Facebook and Google having too much market power is a threat to democracy

But let's start with market power. When the ACCC first released the news media bargaining code, the problem it was trying to solve was the 'fundamental bargaining power imbalance' between Google and Facebook and Australian news media.

Power imbalances exist all over the place in the Australian economy. It's why Australia has the Big Four Banks, and why the two big supermarkets Coles and Woolworths have Australian farmers over a barrel. Monopolies and oligopolies are to blame for astronomical drug prices in the United States, they are bad for consumers and smaller producers.

But, the stronghold Google and Facebook have on digital advertising that the ACCC is trying to address with the news media bargaining code is not just bad for consumers, it's damaging to democracy.

Data from the Public Interest Journalism Initiative shows that 157 Australian newsrooms have closed temporarily or for good since early 2019. Revenue models for news media include paywalls, subscriptions, and donations, as well as advertising.

Whether you are The Canberra Times or The New York Times, Google and Facebook are what the ACCC calls 'unavoidable trading partners', controlling almost the entire digital advertising market and about 81 cents in every digital advertising dollar in Australia.

Google and Facebook control not just the digital advertising retail market, so to speak, but the infrastructure as well. The Facebook share tools on websites allow Facebook to track you and your preferences across the internet even when you're not on Facebook, while almost every news publisher is forced to use Google's digital advertising technology to power the digital advertising on their own websites.

Publishers have no idea how much money Google and Facebook make from that data and consequently, have no idea if they are getting a good deal.

Australian news organisations must have the power to strike a fair deal with Facebook and Google to generate revenue from their own content, otherwise the future for Australian journalism is dire indeed.

Quality journalism is expensive to produce and it's a public good, part what keeps democracies healthy. The siege of the US Capitol and the scenes from UK ICU wards show what happens when misinformation and conspiracies gain prominence over a shared fact-based reality.

Dan Stinton, managing director of The Guardian makes an interesting point about Google's dominance in digital advertising.

"Google doesn't compete with Bunnings in hardware. Google doesn't compete with Westpac for financial services. But they do compete with publishers in the digital advertising market and they take 81 per cent of that market," he said.

As the saying goes, 'if you're not paying for it - you're not the customer, you're the product'. You don't pay a fee to use Google or Facebook, the cost is your data - what brands you like, where you shop and where you travel, and how much time you spend there.

Google CEO Mel Silva released a video implying the code would break the internet, asking people to "imagine your friend asks for a coffee shop recommendation, so you tell them about a few nearby so they can go and choose one and go get a coffee - then you get a bill to pay all the coffee shops simply because you mentioned a few of them," she said.

I don't know about you, but if I recommend a café to a friend, I don't then follow them around logging their shopping habits and then sell that data to advertisers. The reality is, the code won't break the internet, it will only break the market power of Google and Facebook.

And the market power of big tech is so huge it is difficult to opt out. If you quit Facebook, they might still get your data through WhatsApp or Instagram. If you search with Bing, Google might still get your data through YouTube.

For us consumers, Facebook and Google are a bit like the Hotel California, you can check out any time you like, but you can never leave.

The raw market power of big tech was on display when both Google and Facebook threatened to withdraw from the Australian market altogether if they didn't like the code, which should send a shiver down your spine.

Nobel laureate economist Professor Joseph Stiglitz told the Australia Institute last year "[The threat] itself is testimony to their market power". "What kind of platform would weaken the quality of what it does? If you were in a competitive market you wouldn't say you're not going to carry news. The fact is they have such market power they can get away with that kind of threat," he said.

The Prime Minister has said the Australian government does not respond to threats and it is imperative the government does not buckle to big tech.

Imagine being in Perth over the past few days, searching for information on the bushfires and the results included no journalism; no links to the ABC, which saved so many lives during the Black Summer bushfires. Indeed, The Guardian investigated Google's experiment that blocked some Australian news sites from search and found it resulted in sources of questionable quality being promoted over mainstream websites in some cases.

The code won't magically solve all the problems facing the Australian media industry, the ACCC also made recommendations on privacy, transparency, and other issues. It's not perfect, but it's not true that the code will only help Rupert Murdoch and News Limited. To oppose the news media bargaining code because it might benefit News Limited would be to cut off our nose to spite our face.

Google and Facebook have too much market power, that's a problem for Australian journalism.

If the Australian government fails to regulate Google and Facebook, it would prove the tech giants are more powerful than sovereign governments and that's a problem for democracy.

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