The calls between Josh Frydenberg and Mark Zuckerberg that persuaded Facebook to ‘re-friend’ Australia

Five minutes before question time on Tuesday and Josh Frydenberg was walking to the House of Representatives chamber as he made the phone call that ended one of the most dramatic stand-offs modern politics has ever seen. “Are we good?” the Treasurer asked. “Yes,” came the reply from the man at the end of the line. An hour later it was officially announced. The Government had reached a deal with the man on the call, none other than Facebook chief executive Mark Zuckerberg. The stalemate over the news media bargaining code was over and Australians would again be able to access news on the platform. How the deal was struck Mr Zuckerberg, 36, is famously aloof. Most recognise him by his signature hoodie and remember the snarky portrayal by actor Jessie Eisenberg of him in Aaron Sorkin’s hit film The Social Network. But few have been given real insight into what Mr Zuckerberg, who founded Facebook when he was still a college student, is actually like. And governments around the world have usually had trouble pinning him down. In 2018 he refused to give evidence before the British parliament, despite the British government threatening to formally summon the US billionaire, and it was a similar story in Canada the next year when its government suggested he could be charged with contempt for ignoring their request to appear at a committee on tech privacy. But Mr Zuckerberg and Mr Frydenberg spoke so many times when they were hashing out the news media bargaining code that at one point they joked they were talking to each other more than their wives. They even once spoke while Mr Frydenberg was dropping his two children off at swimming lessons. Their first discussion was a video conference on January 28, with Mr Frydenberg in his office in Canberra and Mr Zuckerberg joining from the US. But from there they mostly spoke via WhatsApp, which, perhaps appropriately. is owned by Mr Zuckerberg’s company. In the 36 hours prior to that last fateful call on Tuesday, the pair had spoken six times. One media boss joked to the Treasurer that negotiation with Mr Zuckerberg was like playing chess against grandmaster Garry Kasparov or a tennis set against Novak Djokovic. But Mr Frydenberg held his ground. Prime Minister Scott Morrison, Communications Minister Paul Fletcher, Australian Competition and Consumer Commission chair Rod Sims and Treasury also had big roles in devising the game plan. Mr Zuckerberg was understood to have remained polite throughout the calls, even when Mr Frydenberg expressed his anger that the company had switched off news pages to Australian users. The tech whizz was also across the fine details of the proposed laws. It is considered unusual for someone as powerful as Mr Zuckerberg to be that engaged with legislative negotiations. His main concerns were getting a “two-way value exchange” with media companies and the global impact of the laws. When Mr Frydenberg spoke to Agenda yesterday, he said he had appreciated the time both Mr Zuckerberg and Alphabet chief executive Sundar Pichai had given the negotiations. Alphabet is the parent company of Google. “The discussions with both Sundar at Google and Mark at Facebook were at all times respectful and constructive and I deeply appreciate the personal engagement and the significant time and commitment given to resolving the outstanding issues,” Mr Frydenberg said. “We all knew we were negotiating the deals of an agreement that had global ramifications. Let’s face it, big tech doesn’t like regulation and it was clear neither Google nor Facebook wanted the code in the first place, but they realised the Morrison Government was not for turning and we encouraged them and provided an avenue for them to do commercial deals.” He said the Government was adamant not to let the threats stop them from passing the legislation. “We never dismissed their threats, but neither were we intimidated by them. The negotiations were difficult and complex and we at one point reached a stalemate. But fortunately we made our way through and got the deal done.” So what does the code do? The news media bargaining code started with an inquiry from the consumer watchdog the ACCC. It found there was an imbalance between media companies and tech giants which had “distorted the ability of businesses to compete on their merits in advertising, media and a range of other markets”. While Facebook and Google profited from journalism on their platforms, because of the imbalance of power it was near impossible for media companies to negotiate deals. The inquiry recommended the Government look at developing a code to “address the imbalance in the bargaining relationship between these platforms and news media businesses and recognise the need for value sharing and monetisation of content”. The ACCC led the process for drafting the code which was originally meant to be voluntary. But voluntary became mandatory when the ACCC said it was clear the tech giants weren’t going to come to the party. The code sets up an arbitration model where “designated” tech firms would be forced to compensate media for