Facebook threatened today to block Australians from sharing news stories on its website if it is forced to pay for them.
Australia's world-first legislation would force Facebook and Google to negotiate fees with the news companies whose stories appear on their websites - with fines of millions of dollars if they fail to comply.
But Facebook said today it would 'stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram' if the proposal becomes law.
One expert said Facebook wanted to kill off Australia's initiative to stop it spreading to other countries where the financial impact would be more severe.
Australia's government immediately dismissed the threat today and vowed it would 'not respond to coercion'.
Google has also campaigned against the new law with pop-ups saying 'the way Aussies use Google is at risk', but has not threatened a cut-off like Facebook.
Facebook (pictured, CEO Mark Zuckerberg) is threatening to block news stories from being shared in Australia if the social media giant is forced to pay for them
Australia's crackdown is targeting stories that appear in Google searches, Facebook's news feed and on Instagram without any money going to the news businesses which actually produce them.
Australia says this is a 'fundamental bargaining power imbalance' which means that news websites are unfairly deprived of advertising revenue siphoned off by Facebook and Google.
Regulators say that Facebook and Google not only benefit financially from showing the news stories, but also boost their status as news providers in Australia and collect user data which is used to improve their services.
Facebook also profits from the 'like' and 'share' buttons on other websites which allow its servers to track people's activity and send them tailored ads.
In addition to payment for content, the measures would also force transparency around the closely guarded algorithms that tech firms use to rank content.
The code will require Google and Facebook to give publishers 28 days notice of any algorithm changes that are likely to have a significant impact on their traffic.
The initiative is being closely watched around the globe as media companies worldwide face financial struggles, made worse by the coronavirus pandemic.
In a statement, Facebook's Australia and New Zealand managing director Will Easton said the proposed overhaul 'misunderstands the dynamics of the internet'.
'Most perplexing, it would force Facebook to pay news organisations for content that the publishers voluntarily place on our platforms and at a price that ignores the financial value we bring publishers,' he said.
'Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram.
'This is not our first choice - it is our last. But it is the only way to protect against an outcome that defies logic and will hurt, not help, the long-term vibrancy of Australia’s news and media sector.'
The government of Australian prime minister Scott Morrison (pictured in parliament yesterday) has vowed it will not respond to 'coercion' from Facebook
Easton also accused Australian regulators of having 'ignored important facts' during a lengthy consultation process that ended on Monday.
The regulator 'presumes that Facebook benefits most in its relationship with publishers, when in fact the reverse is true,' he said.
'News represents a fraction of what people see in their news feed and is not a significant source of revenue for us.'
Easton said Facebook sent 2.3billion clicks to Australian websites in the first five months of 2020 at an estimated value of A$200 million (£110million).
It had also been preparing to bring Facebook News to Australia, he said - a feature launched in the US last year where the tech giant pays publishers for news.
'Instead, we are left with a choice of either removing news entirely or accepting a system that lets publishers charge us for as much content as they want at a price with no clear limits,' he added.