Newspapers Vs Google and Facebook: Will Congress Help?

Experts tell TheWrap why prospects look grim for news outlets battling “digital duopoly”

Congress is a tad busy these days, what with various committees investigating the Trump campaign for admittedly seeking dirt from Russia on candidate Hillary Clinton. Not to mention the turbulent fight to pass a health care bill.

So, it’s unlikely that Congress will give immediate relief to a newspaper alliance seeking an anti-trust exemption to collectively negotiate a bigger cut of online ad revenues from digital advertising giants Google and Facebook.

Even in “normal times,” it’s “rare” for Congress to grant any industry an anti-trust exemption, law professor Herbert Hovenkamp told TheWrap.

“These things cook around for years and decades and they are almost never granted,” said Hovenkamp, a law professor specializing in anti-trust law at the University of Pennsylvania.

“In current times, I’d say there’s practically no chance. Congress is not very patient or happy about the press,” said Hovenkamp, a law professor specializing in anti-trust law at the University of Pennsylvania. “I don’t see them giving the institutional press any favors.”

The News Media Alliance, a newspaper trade group that represents more than 2,000 American newspapers, published an op-ed piece in the Wall Street Journal on Monday calling on Congress for an antitrust safe harbor against Google and Facebook, which the group considers a “digital duopoly,” according to the alliance website.

Paul Boyle, senior vice president of public policy at the newspaper group, acknowledges that “in this political environment it is difficult to get anything done.”

“But, there is definitely an interest from policymakers on the impact of the duopoly on local news organizations and concern that with this online dominance there may not be a path forward to fund local journalism over the long-term,” Boyle told TheWrap.

Boyle noted that Congress passed the Newspaper Preservation Act in 1970, granting newspapers an anti-trust exemption by allowing two papers in the same city to combine business operations but keep separate newsrooms.

Federal anti-trust laws prevent companies from banding together and fixing prices for consumers or dictating worker salaries. The newspaper group wants an exemption to join forces and collectively negotiate better deals with the two internet giants.

“Because of this digital duopoly, publishers are forced to surrender their content and play by their rules on how news and information is displayed, prioritized and monetized,” the newspaper group said on its website.

A “duopoly” is like a monopoly, except two businesses dominate a particular market instead of just one. Before the internet, newspapers collected 100 percent of the revenues from ads placed in their papers.  Now that newspapers have migrated to the internet, they are forced to share a larger and larger cut of their digital ad revenues controlled by Google and Facebook.

“CBS’s net profit margin is 10 percent and Google’s is around 30 percent,” University of Southern California professor emeritus Jonathan Taplin told TheWrap.

“What’s the difference? CBS pays a lot to create content. Google doesn’t. Google is a free-rider,” said Taplin, author of the book, “Move Fast and Break Things: How Facebook, Google and Amazon Cornered Culture and Undermined Democracy.”

Even if Google and Facebook are duopolies, they are not violating anti-trust laws unless they collude together to fix prices, which is not being alleged by the newspaper group.

“Even if they are selling ads at a high price, that is not illegal under the anit-trust laws,” Hovenkamp said.

Google and Facebook are monster digital advertising companies that collectively earned 85 percent of all new digital advertising revenue in 2016.

Tim Worstall, a fellow at the free-market think tank the Adam Smith Institute in London, said he was “howlingly sceptical [sic]” of the request for anti-trust exemption relief.

“The industry is being gutted, that’s entirely true, but then it should be,” he wrote in a recent in an Forbes article. “No to the antitrust exemption therefore, let the newspaper industry adapt to the changing economic geography, don’t prop it up.”

Goggle has not escaped anti-trust crack-downs. Last month, the European Union slapped Google with a $2.7 billion fine for favoring its own services in search engine results.