Alphabet Inc's Google has vowed to withdraw its main search engine from Australia, while Facebook Inc says it will block news sharing if the government proceeds with a law to make them pay domestic media outlets for content they feature.
The dispute is being closely watched worldwide since it would be the biggest challenge yet to how the US tech companies that dominate social media and search engines use news on their websites.
WHAT DOES THE LEGISLATION SAY?
The planned law states that Australian news outlets can negotiate individually or collectively with Facebook and Google over payment for content used on the tech firms' sites. Other tech firms may be added if they are deemed big enough.
If the parties cannot reach an agreement, an arbitrator will decide whose offer is more reasonable. If Facebook or Google break any resulting agreements, they can be fined up to A$10 million ($7.4 million) in civil penalties.
The law also requires tech firms give media outlets notice when they change search algorithms in a way affecting the order in which content appears. They must also share their use of consumer data extracted from news content on their sites.
Read: An Australia without Google? The bitter fight behind a drastic threat
The Australian Competition and Consumer Commission (ACCC) began investigating search engine and social media companies in 2017 and worked with the federal government on drafting the rules, which are the subject of a parliamentary inquiry but expected to be passed into law.
While internet and media companies have battled in other jurisdictions, notably in Germany over the copyright rules for news snippets and other items published by Google, Australia's proposal represents the most expansive reform.
WHY WAS THE LAW PROPOSED?
In recent years, traditional media companies operating in Australia have suffered huge hits to income streams, such as subscriptions and advertising. For every A$100 spent on online advertising in Australia, excluding classifieds, nearly one-third goes to Google and Facebook, the competition regulator has said.
In 2019, the regulator published a report stating news outlets lacked bargaining power when negotiating with digital firms over compensation for content posted on online platforms. It said this was a problem because those same publishers relied on Facebook and Google to reach many of their consumers.
The government wanted the tech giants to abide by a voluntary code. Citing lack of progress in discussions, it decided that legislation was necessary.
WHAT HAS THE RESPONSE BEEN?
The local arm of News Corp is a vocal supporter of the legislation. It partly blamed the tech companies for the closure of dozens of mastheads in 2020.
Google and Facebook say they help connect media outlets with consumers, boosting their subscriptions and enabling them to charge advertisers more.
Facebook says it has sent billions of clicks a year to Australian news websites via articles appearing on users' pages, and has threatened to remove news links from Australian users' feeds.
Google says it is prepared to pay for content, though no major media organisation has agreed to its terms. Google has said it will withdraw its main search engine from Australia if the laws go ahead.
Australia is planning more regulation of large technology companies in the media industry. The ACCC has suggested new data-sharing rules which would challenge the dominance of Google and Facebook in the online advertising market, and will publish a report in March on the role of Google and Apple Inc in the smartphone software industry.
Australia has previously engaged in lengthy battles with major corporations. In 2012, the then centre-left government became the first in the world to prohibit cigarette companies from using designs on their packaging to attract consumers. Tobacco companies mounted legal challenges but the courts ultimately upheld the law.