Potential Implications of Recent European Union Copyright Legislation

The new EU copyright legislation has become a highly controversial piece of legislation since its approval on September 12th. A comprehensive regulation with wide ranging implications, the impact of the law can be dissected by looking at its individual components.  While Article 13, the “copyright filter,” which is intended to improve protections for copyrighted work, has been most controversial, Article 11, which implements a “link tax,” is likely to have a much larger economic impact. The link tax, would, in essence, require Google to purchase a license for using the headline, thumbnail, and excerpts from third-party sources. The EU hopes to implement this tax on all major search engines and websites. The purpose of this requirement is to make the distribution of internet revenue more equitable, providing third party content creators greater compensation for their work. While a link tax has been suggested before, this is the first time that an entity as large as the EU has seriously considered its potential.  The reasoning behind Article 11 is that major tech giants like Google and Facebook have been generating revenue from advertisements on their pages without paying a fee to the content creators themselves. Google, for example, does not pay any news publisher for having their links on the Google News platform, yet collects revenue from advertisements on the associated Google News page.

 

While limiting the market power of major tech giants is necessary, Article 11 will likely become an inefficient piece of legislation that hurts the news publishers it seeks to protect. Though approved now, it will likely go through a series of amendments in the coming years and the eventual effects of Article 11 will not be felt immediately. Despite this, the economic consequences of an internet copyright law should still be considered in order to better evaluate copyright law and free press on the internet.

 

This is not the first time that Google has faced copyrights laws seeking to limit its influence and tax its global revenue. In 2014, Spain passed legislation on intellectual property rights that required Google News, Google’s news aggregation platform, to pay for providing links to its domestic news publishers. The logic behind the legislation was very similar to that of Article 11: Google was seen to be unfairly collecting advertisement revenue by providing links to websites, without paying any fees to the publishers. In response to this law, Google dropped all Spanish news publishers from Google News, leading to a substantial decrease in web traffic to Spanish news publishers. This law hurt smaller news networks particularly, because they relied heavily on Google News to create a level playing field of internet traffic by directing viewers to their network. According to an analysis by NERA Consulting, during the first few months following the passing of the law, major news publishers in Spain saw a six percent drop in web-traffic while small publishers saw over a 14 percent decrease in traffic.

 

Many attribute the passing of this legislation to the Spanish government’s misconception of the Internet as a traditional market; taxation or fees on the internet are not as easy to enforce because companies can easily opt out of the market, especially if they hold a high degree of market power like Google. According to Techdirt, a website about law and technology, this law also significantly affected innovative news publishers that sought to use Google News and other news aggregation platforms to develop a mobile and interactive news experience. The amendment failed to understand the symbiotic relationship between Google News and news publishers, and instead drove Google out of the market entirely. Ultimately, it was largely considered a failure that hurt both news publishers and consumers.

 

Supporters of Article 11, however, have argued that Google, Facebook, and other tech giants have far too much market control in the internet space and should be subject to a tax. According to Newsweek, currently Google and Facebook sites and services account for over 70 percent of internet traffic, an increase from 50 percent in 2014. With the expansion of mobile apps and platforms, it is likely that these large technological companies’ market control will continue to rise the internet becomes an even more ubiquitous aspect of modern life. Proponents of the law have also suggested that a link tax for these tech giants is not intended to punish Google, but rather protect the news publishers would are otherwise exploited by Google’s aggregation platforms. Article 11 only taxes hyperlinks with the snippets containing a short description, thumbnail, and link that Google creates. This aspect of the law largely discredits the doomsday predictions that have claimed that Article 11 will mark the end of hyperlinks and search engines.

 

It is difficult to foresee positive economic outcomes from Article 11 if the legislation comes into full effect. The debacle in Spain demonstrated that Google News and other aggregation platforms have a symbiotic relationship with both large and small news publishers by directing revenue-generating website traffic. Furthermore, this type of legislation would stunt the development of more innovative news publishers that seek to use aggregation services to provide more “real time” news and analysis on what events are most talked about. It is likely that a link tax would instead harm small news publishers throughout the EU severely, ultimately stunting economic development and progress. It will be up to future amendments for Article 11 to evolve into legislation that limits the immense powers of the tech giants, while also positively affecting economic growth.