He said the government remains supportive of the proposed law because it will pay news organizations for the use of their material.
Australia's House of Representatives passed the legislation late Wednesday, with the bill now set to be considered by the Senate.
The two men had a subsequent conversation on Thursday morning which was "constructive", Frydenberg said, adding they discussed what he called "differing interpretations" about how the new Media Bargaining Code would work. "As we have made clear to the Australian government for many months, the value exchange between Facebook and publishers runs in favour of the publishers - which is the reverse of what the legislation would require the arbitrator to assume".
"Google Search is inextricably intertwined with news and publishers do not voluntarily provide their content".
That meant the social media giant faced a wave of outrage, not just from Australian newspapers and politicians but around the world.
Australia's government condemned the step, which also blocked some government communications, including messages about emergency services, and some commercial pages.
"I think they're nearly using Australia as a test of strength for global democracies as to whether or not they wish to impose restrictions on the way in which they do business", he said.
"Facebook was wrong", Frydenberg said at a press conference.
"Facebook's sudden ban on news in Australia during a global pandemic is a classic example of a monopoly power being the school yard bully, trying to protect its dominant position with scant regard for the citizens and customers it supposedly serves", he said.
By way of contrast, Google did threaten to pull out of Australia as well a couple of weeks ago, but the company later relented and worked with news publishers for payment.
Facebook is standing up to the Australian government's controversial media code with a rather surprising and dramatic move. Facebook previously said that it wouldn't be able to offer news as a product anymore, so this move doesn't come as a surprise. Of course, many Australians did not find this news interesting.
Their decision to block Australians from accessing government websites (which involve support for the pandemic, mental health, emergency services, and weather services) has nothing to do with media regulations.
Reached for comment, Facebook confirmed it has applied an intentionally broad definition of news to restrict - saying it has done so to reflect the lack of clear guidance in the law "as drafted".
The news ban has already been met with confusion and criticism in the country.
Publishers say platforms such as Google and Facebook have hoarded the vast bulk of revenue as media shift online, even as print and broadcast advertising shrivels, forcing newspapers, magazines and TV and radio stations to shut newsrooms.
"However, Facebook's actions in Australia demonstrate precisely why we need jurisdictions across the globe, including the United Kingdom, to coordinate to deliver robust regulation to create a truly level playing between the tech giants and news publishers".
News publishers saw Facebook's tactics as evidence that the company, which also owns Instagram and WhatsApp, can not be trusted as the gatekeeper for their industry.
The union for Australian journalists is calling on media companies to make sure online revenue goes into news gathering.
Rupert Murdoch's News Corp. has announced a wide-ranging deal with Google covering operations in the United States and Britain as well as Australia.
"This has been a passionate cause for our company for well over a decade and I am gratified that the terms of trade are changing, not just for News Corp, but for every publisher", Thomson said in a statement. But Thorson said that despite the small percentage, "for many people Facebook is their main source of information", making it a critical part of civic discourse.