A Day of Reckoning is Coming for Google, Facebook and other major Online Platforms that access News Content without Payment: Will Canada be Next?

Newspapers and news magazines are struggling but online news aggregators, like Google and Facebook among others, are thriving. The ad dollars that prop up the internet behemoths have drifted away from the producers of the news to those who facilitate access to it without themselves having to invest in the creation of the content that attracts consumers. Readers are drawn to news headlines and stay on the internet services longer in order to browse news content through the portal. This in turn attracts advertisers and helps explain the enormous valuations of Google and Facebook in contrast to the paltry returns, if not incipient bankruptcy, of many newspapers. In the face of the challenges facing news sources on life support, and in support of the principle declared boldly on the masthead of the Washington Post that “Democracy Dies in Darkness”, governments have scrambled for ways to support traditional news-gathering, analysis and reporting. In Canada, a variety of measures have been employed ranging from tax credits to direct funding of local news reporting. But this is chump change when it comes to gaining access to what news organizations consider to be a fair share of the advertising revenues that their content helps generate.

We are talking big bucks. Naturally the internet platforms are not going to roll over and easily give up a share of their revenues. In fact in Australia, where the government is currently proposing a revenue sharing agreement between platforms and news creators, Google is on the war-path. At the end of July, the Australian Government revealed draft legislation that would allow news publishers to negotiate with platforms like Google and Facebook for the latter’s use of news content. The “News Media Bargaining Code” will be administered by the Australian Competition and Consumer Commission (ACCC), using competition law to redress the imbalance of bargaining power between the platforms and news providers. There will be compulsory arbitration after three months if the two parties can’t come to a negotiated agreement, with ACMA (Australian Communications and Media Authority), the broadcasting and media regulator, having the authority to assign arbitrators if there is disagreement. The Code is backed up with substantial fines that could reach ten percent of digital revenues generated in Australia. In addition, there are some other elements of the Code besides revenue sharing that Google in particular objects to, such as required advance notice of changes to algorithms that could affect news item rankings, and a requirement to share data about users accessing news content.

Google has launched a campaign to get Australian consumers to pressure its government to back off, threatening that Australians could lose free search and privacy protections. It has urged Youtubers to bombard the Australian government with complaints about the proposed Code, arguing that the new legislation would benefit “big news businesses”–although the news organizations who will benefit are just a fraction of the size and valuation of Google itself–and even though Youtube is not covered by the proposed legislation.  The ACCC and the Australian government have issued rebuttals  to Google’s allegations, criticizing it for exaggerating and mounting what they term a “scare campaign”, and show no signs of backing down. Google could of course close its operations in Australia, but that is seen as an empty threat. Australia is an important market for Google (it is reported to generate $4 billion annually in revenues). The real issue for Google is one of precedent with regard to payment for news content. It is concerned that if it loses the fight in Australia, this will weaken its position elsewhere.

Google’s basic position is that it provides a service that allows consumers to locate and access content, which in turn benefits the content creator. Creators of the content argue that Google is free-riding on and monetizing their content by collecting and using consumer data for ad targeting (although Google does not sell ads on Google News itself). While Google has announced that it will selectively pay for some content, this is the exception rather than the rule and is on Google’s terms. Google has enormous market power, as it demonstrated in Spain and Germany a few years ago when authorities in those countries attempted to impose revenue sharing arrangements between platforms and news publishers. Google simply shut down Google News in Spain and in Germany kicked off its news platform any news providers who did not agree to voluntarily give Google access to content without payment. This “punishment” made it more difficult for consumers to access news content, impacting views on the publisher’s sites, and soon brought them to heel. (The proposed Australian legislation prevents Google from doing this).

The EU responded with legislation creating a new publisher’s right within the Copyright Directive. (Four years ago I wrote about the need for such a right, and am pleased to see it now enacted).  At the present time, EU authorities are preparing for a second run at Google’s practices, with France in the forefront. (“Holding Google to Account: France Takes a Stand”). Back in April, the French competition authorities gave Google three months to negotiate in good faith with publishers and come up with an agreement that results in payment to them. That period has elapsed and it seems that negotiations are ongoing, with Google dragging its feet by reportedly offering only small payments that publishers have so far rejected. Enabling the negotiations is the EU’s new “neighbouring right” for publishers that expands their ability to control the reproduction and communication of their work to the public.

Facebook has also been active in opposing the Australian initiative. It is fighting the ACCC’s proposals by threatening to pick up its ball and go home. It claims that news content represents “only a very small fraction of the content” in a users’ news feed and has threatened that if the proposals are adopted, it will remove and block news content on its platform. While a user’s news feed consists of a variety of content, including news but also photos, videos, likes, etc., news content plays a role in keeping users engaged and staying on the platform longer (and thus becoming more attractive to advertisers).

Meanwhile, in the wings, Canada is watching and waiting. Responding to Google and Facebook’s tactics “Down Under”, Heritage Minister Steven Guilbeault stated that, “The Canadian government stands with our Australian partners and denounces any form of threats.”  Guilbeault has suggested that legislation could be introduced this autumn requiring companies like Google and Facebook to compensate news organizations when they use their content.  This came after a public plea to the Canadian Government by Canada’s major newspaper publishers.

