Google threatens to withdraw search functions in Australia over upcoming media law

Facebook has voiced similar concerns over the proposed code of conduct for tech giants in Australia

Google said on Friday that it would block its search function in Australia entirely if the government proceeds to pass a legislation that would force Google and Facebook to compensate local media firms for sharing their content.

According to Reuters, Google Australia's managing director Mel Silva told an Australian Senate hearing on Friday that if the proposed code of conduct becomes a law, Google would have no other option but to withdraw Google Search from Australia.

Silva described the current form of the code as "unworkable" and said that withdrawal from Australia would be a "worst-case scenario" for the company.

"The code's arbitration model with bias criteria presents unmanageable financial and operational risk for Google," she said.

In April, the Australian government asked the consumer-rights watchdog Australian Competition and Consumer Commission (ACCC) to create a mandatory code of conduct to instruct tech giants on how to share the revenue they earn by using the content produced by local media outlets.

Under the proposed law, which has broad political support in Australia, Google and Facebook would be required to pay local media firms, ranging from public broadcasters SBS and ABC to Rupert Murdoch's News Corp, for showing snippets and links to news stories in its search results.

The most contentious part of the draft law requires tech giants to enter mandatory arbitration with local publishers if they fail to reach an agreement within three months over the value of their content. The mediator would then select between the payment proposal put forward by the tech firm and the proposal coming from the news outlet.

The requirement, according to Silva, would break the way search engines function.

Facebook has also voiced similar concerns, describing the code as "unworkable" in its current form and stating that it would force Facebook to stop publishing Australian news.

Earlier this week, the US also urged the Australian government to suspend the proposed code of conduct and adopt a voluntary code instead.

"The US Government is concerned that an attempt, through legislation, to regulate the competitive positions of specific players … to the clear detriment of two US firms, may result in harmful outcomes," said the document, submitted to the Australian government by Assistant US Trade Representatives Karl Ehlers and Daniel Bahar.

The document added that such a move could "raise concerns with respect to Australia's international trade obligations".

Australian Prime Minister Scott Morrison reacted sharply to Google's statements made in the Senate.

"Australia makes our rules for things you can do in Australia. That's done in our parliament," Morrison said. "People who want to work with that in Australia, you're very welcome, but we don't respond to threats."

Earlier in July 2019, the ACCC published the final report on its 18-month inquiry into the impact of Facebook, Google, and other digital platforms on the day-to-day lives of the people in Australia.

The ACCC review found that for every 100 Australian dollars spent on online advertising, 53 go to Google, 28 to Facebook and 19 to other media firms.

The report proposed a number of bold recommendations to improve media competition in Australia while enforcing tougher regulations on major digital platforms.