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Opinion

Facebook's Australia tantrum shows why Big Tech must be reined in

Other nations likely to follow Canberra's lead with their own regulatory frameworks

| Australia
Facebook has chosen to take a confrontational approach.   © AP

Dave Sharma is a member of Australia's House of Representatives and chairs the Joint Standing Committee on Treaties. He was Australia's ambassador to Israel from 2013 to 2017.

Twenty years ago, companies such as Facebook, Google, Netflix and Amazon were scrappy startups. Imbued with idealistic aims, they were the disrupters of traditional industries and businesses.

The digital platforms are now the behemoths. In size, market capitalization and corporate power, but also indispensability and ubiquity, they are the railroads and utilities of the twenty-first century. Not only do we use them to communicate and conduct commerce, they are the medium through which we consume entertainment, prosecute politics, and catalog news and information.

Such has been their growth over the past two decades that the poacher has now turned gamekeeper. Much like their twentieth-century counterparts, the digital platforms are fighting hard to maintain their position of unique market dominance and retain the perquisites of monopoly power.

Governments the world over are grappling with the challenge of how to regulate a sector that has been the regulatory equivalent of the Wild West -- beyond lawful frontiers.

This needs to start from the premise that Big Tech and the disruption it has wrought has done much to liberate and improve our lives. We are able to communicate and stay connected with friends and family all around the world for free. For those of us who grew up with expensive international phone calls and aerogrammes, this has been a revolution.

Consumers now have greater choice and information, and are no longer confined to their local market. Producers can reach a potentially massive market for minimal cost. Barriers to entry have been lowered for many businesses. Whole sectors, from share trading to holiday accommodation, have been disintermediated.

Citizens can stay abreast of developments all across the world, while oppressive governments struggle to censor the news and stifle their populations, and can no longer hide their crimes from the outside world. All this disruption has overwhelmingly been for the good of citizens and consumers.

But Big Tech has now become a critical infrastructure. It is ubiquitous, dominant, and in many respects indispensable to modern economic life. Some degree of increased government regulation and oversight is inevitable.

Getting the regulatory framework and balance right in dealing with Big Tech is the public policy challenge of our age. We need to preserve the sizable public benefits of Big Tech, while regulating to limit public harm but not stifle innovation or competition.

The massive growth in Big Tech in the past two decades means it now benefits from a gross imbalance in market power. This is exacerbated by its multinational character, putting it beyond the scope of many national jurisdictions.

This imbalance has made its impact profoundly felt on traditional news media, to the point that this sector now faces extinction. The digital platforms, particularly Facebook and Google, host news content produced by traditional news media.

In doing so, they accrue significant benefits. Such news content improves the value of the platform as a one-stop-shop for information, attracting more views and visits. And the digital platforms can harvest the data from these views and visits and turn it into advertising dollars.

In a functioning commercial context, traditional news media would be able to negotiate and extract its share of the value from these digital hosts. In turn, the digital platforms might extract some value from the news media for the lead generation service they provide.

But the imbalance in market power means no commercial deals are being reached. The digital platforms pay nothing for their exploitation of the news content they host, content that is paid for and generated by others. And such is their centrality to consumer channels that it is unrealistic for news media to take their goods elsewhere.

The imbalance in market power means no commercial deals are being reached.   © Sipa/AP

In Australia, we are seeking to address this issue. Legislation we introduced into Parliament last week, the News Media and Digital Platforms Mandatory Bargaining Code, is intended to ensure that the digital platforms reach commercial terms for the news content they currently take for free.

Commercial negotiations and agreements are encouraged in the first instance. But if commercial deals are not reached, we will impose mandatory arbitration to force such agreements.

Faced with this prospect of mandatory arbitration, Google Australia reached commercial deals with major news media outlets in Australia last week. Facebook chose to take a confrontational approach instead, stripping Australian news media pages from its platforms so it would not have to negotiate a commercial deal with news organizations.

Rather than coming to the table, Facebook sought to overturn it. Facebook's actions revealed that big tech's sense of exceptionalism - that the usual laws and rules do not apply to it - remains alive and well.

The reaction was one of swift condemnation. Political leaders from around the world, and of various ideological shades, joined Australian politicians in calling out Facebook for this attempt at intimidation.

In choosing to wield its market power this way against a sovereign state, Facebook unwittingly demonstrated exactly why big tech must be reined in, and put on a similar regulatory footing as other mature industries. After the backlash to Facebook's brinkmanship, Facebook blinked.

Facebook has since cut a deal with a major news media outlet to pay for content, and reversed the ban of news on its Australian site. Australia intends to proceed with its legislation establishing a mandatory bargaining code. And other jurisdictions are likely to follow our lead with their own regulatory frameworks.

The days of the wild west are over. Big tech must grow up, and assume the responsibilities that must necessarily accompany their immense power.

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