When the Irresistible Force of the Canadian Government Meets the Immovable Object of Meta and Google: What Happens Next for the Online News Act?

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When an “irresistible force” meets an “immovable object”, the result is a classic paradox. That is, unless one of the two—or both—give way. If we assume the irresistible force is the Government of Canada in the form of Bill C-18, the Online News Act, and two giant internet platforms (Meta and Google) are the immovable object, then something has got to give. Right now, a massive game of “chicken” is underway between the two, as the Government of Canada has kept the irresistible force moving forward by rejecting amendments proposed by the platforms that would have significantly altered the implementation of the legislation. C-18 has been enacted into law– without the amendments. The platforms have responded by doubling down on their threats to block access by Canadians to Canadian news content on their services. They are carrying out blockages of news for some Canadian subscribers to “test the feasibility” of complying with the legislation by ceasing to use or link to news content, rather than entering into negotiations to compensate news outlets for using their content on their online services. Blocking news content would technically put them in compliance with the Online News Act although it would defeat the intent of the legislation, which is to establish a framework for commercial negotiations—bearing in mind the enormous and disproportionate market power of the internet giants– between Canadian news outlets and the platforms when the latter use (make available) news content to attract or retain viewers. 

Meta (Facebook and Instagram) has been the most strident stating on June 22, the day C-18 became law, “Today, we are confirming that news availability will be ended on Facebook and Instagram for all users in Canada prior to the Online News Act (Bill C-18) taking effect.” Google also noted its displeasure but indicated it would continue to have dialogue with the government in hopes of reaching an acceptable compromise. For his part, Heritage Minister Pablo Rodriguez, who is responsible for the legislation, has reiterated that he is open to discussion but will not give in to “threats”. While the Bill has passed Parliament and received royal assent, it will not come into effect until implementing regulations are drafted by the Canadian Radio-Television and Telecommunications Commission (CRTC), which will take about six months. This is where the paradox will likely be resolved.

Rodriguez has repeatedly referred to what happened in Australia, where a News Media Bargaining Code was created requiring major internet platforms (the same two, Google and Facebook) to reach content deals with Australian media, failing which the Australian Competition and Consumer Commission (ACCC) would oversee a process of binding arbitration. Google, which also faced and resolved similar demands in France, played hardball by trying to rouse Australian consumers against their own government by threatening to leave the Australian market. Facebook blacked out news feeds, a tactic that backfired. Australian ministers accused the companies of threats and blackmail, but in the end both platforms reached satisfactory agreements with Australian media, and both companies continue to operate Down Under. There are, however, some difference between the Australian situation in 2021 and the Canadian situation in 2023.

The first is that the platforms were able to avoid “designation” by the Australian authorities by coming to agreements with most Australian news outlets without being forced into government managed arbitration. This is important for the platforms who want to maintain that any agreements they reach are “voluntary”. In the case of the Canadian legislation, they are required to self-designate and if they do not–assuming they use news content–they will have to answer to the CRTC. The Commission could issue an exemption order if it was satisfied that the platforms had reached a sufficient number of voluntary and fair agreements, but Google and Meta want to keep the bargaining power in their hands. The Australian government blinked just a bit by allowing them to avoid designation. To this day, the News Media Bargaining Code has not been invoked for either company.

The other big difference is the economic position of both platforms which has changed somewhat since Australia brought in its legislation. Both are still extremely profitable, but both are facing some headwinds. In the case of Google, it is facing–for the first time in many years–some competition for its search engine as Microsoft launches AI-enabled search through Bing. For its part Meta, Facebook’s parent company, has just gone through two rounds of major layoffs, reducing its workforce by over 20,000 positions, and growth has slowed although Facebook continues to generate ad revenues well in excess of $100 billion.

Combined with some retrenchment and increased competition, the platforms are also facing the possibility that after Canada, other jurisdictions will come knocking at their door. Already there is draft legislation in California and at the federal level in the US, the Journalism Competition and Preservation Act, (JCPA) which would “allow news organizations to jointly negotiate fair compensation for access to their content by Google, Facebook, and other dominant platforms” has been re-introduced into Congress after almost passing last year. Whatever deal is struck in Canada, if there is one, will have an impact on how the platforms respond to US developments. (Meta has also threatened to pull its news content in California if that state law passes—but would they really take on California?).

So, where does that leave us with respect to our paradox and events in Canada? Will Pablo Rodriguez prove to be not entirely an “irresistible force” and/or will the platforms fall short of being totally “immovable”? While Rodriguez has received wide support from some parts of the Canadian media for the way he has handled C-18, the media does not all speak with one voice (as one would expect), resulting in some criticism of the minister. In particular, the Globe and Mail, which bills itself as Canada’s national daily, is a lukewarm supporter of the pro C-18 position taken by the news media’s industry association, News Media Canada. One of the Globe’s prominent columnists, Andrew Coyne, has taken particular delight in trashing the legislation. The fact that the Globe has reached a content deal with Google and Facebook is not immaterial.

