Europe is trying to institute a Google tax–again

Is it a push for economic justice, or just money grubbing?
Is it a push for economic justice, or just money grubbing?
Image: Reuters/Eric Gaillard/Illustration/File Photo
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Prodded by the news media old guard, the European Commission tries again to create a “hyperlink tax”—with broad consequences.

Traditional news media always had a problem with hyperlinks. A few years ago, while at Les Echos (France’s main business news publisher), we created an aggregator called “Les Echos 360” that drew its inspiration from Techmeme and Mediagazer. The idea was to provide a bird-eye view of business and economic news by skimming headlines (freely available on RSS feeds) and clustering them by topic and weight in the news cycle. Needless to say, we didn’t fool around with French copyright laws that drastically restrict the use of third party content (American fair use laws are way more permissive, perhaps too much so).

I warned my team: Our competitors might make fun of us for sending traffic to them without getting anything in return. Sadly, I was wrong.

The public liked our product, finding it pleasantly convenient. But our esteemed competitors didn’t like it at all. Unacceptable, a viper in one’s bosom, an exploiting aggregator fomented within the very core of legacy media! In a matter of weeks, almost every major French news brand had sent us a cease-and-desist letter, demanding to be removed from the service. We could have prevailed in court—the law was unquestionably on our side—but it would have been a pointless win.

We simply noted the irony. These media fiercely protected their editorial from us while making it freely available in RSS feeds—which amount to a permission to loot content on a large scale. The very same media brands who keep spending large amounts of money to appear at the top of Google News were threatening to sue us for linking to them.

We ended up closing the French service of “Les Echos 360” and switched to friendlier anglophone contents. It turned out to be a right move: compared to French media, anglo-saxon coverage of business and economy is, by far, of higher quality, more diverse, and better for our business. In addition, English-speaking media were sympathetic to the concept: a publisher told me that traffic referred by a respected news brand such as Les Echos was good for the quality viewership they were angling for.

I could mention numerous tales like this one, ranging from the main French TV network TF1 that forbade others sites to deep-link its content (that was many years ago); or the more recent posture of the Danish public broadcasting service that prevents its journalists from linking to external content.

When the European Commission (EC) decided to reactivate the discussion of an ancillary copyright law, the idea was therefore met with sympathy. Especially because the underlying motive is to make Google pay for snippets, a decade-old fantasy for many European media.

What is it about exactly?

In short, the EC wants to drastically extend the notion of ancillary copyright (a.k.a. “neighboring right”) that currently protects the movie and music industries. Such extension would include all news-related contents accessed via a hyperlink. For example, anyone linking to a piece of news would have to shell out compensation similar to what a radio station must pay for playing a song. In practical terms, this would force any aggregator or search engine to pay for simply linking to a headline or snippet. Needless to say, the elephant that sits in the crosshairs is Google, both for its search engine and the Google News service that aggregates thousands of publishers.

Such maneuvers were once attempted in Spain and Germany, and proved to be a complete failure.

In Spain, when a law forced Google to pay for linked content, the search engine shut down its local Google News, and the Spanish press disappeared from its index. Spanish website traffic plunged by about 20%. In addition, the collection system was never properly implemented—publishers never got a cent from anyone linking to their content. A lose-lose proposition.
Two years ago, Germany passed a similar law, with a similar ending: Google quit indexing German media, traffic plummeted. Publishers came back, hat in hand, begging to be referenced again.

Last March, the EC put the idea back on the workbench, this time by organizing a consultation (closed on June 15) that could pave the way for new legislation by the end of this year.

Two years have elapsed since the last attempt to tame the hyperlink system. The landscape has changed.

During the interval, Google has deployed a great deal of energy and resources to make peace with European publishers. In France, the $60 million modernization fund is considered a success because it allowed many publishers, large and small, to conduct otherwise unfundable experiments.

Last year, Google launched the Digital News Initiative (DNI), built on three pillars: a product development section, a training and research program, and a brand-new European fund of €150 million ($170 million) to stimulate innovation across Europe. (Disclosure: I represent Les Echos in the working group of eight European newspapers involved in the product development section of the DNI.)

The cooperation between the news industry and Google is now broad and deep. For example, the DNI harbors the Accelerated Mobile Page project; while the program is mostly driven by Google’s engineering team in Mountain View, publishers have been closely involved in voicing their opinions on the specs. And there is more to come. By contrast, Facebook has brewed its Instant Article on its own, afterwards cherry-picking the prime candidates it wanted to get onboard. Last week, the Italian Newspaper Publishers Federation (FIEG) made its own peace with the search giant through a bespoke deal that includes a €12 million Google investment in various cooperation programs.

