Giants vs Regulators

Context: Parliament in Australia is debating legislation that would require Google and Facebook to enter into payment negotiations with media companies for using their content, with an arbiter mandated to adjudicate in the event an agreement cannot be reached.

Response from Tech giants

• Counter arguments: Facebook & Google argued that the media industry was already benefiting from traffic routed to them by the digital platforms, and that the proposed rules would expose them to “unmanageable levels of financial and operational risk”.
• Threats of withdrawal: Google threatened to remove its search engine from Australia. Facebook said it could block Australian users from posting or sharing news links if the proposed norms on royalty payments were put into operation.

What is the Core Issue in Australia?

• Importance of news for Tech Giants: While links to news may not be direct advertising money-spinners for Facebook or Google, both see the presence of news as an important aspect of audience engagement with their products.
• Payment of royalties not an issue for Tech Giants: While both companies are prepared to give some money to news publishers, they want to make deals on their own terms. 
• Control over payout process: The fight in Australia is evidently centred on how much control these companies would be able to retain on their payout process — operational aspects such as deciding the quantum of payments for news feed sources, and having to reveal changes in their algorithms.
• Balance of Bargaining Power: But Google and Facebook are two of the largest and most profitable companies in history – and each holds far more bargaining power than any news publisher. The news media bargaining code sets out to undo this imbalance.
• Commercial Agreement preferred: The media bargaining code being introduced is far too systematic for them to want to accept it. They would rather pick and choose commercial agreements with “genuine commercial consideration”, and not be bound by a one-size-fits-all set of arbitration rules.
• Difference with EU regulation: European authorities have specifically linked payments to copyright, without putting a forcing device into the agreements. Australia’s code, on the other hand, is almost entirely focused on the bargaining power of news outlets vis-a-vis the tech majors, and has some coercive features as well. 
• Issue of Power Equations: It is more of a competition issue in Australia, of power equations between traditional news outlets and tech platforms, with the question of abuse of dominance by the latter hanging in the balance

Case Study: South Korea

• Naver Online Platform: Nearly four years previously, Naver, South Korea’s most popular news site and biggest search engine (like Google), had thrashed out an unusual model for working with Korean news publisher.
• New Business model to deal with News Media: Naver started designating some 125 outlets as “Naver News in-link partners”, and paying them for published stories on Naver. Another 500 odd news outlets are unpaid “search partners”. The total payout was over $40 million in 2017.
• Criticism of model: While this may not be the perfect model — news outlets have generally been unsatisfied with their share; and there are allegations that Naver manipulated the ranking of articles critical of South Korea’s top football association on the latter’s request — the template remains operational in a nation where nearly 85% of the population accesses news online.

What has been the Firms’ response elsewhere?

• Facebook plans to launch its news tab feature (available in the US since 2019) in the UK, with likely tie-ups with The Guardian, The Economist, and The Independent. 
• Google is rolling out its news offering platform, Google News Showcase which features story panels that allow participating publishers to package the stories that appear within Google’s news products. It has on board more than 450 publications across a dozen countries, 
• Google had announced in December 2020 that it would “soon start offering people access to paywalled content in partnership with select news publishers”. It had said it would pay participating partners to provide limited access to paywalled content for News Showcase users.
• Both the platforms of Facebook and Google aim to formalise payment pacts with news outlets
• However, Google’s first response to France adopting the EU copyright rules was to stop displaying news snippets – until the French competition regulator stepped in, in October last year. 
• Google also stopped its Google News service in Spain, which made payments to publishers mandatory.

Do You Know?

• In India, digital advertising spends in 2019 grew 24% year-on-year to Rs 27,900 crore, according to EY estimates, and are expected to grow to Rs 51,340 crore by 2022.
• Globally, Facebook and Google together command 61% of the market share in digital ad spends, according to Edelweiss Research; Google leads with 37%. 

The debate in India

• Big Market: According to a FICCI-EY report on India’s media and entertainment sector for 2020, there are 300 million users of online news sites, portals and aggregators in the country — making up approximately 46% of Internet users and 77% of smartphone users in India at the end of 2019. With 282 million unique visitors, India is the second largest online news consuming nation after China
• Dominance of Intermediaries:  Policymakers in India have so far focused on the dominance of intermediaries such as Google and Facebook, which are positioned in a way that service providers cannot reach customers except through these platforms.
• Lacks adequate discussion: A substantial discussion on the impact of intermediary platforms on the health of news media outlets is yet to commence in any meaningful way here.
• Struggling Startups: Other major news aggregators in India are Dailyhunt and InShorts. According to a January 2020 report by Harvard University’s Nieman Lab, publishers were initially paid between Rs 5-6 lakh monthly for content hosted on Dailyhunt — but they started going off the platform after terms were changed.
• Implication of Australia Events: The tussles in Australia and elsewhere could have broader implications for the regulation of the digital economy in India in the longer term.

Conclusion

Google and Facebook have locked horns with Australian govt over laws that propose to make them pay news organisations for using their content. The outcome of the fight will have implications for India as well.

Connecting the dots:

• Dominance of Big Tech: Click here
• Google Search Monopoly: Click here