The Implications of Canada's Online News ActJustin Hendrix / Jun 30, 2023
Last week, Canada passed the Online News Act, legislation that requires tech platforms to remunerate Canadian news outlets, and the platforms are not happy. In response, Google announced it will remove links to Canadian news outlets from its products. Meta also said it would remove Canadian news from Facebook and Instagram.
The Act itself has yet to be implemented- it has to first go through a regulatory process to sort out how it will work in practice. So, these moves by the platforms may be a tactic in the negotiation of the particulars. But the platforms also clearly want to send a message to other jurisdictions where similar legislation is under consideration.
For an expert opinion on the politics surrounding Canada’s Online News Act and its broader implications, Tech Policy Press Contributing Editor Ben Lennett spoke to one person who has been following it closely from his perch in Montreal. Taylor Owen is the Beaverbrook Chair in Media, Ethics and Communications, the founding director of The Center for Media, Technology and Democracy, and an Associate Professor in the Max Bell School of Public Policy at McGill University.
What follows is a lightly edited transcript of the discussion.
Hi, I'm Taylor Owen. I'm a professor of public policy at McGill University and the director of the Centre for Media, Technology and Democracy.
Taylor, thanks so much for joining me today. The big news yesterday was that the Online News Act passed parliament in Canada. What's your reaction to this becoming law?
Well, it's mixed to a certain degree. I mean, I think broadly these media bargaining code approaches to journalism policy are a piece of a broader puzzle of how governments, in my view, should be supporting, in various ways, the journalism sector at the moment as they go through what is a pretty dramatic transition in business models, a transition, I think that poses some real challenges for democratic societies that require a certain amount of journalism, in my view, in order to be healthy. So governments need to engage in I believe a wide range of ways to support that sector. And a bargaining code is one piece of that puzzle, but not a sufficient one. So I'm glad this is finally getting passed in Canada, but it is just a broader piece of that puzzle in my view.
I think there's two things to observe about the Canadian media ecosystem. One is that it is undergoing the very same market driven transitions, as most media and journalism ecosystems in western democratic societies. And that transition is driven in large part by the replacement of at least two of the main revenue sources for journalism over the past a hundred years, which are classified ads, which were quite quickly replaced by various online sites, and ad revenue, which were largely replaced by the efficiency and scale and ability to micro target provided by Facebook and Google in particular. And when you take two thirds of your revenue sources away from an industry, it requires some pretty rapid transition and pretty radical transformation. And that's really what we're in the middle of. That's been a 10-year process. That's happening in Canada, just like it's happening in the US, just like it's happening in the UK, and so on and so forth.
The other variable in Canada though is that we are in many ways interconnected in with the American media ecosystem. We are right beside the US, like no other country that shares the same majority language is, and our ecosystem, we consume a lot of American news and we're connected in with the American system. So in Canada, because of that, we have always had various layers of protectionist policy for our cultural production and for our journalism. And those are also in transition. So what does it mean to protect Canadian content in the digital world? And that is less clear than it was certainly when we could ... I mean we could control who controlled their waves, we could control who owned newspapers, so on and so forth. That's harder in the digital world. So those two variables have led to some real challenges in the sector, and we're seeing the same kinds of declines in local journalism, for example, in overall reporters in the country, in capacity in covering accountability journalism in the country. I mean all of those same variables are present in Canada with this added complication that we sit beside the United States in some challenging ways.
You talked about this advertising challenge in the digital world. You have the Facebooks and the Googles of the world controlling a significant amount of this and it's directly impacting journalistic outlets and their revenue stream. So how does the act itself address that particular challenge?
Interestingly though, these acts in general, this approach is these bargaining code or forced arbitration models for encouraging, or mandating even, content deals between platforms and publishers. They all address the central bargaining imbalance, I would say. And it is over ads to a certain degree. And in Australia they've certainly placed the bargaining over ad rates as the central motivation for the bill because it's being done through a competition bureau. So that's the driving force for the Australian model. In Canada it's a bit different because we don't have a strong competition authority. We're doing a it through a content regulator, our broadcast regulator, content and broadcast regulator, the CRTC. And when you do that, you're not really addressing the core imbalance over ads. You're addressing the imbalance in negotiations over deals for content. And it's a slightly different approach and it actually is one I think that offers some real opportunities, which we can talk about in the details of the Canadian bill.
