Journal of Free Speech Law: "From Hot News to Link Tax: The Dangers of a Quasi-Property Right in Information," by Paul Matzko

Just published as part of the symposium on Media and Society After Technological Disruption, edited by Profs. Justin "Gus" Hurwitz & Kyle Langvardt.

The article is here; here are the Introduction and the start of Part I:

In February 2021, the Australian federal government enacted the "News Media and Digital Platforms Mandatory Bargaining Code," which requires Facebook and Google to pay domestic news outlets for linking to their websites. It was a first-of-its-kind mechanism for redistributing revenue from Big Tech platforms to legacy journalism, and it has attracted global attention from policymakers looking to halt the Internet-fueled decline of the traditional news industry. Thus, the success or failure of what critics call Australia's "link tax" has significant implications for the future of both the World Wide Web and the news industry writ large.

But while the full consequences of Australia's regulatory innovation will not be apparent for several years, there is a precedent from the United States that could shine light on the possible outcomes. In the early twentieth century, U.S. courts created a "hot news" doctrine to bolster the Associated Press newswire service when it faced new competitors and navigated the technological disruption caused by the spread of the telegraph. The intended and unintended consequences of the American hot news doctrine offer a cautionary tale to contemporary policymakers interested in an Australian-style link tax. Both hot news and the link tax are forms of enclosure that turn a category of information into a novel form of property. Doing so has radical implications: rewarding politically connected incumbent firms, punishing insurgent competitors, and producing ideological consensus.

It is not breaking news that newspapers in the twenty-first century have experienced a general decline that has dramatically affected circulation, advertising, and revenue. The rise of the consumer Internet eroded classified advertising, once the single most significant source of newspaper revenue. In Australia, classified revenue fell from $1.5 billion in 2002 to just $0.2 billion by 2018. At the same time, overall Australian newspaper revenue fell by nearly the same margin—from $4.4 billion to $3 billion—suggesting that the migration of classified ads to online clearinghouses like Craigslist was a principal factor in the collapse of the old newspaper financial model.

[I.] Who Should Pay and How?

Australian newspapers had a revenue problem and looked to their national government for redress. A straightforward solution would have been to tax the online classified-ad platforms and redistribute the money to bereft newspapers, whose market share had fallen from 96% to 12%. However, such an approach would have been straightforwardly anti-competitive, would have generated costs that fell directly on consumers, and would have targeted domestic classified-ad platforms. Instead, Australian newspapers sought to take a slice from a much-larger financial pie: online search-and-display advertising, which enjoys quadruple the revenue of online classifieds. Since two companies that are headquartered abroad—Facebook and Google—dominate search-and-display in Australia, the costs of a link tax would not fall as directly on Australian consumers (so long as neither company pulled out of the market entirely).

Online classified platforms derive nothing from newspapers, so taxing them to subsidize newspapers would not have seemed equitable (nor would it have been particularly lucrative). By contrast, Facebook and Google operate as news aggregators, linking to newspaper articles in order to sell ads and garner user data. Since aggregators have a proximate relationship to the news, it is easy to claim that they are free-riding off of journalists' hard work and should pay a fair share. As Australia's Federal Treasurer Josh Frydenberg put it, "This is really a question of fairness. If you prepare the content and the digital platforms are using it to bring traffic to their websites, then they should pay for it."

Note that the justification offered is moral, rooted in a particular concept of what is fair. It is not a proposition that translates well in the offline world. For instance, it would be strange to suggest that brick-and-mortar retailers have a moral obligation to pay manufacturers not only for their product but also for the mere right to resell and display the product on their shelves. (Typically, the relationship is reversed, with manufacturers paying major retailers for prime shelf space. Efficient distribution is a value-added proposition.) Fundamentally, the problem that the link tax is meant to address is not moral but structural, as policymakers attempt to buttress traditional media organizations that are coping with technological disruption, albeit with varying degrees of success.

Yet news aggregators had little to do with the financial decline of the newspaper industry. They were not major players in the rise of online classified advertising. Additionally, online advertising has shifted display-ad revenue away from its traditional proximity to the news. Advertisers have more non-news digital options for placing their ads—social media, streaming, etc.—than they did back when print newspapers were one of the few mediums for reaching large audiences. For example, a clothing store would have once placed an ad in the local newspaper by necessity (and not because it was a newspaper per se); how else could they affordably reach a large group of potential customers? Today, however, that clothing company would be more likely to place an ad with a TikTok influencer or to buy a display ad on Pinterest, neither of which has anything to do with news reporting. Only a miniscule fraction of the revenue lost from display ads in print newspapers was transferred over into advertising on online news aggregators. In other words, even if one were to somehow abolish online news aggregation, it would not return significant display-advertising revenue to newspapers….

