(Since the majority of my readership is outside Canada, I have gone into somewhat more background detail in this post than is probably necessary for Canadian readers, who may wish to skip the parts covering some well-rehearsed details of the legislation).
As Canada’s disastrous wildfires continued their destructive path, with 2/3 of the population of the North West Territories (which is roughly the size of France, Spain and England combined) under evacuation orders and with large scale wildfires in British Columbia, with lives and property at risk and with limited access to critical, possibly life-saving information in remote areas served by limited transportation arteries, Meta (which through its Facebook platform is a major site where Canadians access and share news reports), remained unmoved despite pleas from both provincial premiers and federal ministers requesting that it suspend the blockage of news sources that it imposed on Canadian users in early August. This was the company’s response to Bill C-18, which was enacted in June as the Online News Act (ONA). The Act, although passed, will not come into effect until proclaimed on a date no later than 180 days after passage, or December 19, 2023. In the meantime, and even beyond the date of proclamation, the Canadian Radio-television and Telecommunications Commission (the CRTC-the telecoms and broadcast regulator) will be developing implementing regulations, based on public input.
For readers outside Canada, recall that the ONA is based largely on similar Australian legislation (The Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Act 2021) which required dominant internet platforms (Google and Facebook) to reach agreements with Australian media outlets to compensate them fairly for use of news content on the platforms. After threatening to block news or pull out of Australia, the two platforms in the end managed to reach agreement with a sufficient number of Australian media enterprises to avoid designation under the Bargaining Code. Australia declared victory.
Canada took a similar approach, with some modifications, including requirements for greater transparency. Instead of having the minister “designate” platforms subject to the legislation, the Canadian legislation requires the platforms to self-designate if they meet certain criteria. Those criteria have now been clearly established, in draft regulations issued by the government on September 1. The law will apply to a “digital news intermediary” (defined as a search engine that aggregates news content and pathways to the content of news outlets corresponding to search queries made by visitors; or a social media service that facilitates interactions between users and news content through a social network) that has total revenue from all sources in the previous calendar year exceeding $1 billion and which has had, during the previous calendar year, an average of at least 20 million unique visitors in Canada per month to the search engine, or at least 20 million active users in Canada per month to the social media service. The definition fits Google and Facebook (but not Instagram), and no others at this point, although it is possible in future that a search engine like Microsoft’s Bing might qualify if it increased its number of users.
The definition of digital news intermediary is thus dependent on three primary factors; amount of global revenue, penetration of the Canadian market and whether it uses Canadian news content. The terms “aggregation” and “facilitation” in the regulations include not only repurposing or excerpting the content, but also linking to it. While some critics of the ONA have claimed inclusion of links is unprecedented (while trotting out the usual red herring that this will undermine and “break” the internet) and that setting value on content accessed through links constitutes a “links tax” (this a favourite phrase of C-18 critic Michael Geist of the University of Ottawa), this is not correct. First, it is not unprecedented. The Australian legislation also covered links, as media blogger Howard Law has clearly demonstrated. Second, the internet works just fine in Australia. In the end, the platforms were able to accommodate the Australian legislation.
In Canada, however, to date this has proven impossible. Meta has chosen to “comply” with C-18 by blocking news rather than enter negotiations with news content providers. This is presumably part of its ploy to avoid self-designation (which it must do within 30 days of the Act coming into force if it falls under the Act), even though it meets the other criteria. The legislation, unfortunately, was drafted in such a way as to provide this explicit escape hatch to the platforms. Both Google and Facebook opposed the legislation and warned that they might block news, so this is not a complete surprise although the process is not yet over, especially when it comes to Google.
One of the complaints of the platforms was the “uncapped financial liability” C-18 would present. The legislation imposes final offer arbitration if news content providers and digital news intermediaries cannot reach agreement. Under this system an arbitrator selects one of the two final offers presented by the contesting sides. In theory this could expose the platforms to an uncertain degree of financial risk, making planning difficult if their offer was considered too low and the arbitration process ended up favouring the news content providers. To address this concern, the September 1 draft regulations clarify the expectations for revenue contribution by the platforms.