More broadly, the whole climate has shifted against the idea of a Google Tax. The German embarrassment and the Spanish legislative disaster cause publishers to think twice.

For instance, in a letter to the German publisher TAZ, the editor of Zeit Online Jochen Wegner said that:

EU Digital Commissioner Günther Oettinger, [is] urging publishers to create a new legal Monster in Europe. It is the big brother of the little monster that just dies a slow death in Germany.

As for Wolfgang Blau, while still head of digital at the Guardian at the time (now at Condé Nast International), he said this:

The very few large and international publishing houses (…) want to prove that despite their dwindling journalistic influence, they are still in a position to instrumentalise parliaments in Europe for their purposes and to create obstacles for unwelcome competition. In my opinion, those few large companies have never been after the ancillary copyright per se, but after strengthening their future bargaining position.

Even in Spain, some publishers who supported the failed legislation are now reluctant to reactivate it. Should a similar law be adopted at the European level, publishers recommend at least an escape clause in which a media could agree to be referenced by the aggregator or the search engine of their choosing while waiving its right to ancillary copyright compensation. The editor of Eldiario.es, Ignacio Escolar, said:

I hope that this regulation does not go beyond the border of the Pyrenees and get to Europe because it was completely useless for the readers, the publishers and for Google.

Defenders of a European ancillary copyright law (for instance, in France) invoke the need to be protected from the looting of editorial content by automated crawlers that collect links to rearrange and repackage them into lucrative press review products sold to corporations. They want a law to forbid such practice. In doing so, they overlook the fact that unwanted crawling can be avoided by inserting a small line of code, known as a Robots meta tag, in HTML pages. With such meta tags, “looter” robots can easily be forbidden access to an entire site or parts of it. No need for a law.

Google is evidently unhappy with the possible resurgence of “neighboring rights” legislation. The search giant doesn’t need to brandish the threat of closing Google News or of stopping the indexation of media. It did it in Spain and in Germany—it will do the same in Europe if needed. A short-sighted law could cost millions to the publishing industry.

By itself, such a bill has little chance to survive the legislative process—83 members of European Parliament voiced their explicit opposition—and the pressure keeps mounting.

But a much broader context must be taken in account: In Europe, Google is increasingly under fire for not paying its fair share of taxes.

The problem won’t go away. In the UK earlier this year, the lump £130 million ($190 million) tax settlement triggered an outrage at the British Parliament. MPs blasted what they saw as as an obscenely small sum when compared to Google’s £4.6 billion yearly UK sales revenue. That revenue is channeled through Ireland where Google maintains a 5,000-employee workforce—and where Google, like other tech companies, pays modest taxes.

In France, as the political benefits of the generous Innovation Fund are fading, the government is back in business and wants an estimated €1.6 billion in “overdue” taxes. On May 24, Google offices in Paris were raided by more than a hundred tax and law enforcement officials who collected terabytes of data. The investigation mentions “tax evasion” and “money laundering,” nothing less.

When it comes to its tax situation, Google might be making a serious lapse in judgement.

Google’s defense is based on the fact that, over the last five years, its global tax rate has been 18.7%, in line with the average OECD level. Google argues that the costliest part of is advertising and engineering operations are not done in France or UK, but elsewhere, in Ireland and the US.

Tax lawyers on both sides can debate forever. But one thing remains: throwing stones at Google is extremely popular in a Europe composed of countries loaded with unbearable deficits, ones that have been left out of most digital innovation (just try to name one game-changing company that originated from Europe). Therefore, watching a US internet giant harvesting billions of euros in revenue while paying a ridiculous amount in local business taxes has become an issue that the political establishment—both at the local and the European level—is happy to exploit by pulling every lever available, including the sensitive notion of copyright.

Unfortunately for Google, in real life, tax and copyright issues are no longer disjoint. By refusing to rebalance its tax situation (routing less revenue through Ireland and the US for instance), an entire ecosystem of cross-linking and referencing might become the collateral victim of the political agenda of a handful of Brussels bureaucrats. The ancillary copyright legislation probably can’t sustain an objective analysis. It is certainly without merit, and dangerous for the media industry, but that is beside the point: for the time being, it is simply an incidental weapon in a much larger battle.

This post originally appeared at Monday Note.