By Mike Cherney 

SYDNEY -- Microsoft Corp. said the U.S. should copy Australia's controversial proposal that tech companies pay newspapers for content -- putting it at odds with Alphabet Inc.'s Google and Facebook Inc.

It isn't the first time Microsoft has stepped into feuds involving rivals -- particularly in areas where they have an edge. Its Bing search engine lags behind Google in market share. Microsoft has urged governments to better regulate facial-recognition technology and last year sided with a videogame developer against Apple Inc. in a dispute about app-store fees.

The Australian proposal, if enacted into law -- it is now before a parliamentary committee -- could prompt other countries to follow suit in a global transformation of the relationship between tech companies and traditional media.

Some countries, particularly in Europe, have tried to force tech companies to pay publishers, often with little success. Australia's effort gained momentum last year, when the pandemic-driven downturn further strained the finances of media companies.

"The United States should not object to a creative Australian proposal that strengthens democracy by requiring tech companies to support a free press," Microsoft President Brad Smith wrote in a blog post published Thursday. "It should copy it instead."

The Australian proposal would effectively require publishers and tech companies to negotiate, and submit to binding arbitration if they can't reach a deal. It would also require tech companies to notify publishers of algorithm changes that could affect search rankings.

The Trump administration opposed the proposal, objecting to its applying first to two U.S. companies and to some specifics of the arbitration process, which it said would favor the news companies. Microsoft's Mr. Smith said the Biden administration should reconsider.

"At the end of the day, what is wrong with compensating independent news organizations for the benefits the tech gatekeepers derive from this content?" Mr. Smith wrote. Although the Australian law wouldn't initially apply to Microsoft, he said the company is prepared to sign up to the new law's obligations and share revenue as proposed with news organizations.

Google and Facebook have argued that the proposal would set an unmanageable precedent, given that the internet is based on free sharing of links. If the proposal becomes law in its current form, Google has said it would shut down its search engine in Australia, and Facebook has said it would bar Australian users on its social-media platforms from sharing links to news articles.

The two companies have said they want to invest in local publishers, and point to recent deals to show they and news companies can negotiate fair compensation. They also argue the publishers benefit by having links to their content appear in search results and social media because it sends users directly to their websites.

Google executives have said that Australia's proposal should be narrowed to apply to a new product called News Showcase, rather than search results. News Showcase offers curated panels of news that appear on Google services, with Google paying publishers for content. The company has said an arbitrator could be called in if there are any disagreements involving that product.

This week, Google expanded News Showcase to the U.K. and Argentina, after last week launching in Australia, where it says seven publishers have signed up. Globally, it has committed $1 billion to the product over the next three years.

"This adds to the hundreds of deals we've signed in a dozen countries around the world -- and with the positive comments from publishers and policy makers, demonstrates that Showcase is an attractive solution that supports a strong future of news," said Lucinda Longcroft, Google's government affairs director in Australia.

But some publishers in Australia, including the local subsidiary of News Corp, owner of Wall Street Journal publisher Dow Jones & Co., have argued that Google and Facebook wield so much market power that they have no incentive to negotiate. They say tech giants pay nothing for content, but collect ad revenue based on visits to their sites and increase their traffic by including links to news articles.

The tech giants' lobbying efforts have increased in recent days, ahead of the parliamentary committee's report, due Friday. In the weeks that follow, lawmakers could vote on the legislation, which could be changed along the way.

Senior Australian officials have said they have recently talked to Facebook Chief Executive Mark Zuckerberg, Alphabet Chief Executive Sundar Pichai and Microsoft Chief Executive Satya Nadella.

"I thought it was a constructive meeting," Prime Minister Scott Morrison said of his talks with Mr. Pichai this month. "We have been able to get that into a much more positive space about the ability to continue to provide services here in Australia."

Google and Facebook aren't the only ones expressing concern about the Australian proposal. Tim Berners-Lee, a computer scientist credited with inventing the World Wide Web, said in a parliamentary submission that by requiring payment for linking content online, the law "risks breaching a fundamental principle of the web."

Write to Mike Cherney at mike.cherney@wsj.com

 

(END) Dow Jones Newswires

February 11, 2021 13:14 ET (18:14 GMT)

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