Today we learnt that Google will shut down its ‘Google News’ service this year in Spain. This is just one consequence of the introduction in Spain of an ancillary copyright levy (known as the ‘AEDE levy’) affecting online services (apps and websites).

In a nutshell, if an online service uses short snippets to link to content which is deemed ‘news’, or enables internet users to do so, payment to the Spanish news publishers’ collecting society is mandatory. And by “news”, the law targets not just articles from major newspapers, but pretty much any blog or website that provides “information”, “entertainment” or content relevant to “public opinion” (see Art. 32.2 of the final text here).

What is the problem exactly?

Apart from serious legal concerns about the validity of the law under international and EU law, one can only wonder at the lack of any clear economic rationale. The Spanish competition authority’s report rightly questioned which economic problem or market distortion the law is actually trying to address.

The reality is that the law turns the economics of most internet-based services upside down. Many online services will have no choice but to drop out of the Spanish market.

Online services are valuable to publishers because they redirect a lot of traffic to publisher sites, and because they are constantly experimenting and innovating with new ways of connecting users with publisher content. As the New York Times reported, services like Pinterest are fast becoming “a leading driver of traffic to certain magazines, and in some cases […Pinterest…] serves as a bigger source of reader referrals than either Facebook or Twitter.

Meanwhile, others are backing away from ancillary copyright laws

Germany passed its ancillary copyright law last year and it is currently in force.  Even though it is less restrictive than the Spanish law, at a recent parliamentary committee hearing in the Bundestag, all five expert witnesses agreed that the law is a failure and needs to be repealed. As one the experts, Prof. Dr. Axel Metzger from the Humboldt University put it, “the AC has created a massive bone of contention in the information society.”  And Prof. Dr. Thomas Hoeren from the University of Münster made the impact of the law clear: “the introduction of an ancillary copyright has been a disaster.”

In Austria, the government has pulled back from implementing ancillary copyright. In its draft bill, the Ministry of Justice included provisions for an ancillary copyright.  Three weeks ago, they dropped it from their copyright reform. Just as in Germany, opposition to the law was widespread, ranging from online communities to the Austrian Federal Economic Chamber.

In Switzerland, as a reaction to continued lobbying by publishers, the Government issued a report last week on the state of Swiss media. The report effectively closed the door to any ancillary copyright, emphasising that “a hasty introduction of largely untested supportive measures must be prevented” (own translation from this press release).

The negative effects of this form of legislation are now clear for all to see.  Ancillary copyright levies are a bad idea.  They are harmful to digital services in general, acting a disincentive to innovation. Worse, they restrict choice for internet users and are proving to be an own goal for publishers.

Note: This post originally appeared online at Project Disco.

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