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Vintage newspaper dispenser by Markus Spiske CC-CC0 1.0 https://www.rawpixel.com/image/432264

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Skillful Negotiation or Legislative Fail? Taking Stock of the Bill C-18 Deal With Google

Canadian Heritage Minister Pascale St-Onge’s deal with Google on Bill C-18 for an annual $100 million contribution has sparked some unsurprising crowing from partisans who insist the fears that the government had mishandled the Online News Act failed to recognize a well-executed negotiation strategy. Yet the response from industry supporters of the bill has been noticeably muted: News Media Canada did not issue a press release with CEO Paul Deegan noting that the impact would depend on the forthcoming regulations, the Canadian Association of Broadcasters said it was relieved there was a deal and that links would not be blocked, Quebec broadcasters are already calling for more support, and Friends of Canadian Broadcasting said the deal did not deliver the support it originally hoped for. These comments come closer to reflecting the reality of the deal, namely that the government misread the market, passed deeply flawed legislation, and was ultimately forced to row back core elements of the law and accept payments consistent with what was on the table over a year ago.

The case that this has been a successful outcome is a weak one, but would largely emphasize that there is some new money coming into the news sector. It is reasonable to argue that Google and Meta’s one-off deals with many Canadian news outlets in advance of Bill C-18 were part of their failed strategy to stop the introduction new legislation, so the mere prospect of a new law generated some financial support. The Meta support has now disappeared and Google’s financial agreements will be cancelled as they are rolled into the $100 million payment, but there is no denying that the payment will inject some new additional funding.

But additional funding alone is not sufficient to make the case that the government handled this issue well. Friends of Canadian Broadcasting is not wrong when it says that many hoped for far more. In fact, so did the government. As recently as a few months ago it said it expected to generate $172 million from Google alone. There were various estimates raised throughout the legislative process: the government said $150 million last December, later raised it to $215 million and then to 35% of actual costs by Senator Peter Harder. Meanwhile, the Parliamentary Budget Officer estimated the value at $329 million by comparing the expected Canadian benefits with Australia. No matter the number, the $100 million is far below any of the promised estimates.

A more realistic assessment of the Bill C-18 outcome involves more than just the failure to meet the expected targets, however. There are at least two important issues. First, critics argued that the structure of Bill C-18 with mandated payments for links and an unworkable process made link blocking likely on Meta and a real possibility (though not a certainty) on Google. I think that remains the case. Meta has blocked news links for months in Canada and continues to maintain that is the only way it can comply with the law. As for Google, this deal completely alters the Bill C-18 process.

The government once claimed it would not negotiate directly with Google or any platform. Rather, it said it was creating a framework to allow the media companies to do so with the CRTC in the role of arbiter to determine if the various deals met the government’s policy objectives. Instead, it ended up negotiating with Google on a single payment rather than the individual deals promised by the bill, creating what amounts to a fund model that Google supported from the outset. Even the independence of the CRTC in the process is long gone with the government striking a deal and dictating to the Commission that it must exempt Google provided it cuts the $100 million cheque. This is a near complete reversal of Bill C-18 and provides confirmation that the law was unworkable.

Second, even the $100 million is far less than meets the eye, particularly for print and digital publications who were broadly viewed as most in need of assistance. As noted above, Google already has deals with many of these publications. While the precise value is unknown, it is rumoured to be in the tens of millions. The monetary value of those deals will be rolled into the $100 million payment, meaning that it is not entirely $100 million in money. Further, the bill has created some obvious losses including the lost Meta deals and the cost of lost news links. The estimates of those losses are similarly in the tens of millions and must be considered in assessing the overall Bill C-18 outcome.

Perhaps most notably for the print and digital publications, the majority of the $100 million will likely be going toward broadcasters such as Bell, Rogers and the CBC (unless the government uses regulations to specify how the money should be allocated which would further whittle away at the bill and the independence of the sector). The PBO estimated that it would be a 75/25 breakdown, suggesting that all of Canadian print and digital would share in just $25 million. That amount won’t even offset the lost Google deals and Meta links. It appears the government has recognized that this is the likely outcome since its $129 million media bailout announced in the Fall Economic Statement is only available to Canadian print and digital outlets that are eligible as Qualified Canadian Journalism Organizations. In fact, by more than doubling tax credit for journalist costs from $13,750 to $29,750, the government has clearly used the bailout to compensate for the costs of its own media policy. In judging the outcome of Bill C-18, it is instructive to note that even the government seems to admit that it needed to find additional funding to make up for what is far more legislative fail than negotiating brilliance.

28 Comments

  1. Considering how weak was the government’s position and how Google effectively held all the cards in the negotiations, I have to wonder what other “under the table” concessions were given away by the JustInept government.

    Going forward, I expect to see this government kowtow to Google on whatever Google wants.

    Hopefully when the government is replaced after the next election, all this nonsense can be rolled back and the massive government overreach eliminated.

  2. One hidden cost of this mess is how much foreign investment, especially in the tech sector, has the government driven away because of its vilification of Meta and Google, and unwillingness to listen to reason.

    This Bill also disclosed the government’s terrible negotiation skills – not understanding the strengths of the other party’s position and the weaknesses of your position are critical mistakes. Mistakes that I already see being repeated with the Online Streaming Act.

    • I know this may seem a bit contrarian on my part, but the fact that the Canadian government got taken to the cleaners with the negotiations between itself and Google probably has a lot more to do with the fact that the Canadian government came in with little to no bargaining power – then left with nothing afterwards.

      Even if you are good at negotiating, you need something to back you up. The government simply didn’t have that. Google could essentially wait out the clock, let news links disappear from its indexes, and Trudeau would take the fall for such a mess (rightfully). Google also has no financial incentive to really carry news links. Much like Meta proved, if news links disappeared from Google tomorrow, the search engine wouldn’t really notice a difference. Dropping news links represents zero threat to Alphabet’s business model.