their content. Facebook and Google both threatened to exit the Australian market over the proposed laws. On February 15, Seven West Media, publisher of The West Australian, was the first media firm to announce it had secured a deal with Google under which Google would pay for news content In the following days, Google reached agreements with News Corp, Nine and The Guardian. Mr Frydenberg praised the deals that he said would not have happened without the code. “This is an historic moment; a world first. The digital giants entering into negotiations and agreements with Australian news media businesses to pay for original content. This will help sustain public interest journalism in this country for years to come,” he said. But just days later Facebook would go down a very different path, going nuclear and blocking Australians from posting, sharing or viewing news content on its site. Pages belonging to charities and government organisations were also temporarily blocked amid the ban, including those for the Department of Fire and Emergency Services and even State Opposition Leader Zak Kirkup. What changed Facebook’s mind? The mass blocking exercise was met with global condemnation, with Facebook accused of putting individuals at risk by stopping them from getting life-saving information during a pandemic. Health Minister Greg Hunt said he was “profoundly shocked” health organisations had been impacted. “The fact that the kids’ cancer project could be affected, is, frankly a disgrace. Facebook should fix it and they should address that immediately,” Mr Hunt said last week. Mr Frydenberg and the Prime Minister made no secret of their displeasure, but the negotiations continued. The key amendment that got Facebook over the line was that when deciding to “designate” the code to a digital platform the Government would need to take into consideration whether it had already made a significant contribution to Australian journalism through commercial agreements. This meant they would not have the laws thrown at them if they made deals with media companies on their own. Hours after the Government announced Facebook’s backflip, Seven West Media became the first company to announce it had signed a letter of intent with Facebook. Mr Sims said the changes did not make a significant difference to the intent of the code. “The changes the Government’s made are things that either don’t matter much or are just to clarify things that, at least in Facebook’s mind, were unclear,” Mr Sims said. “Whatever they say, they need news. It keeps people on their platform longer. They make more money,” he said. The passage of the laws has been celebrated by overseas news outlets who have called for their own countries to introduce similar legislation to make tech companies pay for journalism. “Aussies 1, Facebook 0,” read the headline of an editorial published by the New York Post which said: “Washington should take notice and make the tech giants who make billion from advertising pay American media their fair share, too.” The European Publishers Council and News Media Europe said what had happened in Australia and France, where there has also been a crackdown on tech giants, showed the need for similar legislation in Europe. “The experiences in France and Australia have shown us that there’s a real need for a binding instrument to address inherent imbalances in bargaining power with gate-keepers, which undermine the potential of Europe’s press sector,” president of News Media Europe Fernando de Yarza said. Timeline of a deal December 4, 2017 Then-treasurer Scott Morrison directs the ACCC to conduct an inquiry into digital platforms. July 26, 2019 The ACCC hands down its report which finds there is an imbalance of power between media companies and tech giants. It recommends a code be developed. April, 2020 Negotiations led by the ACCC between media firms, Facebook and Google break down. It is announced a mandatory code will be developed instead of a voluntary one. July 31, 2020 The draft mandatory code is released. Google and Facebook start running public campaigns against the proposed laws. January 22, 2021 Google threatens to switch off search to Aussies. January 27, 2021 Google backflips on its threats to exit Australia and starts negotiations with media companies. It comes after Microsoft said it supported the code and would up-scale its search engine Bing if Google exited. January 28, 2021 Josh Frydenberg has his first video conference with Mark Zuckerberg to discuss the laws. They start speaking regularly. February 14, 2021 Seven West Media is the first major organisation to announce it has struck a deal with Google. February 17, 2021 The code passes the Lower House. February 18, 2021 Facebook causes global outrage by blocking news pages to Australian users. February 23, 2021 Facebook backs down. The Government announces it has agreed to amend the code and Mr Zuckerberg says content will be unblocked. Hours later Seven West Media says it has signed a letter of intent with Facebook. February 24, 2021 The news media bargaining code passes through the Senate. February 25, 2021: After amendment in the Upper House, the code becomes law.