Trust Busting For The 21st Century

Harry Spicer

Recently I read an article from an 1881 edition of The Atlantic talking about Railroad entrepreneurs. It detailed how many American businessmen had flocked to create railroads in the late 19th century in the hope of building a fortune. This new technology opened the path for society changing innovation, including the development of new resource industries that paved the way for some of the 21st century’s greatest achievements.

But, this innovation had a dark side. Some railroads turned into monopolies, through their abuse of market power and brutal competition. They charged exorbitant fees, and paid very little in the way of wages to their employees. Local businesses struggled to move their goods and people could not earn a living. So the American government passed the Sherman antitrust act, broke up the monopolies, and created a competitive market.

Today, a new type of railroad tycoon reigns supreme in our landscape. Google and Facebook take an astonishing 50 percent of online advertising revenue in Australia – four out of eight billion dollars. Like their analogous forerunner, they have changed the market forever, and obliterated previous would be competitors, such as Myspace. Google invented an algorithm for ranking web addresses in 1998 which has proven itself to be an information railroad unrivalled in utility. Facebook has connected users to each other in a way considered impossible just ten years ago.

These companies both possess a natural monopoly. Around 94 percent of searches in Australia are through Google. Facebook has 17 million Australian users, some 20 times that of Myspace at its peak.

The problem is the fact that both Facebook and Google are very bad corporate citizens. Despite taking 50 percent of the online advertising revenue in this country, none of them do anything to create content. Neither Facebook nor Google employ a single journalist, or indeed anyone who creates any content at all. In essence, they create a living out of taking journalist’s or publishers work, and distributing it to other people – they are a glorified middle man.

Publishers in Australia simply cannot afford to avoid Google or Facebook due to their enormous market power. The result is a power relationship which is incredibly lopsided. Newscorp was told by Google it had to give three articles for free to users who clicked onto its publications via a Google search. When Newscorp refused, Google buried them in search rankings, causing an enormous decline in traffic. This is a clear cut case of an egregious misuse of monopoly power.

Google’s attitude has shown no sign of relaxing, yet the consequences are about to get very real for Australia and its citizens. Print newspapers have seen a rapid decline in journalists – down 20 percent in just three years since 2014. The total number of journalists has fallen nine percent from 2006 to 2016.  

Many regional publications are closing, and some metro publications are struggling to cover even basic court cases. The result will soon be a society which doesn’t even know of serious crimes committed in its midst.

Australians are no longer hearing about what is happening in their country, because the information journalists gather is being stolen by US technology firms, and publishers cannot afford to pay their journalists. Governments no longer have as many journalists snooping on their clandestine activities, promoting a culture of corruption and misdeed.

Outrageously, Google has reacted with bitter intransigence to any suggestion its behaviour is anti-competitive, has negative externalities, or that it has developed its competitive advantage because of its extemporaneous regulatory position.

The European Union, for example, found Google guilty of anti-competitive conduct earlier this year, imposing an unprecedented five billion dollar fine for dirty tricks similar to the aforementioned Newscorp example. Instead of introspection, Google has attempted to bog down the court process in procedural gridlock, launching what will likely be a vexatious appeal.

It is clear that this enterprise does not contribute to public policy debates in good faith, and is completely duplicitous in its behaviour both online and in court. For time, this article will not dive into Google’s data operations, which have also caused concern.

Last year the ACCC released a draft report which outlined a damning indictment on the behaviours of these technology giants. The report paints a grim picture for journalism in Australia, revealing the decline in professional journalists. It should send a shiver down the spine of every Australian who values transparency from their institutions.

I expect Google and Facebook to react to this report with typical stonewalling and a lack of understanding of the nuance of the issues at play. Indeed, as I edit this document, Facebook has now responded with a statement which completely rejects even the most basic regulatory oversight.

As a young journalist in my first year as a reporter, I’ve witnessed first hand the devastated and pillaged landscape that is journalism. I’ve watched as City Councils in my region – South East Queensland – have been plagued with corruption scandals. Had there been greater journalistic oversight, these criminals could have been detected earlier, or at least been made to think twice before performing illegal activities.

Now, the Queensland government has been able to implement a low profile media strategy which has made them less accountable to the public, chiefly because the number of journalists and their resources covering the government have been slashed.

I do not blame the strategists of the government for doing so, such is realpolitik, but we, the Australian people, are fools if we do not do something to halt the decline of journalism and theft of intellectual property by Google and Facebook.

To Australia’s leaders, please, step in the ring, stand up and fight for what is right, and regulate these tech giants, and make them pay for the intellectual property they are using. The country is counting on you.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s