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Digital giant Facebook (NASDAQ: FB) says it will ban Australian publishers from sharing news on social media sites Facebook and Instagram if a new mandatory code of conduct becomes law.
The draft code, unveiled in July, establishes a framework through which news publishers can negotiate with digital platforms to secure fair payment for content produced.
As part of the code publishers will have the opportunity to negotiate in good faith about the payment of remuneration, but Facebook claims the code would hurt the long-term "vibrancy" of Australia's news and media sector.
In a letter published this morning, Facebook Australia & New Zealand's managing director Will Easton said the draft code "misunderstands the dynamics of the internet and will do damage to the very news organisations the government is trying to protect".
"When crafting this new legislation, the commission overseeing the process ignored important facts, most critically the relationship between the news media and social media and which one benefits most from the other," Easton said.
"Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram. This is not our first choice it is our last. But it is the only way to protect against an outcome that defies logic and will hurt, not help, the long-term vibrancy of Australia's news and media sector."
Further, Easton claims the code of conduct is unprecedented, overreaching and imposes regulations on how digital giants including Facebook and Google deal with news publishers.
"The proposed law is unprecedented in its reach and seeks to regulate every aspect of how tech companies do business with news publishers," Easton said.
"Most perplexing, it would force Facebook to pay news organisations for content that the publishers voluntarily place on our platforms and at a price that ignores the financial value we bring publishers."
Easton asserts the current model allows publishers to reach more readers without any costs.
The MD claims that in the first five months of 2020 Facebook sent 2.3 billion clicks from its News Feed back to websites at no charge, generating traffic worth approximately $200 million.
"We are left with a choice of either removing news entirely or accepting a system that lets publishers charge us for as much content as they want at a price with no clear limits," Easton said.
"Unfortunately, no business can operate that way."
According Rod Sims, the chair of the Australian Competition and Consumer Commission (ACCC), Facebook's threat is "ill-times and misconceived".
"The draft media bargaining code aims to ensure Australian news businesses, including independent, community and regional media, can get a seat at the table for fair negotiations with Facebook and Google," says Sims in a statement posted this afternoon.
"Facebook already pays some media for news content. The code simply aims to bring fairness and transparency to Facebook and Google's relationships with Australian news media businesses."
Sims points to the University of Canberra's 2020 Digital News Report which found that 39 per cent of Australians use Facebook for general news, and 49 per cent use the social media platform for news about COVID-19.
"As the ACCC and the Government work to finalise the draft legislation, we hope all parties will engage in constructive discussions," says Sims.
Facebook's statement about the draft code follows an ongoing campaign from Google suggesting that its platforms are "at risk" from the proposed laws.
In an open letter published earlier this month, Google says the code of conduct would result in the company providing users "with dramatically worse Google Search and YouTube, could lead to your data being handed over to big news businesses, and would put the free services you use at risk in Australia".
"We partner closely with Australian news media businesses we already pay them millions of dollars and send them billions of free clicks every year.
"We've offered to pay more to license content. But rather than encouraging these types of partnerships, the law is set up to give big media companies special treatment and to encourage them to make enormous and unreasonable demands that would put our free services at risk."
The draft code was built in consultation with the ACCC and draws upon the findings from the watchdog's 2019 Digital Platforms Inquiry.
Breaches of the code could see digital platforms like Facebook and Google being slugged with a fine of up to $10 million per breach.
The ACCC will be responsible for enforcing the mandatory code and will be able to issue infringement notices for breaches.
The entire letter from Facebook AUNZ managing director Will Easton can be read here.
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