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EXPLAINER-Australia's news revenue-sharing law behind battle with Big Tech

SYDNEY, Feb 18 (Reuters) - Facebook Inc has blocked Australian users from sharing and viewing news content on its popular social media platform, escalating a dispute with the government over paying media publishers for content.

While Big Tech and media outlets have battled over the right to news content in other jurisdictions, Australia’s looming law represents the most expansive reform and is being closely watched around the world.

WHAT WILL THE LEGISLATION DO?

The so-called Media Bargaining Code has been designed by the government and competition regulator to address a power imbalance between the social media giants and publishers when negotiating payment for news content used on the tech firms’ sites.

Under the code, news outlets will be required to negotiate commercial deals individually or collectively with Facebook and Google. If they cannot reach an agreement, an arbitrator will decide whose offer is more reasonable. If Facebook or Google break any resulting agreements, they can be fined up to A$10 million ($7.4 million) in civil penalties.

The law also requires tech firms give media outlets notice when they change search algorithms in a way affecting the order in which content appears. They must also share their use of consumer data extracted from news content on their sites.

The proposed code will apply to Facebook and Google, although the regulator, which advised government on the legislation, has said it’s likely other tech firms will be added.

HOW IS AUSTRALIA’S APPROACH DIFFERENT?

Australia has used competition law to draft the Media Bargaining Code, an approach the regulator has argued is much more effective than the copyright legislation being used in other jurisdictions, including the EU.

The difference between the two has been highlighted by the recent deals struck with Google by Australian publishers and by outlets in France, which is the first EU country to bring an EU directive on copyright into national law.

Australia’s two largest free-to-air television broadcasters have struck deals collectively worth A$60 million ($47 million) a year, according to media reports. That dwarfs the $76 million Google will split between 121 publishers in France over three years, which averages $209,000 a year per publisher, as reported by Reuters.

WHY HAS THE DISPUTE ESCALATED?

The proposed legislation has reached a crunch point, with widespread support in parliament, where it is expected to be voted into law within days.

In recent years, traditional media companies operating in Australia have suffered huge hits to income streams, due to dwindling subscriptions and advertising. For every A$100 spent on online advertising in Australia, excluding classifieds, nearly one-third goes to Google and Facebook, the competition regulator has said.

Facebook’s decision to block users from sharing and viewing news content was condemned by Australia’s political leaders on Thursday after many of the country’s official health and disaster management alerts were also erased from news feeds.

Facebook said the law did not provide clear guidance on the definition of news content, although it said it would restore content that was inadvertently impacted.

WHAT HAS THE RESPONSE BEEN?

Facebook said that the law “fundamentally misunderstands” the relationship between itself and publishers and it faced a stark choice of attempting to comply with it or ban news content. It said its platform generates billions of free referrals to Australian publishers worth significant sums to the media companies.

Alphabet Inc-owned Google, however, has backed down from a threat to withdraw its main search engine from Australia if the laws go ahead, and has instead struck deals with some of the country’s major commercial publishers. They include a global deal with News Corp for an unnamed sum in one of the most extensive deals of its kind with Big Tech.

Australia has previously engaged in lengthy battles with major corporations. In 2012, the then centre-left government became the first in the world to prohibit cigarette companies from using designs on their packaging to attract consumers. Big Tobacco companies mounted legal challenges but the courts ultimately upheld the law. (Reporting by Jonathan Barrett and Byron Kaye; editing by Jane Wardell)

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