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FACEBOOK INC

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Lawmakers Want to Protect Local Newspapers From Google, Facebook -- 2nd Update

10/27/2020 | 06:38pm EST

By Keach Hagey

Some Senate Democrats are seeking to enable regulators to protect local news outlets, accusing tech giants such as Google and Facebook of "unfair business practices," according to a new report by members of a key committee that will hear from the top industry executives this week.

Released on the eve of the Senate Commerce Committee's hearing Wednesday with the chief executives of Alphabet Inc.'s Google, Facebook Inc. and Twitter Inc., the report argues that local journalism is in a crisis -- badly exacerbated by the coronavirus pandemic -- partly because of alleged anticompetitive behavior on the part of the tech platforms that ought to be policed by the Federal Trade Commission.

"They are facing unfair practices," Sen. Maria Cantwell (D., Wash.), the ranking member on the committee, said in an interview. "We think Congress and the FTC should address those unfair practices."

A Google spokeswoman said the report "distorts the reality around Google's role in the online news ecosystem and the value that we provide to publishers who face challenges in transitioning to the digital world."

Facebook took issue with the report's allegation that tech giants take local news content and data for their own sites, a practice known as scraping. "The accusation that we scrape news articles is simply not true," a Facebook spokesman said.

The report also proposed a range of other legislative changes, including a law that would force tech platforms to negotiate with local news outlets to ensure those organizations are paid for their content, in much the same way that local TV broadcasters are paid by cable and satellite companies for distributing their content.

Painting a grim portrait of the state of the local U.S. news industry, the report noted that it had lost 70% of its revenue in the past two decades, while today Google and Facebook control 77% of local digital ad revenue.

The report argued that the FTC needs new authority now so it can force Google and Facebook to change their practices, given that the Justice Department's current antitrust lawsuit against Google could take years to be resolved.

Democrats don't currently control committee business in the Republican-controlled Senate. Criticism of the tech platforms has been bipartisan lately, though Republicans tend to be more focused on fears that the platforms are silencing conservatives.

Senate Republicans have been critical of the tech platforms' influence over the publishing landscape. During a Senate hearing last month, Republican senators including Mike Lee (R., Utah) and Josh Hawley (R., Mo.) asked tough questions of a Google executive about the search giant's dominant market power in the ecosystem of tools that connect web publishers and advertisers. "This looks like monopoly upon monopoly," Mr. Hawley said at one point.

The Senate Commerce Committee minority report cited practices such as Google's requirement that publishers agree to put their content on Google-hosted Accelerated Mobile Pages, or AMP, to receive a decent search ranking on mobile. Publishers have complained the technology deprives them of customer data and hurts subscription rates.

The report also argued that Google search, by using local publishers' headlines and snippets without compensation and increasingly answering queries on Google without pushing users through to publisher websites, was abusing the original intent of copyright law's notion of "fair use."

Publishers have complained about similar "take it or leave it" dynamics with other Google products, such as Google News and Google Discover, a feed of recommended content. In a report this summer, the News Media Alliance, the news publishers' trade group, alleged that Google's overwhelming market power has effectively deprived publishers of the ability to enforce the copyrights to their own material, since in effect there is no substitutable competitor they would work with instead if they don't like Google's terms.

The Google spokeswoman said Google sends traffic to news websites and its ad products help publishers make money. Google also has reached agreements with selected publishers around the world to license news content.

Citing multiple Wall Street Journal articles on the topic, the report notes that while Facebook has made deals to pay license fees to some publishers, they only cover about a quarter of the local news services whose content Facebook displays in its news tab.

The Facebook spokesman said the company gives "news organizations the ability to post news on Facebook free of charge, and they have full control over how that content is accessed and monetized." He also said Facebook has spent hundreds of millions of dollars on programs and partnerships to help local news.

Wall Street Journal parent company News Corp has been among the companies that have called for Google and Facebook to pay organizations that provide quality news.

The report called on the Senate to pass a set of coronavirus-relief measures similar to what the House passed earlier this year, which would expand the kinds of local news outlets that could qualify for Paycheck Protection Program funds.

It also argued Congress should consider requiring tech platforms to negotiate with local news outlets for use of their content, in much the same way that Congress required cable operators to get permission from broadcasters -- known as "retransmission consent" -- before carrying their programming as part of the 1992 Cable Act. Today the fees that local TV stations get from cable and satellite companies are the engine of their growth, making up more than 40% of their revenue, according to Moody's.

Local newspapers are "just too important a part of our democracy and our economy to let continue to disappear," Ms. Cantwell said.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

10-27-20 1937ET

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ALPHABET INC. -0.17% 1821.84 Delayed Quote.36.02%
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NEWS CORPORATION 0.98% 18.57 Delayed Quote.31.33%
TWITTER 1.19% 47.79 Delayed Quote.49.11%
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Financials (USD)
Sales 2020 83 463 M - -
Net income 2020 26 870 M - -
Net cash 2020 63 906 M - -
P/E ratio 2020 30,5x
Yield 2020 -
Capitalization 803 B 803 B -
EV / Sales 2020 8,85x
EV / Sales 2021 6,93x
Nbr of Employees 56 653
Free-Float 83,8%
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Mean consensus BUY
Number of Analysts 51
Average target price 316,19 $
Last Close Price 281,85 $
Spread / Highest target 33,0%
Spread / Average Target 12,2%
Spread / Lowest Target -57,4%
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Managers
NameTitle
Mark Elliot Zuckerberg Chairman & Chief Executive Officer
Sheryl Kara Sandberg Chief Operating Officer & Director
David M. Wehner Chief Financial Officer
Michael Todd Schroepfer Chief Technology Officer
Atish Banerjea Chief Information Officer
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