September 1, 2020: Facebook has threatened to block Australian publishers and individuals from sharing news stories on its platform in reaction to an Australian measure that could require it to compensate media organizations for its use of their stories.

Under Australia’s closely watched internet reforms, the country will become the first to require Facebook along with Alphabet Inc’s Google to pay for news sourced from media companies under a royalty-style system.

Facebook Australia Managing Director Will Easton said the proposed legislation misunderstands the dynamic of the internet and will damage news organisations.

“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,” Easton said in a statement.

“The proposed law is unprecedented in its reach and seeks to regulate every aspect of how tech companies do business with news publishers.”

Easton said Facebook sent 2.3 billion clicks to Australian websites in the first five months of 2020 at an estimated value of Aus$200 million (US$148 million) and had been preparing to bring Facebook News to Australia -- 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.

"Unfortunately, no business can operate that way."

Facebook on Tuesday also informed Australian users of a change in its terms of service that will come into effect on October 1 and allow it to remove or block access to content if "necessary to avoid or mitigate adverse legal or regulatory impacts".

Google has also campaigned forcefully against the proposed changes, creating pop-ups on the search engine warning "the way Aussies use Google is at risk" and urging YouTubers around the world to complain to Australian authorities.

The legislation, due to be passed into law this year, will initially focus on Facebook and Google -- two of the world's richest and most powerful companies -- but could eventually apply to any digital platform.

The initiative has been closely watched around the globe as news media worldwide have suffered in an increasingly digital economy, where advertising revenue is overwhelmingly captured by Facebook, Google and other big tech firms.

The crisis has been exacerbated by the economic collapse caused by the coronavirus pandemic, with dozens of Australian newspapers closed and hundreds of journalists sacked in recent months.