Comments

[John F. Carr]

"would have generated costs that fell directly on consumers"

What should happen, speaking as an armchair economist, is the costs should go to consumers of news. With a pay to read model Google and Facebook need a contract to get through the paywall.

In practice, the combination of irrationality on users' part and greed on corporate executives' part means this is not the model used for ordinary news. Google does seem to have privileged access to paywalled scientific papers.

I have a paid subscription to a local news outlet too small to afford a legal team to write Silicon Valley-style terms of service. It costs pennies per article that is posted but dollars per article I care about.

[ReaderY]

The discussion attempting to compare to manufactured goods is flawed in two ways. The obvious flaw is that manufacturers are paid for their goods, whereas news services are not. But the subtler flaw is that manufacturers in fact often pay fees to retailers to display their product more prominently. The analogy to manufacturing, far from undermining the idea that aggregators should pay news services, supports it.

Concepts of property ownership are not absolute, objective things, much as the “natural law” crowd would like to think. They are socially constructed, rooted in socially shared concepts of propriety and fairness. The concept that the people who have developed a product have an interest in that product, and others can’t simply lift it up and use it for free, has ancient roots.

Moreover, while it’s true we can’t be absolutely certain that traditional news wouldn’t have declined even if the economic model hadn’t collapsed and revenue hadn’t dried up, and we can’t be absolutely certain that competition from free services using newsgatherers product witiout paying for it caused revenue to dry up and the economic model to to collapse, nonetheless nothing in life is absolutely certain. And as far as the sorts of theories and assumptions used to justify social policies are concerned, this one has a lot more plausibility and support than most.

Legislatures have to be free to craft concepts of property ownership that address changing social circumstances. The idea that existing concepts are somehow written in stone, objective and unchangable, is nonsense.

[Randal]

The obvious flaw is that manufacturers are paid for their goods, whereas news services are not.

Sure they are! They have their own advertising, and if they want to, they can require a subscription.

But the subtler flaw is that manufacturers in fact often pay fees to retailers to display their product more prominently.

Uh... the article makes this exact point. This is what makes it an interesting comparison. (And if you read the whole article, it goes into some depth about why news aggregators are beneficial to news sites, even free ones. Really, if this were a market-driven situation, news sites would be paying aggregators like Google for inclusion and placement.)

[Krayt]

Concepts of property ownership are not absolute, objective things, much as the “natural law” crowd would like to think. They are socially constructed, rooted in socially shared concepts of propriety and fairness. The concept that the people who have developed a product have an interest in that product, and others can’t simply lift it up and use it for free, has ancient roots.

Forget other, inferior definitions by the clueless over the millenia. Civilization is the thwarting of the hunter-gather impulse.

This behavior is perfectly fine behavior for beavers and insects and lions. But if you want the benefits of other people, you have to let them be secure in their labors and not just waltz up and take your stuff after you did all the work.

Also, anyone who says there is no such thing as property is only saying one thing: they want to take your property and use it themselves. Which is the important part of property ownership, not a pink slip of paper in a filing cabinet somewhere. Hence such claims are immediately self-contradictory.

[ReaderY]

Not sure if you’re agreeing with me or disagreeing with me. I’m basically saying that the aggregators could reasonably be characterized as exploiting a loophole in traditional concepts of property that didn’t account for this new situation, and legislatures are entitled to account for it and close the loophole.

That’s why I’m arguing traditional concepts of property shouldn’t be treated as sacred or written in stone. Legislatures are entitled to update them, account for new situations, and close loopholes as they perceive them arising.

[ducksalad]

Articles in a law journal or scientific journal cite other articles. Now that articles are electronic and often include URLs within the cites, it is literally exactly the same thing as a Facebook page linking to a newspaper.

Is your claim that authors of law papers are "exploiting a loophole" by citing other authors? Does it hinge on whether they put the URL in there?