But at its core, it's sort of addressing this status quo in Canada, where some publishers have deals with Facebook and Google, but not all publishers, and all of them are hidden behind NDAs. So we, as the public, have no sense of what the terms of those deals are. So these deals are like the Google News initiative deals, the Facebook news initiative, whatever it's called, deals. They change names quite regularly, but these are just the standard deals that many publishers in the United States have as well. But they are unevenly distributed and untransparent. And they put small publishers in a very difficult bargaining imbalance.
If I'm a small local newspaper, I don't have the power of The Globe and Mail, our biggest national newspaper, to negotiate one of these deals with the platforms. Now The Globe and Mail happens to have, we think, the biggest deal of any publisher in the country, just like the New York Times in the United States has that a hundred million dollar deal with Google. But that's the imbalance, and I would say the bargaining imbalance that this bill is trying to address. If these deals are going to be out there in the world, if money is flowing and platforms see some value in journalism and the production of reliable information in Canada, can we make these deals fairer, more accountable, and more transparent? And I think that's the core of what the bill's getting at, rather than the ad market imbalance, which is sort of a cause of a lot of these problems, but is not something we're fundamentally going to change.
Clearly Facebook and Google are obligated by this act. Are there other platforms that would be required to negotiate with publishers?
So that's a great question, and I think the answer is we don't know yet. So right now the bill has been spelled out in legislation and it will now go through what's called a governance and council process, where the details of the bill and the regulation itself will be spelled out. And that will include much more specific language around inclusion. That's different than the US with the JCPA, where it's actually detailed in the bill, what the criteria are going to be, but right now likely it's just Facebook and Google. I could easily imagine other platforms being included. I think the big question is what's going to happen with generative AI and are platforms that use journalism as part of their models and their training are going to be included somehow. I don't think we know yet whether that's going to be the case or not. But yeah, right now it's going to be Google and Facebook, and I could imagine a world in which Twitter and TikTok in some way get incorporated as well.
So let's turn to the other side of the equation. Who are the outlets that are eligible to participate in these collective bargaining agreements? Are we talking just about newspapers? We talked about a broadcast regulator. Does that include broadcasters? Who can benefit from the act? Who can engage in the process that the act is facilitating?
Important question. In my view, the biggest challenge of any government journalism policy, any government policy to support journalism is that at some point, someone somewhere needs to decide who qualifies, for inclusion. And that's difficult for governments to do. So we've had some experiences with this in Canada. We have a labor tax credit, of 25% of journalistic labor is applicable for a tax credit, which is actually a fairly significant support mechanism for journalism in Canada. It was put in place three years ago and has been functioning broadly fairly well. The way they did it for that was, our Canada revenue, our tax authority adjudicates what they call qualified journalism organizations. And these go through a series of criteria around having editorial standards, having complaint mechanisms, having public editors or oversight, having a transparent board. I mean there's a whole bunch of criteria those follow, a certain number of FTEs.
So that's one category we have. It's fairly stringent, in this sense that because the tax credit is significantly high, it errs on exclusion in many ways. So most journalism organizations who have applied have gotten it, but it requires some sort of robust institutional status. When the bargaining code was being negotiated, there was a real question about should we broaden that out? So because this isn't government deciding, this is the market, in a sense, so it's a market actor as a publisher identifying themselves as wanting a deal and a private actor in terms of the platforms negotiating that deal, arguably the bar for that determination can be a little lower. So it is. Right now, the inclusion criteria for that is two FTEs, one of which can be a proprietor. It started as two FTEs, but a lot of small newspapers, local newspapers in particular, so if you're a newspaper in a small town, you might own the newspaper and have one employee. So they were arguing for inclusion,
So it went down to two FTEs, one proprietor, one owner, and you have to have some basic editorial standards and journalistic practices documentation, and that's basically it. So it's pretty broad in its inclusion. Interestingly, Google has both advocated for it to be broad, to include a whole host of new independent digital actors, and has also at the same time argued that it's so broad it's going to force them to fund non-journalism entities and disinformation outlets, as they call them. So there's a lot of sort of often arguments that are in intentional with each other being propagated by people around this debate. But that's the criteria for this. It's pretty broad. Two FTEs, some editorial standards, and that's pretty much it. So it's going to include a lot of people, which has the other implication of meaning that if Facebook were to block ... and we'll get to their reaction, I assume, but if they were to block access to news on their platforms, it means they're blocking a pretty wide range of sites, not just the large journalism outlets. They're blocking anyone who could be a part of this regime.
