Allan Fels says SMEs caught up in Facebook’s news ban could have cause for legal action… these lawyers disagree


The sign outside the main entrance to Facebook’s HQ.

Former ACCC chair Allan Fels has suggested Facebook could face a class-action lawsuit from SMEs and other organisations caught up in its news ban last week. But, lawyers say small and medium businesses shouldn’t get their hopes up.

In a statement, Fels, who is also chair of the Public Interest Journalism Initiative, noted the government has been well aware of the possibility that Facebook could restrict sharing of news content.

However, limiting access to government information such as weather, health or bushfire information is “unconscionable”, he said.

“This is not ‘news’, nor content envisaged under the Mandatory News Media Bargaining Code.”

Speaking to The Daily Telegraph, Fels reportedly suggested Facebook could now be open to legal action from the small business owners unwittingly caught up in the ban.

Specifically, the tech giant could be liable for breaching unconscionable conduct laws, “due to the overnight cessation of services to businesses, especially small businesses, that largely require Facebook to disseminate their product”, he reportedly said.

This could possibly lead to a class-action lawsuit, he added.

However, John Gray, a senior commercial and corporate lawyer at Hall & Wilcox who specialises in technology, tells SmartCompany that when it comes to unconscionability cases, “the bar is set fairly high”.

Businesses would have to argue that Facebook was “so overbearing that they used duress”, he explains, and that businesses were not using the service voluntarily.

“That’s just not an argument I think can fly.”

Alternatively, they would have to show they didn’t know what they were doing when signing up to Facebook, he adds. Again, that seems unlikely.

However, he concedes that it’s possible SMEs may have lost profits because they could’t promote their products.

Under its terms of service, Facebook doesn’t accept liability for lost profits over US$100, he says.

That could, arguably, be challenged under unfair contracts provisions in Australian consumer law.

“You could attack Facebook’s limitations of liability on the basis that they’re unfair and shouldn’t be enforced.”

That said, Gray doesn’t advise “marching off to court”.

While he would like to see Facebook’s terms scrutinised, any legal proceedings are expensive, and businesses would have to prove the loss they’ve suffered.

For most small businesses the outage was temporary anyway. And, unless a business suffered significant losses as a result, it’s unlikely taking legal action would be financially beneficial.

Demetrio Zema, founder and director of law firm Law Squared, doesn’t believe small businesses — or any businesses for that matter — would have a leg to stand on in bringing legal action against Facebook.

While businesses and other organisations place “enormous efforts, trust and faith” in the Facebook platform, it’s a private enterprise, with clear terms and conditions governing the use of the platform that will likely stand in the way of a lawsuit.

“It is an optional platform for businesses to leverage,” Zema tells SmartCompany.

If anything, he sees this as a lesson for small business owners and other organisations “not to have all their eggs in one basket” whether that’s in terms of community engagement, lead acquisition or sales.

“We’ve seen many businesses invest heavily in Facebook as their sole sales pipeline, which over the years has become both more expensive and less effective,” he adds.

“Despite its size, power and influence, Facebook is, after all, a private company and whilst it owes duties under Australian law, it can largely write its own rules of engagement as governed by its terms and conditions, which businesses, charities and even governments, opt into.”

Fels’ comments followed Facebook’s move last week to block new content shared by either publishers or the public, in protest of the proposed news media bargaining code.

Businesses of all sizes found themselves caught in the crossfire, either having content withdrawn, or being restricted in what they could post.

Mia Fileman, brand director at Idiello, for example, was unable to post her website URL on Facebook, she told SmartCompany at the time.

Under the proposed new laws, digital platforms including Facebook and Google would have to enter into licensing deals with news organisations for the right to display links to news content.

The code passed the House of Representatives last Wednesday and is expected to pass the Senate this week.

In a blog post, Will Easton, Facebook’s managing director for Australian and New Zealand, said the “proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content”.

“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,” Easton said.

“With a heavy heart, we are choosing the latter.”


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