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ELIZABETH:

From Schwartz Media. I’m Elizabeth Kulas. This is 7am.

Following an inquiry into digital platforms, the government finds itself wedged between News Corp and the tech giants with both sides lobbying heavily. Rick Morton on the battle to regulate the internet.
So Rick let's start in September of last year with these meetings that News Corp was having with the government regarding regulation and tech giants like Facebook, Google. The usual suspects.

RICK:

News Corporation dispatched its global vice president of government relations and government affairs, Antoinette Bush, to Australia from New York. So they were taking it very seriously.

ELIZABETH:

Rick Morton is a Senior Reporter with The Saturday Paper.

RICK:

Ah Antoinette actually came to Canberra and briefed News Corp journalists in the press gallery at Parliament House to talk to them about the fact that Google was basically an existential threat to the company. And they were there to bend the ear of the Australian government, and the Coalition, to make that ahh, to make that point.

ELIZABETH:

Hmm.

RICK:

News Corp is not alone in these concerns. Every traditional media company, everyone understands that journalism has been totally disrupted by the new tech giants.

ELIZABETH:

And what was the mood like in the room?

RICK:

She wasn't holding back from the fact that Google as a company had, for want of a better phrase, totally ruined their business. News Corp's kind of motives here align with most of the public, in, in fact that they don't want these monopolies. And she was saying that they, the tech giants, should have these unfair advantages repealed. They don't want anything except a proper market where everybody is competing on the same level. And at the moment, that is far from the case.

ELIZABETH:

And Is that the same message that she was taking to her meetings with coalition MPs on that visit?

RICK:

Look, almost certainly. I mean, she would have put all of those things to them. I imagine they would've also been a political edge. She would certainly have said to them, you know, this is an existential threat to our business. It is not fair. And as the coalition government, who are meant to be the paragons of free market enterprise, you have to do something about this.

ELIZABETH:

And Rick where does the ACCC’s inquiry into digital platforms sit in all this?

RICK:

This is kind of the nexus of it. And I suspect this was the first win in the first place from News Corp. The fact that the Australian Competition and Consumer Commission was directed by the then Treasurer, Scott Morrison on December 4, 2017, to commission this inquiry into essentially Facebook and Google, because they are the two biggest companies in Australia.

Archival Tape -- Unidentified reporter:

“The ACCC’s inquiry is tipped to demand greater insight into the platform’s operation and market power “

RICK:

Just to give you an idea, Google controls 96 percent of the general search market in Australia. So they have so much data and so much knowledge that the ACCC notes that it's almost impossible for someone to start up a competitor, because you have to get to that point of having all that information. You actually can't do it.

Facebook and Instagram, they own 51 percent of the display advertising market in Australia. No other competitor owns more than 5 percent. And so the fact that we even got this inquiry set off a chain reaction of events and circumstances has now been running for two years and the ACCC started five separate investigations into Google and Facebook as a result of their inquiries, one of which has now proceeded to the Federal Court of Australia.

Archival Tape -- Unidentified reporter:

“In a world first, Australia’s consumer watchdog is taking legal action against Google, accusing them of lying to customers about their personal location data “

Archival Tape -- Unidentified reporter:

“Privacy-savvy Android users who thought they’d turned off location sharing may have still been tracked - that’s the claim of the consumer watchdog, which has launched action against the tech giant”

RICK:

You know, there are quite sweeping recommendations that would totally upend privacy law...the federal government has already increased penalties for serious privacy breaches to about 10 million dollars or 10 percent of your local business. And that is so easy to do if you're a company like Google or Facebook that has all of your data. And I do mean all of it.

So that's the kind of stuff that the ACCC is looking at. Is this fair? Are the tech giants telling the truth? And it was such a smashing job, essentially, that I think Google and Facebook underestimated originally how thorough it would be. And so now they've swung into gear.

ELIZABETH:

So does this ACCC inquiry essentially put News Corp and the tech giants on a kind of collision course?

RICK:

Yes. And, you know, it's something that has been brewing for a while. In fact, Rupert Murdoch has made no secret of his hatred for Google over many years. As the ACCC notes, if you want to get your news stories on search results, you have to work with Google. The power imbalance is quite strong. And so this is the kind of thing that Rupert Murdoch was onto very early, and now everyone else is caught up and they said we actually can't we cannot depend on these companies because if they change an algorithm, we lose a hundred million dollars or two hundred million dollars. We cannot plan our business while being captive to these massive companies.

ELIZABETH:

And is it government stuck essentially between those two...

RICK:

Oh yeah. The government is well in the middle on this one. Because, I mean, I think the government knows that they...they need to do something because objectively it isn't a fair playing field.

So on one side, you've got the most powerful media company in Australia. And on the other side, you've got two of the biggest companies in the entire world. And smack bang in the middle, you've got the Australian government and poor old Christian Porter and Josh Frydenberg looking at one to the other going, what is it we are meant to do here?

ELIZABETH:

We’ll be right back

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ELIZABETH:

Rick, how worried can these tech giants be about Australia. I mean, surely we’re small fry in comparison to the rest of the world. Why do they care so much?