So you have this very broad set of institutions that are eligible to participate. I was wondering if you could talk about transparency a bit, whether there are any provisions in the act to ensure that the dollars are actually going to journalism.
Yeah, so this is, again, where I think the model in Canada evolves from and is somewhat different from the Australian model. So as I mentioned at the beginning, the Australian bill, the bargaining code, only cares about a market imbalance in negotiation. That's it. It's a pure market corrective measure. And it does not care. It doesn't ask to see any details of those deals and it does not care what that money is spent on. And I think those are two major flaws in that legislation, frankly. So when Canada looked at this, and now because we're not doing it through a pure competition bureau, we actually have a bit more freedom in how we specify the terms of deals and what needs to be shared and with whom. So the way it works is if a publisher or a collective of publishers, because it allows for collective bargaining, decide to enter into arbitration or into negotiation with platforms, they have a period to do so amongst themselves.
If they can't agree, it goes to an arbitor who sits within our content regulator, the CRTC, or be appointed by. We are allowed to do a couple of things that aren't present in Australia because of that model. One is there's exemption criteria for the platforms to be designated and they're spelled out. So whereas the Australian, it was sort of a binary tell us you've made deals or not, in here there's six or seven detailed specifications. The deals have to be broadly diverse, of different sizes of organizations across the country, the money has to be going to journalism broadly, there needs to be a wide range of types of journalism organizations, a set of criteria there, and the terms of the deals need to be reported to the regulator, who will then disclose them in aggregate annually. So we'll get an annual report from the regulator about the details of the cumulative deals that were made across the country and the character of them and the makeup of them and so on and so forth.
Now, I and many others were pushing or arguing that they should be completely transparent. Why on earth, if these deals are being mandated by a government or overseen by a government, in our interest as citizens shouldn't we have access to the terms of these deals? Both the platforms and the publishers pushed back aggressively against that. Neither want to share the terms of those deals to the public, but also it seems like it would put us in breach of our trade agreement with the United States. We can't force private actors to disclose confidential business information in a discriminatory way. We can't just pick two companies or a hundred publishers and say, "You all who compete against American entities need to disclose all of your business information." So I don't think full transparency was actually even legally possible. So where we got to was deals reported to the regulator and that regulator reporting in some degree of generality annually. So that's kind of where it's at. The question now is will the platforms continue to display news in Canada? In which case they would be under the scope of this regulation or they decide to sort of go nuclear and pull news in Canada. And that's literally where we are this week.
So let's turn to that. Facebook in response to the Australian law infamously shut down access to numerous pages of journalism and news outlets, and then several government and NGO pages were caught up in that as well. That was actually prior to Australia passing their bill. Parliament then amends the legislation to include an exception that we've talked about a bit already, where platforms that made a significant contribution to sustaining the Australian news industry weren't required to then engage in the mandatory bargaining code requirements. But what's been Facebook's response, particularly over the past day or so, to Canada's law?
So I think it's worth stepping back a little bit and looking at both Facebook Meta and Google's engagement as this debate has unfolded over the past year, because I think it's actually kind of informative to other countries that are heading into similar conversations and similar policy processes. So Facebook has been largely hands off. So in Australia they were the ones really leading the charge publicly I think against the bargaining code and then taking that quite dramatic action to block news. In Canada they haven't been. They've been sort of in the background. However, they have had a very firm position that they will block entirely news in Canada should this bill pass. That has been their position for months. It has not changed. And I think ... we can get to this, but I think we should take them at their word on that in Canada for now. Those are the caveats on that.