[Stephen Lathrop]

Articles in a law journal or scientific journal cite other articles. Now that articles are electronic and often include URLs within the cites, it is literally exactly the same thing as a Facebook page linking to a newspaper.

No. They would be the same if Facebook was a journalistic peer of the law journal or the scientific journal, and contributed legal scholarship or scientific discovery which the other journals could also cite. That in fact, is the kind of relationship upon which the traditional news services were predicated. But in the context of that kind of relationship, Facebook finds itself instead in the role of an insufficient contributor to the traditional news service, a parasite to be excluded from membership until it can carry its load of the content creation burden.

[David Nieporent]

The problem with the Australian idea, which rent seekers in the California legislature are also trying to adopt, is that it gets the relationship between the entities backwards. Social media companies drive viewers to the newspapers, not the reverse.

We know that the Australian idea is wrong, because the response of social media companies to "If you want to provide links to news articles, you need to pay the newspapers" was "Okay, so we won't allow links to news articles." And then the legislators acted all shocked, "No, wait, we didn't mean that. We just want to extract money from you to give to the newspapers."

[ducksalad]

Exactly.

[Stephen Lathrop]

The implied threat was to stop linking but keep stealing.

[David Nieporent]

No, it wasn't.

Also, it is not "stealing" to provide a hyperlink to something publicly available on the Internet.

[Randal]

How, exactly, would that work?

[Stephen Lathrop]

Randal, paraphrasing other media’s news stories is one common way. Pretty much the story of the founding of the Huff Post.

Then, if you can get away with news-like presentations based on paraphrase, and you enjoy a public policy privilege which grants you lucrative impunity in other ways, you steal advertising from existing media which pay for the news gathering you steal. You get the advertising, they get the expenses. With their income constricted, they have to back off on the news gathering. That ought to sound familiar.

Of course, you will find no shortage of internet boosters (Nieporent is one, so is the author of this OP) who will tell you the internet put traditional media behind the 8 ball because internet business models worked more efficiently than traditional media methods, which amounted to trying to sell buggy whips. So it's all a matter of free market innovation, and the creative destruction which comes with, and in the long run benefits everyone.

That ignores that the internet was as available to traditional media as it was to social media entrepreneurs. What was not available on an equal basis was public policy. It was Section 230 which selectively put platforms in the drivers’ seats they occupy today.

Unfortunately, it is not possible to explain that to someone unfamiliar with the ins and outs of the publishing business, both traditional and internet. You have to first teach how publishing business models work. And you have to do it for an audience which does not care at all about anything but optimizing their own expressive opportunities, and damn all the practicalities necessary to support publication of their expressions.

To explain that in a blog comments section is not practical, at least not for me. I have tried repeatedly. I am not up to that task. Give me 50 pages and I could make better headway, but only among an uncharacteristically curious minority.

Suffice to say that the notion that internet publishing is inherently more efficient must somehow be squared with the fact that internet platforms do not pay to gather news, but nevertheless manage to run up operating costs many multiples higher than, for instance, the NYT. Facebook’s U.S. operating costs were most recently reported to be about 10 times greater than those of the NYT, which is probably the world’s champion news gatherer today.

It is of course a commonplace, even among internet fans, that if you put social media platforms on a level defamation playing field with traditional media, the traditional media would be fine, and the platforms would suffer catastrophically. I am not certain I agree with that, by the way, but it is telling that almost all internet fans believe it.

What it tells is that internet fans want what they want, via an optimized expressive experience built around treating internet publishing as if it were a newly-discovered lode of natural resources—a magical gift bestowed by incomprehensible technology—and available at no cost to everyone. And what utopian internet fans demand from that gift is anonymous, cost-free, liability free, capacity to publish world-wide, and say whatever they want to say about anyone, without content oversight by anyone else, either before or after publication.

No publisher in world history has ever achieved even a notable fraction of that publishing power. It remains a puzzle to understand what would make sane people think that way—let alone to do so en masse, and with vociferous certainty that anyone trying to explain practical obstacles must be not only wrong, but badly motivated.

Remember, these are all people who know so little about what is going on that they suppose they—and not the media organizations upon which they depend—are the publishers of their commentary. That is an impressive disconnect between ambition and reality, amounting to a mass delusion.

