Google Warns Australia’s Proposed Antitrust Law To Hurt Users, Free Services

Google bashed out at Australia’s watchdog claiming that its proposed law, which would force tech companies to pay media outlets for news content, will hurt local users and channel operators.

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In an open letter, Google (GOOGL) said that the proposed law threatens to provide users with a “dramatically worse” Google Search and YouTube, and could lead to data being handed over to big news businesses. This in turn it is alleged would put the free services users have now at risk in Australia.

“This law wouldn’t just impact the way Google and YouTube work with news media businesses – it would impact all of our Australian users,” Google Australia Managing Director Mel Silva said in the open letter. “The law would force us to give an unfair advantage to one group of businesses – news media businesses – over everyone else who has a website, YouTube channel or small business.”

Silva added that news media businesses would be given information that would help them “artificially inflate” their ranking over everyone else, even when someone else provides a better result.

“The proposed changes are not fair and they mean that Google Search results and YouTube will be worse for you,” Silva said.

Australia’s government announced in April that it will seek to make tech firms such as Google and Facebook Inc. (FB) pay media outlets for news content. Last month, Australia introduced a draft bill including a mandatory code of conduct between media outlets and digital platforms. The mandatory code includes revenue sharing, user data access, news content presentation, and the penalties and sanctions for non-compliance.

Silva said that Google will do everything to get this proposal changed.

“Google will not be required to charge Australians for the use of its free services such as Google Search and YouTube, unless it chooses to do so,” Rod Sims, Australian Competition and Consumer Commission (ACCC) chair said in response to the letter. “The draft code will allow Australian news businesses to negotiate for fair payment for their journalists’ work that is included on Google services. This will address a significant bargaining power imbalance between Australian news media businesses and Google and Facebook.”

Shares in Google have recouped all this year’s earlier losses and are now trading 12% higher than at the start of the year. Meanwhile, the average analyst price target of $1,743.83 indicates shares have room to advance another 16% in the coming 12 months.

Following Google’s 2Q results, five-star analyst Brian Fitzgerald at Wells Fargo reiterated a Buy rating on the stock with a $1,750 price target. Fitzgerald said that the company’s management is being “cautiously encouraged” by advertising revenue trends exiting 2Q, while also noting an improvement in YouTube brand revenues exiting the quarter and into July.

“Google should be well positioned for the next stage of the pandemic (as suggested by improving 2Q trends), as an array of advertisers, including major online retailers, step back into key variable demand channels and brands return to online video advertising,” Fitzgerald wrote in a note to investors.

Overall, Wall Street analysts remain bullish on the stock. The Strong Buy analyst consensus boasts 28 Buys versus 2 Holds. (See Alphabet’s stock analysis on TipRanks)