The 'shakedown' news legislation that is heading to parliament

Dr Eric Crampton
The Post
19 August, 2023

Shakedown rackets are, thankfully, illegal.

Except when government legislates them. In that case, all bets are off. And if I were Facebook, I’d be off too – or at least thinking about it.

The Government finally released the Fair Digital News Bargaining Bill this week. The bill aims to improve news funding by requiring payments from those who link to news online.

Similar legislation caused Meta, Facebook’s parent company, to block all news links in Canada.

So what’s in the New Zealand version?

The legislation puts the Broadcasting Standards Authority (BSA) in charge of a new bargaining framework.

News outlets overseen by a recognised regulatory body like the Media Council, or subject to a standards code, can apply for registration.

It’s the other side of the bargaining table that gets trickier.

Any internet service that makes news content produced by news media entities available to people in New Zealand is considered a digital platform. The definition is very broad – simply facilitating access to news content, for example, by linking, is sufficient.

If you control such a platform, whether directly or indirectly, you’re considered an operator, and potentially subject to registration under the legislation.

The legislation is obviously aimed at Google and Facebook, and potentially Twitter and the Microsoft start page. But the definition of ‘platform’ is much broader. It probably covers Dr Bryce Edwards’ daily online news roundup at Victoria University, and my organisation’s own weekly newsletter. Both link to news.

But the BSA will only register some platform operators. If the BSA believes the platform operator has more than a minor power advantage over a news media entity, it can impose registration.

It’s an odd thing, that power imbalance. A news outlet can set a paywall and can prevent platforms from indexing or scraping content, at the outlet’s sole discretion.

But here, the BSA would consider bargaining power in deals over whether a platform will pay a news entity for the privilege of providing links. And since a platform operator can always decline to pay for links – because links have been free since the Internet was first created – there will be some power imbalance.

The BSA may give regard to a host of different considerations when deciding whether to register an operator. But just how that will work will be impossible to tell until the BSA starts making decisions. And that makes it risky to be a potentially registered operator if the bill passes.

Once a platform is registered, news outlets can initiate bargaining. Parties are under a duty to bargain in good faith and are subject to hefty penalties otherwise. If they cannot come to agreement, a panel of arbitrators is appointed. The parties put up their final offers.

And the arbitrators must choose the offer that “fairly compensates the news media entity party for that party’s news content being made available”.

The whole process is incredibly risky from a platform operator’s side. The news company takes on no risk. Even though the consultancy report produced for the Ministry of Culture and Heritage found that platforms provide considerable commercial benefits to news companies, payments here will only go one way. But it’s impossible to tell just what kind of final offer an arbitration panel would consider ‘fair compensation’.

In a traditional shakedown racket, a mafia boss threatens vague terrible harms if the ‘protected’ business owner doesn’t pay up enough protection money. It’s an offer you’re not meant to refuse.

The Fair Digital News Bargaining Bill has its own shakedown option. A platform can be granted a five-year exemption from bargaining processes if the BSA thinks the platform already makes “a fair contribution” towards news production.

What counts as a fair contribution? It’s hard to say. Broadcasting and Media Minister Willie Jackson has made clear that he wants the platforms to make deals with media outlets. Offer enough, and you won’t have to deal with complicated risky arbitration. Do you feel lucky?

But instead of facing the certainty of a tax code, platforms would face the constant uncertainty of trying to figure out which media outlets need to be paid off by how much to satisfy the minister and the BSA.

As in Canada, there may remain a safer way of avoiding all of it – though I expect anyone with skin in this game is talking it through with lawyers rather than economists.

Arbitrators are required to choose the offer that provides fair compensation to the news outlet for news content being made available.

If the platform stops providing access to news, its final offer in arbitration could be simple. “We do not provide access to news, so our offer is $0.”

Hopefully the bill dies on the order paper after Parliament rises for the election and is not picked up again after the election.

But it is disgraceful that shakedown legislation of this sort has even made it to Parliament for consideration.

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