[Randal]

Yeah, I didn't want a rehash of all your misconceptions about the Internet. This is all I wanted to know:

paraphrasing other media’s news stories

I seriously doubt Google and Facebook's implied threat was to paraphrase news articles. That's hugely slow and labor-intensive, exactly what Google and Facebook aspire not to be.

Maybe it could be done with AI, but even then it would turn Google and Facebook into news publishers, which I'm pretty sure is not a label they wish to be tarred with.

[Stephen Lathrop]

I seriously doubt Google and Facebook’s implied threat was to paraphrase news articles. That’s hugely slow and labor-intensive, exactly what Google and Facebook aspire not to be.

You have no idea what you are talking about. Facebook spends about $10 billion a year on U.S. operating expenses. Almost 3 times that worldwide. How big a staff does a task need to qualify as, "labor intensive," in that context?

I could do that job for Facebook with a staff of 40 people. In fact, I have done it on a smaller scale. For a brief period in the early 80s I was the managing editor of a daily newspaper with a staff of 6 in Aspen, CO, run on exactly that basis—poaching and paraphrasing national news. The daily news we poached from early morning radio broadcasts would have met the needs of any slipshod national publication. And that meager staff spent most of its time covering local news the old-fashioned way.

With a staff of 40 people today, I could give Facebook a national news feed which would make typical internet commenters think they were getting the NYT, because they would be.

Also, if you think Facebook is not a publishing business, and nothing but a publishing business, it is you who suffer misconceptions about the internet.

Here is a hint for you. If you have been following public commentary about the internet online, and suppose that empowers you to understand how internet business models work, you don't. The people who understand that stuff are less likely to want to share it than are the people who think the internet is about delivering to Joe Keyboard his dream of unfettered expressive freedom. Joe is an internet utopian who is happy to stay that way. He understands instinctively that if he understood the practicalities that might hamper his demands for unlimited personal publishing power.

Let's use the OP to illustrate the difference between internet utopianism, and practical publishing reality. Paul Matzko spent tens of pages on an article which purports to analyze how the internet works, and to compare that to traditional publishing. He got some of his history flat wrong, and misunderstood even more of it.

Yet Matzko never got around to discussing the most consequential distinction between internet publishing and traditional publishing. That distinction comes from the fact that the internet empowers a publisher to target each audience member individually, and to publish X to one person, and Not-X to the next person, with almost no one aware that is even happening—and no one at all in a position to understand in real time what systematic effects that actually delivers.

By contrast, traditional publishing business models depend perforce on assembling, curating, and monetizing a collective audience. That one difference mandates enormous divergence between both the business models and the journalistic practices available in each respective case, the internet case on one hand, and the traditional case on the other. How can anyone set up to do the job Matzko attempted, and not even analyze that difference?

By the way, that distinction has a great deal to do with public policy in respect to publishing. Useful publishing policy requires understanding what Section 230 actually means in every practical context—whether for content, for expressive freedom, for material means of support for publishing, for audience assembly, for trustworthy publishing, and even for the ostensible purpose of Section 230, which is the regulation of liability for defamation—which is actually small potatoes compared to other effects. I would have to write many pages to explain why. See if you can work some of it out for yourself.

Implicated in those discussions would be: factors related to creating a trusted news source, and the various and divergent means to do that; factors related to creating a trusted and useful advertising medium, and the various means to do that; factors related to which kinds of content can be classed and recognized, and which content types work successfully in various publishing contexts, but fail in other publishing contexts; factors related to the cost of creating content; factors related to which kinds of revenue sources are available to respective media types, and the various importance and availability of each; factors related to classes of advertising, and which classes work, and which fail, in various publishing media; questions of geographic reach, and its effects on audience and costs; factors related to publishers' liberty to control what appears or does not appear in a publication; factors which support the public life of a nation, and other factors which blight it; and questions which relate to the material means necessary to support and guard press freedom as a meaningful liberty worth protecting.

When you can explain to me what effects you expect Section 230 would logically create in the context of each of those separate discussions, maybe we could meet as partners in a discussion touching on, "misconceptions about the internet." If we do, expect me to bring up other stuff I haven't mentioned yet.

[Randal]

I agree Facebook is a publishing business. But not a news publishing business.

With a staff of 40 people today, I could give Facebook a national news feed which would make typical internet commenters think they were getting the NYT, because they would be.