The formula consists of the intermediary’s global revenue times Canada’s share of global GDP times four percent. Thus the intermediary’s contribution to Canadian journalism is expected to be around 4% of its Canadian revenues, while being subject to some other criteria such as fair agreements being within 20% of average relative compensation, committing to the production of news content, protecting journalistic independence and including independent local, Indigenous and official language minority community news businesses. While technically the new regulations set only the minimum contributions required, in fact they amount to a de facto cap on contributions because once the minimum is met, the platforms can request, and will be granted, an exemption from the application of the Act and will not be subject to the arbitration process. Based on the 4% figure, the estimated contributions from the process were identified as $172 million a year from Google and $62 million (Canadian dollars) a year from Facebook. This provides a degree of certainty, as requested by the platforms, but will this end the impasse?
As the blog MediaPolicy.ca noted, “Canada gives Big Tech what they asked for on C-18”, although Michael Geist expressed the contrary view, declaring that the draft regulations just increased the chances of no news on Meta and Google in Canada. According to him, the global implications could run into the billions for Google alone, and “no country in the world has come close to setting this standard”. I am not so sure about that. The Australian government reported that its legislation had resulted in payments of US$140 million (AUD$200 million) to Australian news organizations in its first year. CAD$234 million, the supposed price tag for the two platforms in Canada totals US$170 million. Given that the Canadian economy is about 25% larger than that of Australia in terms of total GDP, and its population is 50% larger, the 15% increase in expected financial contribution would seem, in fact, to be very much in line (in fact smaller proportionally) with the contribution made by the platforms Down Under. The question is, however, whether Google and Facebook are prepared to replicate the Australian experience in Canada (and elsewhere), or are having second thoughts about the implications of the deal they struck. Maybe being “second mover” is not such an advantage for Canada after all.
Now the argument has been removed that the ONA’s financial obligations for the platforms are unlimited, the real issue stands in the open, bereft of its camouflage. Are the platforms willing to pay a small share of the revenues they generate in Canada (and elsewhere) to support journalism in order to be able to continue to display news? The essence of the argument requiring payment is that curated, professional news content has value (in terms of attracting and retaining viewers, which can be monetized through online ad sales, which is where Google and Facebook dominate, controlling 80% of digital advertising). That content is expensive to produce, and the ad revenues that once provided much of the financial support for journalism have migrated to the online intermediaries. A viable Fourth Estate is essential for the effective functioning of democracy so, as the argument goes, those who have benefited from this content and who have reached a quasi-monopolistic dominance, should be expected to make a financial contribution toward its maintenance.
The logic is compelling; even the platforms seem to agree with this proposition since both have instituted various grant programs to provide support to journalism. The key question, though, is what form should the financial support take and who gets to decide how much it should be? The platforms want to be in the driver’s seat and make those decisions. They don’t like governments telling them what to do. Should the support be on terms set by the platforms, where they negotiate ad seriatim with various news content providers, on their terms while keeping those terms secret, or should there be a transparent framework where the media providers can negotiate as an entity (if they wish), backed up in extremis by the stick of possible arbitration? That is what Australia did, and what Canada is trying to do.
But will it work? It depends on who holds the most leverage-a sovereign government or two giant hi-tech internet companies. Normally, in the final analysis, a government in a modern country like Canada would prevail, but it is a high stakes game. For the platforms, who may be regretting the deal they struck in Australia, now may be the time to dig in. For Meta, that seems to be the case. Their objection seems as much ideological as financial, although the financial concerns cannot be ignored given the development of legislation similar to C-18 in the US (the Journalism Competition and Preservation Act, and parallel legislation in California) , the UK, New Zealand and no doubt soon in other countries.
