Facebook is threatening to stop Australian users from sharing news if the social media giant is forced to compensate media companies for publishing their stories.
Facebook executive Will Easton said a code of conduct being pursued by the Australian government ignored the relationship between social media and news organisations, which he claimed would suffer the most.
"Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram," he said in a statement on Tuesday.
"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."
The threat follows similar warnings from Google, which claimed the proposed media bargaining laws could force it to offer Australian users "dramatically worse" Google Search and YouTube products.
But Treasurer Josh Frydenberg has rejected the warning from Facebook saying "threats" won't sway the government's position on the matter.
"Australia makes laws that advance our national interest. We don't respond to coercion or heavy handed threats wherever they come from," he said in a statement.
"These reforms will help to create a more sustainable media landscape and see payment for original content."
Mr Easton said Facebook supported the Australian government's goal of supporting struggling news organisations, but its solution was counterproductive.
He argued the government wrongly assumed Facebook benefited most in its relationship with publishers, when the reverse was true.
Facebook sent Australian news websites 2.3 billion free "clicks" in the first five months of the year, driving traffic worth an estimated $200 million.
As well, Mr Easton claimed Facebook already invested million of dollars in Australian news and offered to invest even more, and proposed introducing a dedicated platform for local content.
"But these proposals were overlooked," he said.
"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.
"Unfortunately, no business can operate that way."
Google has also warned the proposed code could compromise the personal data of its Australian users and stymie their access to free services.
The Australian Competition and Consumer Commission has questioned the basis of complaints made by Facebook and the search giant.
"Facebook's threat today to prevent any sharing of news on its own services in Australia is ill-timed and misconceived," the watchdog said.
"The draft media bargaining code aims to ensure Australian news businesses, including independent, community and regional media, can get a seat at the table for fair negotiations with Facebook and Google."