Exactly. You'd get Facebook news. But the whole point of Facebook (and Google) is that you can get ALL the news. Not just Facebook news (i.e. NYT regurgitated), but Fox News, HuffPo, all local news, WSJ, Al Jazeera, BBC, everybody. You're telling me you're going to paraphrase all world news all day every day with 40 people? Ridiculous.

[David Nieporent]

Facebook isn't a publishing business. Facebook is a distributor. Lathrop doesn't even understand the concepts he's blathering about.

[Randal]

Let's see if I agree with that.... I mean, not really. I think it's a publishing business. They exercise (some) editorial control, they determine the layout and access, they get the ad revenue. They bear the risk. Section 230 exempts them from certain elements of that risk, but I think the fact that they'd be liable without Section 230 proves they're a publisher, it doesn't transform them from a publisher into a distributor.

I think of a distributor as a pass-through. Comcast is a distributor.

[Longtobefree]

"Mandatory Bargaining"
Newspeak at doubleplusgood.

[Stephen Lathrop]

I have not time now to critique this OP. It seems every paragraph relies on misunderstanding, mischaracterization, or reliance on presumed plausibility where facts are indispensable. I do not fault the author's motives. The article is bad because the author has no idea what he is talking about.

In general, this is another in a long line of commentary from ideologically motivated would-be internet analysts who do not understand either the internet publishing business, or publishing more generally. As usual, that missing insight reduces the discussion to little more than speculation about policies which might or might not work in a utopian framework—which is to say a framework where the goals imagined would thwart any conceivable means to deliver them.

As usual, that utopian framework is bounded only by the mutually competing preferences of internet comment contributors—whose suppositions come from misperceptions. They suppose their keyboard exertions engage them in a business which either exalts them in the role of a publisher, or caters to them in the role of a customer. Few of them ever notice that neither supposition is even slightly correct.

Instead, their only consequential participation involves them as the product for sale. Or more accurately, it is their attention which is for sale to actual customers of internet publishers. Those customers are either the purchasers of advertising, or sometimes the purchasers of personal data about the folks operating the keyboards—who think the entire business is about giving them the expressive options they demand. When they notice that is not happening, that makes them angry, instead of thoughtful.

If I can find time, I will add a bit more later, to detail some of the problems with the OP.

[David Nieporent]

If you can find time, maybe you should learn something about the Internet first.

[Randal]

Exactly. Lathrop pontificating about the Internet is like me pontificating about the social customs of French impressionists.

[Stephen Lathrop]

It has now been almost 30 years since the passage of Section 230. Internet boosters recognize its pivotal importance to the giantistic platforms upon which they rely. But they deny Section 230 had anything much to do with the dire fate of traditional news media, which they attribute to bad management in the face of technical advances.

I propose a policy experiment. Reverse the course of history. For the next 30 years deny Section 230 protection to the likes of Facebook, Twitter, YouTube, and other internet platforms which grew under its protection. Instead, during that interval, extend Section 230 protection only to legacy media which were in existence in 1996, when it was passed.

Then, 30 years hence, take a look at which kind of business model has thrived best. Will it be Facebook, without news gathering, or the New York Times, with news gathering? Who would bet on Facebook?

[Randal]

But they deny Section 230 had anything much to do with the dire fate of traditional news media, which they attribute to bad management in the face of technical advances.

I think you misunderstand the argument. The technical advances were certainly amplified by section 230.

[Stephen Lathrop]

Randal, you seem to argue that an objective of passing Section 230 was to drive legacy media out of business. I get that there is a bloc among right wingers who think of legacy media as an elite presence politically hostile to them. Among that group, any adversity which befalls legacy media is celebrated.

But I don't think that way at all, and do not suppose Section 230 was intended specifically to damage legacy media. I think it was a blunder, passed with the best of intentions, but with practical implications the congress did not understand, and consequences they did not foresee.

Technical advances you suppose Section 230 facilitated had to be inherent in any publishing business model which permitted publishers to bypass liability for defamation. That would have been as true before Section 230 passed as after it. It would have applied alike if before the internet was invented impunity for defamation had been settled by policy on some class of nobility, but withheld from everyone else. Section 230 was nothing but a national policy decision to forego previously existing libel protection, but to award that change as a competitive advantage selectively to internet publishers.

Congress thought the internet was a boon, and wanted it to have every advantage to grow maximally. At the time, nearly everyone supposed Joe Keyboard could not be taught to avoid libeling people, which would hamper the growth of the internet. People still think that, and defend Section 230 on that basis.