Google has been, unlike in Australia, been very much in the mix in Canada over the debate about the bill. They decided to host their Newsgeist conference, which is their sort of tech journalism conference that's in Arizona almost every year for the past 15 years. First time they hold it outside of the United States, happened to be in Canada a few weeks after the bill was tabled. At that conference, a whole host of ideas around how this bill was going to hurt independent journalists, how it was going to kill innovation, and so on and so forth were widely discussed. So they've been sort of stirring the nest, I would say, and in my view, trying to pit publishers against publishers. They'll divide the journalism community against itself, arguing this bill was going to preferentially treat the large incumbent actors, disproportionately affect digital startups, small outlets, so on and so forth.
So they've been very much in the mix of this public debate, and they tested what it would look like to block news in Google search in Canada. They apparently did this on 5% of the Canadian population for a period of time, I think for a month. And that was sort of their version of Facebook's threat to block. So that's happened to date. I think it's important to look at why they're both in the positions they are now and how those are likely to play out in the future. So Facebook's position, in my view, is part of a much wider global strategy to throttle down news. So this isn't just focused on Canada and it's not even just focused on these bargaining code bills. They are transitioning, in my view, or they seem to be anyway, away from news is one of the central types of content that fills their platforms. And they've been throttling that down for a long time, so we're part of that trend.
I think technically in Canada, in a country anyway, they could do it. They can make a list of journalism organizations and just block posting of URLs to those websites on Facebook. So it's possible to do it here. I think their actions are also very clearly pointed at California, the US Senate, the UK, and Brazil, all of whom have bills at the moment that are similar. And I actually think that starts to become a problem for them if the citizens ... and that's a lot of people under all of those regimes and all those countries that would have a material effect on their business. So I think this act and the sort of binary act of if this bill passes, we will block everything is aimed at those other markets, not really at Canada. So that's kind of where Meta is.
Google, on the other hand, has I think two real challenges that put them in a very different position than Meta. One is technical. They would have to not just block sites, but de-index them from Google search. And that's a very different process. So technically I think it's difficult and maybe they can do it with some degree of error in a country, but it's very hard to imagine, to me anyway, them being able to do that globally or for multiple countries around the world, but that gets very difficult. And perhaps more importantly, it goes to the core of their value proposition. Facebook is not telling you, you go on Facebook and you're going to find the most reliable information in the world. That was never their value proposition. Google's value proposition was you go into search and we're going to give you the best possible answer to the question you asked, and that very often includes journalism as part of those results.
And for them to then say, we're going to give you the most accurate search results to the thing you asked for, except all of journalism, to me poses sort of an existential question to what Google is and what search is. So I think in likelihood Facebook blocks in Canada in the short term until some other countries come online with these similar policies, if they do, and Google probably figures out a way of entering into a broader range of deals for companies in Canada, but we'll see. It's playing out in real time right now.
You've talked through your sense of how these companies are thinking about dealing with news. Do you think any of their concerns about the Canadian law are valid? Google, for example, says that Canada's law is broader than it was in Australia, essentially you're putting a price on links displayed in search results. And I'm sure Facebook would make a similar argument about their platforms. Do you think any of those concerns have any validity?
I do. I mean Facebook doesn't really have concerns with the bill. They say they reject the premise of it in its entirety. So I think we need to put that aside to a certain degree. Google, on the other hand has, as you mentioned, a few of them, raised a number of critiques, some of which have been incorporated in various amendments in the bill through the process, but one of the most prominent ones has been this idea of a link tax. Nowhere in the bill does it actually say the deals have to involve value for links. Those deals can be over on terms negotiated through the private parties themselves. It can be for access to some sort of Google News system, it could be just for broad support for journalistic practices in the publication, just like the deals they've already made have been.
