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Why the tech giant took the nuclear option

Although Facebook would rather the soon-to-be-legislated News Media and Digital Platforms Mandatory Bargaining Code never see the light of day, the eleventh hour split between Zuckerberg and Frydenberg boils down to different interpretations of the legislation.

Treasurer Josh Frydenberg says Mark Zuckerberg’s Facebook was ‘wrong and heavy handed’ to ban news in Australia. Alex Ellinghausen, AP

The bill sailed through the House of Representatives and is only days away from being rubber-stamped by the Senate as law.

A big sticking point is the “Division 5-Non-differentiation” section of the government’s legislation, which has caused Facebook to take the nuclear option and pull back from Australian news, according to sources.

New versions

Facebook is concerned that the rules will hinder its innovative development of new versions of its News Feed or other new social media products.

Australia is an advanced market where Facebook likes to trial innovations before expanding them globally.

The Silicon Valley-based company believes that if its services are updated – as they probably will be in the future – it could be forced to renegotiate existing deals with media companies that it enters into agreements with under the mandatory arbitration code.

“We don’t share that interpretation,” Frydenberg said.

Second, Facebook is also under the impression that it may need to negotiate hundreds of deals with local large and small news publishers.

But Frydenberg says this is a “misapprehension” because Google and Facebook can issue simple “default offers” to smaller media players such as regional and suburban news businesses, which may also band together to negotiate as a block.

Frydenberg spoke to Zuckerberg for about 30 minutes on Thursday morning.

He asked Zuckerberg to return with specific suggestions that the government could consider clarifying in the legislation and explanatory memorandum, without undermining the thrust of the law.

“We’re happy to help clarify some of those issues with Facebook,” Frydenberg says.

The Treasurer is a natural dealmaker and pragmatist, so he is likely to try to achieve a compromise.

But the government will not give in to Facebook’s bullying and will press ahead with the mandatory bargaining code that has forced Google to strike commercial deals to pay news publishers for original journalism content.

“Facebook’s actions were unnecessary, they were heavy-handed, and they will damage its reputation here in Australia,” Frydenberg warned.

Facebook’s shock retreat already appears to be backfiring after the blacklisting caused users to no longer be able to access important public health websites via the social media platform.

Arguably, democracy in Western Australia was undermined as the state opposition leader’s page was blanked out only three weeks from election day.

It was an own goal in the court of public opinion that Facebook vowed to correct.

Communications Minister Paul Fletcher is warning that Facebook is now feeding Australians untrustworthy and potentially fake news that is not fact-checked, not undertaken by paid journalists and without editorial policies.

Zuckerberg has long been defiant towards regulators and politicians seeking to crack down on the tech titan.

He and chief operating officer Sheryl Sandberg failed to attend a hearing at Canada’s parliament in 2019, despite being summonsed. They risked being issued a contempt of parliament.

Zuckerberg originally pushed back aggressively against claims about Facebook’s influential role in helping Russia spread fake news to American voters in the 2016 presidential election.

He later conceded Facebook was “too slow to spot and respond to Russian interference”.

On Facebook data misuse by a political consultancy, Zuckerberg also conceded, “It was my mistake, and I’m sorry. I started Facebook, I run it, and I’m responsible for what happens here. It was my mistake.”

Frydenbgerg had joked last month that the only difference between him and Zuckerberg was their salaries.

“Zuckerberg, Frydenberg, what’s the difference, except a few billion dollars I suppose.”

The stakes have just got a lot bigger than that.


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