Very few people have yet noticed the other implications of that policy change, even with the results staring them in the face. Folks think internet giantism is a natural property of internet technology, not of policy. Folks think of the decline of news gathering as failure to cope with new technology, instead of being a result of policy. Folks think of calls for government intervention in publishing—to adjust content for the sake of protecting this content creator or that one—as a result of novel internet technical glitches, instead of as a result of policy. Folks think a national publishing regime awash in defamation, lies, and hoaxes, is just an unavoidable consequence of technical change, instead of the result of a policy choice.

Folks think all those things because they are motivated to think them. Most folks remain internet utopians, who prioritize maximal individualized expressive freedom ahead of every other consideration, including considerations of whether any practical way to create and maintain such a regime is even possible.

It is not possible. And the bad policy results are exacting a fearsome price from the nation.

[Randal]

Randal, you seem to argue that an objective of passing Section 230 was to drive legacy media out of business.

No, the objective of Section 230 was to facilitate Internet-scale publishing. A consequence of the rise of Internet-scale publishing was the decline of (elements of) traditional publishing.

It's possible for the decline of traditional publishing to be neither the objective of nor independent from Section 230.

Folks think internet giantism is a natural property of internet technology, not of policy.

As I've demonstrated to you a million times, Internet giantism preceeded Section 230, so yes, it is a natural property of Internet technology. It was in fact the explicit goal of the technology. But no! I'm not going to get drawn into this again, you obviously have no intention of learning about this subject...

[David Nieporent]

It has now been almost 30 years since the passage of Section 230. Internet boosters recognize its pivotal importance to the giantistic platforms upon which they rely. But they deny Section 230 had anything much to do with the dire fate of traditional news media, which they attribute to bad management in the face of technical advances.

I do in fact deny that § 230 had anything much to do with the dire fate of traditional news media. The Internet certainly harmed traditional news media, but it had virtually nothing to do with § 230. But, no, you've invented another strawman. I don't attribute it to "bad management." Craigslist destroyed an important source of local newspaper revenue, but that was neither § 230-related nor bad management related. The ability to access national media — by that I mean traditional media, such as the NYT, not Facebook — online was another key factor that had nothing to do with either of your two straw men.

I propose a policy experiment. Reverse the course of history. For the next 30 years deny Section 230 protection to the likes of Facebook, Twitter, YouTube, and other internet platforms which grew under its protection. Instead, during that interval, extend Section 230 protection only to legacy media which were in existence in 1996, when it was passed.

I mean, that's really stupid as a proposal, but destroying Twitter would do absolutely nothing to make your sad little Idaho newspaper, or any other local paper, financially viable.

[Randal]

I think Section 230 certainly helped craigslist destroy traditional media, don't you?

[David Nieporent]

Seems unlikely. Craigslist doesn't have non-advertising content (I don't think), so defamation is unlikely to have been an issue, and in any case, Craigslist didn't exercise editorial control, and would not have been liable under traditional pre-230 jurisprudence (e.g., Cubby v. Compuserve.) § 230 never hurts an online business, of course, but I don't think it particularly important for Craigslist. It's certainly far afield of Lathrop's whining about defamation.

[Honest Economics]

For sound economic perspective please go to https://honesteconomics.substack.com/

[markm23]

There are two different meanings of "link", which Lathrop failed to distinguish. One is a button you click on in one website, and it takes you to a different website. If like 99% of news services, the second website is funded mainly by advertising, the first website is doing them a service. The link brings more clicks and more advertising revenue to the second website. If you are the second website and object to this, almost certainly you don't understand your own business and are undercutting yourself.

If your website is not supported by advertising and you don't want random strangers who haven't paid for it finding it through links from other sites, all you have to do is require opening a paid account and logging in.

Nor does the second website normally need to pay the first website a referral fee. Normally the first website is also advertising-supported and the more relevant links it provides, the more people come to it.

------------------------------------------------------------
But the second sort of "link" is when website 1 grabs content from website 2 and displays it on their own page, often with nothing to indicate that it came from elsewhere. Ad revenue goes to #1, not the content originator, #2. It's content theft. Even if #2 is only collecting free content from elsewhere, it's denying #2 the clicks they earned as an aggregator. I see no problem in banning this practice, unless #2 specifically allows it.