The legislation could provide a framework for other countries looking to address platforms’ dominant position.
Australia’s parliament passed landmark legislation on Thursday requiring global technology giants to pay for the news content shared on their platforms, in a move that is being closely watched around the world.
The law was passed after a last-gasp deal that watered down binding rules Facebook and Google had fiercely opposed and which last week prompted Facebook to remove all news from its Australian platform.
“The code will ensure that news media businesses are fairly remunerated for the content they generate, helping to sustain public-interest journalism in Australia,” Treasurer Josh Frydenberg and Communications Minister Paul Fletcher said in a joint statement. The rules will be reviewed after a year.
Google will now pay for news content that appears on its Showcase product and Facebook is expected to pay providers who appear on its News product, which is to be rolled out in Australia later this year.
Regulators had accused the companies, who dominate online advertising, of draining cash away from traditional news organisations while using their content for free.
The law was developed after extensive analysis from Australia’s anti-trust regulator and almost three years of public consultation and could offer encouragement to countries such as Britain and Canada which are planning similar laws.
Big technology firms had fiercely opposed the legislation, fearing it would threaten their business models.
In particular, the companies objected to rules that made negotiations with media companies mandatory and gave an independent Australian arbiter the right to impose a monetary settlement.
That prospect was dramatically reduced by the last-minute amendments.
“Importantly, the code encourages parties to undertake commercial negotiations outside the code and the government is pleased to see progress by Google and more recently Facebook in reaching commercial arrangements with Australian news media businesses,” Frydenberg said.
Google was also keen to avoid creating a precedent that platforms should pay anyone for links, something that could make their flagship search engine unworkable.
Facebook had initially claimed being forced to pay for news was not worth it and that publishers shared content on the platform voluntarily.
The two companies now have an additional two months to reach further agreements with news organisations and avoid binding arbitration.
Google has already brokered deals worth millions of dollars with local media companies, including the two largest: Rupert Murdoch’s News Corp and Nine Entertainment.
Facebook, which made a net profit of $29bn last year, announced its first proposed deal with an Australian media company, Seven West, on Tuesday.
Facebook and Google have each said they will invest about $1bn each in news around the world over the next three years.
Critics of the law say it punishes innovative companies and amounts to a money-grab by politically connected, traditional media notably News Corp, which dominates the industry in Australia, and the United Kingdom and operates Fox News in the United States.
Nick Clegg, the head of global affairs for Facebook and a former deputy prime minister in the UK, on Thursday said the original draft of the law would have forced Facebook to pay “potentially unlimited amounts of money to multinational media conglomerates under an arbitration system that deliberately misdescribes the relationship between publishers and Facebook”.
Thousands of journalism jobs and dozens of news outlets have been lost in Australia alone over the past 10 years as advertising revenue went digital.
For every $100 spent by Australian advertisers today, $49 goes to Google and $24 to Facebook, according to the country’s competition watchdog.