So they are already, and is the core thing we need to remember here, this is not forcing deals that have never been done before. These exist now. They're just not transparent and we have no idea what the terms of them are. So it's simply saying that those deals need to be more broadly accessible to a broader range of organizations and be made somewhat transparent and accountable. So I mean I think maybe technically those deals could be made on reach of links and visibility of links, but that's not required. So it's not a tax in that sense, that it's mandated that be the criteria through which these deals are given value. And the argument that this is disproportionately affecting the big publishers, which they've also put forward and sort of propagated within the journalism community quite aggressively, I think it's just, on its face, not true. If anything, because this system allows for collective bargaining amongst smaller publishers, they are now going to get access to the kinds of deals that only the big publishers used to get, the publishers with power.
And in fact, since the deals will almost surely be prorated for a number of journalists, they'll either get equivalent deals, or I would argue because they're smaller, they'll probably get per FTE a better deal than the bigger outlets. Another critique has been raised that the broadcasters are going to be included and the public broadcaster is included. Our big cable companies and our big broadcasters, they're included because they do journalism, they do online journalism. And this is a bill to support anyone who does online journalism and participates in our online journalism market. Anybody who thinks they shouldn't be included needs to make the case for exclusion rather than I think defending inclusion. Our public broadcaster has a slightly different story. So the CBC, the Canadian Broadcasting Corporation, receives $1.2 billion in federal funding a year. And it is a big player, the biggest player in our journalism market. They are included because they sell ads, they participate in the private market.
Now my belief is that they shouldn't be selling ads. That has a real distorting effect on the digital ad market in Canada, hurts smaller publishers that compete with them, or all publishers that compete with them. So the solution to their inclusion, from my perspective, is they should not be selling ads. Their mandate should be reviewed to not sell ads, in which case they'd just be a pure public broadcaster that is producing journalism for the public good. That means it's a public broadcaster in a more traditional sense, but it is also one that participates in the digital ad market and often undercuts private actors because of the scale it has and its ability to ... because it's also subsidized, it can undercut private actors in the ad market, which to me has a distorting effect and that needs to be fixed. So I mean I say all those things because there are a lot of arguments and I think legitimate concerns with this approach.
The biggest, and I'll end with my concerns of it, the biggest problem with this bill, in Canada anyway, is that we are likely to end up in a situation where 25% of journalistic labor is funded by this tax credit from the government. And if these deals look anything like they did in Australia, maybe another 25% is funded by tech companies. So you could have a journalism sector which is supported, 50% of journalistic labor is supported by either government or tech. And that is not, in my view, in any way a desirable long-term solution for the free press. I think if anything, if we are doing these bargaining codes, we need to see them as a transition. So we need to be doing things in addition to them that help the sector transition to whatever comes next, because this current model, even if it's needed, and I can make the case that it is, to sustain a certain amount of journalistic production in this moment of transition, can't be seen as a long-term state. It needs to be transitioning.
Taylor, you've already talked through some of your concerns about this bill. We seem to be heading into a similar direction in the US. We talked about the Journalism Competition Protection Act, the JCPA, which the US Senate has revived this year after its did not make it for a vote last year. It largely replicates the Australian approach. We have to amend antitrust law in the US to enable journalistic outlets to collectively bargain. The state of California is also moving ahead with its own bill. A version passed the state House. It's currently being debated in the state Senate. What advice or recommendations would you give US policymakers? You talked about the Online News Act not being the most ideal approach to support journalism. What should we be doing?
I think it's part of a broader puzzle of how to support journalism in this transition. I think governments should also be supporting public broadcasters, which I know the US doesn't have a particularly rich tradition of, but could, more broadly, funding public media infrastructures I think which is where the conversation should be going in terms of public funding side, perhaps doing things like our tax credit for journalistic labor, and some sort of voucher system for reimbursement for subscriptions. We do that to some degree here, but I think it could be increased significantly. So I think there's a package of things that can be done to support journalism. If the Senate and California move forward with their bargaining codes, which it seems like they're going to, and really this applies to any country or jurisdiction that's imposing bargaining codes, I would ask three things of the bill.
