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The Online News Act could have used a different model for bargaining

How did the Canadian government land on the news media compensation model it decided on for Bill C-18?

February 1, 2024

7-minute read

When the Canadian federal government introduced Bill C-18, the Online News Act, it was picking up where Australian legislation had left off. But first the governing Liberals had to make an important choice about policy design. Once that was done, the legislation would face the normal Parliamentary hazing from the Opposition, quite a few upstart online news outlets, and a skeptical commentariat of critics.

The mainstream of the Canadian news industry—Newsmedia Canada, the Canadian Association of Broadcasters, and the CBC—wanted Ottawa to adopt the Australian bargaining code in Canada. To make that work, Parliament had to create an intellectual property right over online news content that publishers made available on Meta and Google’s intermediary platforms. The Canadian bill would replicate the Australian ‘net exchange value’ as the measuring stick of compensation.

Finally, the legislation would need to rebalance bargaining power. It would enable publishers to obtain compensation from platforms by allowing news companies to combine into bargaining consortia and—if negotiations with Google or Meta failed—seek binding arbitration.

In April 2021, a month after the bargaining code came into effect in Australia, the Canadian government began the type of public consultation that is typically conducted before tabling novel legislation. The federal Heritage Department already had the recommendation of a government advisory panel—the same panel that recommended the Online Streaming Act—to rebalance platform-publisher bargaining power. In 2019 the MPs on the House of Commons committee reviewing copyright legislation had recommended the government study the recently enacted EU Directive 2019/790 on news distribution. In the same time frame, Conservative Senator Claude Carignan was preparing Bill S-225 modelled on the French legislation that implemented the EU Directive.

With all of that policy momentum propelling him forward, Heritage Minister Steven Guilbeault’s consultation asked the public about adopting the Australian code. He also asked for input on an alternative to a bargaining code—an independent news fund which platforms would contribute to financially, and online news publishers would draw from.

Guilbeault’s solicitation of opinion on an independent fund seemed like going through the motions—Australia and Europe had blazed the path with a bargaining model which gave it instant policy credibility and was what mainstream online publishers wanted anyway.

Independent funds had a track record in Canada. The federal government had relied upon an independent committee to be the gatekeeper for distribution of Ottawa’s 2019 journalism labour tax credits, popularly known as the ‘QCJO’ program from its tax nomenclature “Qualified Canadian Journalism Organization.” The CRTC had directed cable and satellite distribution companies to contribute five per cent of annual revenues to the public-private Canada Media Fund and community cable channels since 1994. Beginning in 2016, the contributions sponsored a news fund for 20 independently owned local television stations.

As expected, industry response to the public consultation from Newsmedia Canada and the Canadian Association of Broadcasters favoured the bargaining code over an independent fund.

Bell, the country’s largest media company and owner of the biggest news network, CTV (also the number one online news site), offered some revealing arguments about why it preferred a bargaining code. As a large media organization, Bell liked the idea of negotiating a bespoke arrangement directly with the Big Tech platforms. That might allow some latitude to substitute distribution arrangements for cash contributions. And with its eye on how quickly Australian media companies were signing agreements with the platforms, Bell assumed the same could be achieved in Canada.

As Bell representatives archly observed, “the creation and operation of an independent news compensation fund is likely to be highly politicized with the concomitant risk of undermining the freedom of the press.” This without a doubt was an allusion to political heat the governing Liberals had taken over the QCJO program two years earlier. In contrast, legislation that focussed on bilateral negotiations between private companies might escape those politics.

Where is the money going?

While the choosing between these two policy paths—platform/publisher bargaining versus a ‘contribution and draw’ fund—offered various pros and cons, the sleeper issue was about how compensation would be divided.

In the bargaining model, the basic premise of ‘net value exchange’ did not compel an equitable distribution of compensation based on the number of employed journalists or any other metric . A rebalanced marketplace was still a market—some news content would fetch a higher price than others. Some platform distribution was of greater or lesser value to news organizations, depending upon the circumstances. These uncertain outcomes fed the fears of independent news outlets that Bell and the other big media companies would manipulate the bargaining model to their own advantage and drink the waterhole dry. Convinced that the fix was in, most of the small and independently owned news outlets put themselves on record as opposed to the legislation.

On the other hand, an independent fund was almost certain to adopt a policy of equitable or proportional distribution of compensation, just as the QCJO program had subsidized news outlets on the basis of payment per employed journalist.

One of the few proponents of an independent fund was Unifor, the largest Canadian media trade union (I was Unifor’s Media Director at the time). An independent fund was better, according to Unifor, because “the public interest is squarely at the beginning, middle, and end of this process, as the government sets the levy rate and the distribution formula.” Nevertheless, Unifor ranked the bargaining model as an expedient second choice.