Bell Media not coincidentally announced earlier this month that it was laying off 1300 journalists, closing six radio stations, eliminating all of its foreign bureaux but Washington, and consolidating news reporting, in effect gutting news coverage at most of its local TV and radio outlets. It attributed the cost-cutting measures to “unfavourable public policy and regulatory conditions that it can no longer wait out“, launching speculation that Bell had decided that there will be no funding coming from Google and Facebook. This week it was revealed that two of the other major press organizations, Postmedia, publisher of the National Post and Nordstar, publisher of the Toronto Star, are in merger talks. Rodriguez and the Trudeau government are under considerable pressure to deliver some relief for hard pressed news organizations as a result of C-18. What can Rodriguez do? The lever of pulling government advertising from the platforms is a thin reed. According to the Globe, the Canadian government spent just over $11 million on advertising on Meta last year. For a company whose ads sales top $100 billion, this amount is a rounding error. Spending on Google was even less at $8 million. More important for the platforms, however, is the reputational damage. It is not a good idea in the end to headbutt the government of a wealthy G7 country of 40 million. Not smart in the long run. Do the platforms really want to antagonize the people and government of Canada if there is a better way?

I have no crystal ball or inside sources, but my hunch is that this is not over. In fact, it’s never over ’til it’s over. (Did Yogi Berra really say that?) As much as Meta says there is nothing to negotiate, there is surely an elusive landing zone somewhere between the immovable object and the irresistible force, and both sides have around six months to find it. It’s not as if the Australian government refused to negotiate with the platforms. Australia did not back down from its overall objectives, but it agreed to modify the process, to the platform’s satisfaction. In drafting its regulations, the CRTC can surely find some wiggle room or ministerial discretion without amending the legislation. (Introducing amendments to water down the Act would open the government to charges of caving in to “US tech giants”). The estimated cash bonanza may be somewhat less than originally expected and perhaps not every news outlet in the country will benefit to the extent that they would like but at the end of the day, I believe it is still possible that a compromise will be reached allowing both the companies and the Government of Canada to claim victory. (Part of the problem in Canada is that in their zeal to be all-encompassing, Parliamentarians added amendments to widen the scope of those eligible for payments including campus and community radio stations that may not even produce news. This has weakened rather than strengthened the legislation).

The bottom line, however, is that the platforms derive value from news content, and they should be paying for it. Meta in particular has complained that it should not be required to pay news content providers for content that these same providers post to the Facebook platform. There is logic to this position. If one looks at just these transactions, it is illogical to expect payment for every post when the posts are being put up by the news organizations themselves. If that were the case, as David Common of the CBC observed when interviewing Mr. Rodriguez on this point, the CBC could simply hire staff whose sole job was to post news items to Facebook in order to claim compensation from Meta. Moreover, the news organizations themselves benefit from the exposure provided by Facebook. But no-one is arguing that the compensation be based entirely on these one-way transactions. It all has to do with commercial negotiations over what constitutes “fair compensation”, as laid out by the legislation. As I pointed out in an op-ed back in September of last year;

“Fair compensation negotiations will take into account the benefit that news publishers gain by posting links to the platforms. That benefit will be offset against the greater benefit the platforms gain by using news content to attract viewers and advertisers. That trade-off will normally be worked out during bilateral negotiations between the publishers and the platforms, with the government stepping in only if there is a failure to reach agreement.”

Engaging with news content encourages Facebook users to stay on the platform longer, which is what it is all about from Meta’s perspective, because this promotes greater exposure to ad content. That content had to be produced by someone. Meta (and Google) should not be getting a free ride. Exactly how much they should pay, however, is complex and is best determined through commercial negotiations, with the government (the CRTC) preferably staying very much in the background. It is in the interest of all parties to find the sweet spot. While playing “chicken” is one way to negotiate, it is a risky, high-stakes strategy. The sooner both sides get down to finding that sweet spot, the better it will be for all concerned—journalism, advertisers, social media platforms, search engines, government and most of all, consumers.

© Hugh Stephens, 2023. All Rights Reserved.

Update: This issue continues to evolve, almost daily. Since this blog was posted, Google has announced that it too will block news in Canada by removing links to Canadian news sites. Sites such as the New York Times, which maintains a news bureau in Canada, will also likely be blocked. Facebook, and now Google, have also served notice to those news sites with whom it has reached deals to provide financial support or compensation for news content, that it will terminate these arrangements. This is clearly an attempt to split the Canadian media and turn the “haves” (those who have already reached deals with the platforms) against the rest. If Google blocks Canadian news, it will be shooting itself in the foot as this will only encourage users to turn to alternative search engines, and is a dramatic escalation of the game of chicken that is being played. Pedro Rodriguez has called the platforms “deeply irresponsible” and “out of touch”. The outcome of this tussle is of enormous importance for the viability of responsible journalism in many countries.

Is this the final turn of the wheel? Stay tuned. Yogi Berra was right!

Author: hughstephensblog

I am a former Canadian foreign service officer and a retired executive with Time Warner. In both capacities I worked for many years in Asia. I have been writing this copyright blog since 2016, and recently published a book "In Defence of Copyright" to raise awareness of the importance of good copyright protection in Canada and globally. It is written from and for the layman's perspective (not a legal text or scholarly work), illustrated with some of the unusual copyright stories drawn from the blog. Available on Amazon and local book stores.

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