And I think you can ask this of both the JCPA and the California bill. How can this legislation or is this legislation as transparent as legally possible? So figure out what is legally possible to force in terms of transparency of deals and go as close to that line as you can. I think that's first thing. Second, how can you make inclusion as maximally inclusive, while preserving the journalistic integrity of the organizations that are included? So how can you include as many people as possible, but also ensure that they are doing journalism in some way? And that line's going to be different in different countries and I think different governments and different entities are going to come to different definitions of what that is, of just inclusion. Canadians came to one. I think there's lots of other ways of doing it, but I think that's what has to strive to. And you have to look at those inclusion criteria carefully. And then third gets to this transition period, is how do we ensure that these bills are sunsetted, these aren't permanent things, that these are acts of transition and support of an industry in transition? And does the bill account for that?
So I would look at the American bills just like I would what's being proposed in the UK and Brazil and Indonesia and a host of other countries that are talking about this and ask those three questions. And that makes them, in my view, if they get close to reasonable states on each of those three, then I think they're probably worth doing in the short run. Every country's going to do them in slightly different ways because of, again, which authority will oversee it and who will they report to and who will appoint the arbitrators. So that's going to be different in every country, but the core principle that some degree of accountability and transparency should be applied to deals like the hundred million dollar deal between Google and the New York Times, let's not lose sight of that, that some degree of democratic accountability over those kinds of deals should exist, to me is a principle that's worth pursuing.
Finally, where does Canada go from here in terms of the act? Facebook's had their response, Google's had their response. They're obviously going to evolve. Is there any point at which Canada turns back? Prime Minister Trudeau gave a defiant speech a few weeks ago, but does the law change? You talked about the possibility for the government to adjust some aspects of it through the implementation process.
So we're now going to sort of develop the regulations that will determine inclusion and the exact criteria and the exact rules. And there will be a public debate and a significant lobbying effort by the companies to water down the bill through that process. So that will play out over the next number of months. And my broad view is that what would it say if government caved at this point to the threats of the two companies? This bill, for better or worse, has gone through our parliament, through our Senate. It has fairly high support among the Canadian population as far as we can tell through survey data. So a democratic government has developed a piece of democratically accountable legislation to incentivize a certain outcome that they see as in the interest of their citizens. Once that bill's passed by our parliament, which it has now been, by our elected representatives, for the government then or the regulator to then cave in to the threats of American private companies that don't like the terms of that Democratic bill, I mean, what would that say about our democratic process?
So whether you like this thing or not, I think it's now pretty imperative that we not cave in to the threats of these companies. Now does that mean we can't have conversations about implementation? Of course we will. I mean that's what always happens in any regulatory process, with any industry. There's a process of development of regulations and application and rules and companies will have lobbyists who will argue their cases on this and that's fine, but the idea that the government should now cave because Facebook is doing this threat that it said it was going to do for the last six months doesn't make sense to me. It's not the government turning off the news here, it's Facebook turning off the news. And I think we have to be very clear on that.
So how it plays out, I think a regulation's been developed. I imagine, my best guess, I mean what do I know, but my best guess is Meta sticks to their block for a while and sees how things play out in the UK and the US and sees what California does and what Senate does and what the British government does with the Competition Market Act. Google, I don't know, because for the reasons we talked about, I think it's much more complicated for them to do this. My suggestion is they should just do a version of the Google News Initiative that's more like the journalism fund they've been advocating for. So one part of the debate in Canada has been should it be a bargaining code or should the government just create a journalism fund that the platforms would pay into?
Which it might be as problematic for the government to do. It actually gets them much more involved in the decisions over who gets money and setting up a regime. And it would actually be overstepping in my view to do that, but nothing's stopping Google from doing it. So Google could tomorrow set up a fund that was transparent and maximally inclusive, included any publishers that wanted to apply to it, gave the same amount per FTE to everyone who applied, per journalist. They could build the exact model they were advocating for publicly through this process and align them broadly with the exemption criteria of our Online News Act. And that would be it. I think that'd be the end of it. It would just be a better version, in my view, a more accountable and transparent version of what they're already doing, the Google News Initiative. And it would be a model for what they could do in other countries as well. So to me, that's the high road they could take. We'll see.
Well Taylor, we'll definitely need to check back in with you in six months or a year or so to see which road Google and Facebook have taken and certainly how things have developed. Thanks so much for walking us through the Canadian law and all the details of it. Really appreciate it.
My pleasure. Anytime.