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* Facebook had blocked Australian users from viewing newscontent
* The negotiations have been watched internationally
* Legislation to address a power imbalance duringnegotiations
* Google previously threatened to withdraw its search engine(Recasts with analyst reaction)
By Byron Kaye and Colin Packham
CANBERRA, Feb 23 (Reuters) - Facebook will restoreAustralian news pages, ending an unprecedented week-longblackout after wringing concessions from the government over aproposed law that will require tech giants to pay traditionalmedia companies for their content.
Both sides claimed victory in the clash, which has drawnglobal attention as countries including Canada and Britainconsider similar steps to rein in the dominant tech platformsand preserve media diversity.
While some analysts said Facebook had defended its lucrativemodel of collecting ad money for clicks on news it shows, otherssaid the compromise - which includes a deal on how to resolvedisputes - could pay off for the media industry, or at least forpublishers with reach and political clout.
"Facebook has scored a big win," said independent Britishtechnology analyst Richard Windsor, adding the concessions itmade "virtually guarantee that it will be business as usual fromhere on."
Australia and the social media group had been locked in astandoff after the government introduced legislation thatchallenged Facebook and Alphabet Inc's Google'sdominance in the news content market.
Facebook blocked Australian users on Feb. 17 from sharingand viewing news content on its popular social media platform,drawing criticism from publishers and the government.
But after talks between Treasurer Josh Frydenberg andFacebook CEO Mark Zuckerberg, a concession deal was struck, withAustralian news expected to return to the social media site incoming days.
"Facebook has refriended Australia, and Australian news willbe restored to the Facebook platform," Frydenberg told reportersin Canberra.
Frydenberg said Australia had been a "proxy battle for theworld" as other jurisdictions engage with tech companies over arange of issues around news and content.
Australia will offer four amendments, which include a changeto the proposed mandatory arbitration mechanism used when thetech giants cannot reach a deal with publishers over fairpayment for displaying news content.
Facebook said it was satisfied with the revisions, whichwill need to be implemented in legislation currently before theparliament.
"Going forward, the government has clarified we will retainthe ability to decide if news appears on Facebook so that wewon't automatically be subject to a forced negotiation,"Facebook Vice President of Global News Partnerships CampbellBrown said in a statement online.
The company would continue to invest in news globally butalso "resist efforts by media conglomerates to advanceregulatory frameworks that do not take account of the true valueexchange between publishers and platforms like Facebook."
Analysts said while the concessions marked some progress fortech platforms, the government and the media, there remainedmany uncertainties about how the law would work.
"Retaining unilateral control over which publishers they docash deals with as well as control over if and how news appearson Facebook surely looks more attractive to Menlo Park than thealternative," said Rasmus Nielsen, head of the Reuters Institutefor the Study of Journalism, referring to Facebook headquarters.
Any deals that Facebook strikes are likely to benefit thebottom line of News Corp and a few other big Australianpublishers, added Nielsen, but whether smaller outlets win suchdeals remains to be seen.
Tama Leaver, professor of internet studies at Australia'sCurtin University, said Facebook's negotiating tactics haddented its reputation, although it was too early to say how theproposed law would work.
"It's like a gun that sits in the Treasurer's desk thathasn't been used or tested," said Leaver.
The amendments include an additional two-month mediationperiod before the government-appointed arbitrator intervenes,giving the parties more time to reach a private deal.
It also inserts a rule that an internet company's existingmedia deals be taken into account before the rules take effect,a measure that Frydenberg said would encourage internetcompanies to strike deals with smaller outlets.
The so-called Media Bargaining Code has been designed by thegovernment and competition regulator to address a powerimbalance between the social media giants and publishers whennegotiating payment for news content used on the tech firms'sites.
Media companies have argued that they should be compensatedfor the links that drive audiences, and advertising dollars, tothe internet companies' platforms.
A spokesman for Australian publisher and broadcaster NineEntertainment Co Ltd welcomed the government'scompromise, which it said moved "Facebook back into thenegotiations with Australian media organisations."
Major television broadcaster and newspaper publisher SevenWest Media Ltd said it had signed a letter of intent tostrike a content supply deal with Facebook within 60 days.
A representative of News Corp, which has a majorpresence in Australia's news industry and last week announced aglobal licensing deal with Google, was not immediately availablefor comment.
Frydenberg said Google had welcomed the changes. A Googlespokesman declined to comment.
Google also previously threatened to withdraw its searchengine from Australia but later struck a series of deals withpublishers.
The government will introduce the amendments to Australia'sparliament on Tuesday, Frydenberg said. The country's two housesof parliament will need to approve the amended proposal beforeit becomes law.(Reporting by Colin Packham and Byron Kaye; additionalreporting by Renju Jose, Kate Holton and Douglas Busvine;Writing by Jonathan Barrett; Editing by Sam Holmes and MarkPotter)