Facebook insists it derives little or no value from hosting news content, and instead provides a benefit to news organizations by giving them exposure. It is an unfortunate fact that many consumers in Canada and other countries access and share news primarily through the Facebook platform. According to the Canadian government, 69% of Canadian consumers access news online. That does not mean they all use Facebook; they can just as easily go directly to various news sites operated by the media, but there is no question that Facebook is a convenient way to share news, by posting links or snippets. Facebook has made it that way, and there is not much real competition. That is the unfortunate reality as over the years, Meta has bought out any viable competition, giving it a virtual monopoly. It may be that Meta has decided it can get away with thumbing its nose at Canada, and that, in Canada and potentially elsewhere, it will purge its platform of news, betting that people will still come to it for social interactions. Maybe their gamble will be right. And maybe it will be a good thing if consumers start going directly to news sources instead of mindlessly logging onto Facebook for all their needs. Possibly, (and hopefully, from my perspective) there will be a lessening of dependence on this one platform, and consumers will spend more of their online time elsewhere. If Facebook’s revenues suffer, it is what they asked for and what they deserve.
Google’s situation is different. It has competition, it needs to maintain a viable search engine in Canada, and Google Search will lose effectiveness if it cuts off the population of a country the size of Canada from contributing algorithmically to its search results for news. Google has also been less categoric about whether it will block news search in Canada, although it has threatened to do so. It has also played hardball with the Canadian media by beginning to terminate some of the revenue-sharing arrangements it had already reached (arrangements that the ONA would specifically recognize as part of Google’s contribution). At the same time, Google is looking over its shoulder at Microsoft which is not (yet) covered by the ONA because it does not have sufficient penetration. In Australia, Microsoft made a point of endorsing the legislation and the Bargaining Code; in Canada it has said that if it were to “qualify” for designation under the ONA it would comply with the legislation as it applies to its products, (presumably not by opting out, as Google is threatening to do).
The domestic political situation in Canada is also different from that which existed in Australia, where there was broad all-party support for bringing the platforms to heel. Unfortunately, that same solidarity does not exist in Canada, and the platforms will not hesitate to exploit these political divisions. The opposition Conservatives under a previous leader were onside with making big tech pay its share, but under current Conservative leader Pierre Polievre, C-18 has become one more stick with which to beat the government. There is no question that the Trudeau government’s management of the file could have been handled better, but Polievre has distorted the C-18 debate to become one of government intervention versus free expression. He has also enlisted the legislation in his crusade against the publicly funded CBC (which would benefit significantly from C-18 because of its extensive news operations). Defunding the CBC—seen by many on the right as a left leaning media organization—is one of Polievre’s favourite talking points. At present, the Conservatives are up in the polls and the platforms may be wagering that if they can wait out the Trudeau Liberals (an election must be held by the fall of 2025 at the latest), a new government might reverse C-18. They are eager for a chance to push back on what seems like a growing international tide of jurisdictions willing to take on Big Tech.
Back to the question posed in the title of this blog posting. How likely is it that the new regulations clarifying the revenue expectations of the platforms will bring about an end to the news blocking? The new measures give Google what they were asking for and given where Google stands on this issue (with Microsoft breathing down its neck), it has every reason to find a response that will satisfy the intent of the ONA. However, nothing, it seems, will satisfy Meta short of the complete withdrawal or gutting of the Act, and that is not going to happen. It is politically untenable for the Trudeau government to back down. My conclusion, therefore, is that the new regulations have helped move things forward with the biggest player, Google, but with respect to Facebook, probably nothing will lead Mark Zuckerberg to change his mind (although one never knows for sure).
The stakes are high for Canada and for the Trudeau government. They are also high for other countries contemplating similar moves to require the big internet platforms to make a financial contribution to the sustenance of professional journalism. The end result may be a welcome infusion of some financial resources to the stressed journalism sector from Google, along with a change of behaviour for Canadian consumers who may no longer be able to find or share news sources on Facebook. Although Facebook has made itself seem indispensable to many as a vehicle of information exchange, by shooting itself in the foot through its blockage of news, it may just be starting a trend of encouraging consumers to look elsewhere for their information needs. If that helps bring people back to direct news sources, and provides some competition for Facebook, that won’t be a bad outcome. And that may be an outcome replicated in other countries as they come to grips with the same issues and the same players.
© Hugh Stephens, 2023. All Rights Reserved.