“Sovereign risk” isn’t a term you hear much these days. It was thrown around a lot, however inaptly, by the Coalition, mining companies and their media apologists a decade ago in relation to Labor’s mining tax.
It was employed occasionally by the energy sector in the debate over the government’s proposal to give itself a divestment power in relation to energy companies. And recently Clive Palmer, a long-term abuser of the phrase, has invoked sovereign risk to describe Western Australia’s legal action against his $30 billion damages claim, and been echoed by far right media supporters in doing so.
Now the government is pursuing a policy that, in its rejection of the rule of law and its arbitrary market intervention at the expense of investors and corporations, is the perfect embodiment of the idea of sovereign risk. And exactly no one is pointing it out — because Australia’s media companies are the beneficiaries of it, and the targets of it are two of the most hated companies in the world.
The government’s proposed News Media and Digital Platforms Mandatory Bargaining Code would be a draconian regulation to force two explicitly identified companies, Google and Facebook, to hand an unlimited amount of revenue over to Australian media companies, justified by a fiction that those companies steal news content.
The regulatory model was dictated by News Corp, which proposed the “final offer” arbitration process to the government. Under that process, if media companies and Google/Facebook can’t negotiate an agreement for remuneration for the use of news content, an arbitrator selects one of the two parties’ final offers and imposes it.
There is thus no limit to how much News Corp, Nine or other media companies could successfully demand from Google and Facebook under the regulation. The Liberal Party’s Peter Costello, chairman of Nine, says the platforms should hand over $600 million. News Corp says they should pay at least $1 billion.
If Google/Facebook fail to comply with the code, they face a penalty of 10% of annual turnover in Australia, which could be between $600-$1 billion.
As Quentin Dempster has noted, however, there are two media outlets that the government has specifically banned from benefiting from the code. As part of its pathological hatred on the ABC, the government has blocked the ABC and SBS from being able to participate in the process despite ABC news and current affairs content being trusted by Australians far more than that of News Corp or Nine.
The code is justified by a News Corp lie, that Google steals news content and makes billions of dollars from it. The ACCC forensically compiled evidence that this was false. Knowing that the News Corp claim was wrong didn’t prevent Treasurer Josh Frydenberg from spreading it himself. But the only theft here is what is proposed for Google and Facebook.
This fulfils, in every particular, the fantasy of sovereign risk about which business has long railed, and which has driven the imposition of investor-state dispute settlement clauses on economic vassal states the world over. A government, at the behest of incumbents that wield significant influence over the ruling party, arbitrarily proposes to transfer resources from innovative external firms that have out-competed lazy locals, without policy rationale or legal basis. It’s Banana Republic stuff.
At a point when the government, business groups and media companies are publicly hand-wringing about how to increase business investment to spur recovery, what signal does the code send to foreign investors? Don’t offer a product that’s too competitive for local firms, or you’ll have your revenue taken from you and handed to local duds.
For the avoidance of doubt, it couldn’t happen to two nicer companies. There are sound policy reasons to loathe Google and Facebook — for their relentless accumulation and abuse of personal data, for their anti-competitive acquisitions of smaller rivals, for their tax dodging, for their complicity in the spread of highly damaging, often literally lethal misinformation and propaganda.
But their alleged theft of news content isn’t one. The crime of Google and Facebook in relation to journalism is to offer a much more targeted way of delivering advertising to consumers than the clumsy method used by old media companies of spraying as many ads as possible at as many eyeballs as possible and using their influence with politicians to prevent competitors from offering consumers more choice.
News Corp and Nine, used to being the 800-pound gorillas of Australian media for decades, have been squashed by two 800,000 pound gorillas from the internet.
The result is to shut off the flow of ad revenue that once supported news-gathering. If Australians think that’s important enough to support, they should pay for journalism, either by buying it or funding it via government. Not abandon the rule of law and steal revenue from successful companies.
I haven’t really taken much notice of this “new stupid government doing Murdoch bidding” news but I do have 2 questions:
When you look at both those questions you have to say our local “privately” owned media is strangely shooting themselves in the foot.
Exactly, this has happened to an extent elsewhere e.g. some nations in the EU; ‘moral hazard’ by not indexing large media content which sent their clicks etc. through the floor then quickly backtracked….
Further, it is why many global corporate entities would like to nobble the EU aka Brexit, due to plans to regulate and/or tax cross border transactions of ‘no where’ global corporate entities vs. ‘somewhere’ locals who pay tax.
The legislation is tricky (and beyond unreasonable): it counts any news information from any source that could be interesting to Australians. Just avoiding News and Nine sites would not satisfy the rules, they would have to filter anything that looked or operated like news from any Australian search or feed. And they’d have to give 28 days notice of such a plan, so they couldn’t just spring it as a surprise.
I have to agree with Bernard’s: “There are sound policy reasons to loathe Google and Facebook — for their relentless accumulation and abuse of personal data, for their anti-competitive acquisitions of smaller rivals, for their tax dodging, for their complicity in the spread of highly damaging, often literally lethal misinformation and propaganda.”
That said, I wouldn’t care a hoot if Google and FB stopped filching Australian news. I wouldn’t care if they just grabbed it from the ABC and SBS. It’s not why I use them in first place. What I DO care about is the fact that these two big advertising agencies (that’s really what they are) book a huge amount of work from Australian businesses and don’t report it as Australian income; pretending it’s actually happening in Ireland/Singapore/etc. That’s the whatever in the woodpile that the government should be pursuing.
Agree.
I work for an insurance company based outside Australia. We pay 3% withholding tax on every dollar of premium REVENUE (the assumption being 30% corporate tax rate and an assumed 10% of revenue profit).
I don’t understand why the government cannot introduce exactly the same impost for all foreign revenue paid by Australians, thus capturing tax on all these allegedly foreign transactions.
This is a completely different issue to the one Bernard writes on. There is no justification for Google and Facebook to pay Australian media companies. I hope FB and Google just say screw you guys and stop serving up links to any Australian based news.
That’d learn ’em though they’ll be long dead np matter what happens.
It is one of the great continuing mysteries, and cause for national shame, that anybody/voters ingests what Moloch/NEIN extrude and think it non-toxic.
Is this any more than a subsidy for media backers of the Coalition government?
If they can’t get Google-Book to pay taxes – that can be “redirected” to PR-donors Rupert and Costello – this is the plan?
‘Living in a failing democracy.’
Forcing these large companies like Google, Facebook, News Corp and others to pay tax in Australia on their local earning is the main challenge.
Unless there is some method to quantify how much addition income is generated by these behemoths from accessing local news sources, the proposed imposed arrangement is just a pathetic grab for funds by media companies that have made dismal and blinkered business choices for the last decade or so.