SYDNEY (Reuters) -- Facebook Inc will block news sharing on its platforms in Australia if a proposal to force the U.S. tech giant to share revenue with local media outlets for featuring their content becomes law, the firm said in a statement published on Tuesday.
Under Australia's closely watched internet reforms, the country will become the first to require Facebook along with Alphabet Inc's Google to pay for news sourced from media companies under a royalty-style system.
Facebook Australia Managing Director Will Easton said the proposed legislation misunderstands the dynamic of the internet and will damage news organisations.
"This is not our first choice - it is our last. But it is the only way to protect against an outcome that defies logic and will hurt, not help, the long-term vibrancy of Australia's news and media sector," Easton said in a statement.
"The proposed law is unprecedented in its reach and seeks to regulate every aspect of how tech companies do business with news publishers."
If Facebook enacted its changes, media companies and social media users in Australia would not be able to distribute any news articles on Facebook or photo and video-sharing site Instagram.
Like in most countries, Australia's traditional media companies in recent years have seen their mainstay advertising income streams eroded by online competitors, and consumers shy away from paid subscriptions.
Australia's competition regulator has argued the new legislation would allow news businesses to negotiate for fair payment for journalists' work.
The Australian Competition and Consumer Commission (ACCC) said there was a power imbalance between the big social media and search platforms and smaller Australian publishers.
Australia's Ministry for Communications did not immediately respond to Reuters' questions on the matter on Tuesday.
Google said in August its free search service would be "at risk" and users' personal data could be shared if it is made to pay news organisations for their content. The ACCC called the comments "misinformation".