The problems with government’s Bill C-18 draft regulations involve more than just what amounts to a 4% link tax on Google and Meta alongside little effort to ensure the resulting revenues are used to support spending on journalists and news content. As noted in previous posts, the draft regulations put an end to the claim that the Online News Act involves compensation for news creation since the standards are now simply a function of Internet platform revenues, not news production costs.  Given the global implications of a 4% tax on revenues to support media, that approach likely further cements Meta’s decision to comply with the law by stopping news links and increases the chances that Google follows suit.

But the concerns with the draft regulations do not end there. Indeed, the regulations revive the frustration of many smaller, independent and digital-first news outlets who feared that Bill C-18 would harm them competitively by receiving less support relative to larger companies such as Bell, Rogers, the CBC, and Postmedia or be excluded altogether. This issue was one of the most prominent aspects of the Bill C-18 committee hearings, with MPs from all parties expressing concerns about potential exclusions. The government ultimately passed amendments that expanded the eligibility of news outlets to account for the fact that smaller outlets often have very few full-time employees, relying instead on owner-operator models, community contributors, or freelancers.

While the amendments expanded eligibility with lower eligibility thresholds, the draft regulations effectively revive the same concerns. At issue are the regulations related to “fair compensation”, which is one of the criteria for the CRTC to consider in determining whether to grant an exemption from final offer arbitration. The regulations contain two relevant provisions. First, the fair compensation regulation:

6 (1) For the purposes of subparagraph 11(1)(a)(i) of the Act, if the relative compensation provided for in each of the agreements, submitted by the operator with its request for an exemption, is within 20% of the average relative compensation of all of the agreements submitted with that request, the Commission must interpret the agreements as providing for “fair compensation”.

The effect of this provision is to ensure that all agreements must be within 20% of each other from a relative compensation perspective. But how to judge “relative compensation”? The second regulation states:

(2) For the purposes of subsection (1), relative compensation means the ratio of compensation relative to the number of full-time equivalent journalists paid by a news business or group of news businesses, as the case may be, in the previous calendar year.

In other words, the standard used to compare compensation between news outlets is measured by the number of full-time journalists (ie. $100,000 for an outlet with 10 full-time journalists is the same as $20,000 for an outlet with 2 full-time journalists). This brings back the same issue that arose during the Bill C-18 hearings since the standard creates an advantage for those who structure themselves primarily through full-time journalists rather than with freelancers or other contributors. These other journalists do not count nor do other potential metrics that might measure quantity, impact or quality that could include assessing quantity of news content, links, clicks, or website traffic. 

The approach works for larger outlets, but is awful if you are a smaller community outlet that produces news content with relatively fewer full time journalists. The smaller outlet may have a relatively comparable impact (accounting for size), but will receive less compensation under the Bill C-18 system. Moreover, given the 20% band requirement, the platforms can’t pay the smaller outlet more without raising the rates paid to the established players. The end result will be to entrench the more established outlets, while making the smaller, independent and digital-first outlets less competitive. During the Bill C-18 hearing, Liberal MP Lisa Hepfner stated that online news wasn’t real news. The Bill C-18 draft regulations reflect that attitude, rewarding the large lobbying groups and continuing the harmful effects of the Online News Act for many media stakeholders.