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Facebook's Australia face-off could backfire across the globe

Vlad Savov, Bloomberg News on

Published in Business News

Facebook Inc.’s dramatic move to block Australian news sharing escalated a broader battle against global regulation. That gambit looks likely to backfire.

World leaders were already watching Australian legislation expected to pass next week that will force tech titans Facebook and Alphabet Inc.’s Google to pay publishers for news content. But this week’s abrupt news blackout forced the issue onto the agenda of governments whose regulators are already ramping up scrutiny of the growing influence of Facebook and its ilk in spheres from media to artificial intelligence.

“There is a lot of world interest in what Australia is doing,” Prime Minister Scott Morrison said on Friday, adding that he discussed Facebook with Indian Prime Minister Narendra Modi, Canadian leader Justin Trudeau, French President Emmanuel Macron and the U.K.’s Boris Johnson. “They’re already going down this path.”

Facebook drew a line in the sand precisely because it feared even larger markets would follow Australia’s lead. From Europe to the U.S. and China, governments are grappling with the issue of how to regulate the world’s largest internet giants, which have recently grown into trillion-dollar behemoths that help determine what billions of people view, discuss and consume on a daily basis.

The related issue of how to fairly compensate news providers is a thorny challenge given an online community accustomed to free content. Still, the push to redress the monopoly-like power of these platforms appears to be gaining momentum.

“The dominance of a handful of gatekeepers online has wreaked havoc on competition, suppressed innovation, and weakened entrepreneurship,” U.S. Representative David Cicilline of Rhode Island said in a statement Friday. He pledged to undertake legislative reforms that “restore competition online.”

 

The antitrust committee he chairs will be hearing testimony from the CEOs of Facebook, Alphabet and Twitter Inc. in the coming week. Any concessions made by Facebook in Australia are likely to feed into those deliberations.

The priority of Facebook, whose shares fell 1.5% on Thursday, is now to try and get the legislation amended — especially as politicians there signal interest in finding common ground. Founder Mark Zuckerberg has met Australian Treasurer Josh Frydenberg twice and will do so again over the weekend.

“We’ll see if there’s a pathway forward,” Frydenberg said in a Nine Network television interview.

Facebook may be counting on the lopsidedness of its Australian presence to wrangle concessions from Canberra. It has argued that its business gain from news is “minimal” and that articles account for less than 4% of content users see in their news feeds. Still, it’s among the most popular ways Australians get their news online.

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