US-based internet search giant Google has rejected the Competition Commission’s (CompCom’s) provisional findings that it prejudiced South African publishers and must pay them yearly compensation, ranging from R300 million to R500 million, for a three- to five-year period.
This, after the CompCom’s Media and Digital Platforms Market Inquiry yesterday released a scathing provisional report, which accuses Google and other social media companies of anti-competitive business practices in South Africa.
The report comes after 16 months of extensive evidence-gathering, public and in-camera hearings, expert report submissions, consultation with industry role players, a consumer survey and focus group discussions, says the CompCom.
According to the competition watchdog, Google’s monopoly position and the unequal bargaining position of the media means there has not been an equitable share of value between the internet search giant and news publishers in South Africa, both historically and currently.
It notes this inequity has materially contributed to the erosion of the media in South Africa over the past 14 years and will continue to do so unless remedied.
The watchdog explains that the inquiry used a variety of measures to determine the additional value extracted by Google Search annually from publishers, or value destroyed through conduct that promotes zero-clicks, resulting in a range of estimates from R300 million to R500 million for 2023.
Seeking balance
“The unequal bargaining position has resulted in an inequitable sharing of user data and insights between Google and news publishers,” the commission says.
“The Google algorithm distorts competition between news media organisations, in so far as it over-represents global news media in South Africa for search and top stories, under-represents vernacular and community media, and over-represents subscription publishers.”
It adds that Google appears to self-preference YouTube links on the Search Engine Results Pages and Discover feed relative to links to third-party video providers, including South African news broadcasters.
“These issues are exacerbated by SEO [search engine optimisation] requirements for the algorithm and for core updates to the algorithm where there is insufficient transparency on how the media will be affected and how to avoid traffic loss.”
The commission believes artificial intelligence (AI)-powered search is likely to cause an even greater extraction of value by search engines from news publishers, unless news publishers have the option to opt-out of AI summaries, and technological choices are made that ensure referral traffic to news publishers is not degraded by these tools.
It points out that Microsoft Bing has the potential to become more relevant to news publishers in future given the outcome of the US case against Google and its relationship with OpenAI. This will make its approach to search, and AI-powered search, more impactful on the media in future, it adds.
The CompCom then recommended that Google compensate the local news media for the additional value extracted annually of R300 million to R500 million.
The compensation can include funding support for projects that build digital news capabilities with the objective of improving revenue generation, but the majority of funding must be transfers to support and strengthen journalism.
The regulator says the administration costs are on Google’s account. It notes that news media and broadcasters are eligible if they predominately service the South African market, report on current issues or events of public significance for South Africans at a local, regional or national level, and adhere to the regulatory oversight by the Press Council or the Broadcasting Complaints Commission of South Africa (BCCSA).
It also urged Google to provide dedicated SEO support for local news publishers to assist with responding to core updates timeously to avoid traffic disruptions.
The other recommendation is for Google and Microsoft to negotiate annual contributions to the oversight institutions, namely the Press Council and BCCSA.
“Our preliminary view is that if the remedies are implemented in good faith to rebuild the industry and provide for long-term sustainability through improving the referral revenue from search, then historic compensation may be of less relevance,” says the CompCom.
“However, were there to be a non-cooperative position adopted by the search platforms that continues to leave the media industry in a precarious position, then pursuing historic compensation may be more appropriate.”
Traffic jam?
Responding to the provisional report, Google denies any wrongdoing in the South African market.
“We will review the report in detail but we disagree with the claim that Google has taken disproportionate value from publishers,” a Google spokesperson tells ITWeb via e-mail.
“In 2023, our products like Google Search and News generated an estimated R350 million in referral traffic value for South African publishers, while we earned less than R19 million from ads displayed next to news queries.
“Alongside this, we have invested in products, training and partnerships to support publishers and the broader news ecosystem, and will continue to do so.”
Meanwhile, Khusela Sangoni Diko, chairperson of the Portfolio Committee on Communication and Digital Technologies, has welcomed the CompCom’s recommendations.
Diko believes the recommendations strengthen the committee’s call for an urgent publication of a white paper on audio and audiovisual media services and online content safety by the Department of Communications and Digital Technologies.
“For a very long time, over-the-top (OTT) digital platforms exploited the regulatory gap in the sector to the detriment of the public broadcaster, the South African Broadcasting Corporation, which operates under stringent regulations.
“We further welcome the recommendation that media houses be remunerated for the content they produce that gets to be exploited by OTT and digital platforms.”
Diko adds that the recommendations on Google and YouTube, among others, will hopefully serve as deterrent to everyone that the lack of direct regulation in the sector is not a licence for unscrupulous business practices.
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