Fresh Takes

GAFA: Australia shows what not to do

With Parliament back in session, the federal government plans to introduce a bill forcing Web giants to pay news sites for content published on their platforms. Citing the Australian example, the government wants to allow Canadian media to bargain collectively with large digital platforms. In the case of a disagreement among the parties, a government-appointed arbitrator will determine the remuneration to be paid to the media outlets concerned.

This bill is problematic for a number of reasons. First of all, it is a solution in search of a problem. Indeed, advertisers prefer the Web giants for their ads because these platforms are better able to target an audience for an ad campaign.

A dollar invested in advertising on Facebook or Google is more profitable than in a physical newspaper, and entrepreneurs are well aware of this. For advertisers, the logic behind this bill amounts to forcing automobile manufacturers to pay sums of money to horseshoe makers. Since web platforms and newspapers are competing for advertisers’ business, it is perfectly normal for the clients to prioritize platforms that offer a better return on investment, namely Google and Facebook.

Moreover, the bill imposes government arbitrage, which prevents any possibility of negotiating in good faith. It is not the Web giants that need news sites, but the exact opposite, as shown by Facebook’s pressure tactics when the Australian law came into effect. The imposition of arbitrage is therefore always to the advantage of media groups, which depend on the platforms and would be the ones to receive compensation. This bill is a clear example of regulatory capture penalizing successful companies, to benefit of others that have not adapted to the digital age.

The government must go back to the drawing board. In its current form, this bill will definitely be economically harmful. It’s hard to stimulate entrepreneurial innovation if policy-makers legislate for the benefit of certain companies. They should instead focus on never undermining innovation.

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