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EU poised to pounce next as Facebook’s Aussie news spat rolls on

Facebook exchanged some big punches with the Australian government this week in the ongoing row over news payments but there’s even bigger opponents waiting in the wings – the EU and the US.

MEPs are already working on two landmark draft European digital regulations – the Digital Services Act (DSA) and the Digital Markets Act (DMA) – and they have been watching the Australian situation closely.

“The world paid close attention to what Facebook did in Australia and it could potentially strengthen the case for US anti-trust laws being tightened,” InvestSMART’s chief market strategist Evan Lucas said.

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“That wouldn’t be good for Facebook’s business, especially if it is forced to sell WhatsApp or Instagram down the line. But the EU is a bigger concern for Facebook, as they’re thinking of passing similar legislation to Australia.

“Europe is a bigger fish to fry than Australia. So if the EU started charging Facebook for their media content, that could have a material impact on its bottom line.”

In the States, bipartisan members of Congress plan to introduce a bill in coming weeks to make it easier for smaller news organisations to negotiate collectively with Facebook and Alphabet’s Google.

While Facebook has fought publishers, Google has struck deals with them in France, Australia and other countries. 

ADVERTISING REVENUE

Social media companies use news to attract customers and have been accused by news publishers of not sharing enough advertising revenue with them. The legislation could boost sales in the struggling news business.  

“What publishers have experienced is that platforms go to them one by one, make them sign NDAs and try to optimise per publisher without publishers being able to compare notes,” said David Chavern, president and chief executive officer of the News Media Alliance, an industry trade group that is promoting the US bill. 

“Big national publishers probably have the capacity to get their own deals. If you look at smaller publishers, the only way to get some fair value is if they act together.”  

Shares in Facebook fell (-1.5pc) as investors assessed the wider ramifications of its move to block all news content in Australia.

DRAMATIC ESCALATION

Australians were blocked from accessing news in their Facebook feeds on Thursday, in a dramatic escalation of the social media giant’s stand-off with the federal government over its proposed media bargaining laws.

“The market was reacting to information which may support the argument that Facebook is now too big, and needs more anti-monopolistic regulation put in place to maintain a level playing field for competition,” said Chris Pedersen, the chief executive of Pedersen Asset Management.

“It is really about Facebook wanting to be one-stop shop for all your information sources. This is a monopolistic business plan – it’s the end result of a tremendously successful business model. Free market economics and capitalism at work.”

The social media giant was sold off more heavily than its tech-related peers, including Apple (-0.9pc), Netflix (-0.6pc), Google’s parent company Alphabet (-0.6pc), Tesla (-1.4pc) and Microsoft (-0.2pc).

  • Additional reporting by Reuters

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Sean OMeara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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