Clickbait economics

Why the Competition Commission’s plan to make Google pay for news gets the digital economy all wrong

Google is the reason South Africa’s news media is dying. So says the South African Competition Commission in a new report, which demands that it pay local news publishers between R300 million and R500 million over three to five years.

In short, the Commission accuses the tech giant of profiting off work produced by local media. This creates a ‘value imbalance’: Google reaps a hefty share of advertising revenue and audience data whenever it displays links and snippets of South African news content, yet the publishers themselves see only a fraction of that benefit. To redress this imbalance, the Commission proposes that Google reimburse publishers and change its algorithms to ensure the news industry sees a fairer return.

‘I can’t help feeling like we’re busy asking car makers to help out the horse-drawn carriage industry’, Alastair Otter, founder of The Outlier, wrote on LinkedIn. He is spot on. Below, I will argue that, in one sweep, the Commission’s report misreads consumer choices as monopoly power, overlooks the rise of new media that exist because of digital platforms, exaggerates the impact of ‘zero-click’ searches and calls for large payouts that ignore the balance between innovation and fair competition.

It is important to note that this is only a provisional report. The Competition Commission can make findings and recommendations, but it lacks the authority to impose fines or force companies to comply. Some recommendations might be enforceable through the Competition Tribunal, but legal uncertainty remains –particularly around whether firms can be compelled to make payments to others, a move that would raise Constitutional concerns. As technology lawyer Heather Irvine points out on LinkedIn, such an order would be unprecedented and open to legal challenge.

Yet even if these proposals never see the light of day, the report itself reveals a troubling departure from basic economic principles. While there is a global push to rein in Google and other tech giants, the Commission’s stance is a reminder that too much regulation can be just as damaging as market failure.