Issue 91

No lessons were learned

Delivered on 14 December 2020 by Justin Pyvis. About a 5 min read.

The Australian government unveiled its 55-page News Media and Digital Platforms Mandatory Bargaining Code last week, designed to force Facebook and Google to pay local news outlets for content excerpts displayed on their platforms:

Australia finalised plans on Tuesday to make Facebook Inc and Google pay its media outlets for news content, a world-first move aimed at protecting independent journalism that has been strongly opposed by the internet giants.

Under laws to go to parliament this week, Treasurer Josh Frydenberg said the Big Tech firms must negotiate payments for content that appears on their platforms with local publishers and broadcasters. If they can’t strike a deal, a government-appointed arbitrator will decide for them.

I've opposed this from the start because Google and Facebook aren't "taking their news content without paying for it", as Denis Muller from the University of Melbourne's Centre for Advancing Journalism put it. Users on their platforms are posting links, which also include a thumbnail image and a short excerpt (similar to the Reuters link below). Presumably local media complained that people cared so little about the actual article that they never clicked it, depriving them of advertising revenue.

Australia to make Facebook, Google pay news outlets for content
Australia finalised plans on Tuesday to make Facebook Inc and Google pay its media outlets for news content, a world-first move aimed at protecting independent journalism that has been strongly opposed by the internet giants.

Fortunately the legislation has been watered down to the point where it will likely cause fewer distortions. This new concession is key:

...the revised code will now abide by an added “two-way value exchange” principle. This allows the monetary worth of traffic sent to news providers to be taken into account when determining the financial value of a particular news business’s content to the platforms.

[Another] concession is the halving of the 28-day notice period for the platforms to warn news websites of major changes to their ranking algorithms. These directly impact how news articles are displayed on Facebook’s Newsfeed and Google Search.

I suspect those new concessions, and the possibility of further concessions to come, mean that Facebook and Google will continue to operate in Australia. It could even prove profitable for Facebook and Google, should the new arbitration process (when no agreement can be reached prior) value the aggregate clicks that Facebook and Google deliver to local news outlets as greater than the value of the social media excerpts.

But what really irks me is that the Australian government is wasting everyone's time with this kind of protectionist clap-trap following a recession and ongoing global pandemic. This is a government whose drastic and ill-conceived pandemic sending is expected to send net debt up more than twofold. I just wish it would spend more time on removing activity-stifling constraints such as this proposed legislation. But no, it seems behind the scenes they've carried on as if nothing has changed, looking to dive ever deeper into their assault on technology and innovation in Australia.

Alas, that is how the political incentives line up. Beat your chest pretending to be looking out for the consumer (who clearly prefer Facebook and Google's summaries) when really all you're doing is supporting your mates called Murdoch, Stokes and Packer at the consumer's expense.

Speaking of suffocating regulation, wither California?

Elon Musk last week announced he was no longer a resident of California, opting to live in Texas instead:

"You have a forest of redwoods and the little trees can’t grow", in the interview, which took place during the Wall Street Journal’s annual CEO Council Summit, Musk said, "California has been winning for a long time, and I think they’re taking it for granted".

Musk has long had beef with California, which back in May reached boiling point after Musk threatened to move the Tesla plant out of California and said he was going to sell all of his physical possessions, mostly Californian houses. His threat was met by this delightful tweet from California Assemblywoman Lorena Gonzalez:

One billionaire moving to Texas isn't the end of the world for California. But a pattern is starting to emerge:

HP Enterprise also announced earlier this month that it would relocate its headquarters from San Jose to the Houston suburb of Spring. Palantir Technologies relocated from Palo Alto this year, landing in Denver. The tech giants Google and Apple have been expanding their presence in Austin over the last several years... [Now] Oracle Corp. is the latest Silicon Valley-based company to exit California amidst the pandemic with plans to shift its headquarters to Austin.  The $39 billion-a-year tech giant announced the headquarters move in a regulatory filing after stock markets closed Friday.

That wouldn't be a problem, except California - the state with the highest state-level sales tax rate at 7.25% - needs all the businesses and taxpayers it can get:

California has the fifth-highest debt of any state... Combining California’s federal, state, and local debt, however, brings California’s debt total to over $1 trillion. According to this report, the debt would cost each resident of California $33,000 or each taxpayer $74,000.

Relatively nice weather can only get you so far. Perhaps a good place to start would be for California's elected officials to stop flinging expletives at any of its residents, even those big bad billionaires.

The antitrust lawyers want to break up Facebook

Facebook was hit with an antitrust lawsuit last week:

The Federal Trade Commission (FTC) and 46 states sued Facebook Inc. on Wednesday, accusing the social-media giant of buying and freezing out small startups to choke competition.

The FTC’s sweeping antitrust case seeks to force Facebook to unwind its acquisitions of WhatsApp and Instagram, two of its landmark deals. The states filed a separate and similar lawsuit, alleging a lack of competition has harmed consumers, including by weakening privacy protections.

Regular readers know I don't like (and don't use) Facebook. But I don't support this lawsuit. This is the politicisation of antitrust, nothing more, nothing less. Facebook does not have a monopoly: has the FTC not heard of TikTok (it's not mentioned once in its 53-page complaint)? Snapchat? Google?! (remember Facebook is first and foremost an advertising company, not a social media platform). Its acquisitions of Instagram and WhatsApp were also approved by the very same FTC. Nothing has changed since then, except the people in charge of the FTC (political appointees).


Issue 91: No lessons were learned was compiled by Justin Pyvis and delivered on 14 December 2020.