Communications Minister Paul Fletcher said the ACCC inquiry into digital platforms will lead changes in Australia’s media regulatory framework and raised the possibility of tighter regulation of US tech giants while addressing industry in Sydney this week.

“20 plus years ago there was still a strong mindset that said ‘the internet ought to be free of any regulation’,” Fletcher said at the NewsMediaWorks Inform Summit in Sydney yesterday.

“That might have been a tenable position when it was a resource used by scientists and academics. But once it became a mass market consumer phenomenon that was completely untenable.”

Fletcher said the consolidation of internet companies into relatively few “very large global companies”, which now hold strong market positions made the prospect of regulating them more viable.

“It’s not, in fact, as challenging in some ways to regulate the internet as we thought it was going to be 20 plus years ago when the view was that they’d be millions of websites around the world, and most of them would ignore the regulation of a particular country like Australia.”

Fletcher would not be drawn on the potential of breaking up US tech giants, an argument which has gained momentum in recent years but would likely need to be led by the US. 

Tech giants, meanwhile, have argued that national regulation would create an undue patchwork of rules, and are instead asking for a global approach and minimal regulation. Fletcher said that was not the view of the Australian government and all companies operating in Australia are subject to the rule of law.

Taxing Facebook raises ‘technical complexities’

Fletcher said that included taxation and he expects companies operating in Australia to comply with Australian tax law but added companies like Facebook, which provides almost entirely digital products and services, raised “a lot of technical complexities” in regards to taxation.

Facebook — which along with Google pulls in half of Australia’s online advertising spend — reported Australian advertising revenues over $579 million in the last calendar year. But the multinational billed the vast majority as services to lower taxing jurisdictions and ultimately paid just $11.8 million in tax, according to reporting by The New Daily.

According to Fletcher, “There are complexities because when it comes to transfer pricing issues with physical goods, these issues are clearer to understand than when it comes to the question of whether advertising charges are being paid to Facebook in Australia or Facebook in Ireland [a low tax jurisdiction].”

The communications minister ducked questions on a potential new tax on big tech, saying he would “leave the specifics of our tax policy to the treasurer to talk about”.

Media regulation has not kept pace

In his speech to the Australian media industry Fletcher told delegates the ACCC Digital Platform Inquiry would be “very influential” in Australia and abroad.

The government says it will formally respond to the consumer watchdog’s 23 recommendations by the end of the year but Fletcher says the government accepts the need for reform.

“We accept the ACCC’s overriding conclusion; there’s a need for reform to better protect consumers, improve transparency, recognise power imbalances, and ensure the substantial market power is not used to lessen competition in media and advertising services market.”

Fletcher said he also accepted the need for a “harmonised media regulatory framework” and the current model has not kept pace.

“Australia’s current media regulatory framework is struggling to keep pace with changes in technology, consumer preferences, and the way in which media businesses now operate.

“Traditional media businesses can face very detailed regulation while competing with digital platforms which largely go unregulated in Australia.”

Fletcher said traditional media businesses and digital platforms faced a “paradox” of competing with each other but also being “essential business partners” in advertising and “dissemination opportunities”.

Editors from Australian mastheads said, in a separate panel, platforms were getting the better side of the deal.

“I think that it’s mostly beneficial for them [Facebook and Google],” said editor-in-chief Kate de Brito. “Really for us it’s about clawing back a little bit of that power around our own content.”

“And that’s been one of the biggest changes that’s occurred for us. Obviously, as the Minister said, we’re still creating all the content, we’re still creating good content; it’s still coming out traditional newsrooms, but it’s being distributed by someone else … Now we’ve got to rely on some other pretty big players to distribute that content. And I don’t think that’s going to get any easier until we make some changes.”

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