RICK:

You’d think their market in Australia would be huge and it’s not on the pure mathematics. You know, I think their revenue in Australia, um, which is what they've told the ACCC, is in the order of about five billion dollars collectively. But to them, when they're making, you know, billions, $157 billion dollars in revenue around the world. Small change, right? In Australia, however, we're kind of at, in many cases the leading edge of regulation. Certainly we have a more interventionist government than America. And people don't like...particularly big companies they don't like Australians getting ideas that others might tend to copy later on. So I think what we're seeing here is a little bit of containment. You know, Facebook and Google don't...they don't allow accidents to happen. They wouldn't give an inch because they're worried that other countries would take a mile. Google and Facebook are not going to allow experiments with regulation.

Last month, Facebook dispatched Joel Kaplan. He's the global vice president of public policy. They sent him to Australia with the express mission to meet with MPs, to meet with politicians, and convince them that Facebook has done the right thing in its fight against misinformation.

These global corporations don't send their highest paid executives to Australia for nothing. It's a long trip and he’s not here for the Christmas parties. He's an interesting fellow, Joel Kaplan, he's a former deputy chief of staff to President George W. Bush in the White House. He was then headhunted by Facebook a few years after Bush's presidency to bolster their Republican credentials. He's quite conservative. And he's out here bending the ear of politicians.

ELIZABETH:

So who’s he meeting with, and what’s his strategy when he meets with them?

RICK:

Facebook efforts more broadly have concentrated on Nationals MPs and backbenchers. They're not getting a lot of traction with government ministers. In fact, they're not getting a lot of anything out of government ministers in terms of direction or clarity. And so I think part of what they're doing is using it as a failsafe. They're talking to backbenchers and Nationals MPs because if a controversial policy got into the party room and there was enough rancour or negativity raised by backbenchers, then it could kill the action. We've seen in the Coalition - it's such a successful strategy - with the National Energy Guarantee, Malcolm Turnbull's leadership, climate change policy...if you want to kill something and you don't necessarily have the numbers, create chaos.

ELIZABETH:

And do you know if Kaplan got to meet with Frydenberg or Christian Porter?

RICK:

He did not. And I don't know whether that was for lack of trying or being blocked, but I did check with both Frydenberg’s office and Christian Porter's office, and they didn't meet with either Joel Kaplan or anyone from Google in the last week. But both Google and Facebook told me separately that, you know, they're not hiding the fact that they proactively try to engage with MPs, with stakeholders, with non-government organisations, whoever out there had some interest in their business, of course, they're going to talk to them. And that's not illegal, and that's perfectly normal trade of information in politics. But I think it's telling that the ministers themselves are at least a little bit more separate from this process for the tech giants than they probably are from Newscorp.

ELIZABETH:

Tell me about that side, how are their attempts going, because obviously they've got their own lobbying mechanisms kicking into gear on the same issue…

RICK:

Yeah Newscorp’s an interesting one because obviously they've got Antoinette Bush who came out to do the official briefings, but they've always had their own in-house lobbying outfit in the name of Lachlan Murdoch and Rupert Murdoch. I mean, they just pick up the phone. And likewise, it works in reverse. Like I know Josh Frydenberg was in constant contact via text messages and phone calls, often daily with News Corp newspaper editors, masthead editors. And it was quite a freewheeling conversation about information, stories, ideas, things like that. And as we all know, I think it's not a controversial statement to say that News Corp editors are fairly good at pushing the company line, particularly when it comes to threats against their own journalists from companies like Google and Facebook.

I mean, the ACCC made the interesting point that in the 10 years to 2016, the number of journalists across all of Australia, not just News Corp, fell by almost 10 percent. The number of local news organisations, local newspapers fell by 108. And there are now, in the decade to 2018, there are now 21 local government areas across all of Australia that have no local paper or no local online presence covering them. And that is a problem for democracy.

ELIZABETH:

Massive!

RICK:

It’s a huge problem. And that is kind of what energises the News Corp newspaper editors. And certainly that would come across in, you know, incidental discussions with government ministers.

ELIZABETH:

So if you're the Australian government, you've got these two huge tech giants on one side, you've got the focus of NewsCorp really as a test market for what they want to see happen in their favour...what the hell do you do?

RICK:

So far you do what they have done, which is delay for six months and hope the New Year brings renewed revelation about the right way forward. I don't think they know. I suspect they've got some ideas, but they've been sounded out and there has been a lot of pressure applied from the big tech companies. And it's one of those dangerous paths to go down, which is: never be convinced by the last argument you heard. And so they're probably going to get more arguments, I think, and it's contributed to this paralysis. They're probably hoping that their New Year's resolutions will allow them to have a bit more fortitude and to make a decision. Welcome 2020: The tech giants versus NewsCorp.

ELIZABETH:

Rick, thank you.

RICK:

Thanks Elizabeth.

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ELIZABETH:

Elsewhere in the news:

A volcanic eruption on New Zealand’s White Island has left multiple people dead and many others wounded. Three of the five confirmed dead are believed to be Australian, with a number of Australians still reported to be missing. NZ Police will open a criminal investigation in conjunction with WorkSafe New Zealand. New Zealand Prime Minister Jacinda Ardern said local teams were working with Australian authorities. She said, "We're devastated at what has happened and particularly want to acknowledge those from Australia who have been caught up in this horrific, horrific incident."

And in Sydney on Tuesday, the air quality reached 12 times higher than the threshold for “hazardous levels” in some areas of the city. NSW Health advised people with breathing and health conditions to stay indoors as the city was blanketed in smoke from nearby bushfires. The department also said that this level of air pollution means everyone, regardless of their health, should cut back on outdoor physical activity.

This is 7am, I’m Elizabeth Kulas, see you Thursday.