By Bronwyn Howell

In February, the Senate Judiciary Committee’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights considered options for getting Google and Facebook to compensate news media companies for the platforms’ use of their content and (alleged) loss of advertising revenues with which the creation of news content has traditionally been subsidized.

The inquiry drives toward a US version of last year’s high-profile case in which the Australian government legislated to impose mandatory arbitration if Google and Facebook did not voluntarily pay a wide range of media companies recognized by the Australian media regulator for the use of their content. The legislation has apparently resulted in around AUD 200 million being paid to the media firms, but it has been described as an “opaque mess” in a report commissioned to evaluate its effectiveness. The terms of the deals do not have to be published, so it is difficult to determine what has been paid to whom, or where the estimated 50 new journalist roles attributed to the funds are distributed.

Anecdotal evidence suggests the market for entry-level journalists is the best it has been for 20 years. Nonetheless, concerns remain that the benefits are disproportionately distributed, with large companies able to get better deals than smaller firms are, as smaller firms lack the negotiating heft to extract fair compensation. Also, firms not subject to media-regulator recognition are effectively cut out of doing deals. 

US Competition Versus Australian Regulation

At the aforementioned subcommittee hearing, economist Hal Singer presented a plausible case that rather than legislating as Australia did, the US would be better to relax antitrust enforcement to “permit the news publishers and broadcasters to coordinate their dealings with the digital platforms over payment terms and conditions.” Normally, if firms join to negotiate as if they were one firm, the resulting cartel would be deemed anticompetitive. However, in this instance, collective bargaining by media companies would go some way to counter the market power exerted by tech firms, not to mention to more efficiently share the high fixed and sunk costs of negotiation. And so long as the media firms could agree on a means of dividing the revenues, the disproportionate distributions observed in Australia might be avoided.

The idea of collective bargaining has
sufficient merit that it is already being pursued in New Zealand. But although
conceptually appealing, the New Zealand example shows that this too is no
instant panacea for the struggling journalism industry.

Lessons from New Zealand

In November 2021, the New Zealand Commerce Commission (the nation’s competition regulator) announced it had received an application from the News Publishers’ Association of New Zealand (NPA) to seek authorization on behalf of itself and its current and future members to collectively negotiate with Facebook and Google individually about the terms on which their news content appears on each platform. The NPA represents approximately 10 news media companies, including New Zealand’s biggest media firms, Stuff and New Zealand Media and Entertainment (NZME). The commission must first assess whether it has jurisdiction to make a ruling, and, next, whether allowing the joint bargaining would be in the public interest.

Case register submissions reveal the NPA’s application is not uncontroversial. First, not all the country’s news media firms are NPA members. State-owned Television New Zealand (TVNZ) and Radio New Zealand (RNZ) had sought to join the collective, but the NPA declined their approach, citing that these firms’ interests were sufficiently different than its members’ and that they were large enough to negotiate their own deal. (TVNZ and RNZ are currently undergoing a merger, as directed by their political masters, which somewhat ironically escapes commission purview as state entities are exempt from the country’s competition laws.)

Second, if successful, the waiver creates new value from NPA membership. New news media firms entering the New Zealand market will face a disadvantage relative to NPA members, as the news media firms shoulder the full cost of negotiating their own agreement if the NPA uses its membership status anticompetitively to shut them out of the benefits.

Furthermore, recent moves by the NPA’s largest member (and the instigator of the application to the commission) reinforce the fragility and instability of any cartel in the first place. Defection is the biggest risk—as illustrated by the saying that there is “no honor among thieves.” Late last month, NZME announced it was close to unveiling its own bespoke deal with Google, and another is expected soon with Meta, Facebook’s parent company. Exactly where this leaves the commission application is now uncertain, but the other nine NPA members are, to say the least, not very happy.

It’s Not Simple . . .

While there are theoretical merits in using
competition law instead of government regulation to address the issue of how to
subsidize journalism and news creation, US legislators and policymakers have
been forewarned; there are no simple solutions here.

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