The Federal Government has tech giants’ power firmly in its sights, with the consumer watchdog warning of a lack of competition and transparency in the digital advertising space.

Key points:

A new interim report from the Australian Competition and Consumer Commission (ACCC) inquiry into digital advertising zeros in on Google’s “significant presence” in the ad tech supply chain.

The report notes the company has “the ability and the incentive to preference its own ad tech businesses in ways that affect competition”.

It follows an ongoing debate about whether or not Google and Facebook should pay for news content that appears on their platforms.

As audiences have moved online, traditional media companies, including newspapers and television stations, have lost significant advertising revenue.

The Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020, created by the ACCC, seeks to rectify this by forcing the tech companies to pay media outlets.

“These companies have got enormous market power,” ACCC chair Rod Sims told 7.30.

“I think it’s only fair they pay for it.”

Debate over news payment fires up 

The Government says it wants digital platforms and media companies to strike commercial deals outside of the code but if a price cannot be agreed upon, an independent arbiter will decide.

The tech giants have argued the proposed code is one-sided and leaves them open to unreasonable demands for compensation.

Facebook said it would stop all news content being shared on its platform if the code goes ahead.

During a Senate hearing last week, Google Australia managing director Melanie Silva said the company would be left with “no choice” but to remove its search engine from Australia.

“Google and Facebook are being asked to do something they really don’t want to do, which is to pay for something they now get for free,” Mr Sims told 7.30.

Newscorp, Nine, Seven, the ABC and SBS are among those who could receive payments under the code.

Mr Sims told 7.30 he expects lump sum payments would be made by tech companies for access to news, instead of pays per click.

‘Pure protectionism’

Critics of the code are concerned it could endanger a free and open internet, branding the legislation “absurd” and “unprecedented in its idiocy”.

Journalism professor Jeff Jarvis, director of the Tow-Knight Center for Entrepreneurial Journalism at the City University of New York, is a long-time defender of Google.

“This legislation is pure protectionism out of the brain of Rupert Murdoch to try to create a tax on his competitors,” Professor Jarvis told 7.30.

“What’s happening right now is the big old institutions are trying … to preserve what they used to do.

“If the Australian Government pushes ahead with this … they could well lose the internet to Australia.”

The City University of New York has received funding from Facebook for programs in the past.

Tech giants’ business models ‘being threatened’

Former Facebook Australia chief executive officer Stephen Scheeler believes the influence of the tech giant has grown to disrupt access to high-quality journalism.

“This isn’t just about who makes how much money,” Mr Scheeler told 7.30.

“This is about [how] we need a vibrant public interest, investigative, free journalism ecosystem in this country and in every democracy around the world.”

Mr Scheeler explained how his former employer is simply trying to fend off a threat to its business model.

“Facebook and Google are trying to hold back the dam from bursting,” he said.

“That opens the floodgates to having to perhaps pay for everything that goes on the internet that they happen to curate through their platforms.”

Other countries such as Spain and France have attempted similar regulation to varying degrees of success.

“We have this unique situation where sovereign countries are having to confront companies that, in many ways, are more powerful than they are,” Mr Scheeler said.

Google and Facebook declined interviews with 7.30.

Both companies say they hope to see a more workable code developed. They maintain they are open to paying for news, but would like to see their own news licensing programs used.