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Microsoft: U.S. should consider Aussie law vexing Facebook, Google

Microsoft President Brad Smith told Axios in an interview that the U.S. and other countries should consider adopting media rules like those Australia is poised to soon enact to force tech companies to pay publishers for content.

Why it matters: Both Facebook and Google have said they can't run their businesses as usual with the code in effect and warn that if Australia passes it as expected, they'll pull some of their services from the country.

"I would be the first to acknowledge that we recognize that this is an opportunity to combine good business with a good cause," Smith told Axios.

  • Microsoft has backed Australia's planned code, suggesting it could help even the playing field in search and make Microsoft's Bing search engine a more viable competitor for Google.
  • Smith noted that Microsoft, which has a revenue-sharing program with publishers through Microsoft News, would be able to bring more revenue to publishers in Australia if it had more market share.
  • "We can't share revenue unless we have revenue to share," he said.

Catch up quick: The new bargaining code is expected to be delivered to Australian lawmakers as soon as this Friday, and passed within the next two weeks. That would make Australia the first country to force Google and Facebook to compensate news publishers or else face hefty fines.

  • In response, Facebook says it may block users from being able share news links in Australia. Google says it may have to stop making Google Search available in the country.
  • Other tech giants can be added to the code if regulators find enough evidence that their size or scope could drive a power imbalance with news companies.

Several key tenets of the code could be taken up in the U.S. and other countries, Smith argued, even without importing the rules wholesale.

  • "We shouldn't be too quick to conclude that we can't innovate in the U.S. the way the Aussies are," he said.
  • Already, U.S. lawmakers have proposed giving news publishers an antitrust exemption similar to a provision in the Australian code that would let them band together to jointly negotiate against tech platforms.
  • Smith said that's one area where the U.S. could follow Australia's lead, along with imposing transparency obligations on the platforms and requiring them to go through an outside arbitrator to negotiate payments with publishers for linking to their content.

Between the lines: Google and Facebook take particular issue with the arbitration clause in Australia's code, which would also see a government-appointed panel set the payout rate if the parties can't reach a deal.

  • Sources say that the tech giants worry that involving third-party arbitrators could help publishers successfully make unreasonable demands.

The other side: Smith said this style of negotiation, commonly known as baseball arbitration for its use in the MLB, "encourages reasonable negotiation."

  • "This is a tried-and-true matter around the world," he said.

The big picture: Both Google and Facebook have in recent months created new features that steer money to news outlets without having to totally reimagine their businesses.

  • Google has started to roll out its "Google News Showcase" product in the U.K. and Argentina. Facebook launched its Facebook News Tab last week in the U.K.

What to watch: News Corp, the global publishing giant run by Rupert Murdoch, has been aggressively lobbying for such reforms, as it owns a sizable portion of the newspaper market in Australia.

  • Smith said he hasn't himself spoken with anyone from the company after Microsoft came out in favor of the law last week, but that News Corp has since reached out to others at Microsoft.

The bottom line: "Sometimes it takes someone who has a powerful microphone to ensure that many voices are heard and that's not a bad thing," Smith argued.

Go deeper: Tech coughs up money for news as regulatory threats loom

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