U.K. Must Regulate Power of Facebook Over News, Report Finds

(Bloomberg) -- The U.K. should tackle the power of Alphabet Inc.'s Google and Facebook Inc. over Britain's news publishers and push the tech platforms to promote quality journalism, according to a report commissioned by the government to find remedies for the struggling local press.

The Cairncross Review called for codes of conduct to govern commercial relationships between the Silicon Valley giants and news publishers that would be overseen by a regulator with enforcement powers, according to its findings published late Monday.

“While each platform should devise solutions which best fit the needs of their particular users, their efforts should be placed under regulatory scrutiny - this task is too important to leave entirely to the judgement of commercial entities,” said the authors of the review led by Frances Cairncross, an economist and former journalist.

The report comes as the U.K. government considers how to sustain high-quality journalism as print circulations plunge and even new digital news outlets like BuzzFeed Inc. make harsh retrenchments.

The tech giants have become a vital gateway to readers of local journalism and are under pressure to share more of their ad income. A proposed copyright law devised by European regulators would give publishers the right to demand more money from the web platforms. Google has said it might withdraw its news service from the continent as a result.

Cairncross focused on themes including the role and impact of search engines, social media platforms and digital advertising. Under its proposals, Facebook and Google could commit not to impose their own advertising software. According to its website, Facebook Instant Articles lets publishers sell ads directly as well as through the company's software.

The review said the Competition and Markets Authority should investigate the online advertising market, which is dominated by Google, Facebook and Amazon.com Inc., and where intermediaries and profit margins are less transparent than those in print.

Britain's opposition Labour Party said the recommendations didn't go far enough.

“As long as tech giants continue to completely dominate the market it's difficult to see how a sustainable financial footing for journalism can be achieved,” Tom Watson, deputy leader of Labour and shadow culture secretary, said in an emailed statement.

Cairncross also recommended:

Value-added tax relief for online news, and charity or creative-sector style relief for public interest news.
The creation and funding of an independent Institute for Public Interest News for local and investigative reporting, which is generally unprofitable. It could resemble the U.K.'s Arts Council, channeling public and private funds into worthy parts of the industry.
Subsidies to sustain local and public-interest journalism.
Communications watchdog Ofcom should investigate whether the taxpayer-funded British Broadcasting Corp. is crowding out commercial journalism, and the BBC itself should do more to support local publishers.
Government and the regulator should craft a media literacy strategy, as too many people “struggle to assess the reliability of the news they see online.”

--With assistance from Robert Hutton.

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, Kim Robert McLaughlin