While the timing for legislation to give the CMA’s Digital Markets Unit (DMU) a legislative footing and additional powers is uncertain, the DMU continues to undertake market studies and make recommendations relevant to a future regime. Recently-published advice by Ofcom and the CMA sets out recommendations made by the regulators to the UK government in November 2021 which provides advice on how a principles-based code could apply to the relationship between platforms and content providers, such as news publishers.

An uncomfortable relationship?

Publisher content attracts users to platforms and enhances platforms’ capacity to analyse data, which, among other things, helps platforms improve their advertising potential. However, regulators consider that with the structural decline of print media since the early 2000’s, ‘each publisher needs Google and Facebook more than the platforms need them’, an imbalance which has led to several concerns:

  • Algorithmic transparency – a web of algorithms helps platforms connect consumers with tailored content. Publishers rely heavily on these algorithms to direct users to their own sites and coding tweaks can have significant knock-on impacts – reducing site traffic and resultant revenues.

  • Data access asymmetry – whilst platforms can track users across the online ecosystem, including gathering data from publishers’ sites (for example through cookies), publishers do not enjoy full access to the data associated with their content when hosted by third parties. This limits publishers’ ability to tailor and monetise content and, alongside the use of algorithms, could be used to undermine the value of advertising on publishers’ websites.

  • Content presentation – platforms often control how publishers’ content is presented to users and present disaggregated data, making it challenging for consumers to discern where content has come from, and build trust with publishers.

  • Payment for content – some platforms have balked at the notion of remunerating publishers for content which they ‘neither take nor ask for’. Meanwhile, publishers have claimed that they do not always receive fair (or in some cases, any) value for the use of their content.

  • Advertising – publishers are concerned that they: (i) cannot compete with platforms when marketing their advertising inventory due to platforms’ greater ability to utilise data to provide effective targeting and attribution; and (ii) rely heavily on ad tech intermediaries (such as platforms), who receive a significant proportion of publishers’ advertising revenues.

Rebalancing the scales: An SMS code of conduct

The CMA and Ofcom have proposed several ways in which a legally-binding, principles-based Strategic Market Status (SMS) code of conduct could serve to rebalance this relationship.

  • Transparency –  Algorithms cannot be disclosed to publishers in their entirety, as this may allow gaming of the system. However, SMS firms should provide clear, relevant, accurate and accessible information to users regarding the algorithms and processes which control the content users see. Users should also understand how these change over time. Platforms should provide ‘fair’ notice of any changes to algorithms which would likely have a material impact on publishers and allow sufficient audit and scrutiny of the processes behind forming and updating algorithms.

The regulators’ interpretation of ‘fair’ notice remains unclear – under the Australian News Media Bargaining Code (Australian Code), regulated platforms must give at least 14 days’ advance warning of algorithm changes (a shorter period of 48 hours’ notice post-change applies to matters of urgent public interest). This remains yet to be tested in practice, given the absence of any platform designations by the Australian government.

  • Justified data terms – Platforms could do more to limit their data advantage over publishers and the imbalance of power when determining content display. For example, platforms should support publishers by presenting content in their preferred web format, unless there is an objective justification to use a specific format. Platforms can also limit data analytics to only what is required for a specific service – this may mean slimming back on the extent to which SMS firms can require data collection through cookies on publishers’ sites.

  • Fairness – Whilst a fixed methodology to establish remuneration would not be an appropriate or future-proof solution, the report suggests that a ‘fair trading’ objective would be beneficial, to ensure fair, reasonable and non-discriminatory (FRAND) remuneration for content. Remuneration should strike a fair balance between the revenue received by platforms and publishers, considering both the joint value which each gain from their partnerships, and the collective value created from the use of a particular type of content on a platform from all contributors of that content, whilst not unduly discriminating between content providers. 

The CMA and Ofcom favour equipping the DMU with an Australian-style binding arbitration backstop power where parties cannot come to a timely agreement. It is not clear whether the DMU would follow the Australian Code methodology (which allows parties three months to negotiate remuneration before an arbitral panel selects between the final offers of each party) or considerations for "fairness", under the Australian Code, an arbitral panel considers: (i) the benefits each party brings to partnerships; (ii) ‘reasonable’ costs incurred by each party; and (iii) whether remuneration would create an ‘undue burden’ on the platform.

The UK regulators have also looked to the French competition authorities which have been active in this area, granting and defending publishers’ right to remuneration for press articles, and extracts (except ‘very short extracts’), published on digital platforms. For example, following the transposition of the EU’s Copyright Directive, the French authorities imposed interim measures (and subsequent fines for non-compliance) when Google was accused of bypassing fair negotiations mechanisms by imposing imbalanced conditions on publishers.

Platforms are already responding to these concerns – Google has launched Google News Showcase, an initiative which offers news publishers copyright deals to show extended previews of their content online. Google will pay a license fee for content used. The tool has debuted in Germany and Hungary and is set to launch across the EU.

Are we there yet?

The DMU is still some way off from being able to designate the likes of Google and Facebook as having SMS and to enforce a code of conduct. The report foresees a DMU with investigative and information gathering powers, authority to direct SMS firms to comply with a code (including fining powers) and a backstop enforcement power to ensure that code breaches do not persist for prolonged periods.

In some cases, the DMU may need to take decisions itself – particularly when deciphering ‘fair and reasonable’ pricing – however, in tandem with the approach taken in the recent Google Sandbox case, the report articulates the regulators’ preference for collaboration with key players to imbue transparency and fairness in digital markets.