Unifor’s submission to the public consultation also warned that Google or Facebook would look for a way to derail the government’s efforts:

"We support the Australian model with the added caveat that the federal government must retain default power to impose a news fund as a remedy to shortcomings of the Australian model. We believe there are any number of ways that digital platforms might sabotage the government’s efforts in this exercise, as Facebook did in its week long capital strike in Australia earlier this year. We would be naïve to think that Facebook would never try that again, from the safety of their American corporate nationality and their billions of dollars in cash reserves. This is, after all, a warm up for the American political battle over the same issues, and the platforms will make every effort to win that battle. Unfortunately, Canada could easily be collateral damage. Accordingly, the power to impose a news fund model should remain within the discretion of the government, allowing them to impose a levy arrangement on a platform."

The recommended fail-safe option of a fund levy did not make it into Bill C-18.

Before the Trudeau government could table a bill, the October 2021 election intervened.

In their election platform, the Liberals promised to implement a bargaining code modelled on Australian legislation. The Conservatives agreed and matched the Liberal promise with a detailed proposal to “adopt a made in Canada approach that incorporates the best practices of jurisdictions like Australia and France,” including binding arbitration and a proviso against government “handpicking” which news organizations should have access to the royalty framework.

The Liberals tabled the Online News Act Bill C-18 on April 5, 2022—six months after being re-elected as a minority government. Without explaining its choice, Heritage went with a bargaining code over an independent fund.

Like the Australian code, the Canadian bill created a property right in news content that publishers linked to Google and Meta’s sites, with or without being able to secure a licence agreement. The legislation described this property right as “making content available,” while opponents labelled it a “link tax.”

With the foundational property right established for publishers, the legislation replicated the Australian architecture with a bargaining regime between the platforms—dubbed Digital News Intermediaries (DNIs)—and “eligible news businesses” who were permitted to form collective bargaining coalitions. If bargaining did not produce a voluntary agreement, the publishers could seek “final offer” (baseball-style) arbitration. An arbitrator would apply the criterion of net value exchange.

The Canadian bill differed from the Australian code in at least two important ways.

Like the Australian code, section 11(1) of the Canadian bill also offered Google and Meta—the only platforms big enough to qualify as DNIs—a pathway to a CRTC-dispensed exemption from arbitration if it negotiated “fair compensation” with “a significant portion” of Canadian news outlets from a wide diversity of news organizations. The diversity requirement was a Canadian innovation on the Australian approach.

The CRTC had a mandate to review a thorough checklist of policy goals reflected in the voluntary agreements between platforms and publishers. It would ensure that the deals reflected “fair compensation” for all news content made available by publishers and the Big Tech platform and that an “appropriate portion” of the compensation be used by online publishers for news production. The regulator would also ensure that the distribution benefits a diversity of the news industry—covering nonprofit newsrooms, official language communities, local news, racialized and Indigenous communities, and so on.

There was another important difference between the Canadian “exemption” and the Australian “non-designation” in their respective bargaining codes . Both codes allowed the DNIs to sign only a “sufficient” number of news outlets to voluntary agreements. But the key difference between the Canadian and Australian approach to exempting the DNIs from further regulation was that the gatekeeper of Australian non-designation was the Finance Minister acting by fiat (having taken the advice of the Competition Commissioner). By contrast, in Canada the CRTC ruled on exemption based on legislative criteria and subject to appeals.

The exemption provision in section 11(1) of the Online News Act baked into law the public policy goal of distributing compensation to a wide diversity of news organizations. The importance of that feature of the Canadian bill became more pronounced in 2022 when the Australian Finance Minister granted non-designation to Meta despite it refusing to negotiate with two prominent Australian news outlets.

One thing the Canadian legislation didn’t provide was a bottom line on compensation outcomes. But in light of the fact that Bill C-18 was replicating Australia’s bargaining code, there was a widespread assumption in public commentary and Parliamentary debate that Canadian news publishers would obtain similar results through bargaining or arbitration. The Australian dollar figures were shrouded in confidential agreements and the only information on the public record was Australian Competition Commissioner Rod Sims’ statement that the aggregate value of the various agreements was approximately $200M AUS ($190M CDN) and an assurance from small Australian news organizations that they had been treated fairly.

Commentators assumed the value of the undisclosed Australian deals to compensate 30 per cent of publishers’ editorial salaries and costs (with Google and Meta dividing the payments, 20 per cent and 10 per cent). Perhaps based on this 30 per cent figure, Canada’s non-partisan Parliamentary Budget Office estimated that the DNIs would end up paying $329M CAD to Canadian publishers.

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