In a dramatic escalation of tensions, Facebook Inc (NASDAQ: FB) on Thursday morning blocked Australian users from sharing or viewing news articles.
The social media giant, along with Alphabet Inc (NASDAQ: GOOGL), has been locked in a public argument with the Australian government about a proposed new media code.
The code is the first attempt in the world to try to force the platforms to share the revenue they earn from content produced by media companies.
As other nations are watching closely at the precedent the Australian deal might set, both tech companies had threatened to cut off their services during negotiations.
But Facebook's move on Thursday is the first shut down actually implemented.
Facebook ANZ managing director William Easton said the proposed law "fundamentally misunderstands the relationship" between it and news publishers.
"It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia," he wrote on a company blog.
"With a heavy heart, we are choosing the latter."
Image source: Getty Images
Facebook says it's different to Google
Easton objected to Facebook and Google being treated in the same way through the proposed laws.
"Our platforms have fundamentally different relationships with news. Google Search is inextricably intertwined with news and publishers do not voluntarily provide their content," he said.
"On the other hand, publishers willingly choose to post news on Facebook, as it allows them to sell more subscriptions, grow their audiences and increase advertising revenue."
Facebook had been in discussions with the Australian government for 3 years to reach a settlement reflective of this difference, according to Easton.
"Unfortunately this legislation does not do that. Instead it seeks to penalise Facebook for content it didn't take or ask for."
Easton added the "value exchange" between the social media platform and news publishers is well in favour of the latter.
"Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million."
Facebook: we're taking our money elsewhere
The social media platform had been preparing to launch Facebook News in Australia, but those plans have now been shelved.
"We were only prepared to do this with the right rules in place," said Easton.
"We will now prioritise investments to other countries, as part of our plans to invest in new licensing news programs and experiences."
The news ban now means Australian users will not be able to view or share any local or international news content.
Australian news publishers will not be able to post or share content, and overseas media companies will not have their articles viewed by Australians. Overseas users will not be able to view or share content produced by Australian news organisations.
"For Facebook, the business gain from news is minimal," Easton said.
"News makes up less than 4% of the content people see in their News Feed."
Facebook shares were down 0.15% overnight, while Alphabet shot up 0.38%.
