The action-packed year that made Australian regulation a Silicon Valley bugbear

09 April 2019 00:00 by James Panichi

Until relatively recently, there was little to indicate that Australia was on the cusp on a regulatory push that might keep Silicon Valley’s most powerful companies awake at night. 

With a small population base and just a handful of world-class tech success stories of its own, Australia appeared likely to remain a footnote on the Asian balance sheets of the Amazons, Facebooks and Googles of the world.

Then just over a year ago, things started to move — fast.

First it was the draft report into the impact of digital platforms on the media and advertising industries prepared by the country’s competition watchdog. The interim findings weren’t binding, but they revealed that the Australian regulator had ventured deep into the US companies’ business models.

The audacity of the investigation’s mission statement appeared to whet the appetite of legislators to take on Silicon Valley. Within months, an anti-terrorism bill granting law-enforcement agencies access to encrypted messages on apps such as Facebook’s WhatsApp had made its way onto the statute book.

And earlier this month, Canberra adopted another world-first measure that hit the tech giants where it hurt: the “abhorrent violent material” law. Australian-based Facebook executives could now wind up on the wrong side of a prison door if they fail to move swiftly to remove violent, live-streamed content. 

These sweeping changes to the regulatory landscape all came about quickly — in the case of the violent-content legislation, less than a week passed between it appearing as a ministerial thought-bubble and its adoption by parliament.

More importantly, though, the global implications of the new legislation are considerable. By demanding access to encrypted messages, for example, Canberra overrode the US companies' concern about their global reputation, which hinges on a guarantee that their users' privacy will be protected. 

It’s true that US tech companies have more significant regulatory challenges to contend with in the EU and domestically. Yet, Australia’s unapologetically parochial approach to legislation — one that regulates Facebook and Google with scant regard to the laws’ global impact — is nonetheless troubling.

The one, clear message coming from Australian legislators is that they don’t care about the international obligations of online platforms, about the technical difficulties posed by their demands or that data-privacy regimes abroad are incompatible with Canberra’s rules.

Lawmakers tell anyone who will listen that the global nature of communications technology or online platforms can’t be allowed to undermine the sovereignty of local laws. If Facebook broadcasts video locally, it’s an Australian broadcaster; if Google accepts local advertising, it’s an Australian publisher.

Now, critics say that Canberra’s belief in its absolute technological sovereignty is at odds with an interconnected reality where national borders are increasingly irrelevant. But local legislators don’t care: they’re fighting a war of values against the tech giants and they’ve so far won every battle.

Changing atmospherics

The inquiry into digital platforms came about as part of a political compromise. As it overhauled laws dealing with media ownership, the government was forced to accept the demands of minor parties in the Senate — a probe into the impact of platforms was among those demands.

The inquiry exposed seething resentment directed at the platforms. The Australian Competition & Consumer Commission, or ACCC, handed established Australian media companies an opportunity to take a swing at Facebook and Google and traditional media reached for the baseball bats with glee.

The platforms hit back, saying that legacy media had themselves to blame for the collapse of their business model, arguing that the online ecosystem was thriving but traditional media outlets simply hadn’t worked out how to monetize it.

In this regard, the submissions were predictable. Newspapers, led by News Corp., and commercial television broadcasters weren’t ever likely to embrace the platforms’ criticism.

But the ACCC’s preliminary report appeared to come down firmly on the media’s side by opening up the prospect of the platforms facing stronger regulation over their use of data. The interim findings also lashed the platforms’ habit of acquiring startups before they bloomed into rivals.

It’s true that these are the preliminary findings of a non-binding recommendation to government, with the final report expected by the end of June. It will ultimately be up to the country's executive to decide if and how to regulate US technology companies.

Yet the digital-platforms inquiry appears to have changed the atmospherics on all sides of politics. The swift legislative process that led to the adoption of the encryption and violent-content legislation between December 2018 and last week suggested politicians aren’t buying Silicon Valley’s calls for caution.

The ACCC is using the probe to build its understanding of the digital platforms’ operations in Australia. The regulator openly credited the probe as the source of its intelligence when dealing with the merger between Nine Entertainment and Fairfax Media in November.

This intelligence will result in the ACCC being better placed to put forward new ideas that are likely to be embraced by a political class thirsty for new regulatory avenues with which to rein in the tech companies.

Encryption intransigence

Australia’s adoption of tough encryption laws at the end of 2018 marked a serious defeat for US and Australian technology companies that had lobbied and campaigned tirelessly against the laws.

Unlike the violent-content laws passed last week, the encryption legislation was debated and reviewed, with key international players in the industry — including, Apple Facebook, Google and Cisco Systems — speaking or writing to lawmakers to express their concerns.

It was all for nothing. Australian politicians premised their demands for access to encrypted messages on a simple assumption: Law-enforcement agencies have been able to tap phone calls as part of criminal investigations; why shouldn’t they have access to encrypted messages as well?

The technology companies’ protests that the law would weaken encryption for users around the world and that demands for data stored in other jurisdictions raised concerns over privacy guarantees fell on deaf ears. Australia’s police forces and spy agencies got what they wanted.

The passage of the “abhorrent violent material” legislation this week followed a similar narrative — albeit with legislators allowing zero time for consultation.

Both US and Australian technology companies denounced the law, which was drafted in response to last month’s massacre in New Zealand, in which the alleged perpetrator live-streamed his actions on Facebook. Fifty people were killed in the incident.

The platforms argued that the law was vague and extremely far-reaching. Again, they warned of the extraterritorial impact of the legislation, with requirements that Facebook move swiftly to remove certain violent content no matter where it was produced and regardless of Australian involvement.

True to form, Australian politicians treated all arguments rooted in tech companies’ global operations with contempt. The message was that if platforms thought they could operate in a different regulatory environment from, say, Australian television broadcasters, they were deluding themselves.

“Mainstream media that broadcast such material would be putting their license at risk and there is no reason why social media platforms should be treated any differently,” Australian Attorney General Christian Porter said.

There are no political downsides to this tough stance. There are no major Australian international players in this space — with the exception of Sydney-based software company Atlassian. Silicon Valley is not a large employer in Australia; so antagonizing Facebook or Google is a risk-free operation.

Given the ease with which both the encryption and the “abhorrent violent material” laws went through parliament, it’s safe to assume that Australia’s muscular approach to the regulation of technology companies will continue.

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