One approach that Guilbeault could adopt is to establish new rights for publishers along the lines of the EU’s expanded neighbouring rights regime. The Parliamentary Committee that examined the Copyright Act as part of a periodically mandated review of the legislation last year looked at what it termed a “journalists remuneration right”. Noting that, “The production and dissemination of news content is essential to democratic societies”, the Committee stated that it “supports the notion that OSPs (Online Service Providers) who profit from the dissemination of copyrighted content they do not own should fairly remunerate its rights-holders”. However, at the time the Committee was not prepared to make a recommendation for action, but instead proposed further study to take into account developments in other countries dealing with the same issue. Its specific recommendation was that;

“the House of Commons Standing Committee on Canadian Heritage consider conducting a study to investigate the remuneration of journalists, the revenues of news publishers, the licences granted to online service providers and copyright infringement on their platforms, the availability and use of online services, and competition and innovation in online markets, building on their previous work on Canada’s media landscape.”

Despite this cautious recommendation, it appears that Minister Guilbeault is preparing to move soon to deal with the issue of fair remuneration for use of news content without prolonged further study. There are various ways to go about this. The government may choose to deal with this as a copyright rather than a competition issue, for example, or it may pursue other means. One factor to bear in mind is the possibility of running afoul of commitments Canada made in the new NAFTA (USMCA) agreement, an objection raised by University of Ottawa law professor Michael Geist, who has consistently opposed requiring platforms to share ad revenues with content providers. Geist has argued that a system that required US companies to pay while only Canadian companies benefited would “likely” violate the USMCA, although this is difficult to predict since the Agreement requires only that digital products of one party be granted treatment no less favourable than like digital products of the other party. However, any measure adopted that is of general application would be non-discriminatory, even if it happened to have the greatest impact on US companies like Google and Facebook.

It is plain that perceptions have changed over the last decade about the value and importance of protecting and remunerating professional content in a world awash in disinformation and illegally distributed works. The fact that legislators and regulators are more engaged than ever in addressing abuses and ensuring a healthy online environment is to be welcomed.

The struggle going on in Australia and France between Google, Facebook and news publishers is unquestionably germane to what happens in Canada, and the stakes are high. Even in the US Google is facing its critics. Draft legislation, the Journalism Competition and Preservation Act, has been introduced into Congress, both the House and Senate, with bipartisan support. If adopted, it would provide news publishers with a four-year exemption from anti-trust restrictions so that they can combine to negotiate with major platforms. It has been supported by the Authors Guild and the News Media Alliance, among others. The legislation would apply to Google and Facebook and potentially to Apple and Microsoft, given their revenue thresholds. At the moment, however, this legislation is stalled while the US Presidential election is underway.

Given widespread dissatisfaction with Google’s current dominant role in many countries, it seems likely that the internet giant will have to make some compromises and start negotiating compensation for its access to valuable news content. However, the amount of revenue it is prepared to offer is likely to be considerably less than the publishers would like to see, although certainly more than Google would like to pay.  If agreement cannot be reached, governments will have to step in and broker a deal. As has been seen in Australia, Google will pull no punches and will use every means it has to fight forced sharing of ad revenues. In the case of Canada, it will undoubtedly remind the Canadian Government of its significant investments in R&D facilities in Waterloo, Ontario with planned expansion in Toronto and Montreal. Of course Google is not investing in Canada to be nice to Canadians. Waterloo is the hub of Canada’s “Silicon Valley” and an important source of cost-effective talent. Plus, Canada’s multicultural society and more relaxed immigration policy make it attractive to offshore software engineers and other experts, something that Google has not hesitated to benefit from. Facebook could also make threats to remove news content from its platform in Canada, similar to what it is threatening to do in Australia, although it surely recognizes that access to news is a key part of its offering and attraction to users. The fact that it has moved to license some content from trustworthy news providers is proof of the value proposition that reliable news content presents.

Will Canada grasp the nettle and introduce legislation to give news publishers greater control over their content, thus helping them to negotiate licensing fees with the big online platforms? Will the pushback from Google and Facebook in Australia give Canada pause? Heritage Minister Guilbeault has said that Canada will not be bullied, comparing the tech giants to “polluters”, a reference to his earlier incarnation as an environmental activist. We will have to wait to see what transpires this fall. First, however, the Trudeau government has to survive a confidence motion when Parliament resumes at the end of September (recall that it is a minority government and requires the support of at least one of the three main opposition parties to survive such a vote), and then it has to decide that copyright issues require legislative attention at a time when response to COVID dominates the Parliamentary agenda.

There is a legislative opportunity, however. Despite COVID, Canada needs to introduce amendments to the Copyright Act to bring it into conformity with commitments made in the USMCA to extend the term of copyright protection in Canada by an additional twenty years. Canada has 30 months from the date of implementation of the Agreement, July 1, 2020, to do so. The statutory need to review legislation would give the government an opportunity to address some other issues at the same time, including fair remuneration for online news content.

I am sure the Canadian Government is watching with great interest what happens in Australia with regard to Google and Facebook and their attempts to roll back the proposed Australian legislation. Meanwhile this autumn’s legislative agenda is being considered and I am betting that the odds are pretty good that publishers of news content—and possibly final publishers of other types of content as well—will find themselves equipped with legal provisions designed to help them negotiate a fairer share of the online revenues that their content generates. If it doesn’t happen in the fall session, then look for legislation to be introduced next spring. Either way, the day of reckoning is coming for the big platforms. And it’s about time.

© Hugh Stephens 2020. All Rights Reserved

This post has been edited and updated to reflect recent remarks by Minister Guilbeault on the situation regarding Google and Facebook in Australia and on possible action on this issue in Canada.