Google’s “misleading scare campaign” should not stop the “trillion-dollar search engine” making fair payments for Australian news content, Labor has told parliament.

The shadow assistant treasurer, Andrew Leigh, said Australian journalism was struggling, newspapers were closing and Google could afford to share a small slice of their billions in profits with the news media “that is fundamental to Australian democracy”.

Labor was responding to Google’s aggressive scare campaign in recent days, which has seen the digital giant post an open letter about the draft media news code labelled as “misinformation” by the Australian regulator.

Google, Facebook and other digital platforms could be forced to pay hundreds of millions of dollars in fines if they fail to comply with a proposed mandatory news code.

The Australian Competition and Consumer Commission was asked to develop the mandatory code in April by the treasurer, Josh Frydenberg, after negotiations between the digital platforms, the ACCC and media companies stalled, and media companies experienced a sharp fall in ad revenue due to Covid-19.

Both Google and Facebook say the code is unworkable, but the search engine has taken the lead in the fight against it while the social network has been relatively quiet.

Guardian Australia can reveal Google’s public campaign has been accompanied by a last-minute lobbying offensive that has seen Google Australia’s managing director, Mel Silva, contacting Labor parliamentarians about the proposed news media bargaining code.

Google has not responded to a request for comment about Silva’s pitch to Labor, which is on record as supportive of the ACCC’s plans.

Last week, Google put a yellow warning sign on all its websites claiming regulation proposed by the ACCC “put free services at risk”.

The chair of the ACCC, Rod Sims, said Google’s letter “contains misinformation” about how the code would work, but Google followed it up with an international campaign on YouTube that called on creators and fans to swamp the regulator with their views about the draft code before submissions close on Friday.

“Never has Australia’s media been more under pressure – and never have we needed quality journalism more,” Leigh said.

“In this environment, the ACCC has proposed a scheme that asks Google to negotiate fair payment for Australian news content.

“In response, the trillion-dollar search engine has launched a misleading scare campaign,” he said.

“Google claims that having to give news organisations advance notice of demotion would give others an unfair advantage. It wouldn’t.

“It says sharing data would lead to data breaches. In fact, Google won’t be required to share any additional user data with media outlets unless it chooses to do so,” he added.

Leigh said investigative journalism, which helped spark royal commissions into child sexual abuse and banking misconduct and corruption investigations, were at risk if journalism wasn’t funded properly.

Google’s stance has found some support, notably from the Atlassian co-founder Mike Cannon-Brookes, and some technology media and academics.

On Monday, Google’s latest blog post, 13 things you need to know about the News Media Bargaining Code, recommended a “thorough article by an independent media analyst” that contained some inflammatory claims, including that the news media code was a “shakedown” and a government tax.

“Don’t pretend like this regulation is some sort of honest attempt at collective bargaining when it is the extraction of money at the point of the proverbial gun,” the article read.

“Should Netflix be forced to pay for reduced cable bills? For lower popcorn revenues at movie theatres?” Cannon-Brookes asked on Twitter.

A Bloomberg editorial said the Australian attempt to make Google and Facebook pay was “hopelessly misguided”.