      What did the government have? Threatening to kick Google out of the country as Google was threatening to pull services anyway? Not really a threat to them. Bad publicity? Google’s been used to that for a LONG time now. A legal challenge? Uh, what laws are Google breaking here? I can’t think of anything the government had that represented a bargaining chip in the first place. The best someone can come up with is “well, the government is trying to do a good thing.” Might be useful for a headline, but in business negotiations? Not so much.

      The government may very well have sent in a good negotiating team to fight the good fight, but when your negotiating team has nothing to really work with, there’s only so much they can do. With time running out, the government blinking was the most probable way that Canadian news links stays up in Canada on December 20th. That… was exactly what happened.

      • The government acted like they held all the cards when they clearly didn’t. How anyone can go into key negotiations and not understand the relative strengths and weaknesses of both party’s positions is beyond me.

        Business schools will likely use the government’s handling of this Bill as a model for what not to do. The government acted like a bunch of five year olds having temper tantrums. Google and Meta were always professional.

  3. I’m wondering if Meta is open to be sued since they acted well in advance of the legislation taking effect in December. The loss of media facebook pages for months now has cost many digital media businesses dearly.

    • Meta’s actions are 100% in line with what would be allowable under the bill. So I’m not sure what the grounds for a lawsuit would be.

      • The only thing I can think of is that they may be liable for is the cancelling of existing agreements. However since the government, in essence, cancelled the existing agreements with C-18 I would think it would be tough to make the case that Meta should be held liable. I don’t remember the timeline; did they start blocking before or after the bill received royal assent? If yes then there might be some liability since they would have jumped the gun relative to the bill becoming law rather than taking effect in December.

    • Stephen Gillis says:

      We were told by the government and various partisans that Meta was “stealing” from these outlets, now you’re making the case that in fact Meta sharing links was *critical* to their business model?? Who was stealing from whom 🤔

  4. Doug Caldwell says:

    Bill C-18 Canada’s Online News Act, (I call it the Candlemakers Act) is another Trudeau Liberal government payoff to the legacy media who are struggling to catch up to modern times and because they refuse to do so, our tax dollars were provided to help ease the sting of business competition and the evolution of commerce. Many were critical of taxpayers shoring up media moguls who came to enjoy the cash flow they used to enjoy before the Internet and new creative minds got to work. In mainstream Canadian newspapers a display ad was their bread and butter, that’s why they can sell their paper for a buck, advertising revenue floated their business. A full-page ad on the back-cover page of some papers could sell for many thousands of dollars for only one insertion. As you can imagine it was a great money maker – then came the Internet and the ability not only for people to easily and affordably share information between themselves like breaking news stories, but also it provided the opportunity for ordinary people to be media reporters too. Witness something newsworthy; you film it with your smart phone and upload it to any number of publicly accessible websites for global distribution. The news industry is evolving, always has, yet for some reason our government believes it is a worthy cause to shore up legacy media – who also utilize the Internet in their daily business yet fail to adapt new creative products to remain appealing and competitive. The Trudeau Liberals believe the best and only way is to levy a fee or tax on the internet companies who provide the media platform for consumers to use, that’s what C-18 really is: A toll bridge on the Information Super Highway.
    I doubt any alive today witnessed the technology revolution when the electric light bulb came on the market. Illuminating homes and businesses into the evening hours which created new opportunities for our society to grow and evolve with the benefits the technology of reliable and affordable light provided to consumers. However, it was not a benefit for all the candle-makers who had enjoyed a captive marketplace for centuries. So, their lucrative businesses had to adapt if they hoped to enjoy a future in the light industry equal to their past. Some did evolve, while others withered and disappeared. No government of the day would even consider shoring up the lost profits of candlemakers, but they were not as progressive as the government we have today.

  5. It’s hard to believe a skillful negotiation would include making the Canadian government appear to be able to extort a business on a whim. Just another reason the difference between domestic and foreign investment is increasing dramatically.

  6. Because the Bill doesn’t come into effect until Dec. 19th I believe. So, shuttering everyone’s facebook page six months ahead of time, without notice, must be a violation of something. We put hundreds of thousands of dollars into building our facebook page and develop those relationships. Now it’s all gone. I doubt the legislation covers them for having acted prematurally. We’re certainly considering it. I would pursue a class-action if others were interested.

    • Why would taking down your content be a violation ? A violation of what? You gave them your content. They hosted it without charge. Neither of you signed a contract saying they would do so in perpetuity.

      • You don’t have a facebook page obviously. You can’t communicate with your audience without buy ads. We invested in the platform. At a very minimum they have broken our trust.

        • > You don’t have a facebook page obviously.

          I don’t. I don’t bind the success of my business to the success or willingness of another business to allow me to do business on their platform. That’s just a recipe for exactly what happened.

          > We invested in the platform.

          Did you enter into a performance contract of any kind with the platform where you pay for a level of performance that they are now in breach of by ceasing the platform?

          > At a very minimum they have broken our trust.

          Fair enough. Take your money elsewhere.

          But broken trust is not standing to sue anyone about. If it were there’d be lawsuits until the cows come home over it.

          Learn from your mistakes and pivot. No reasonable business plan should have bet the entire business on somebody else’s business.

    • So if I put up a billboard on my own private property and allowed you to post bulletins on it for free (and you put all of your eggs in the one basket of only posting your bulletins on my billboard) and then one day I decide to take that billboard down, you have standing to sue me for that?

      On what grounds? Just because I provided a free-to-use billboard for some amount of time, I am expected to provide and maintain it in perpetuity? What if I sell the land it’s on? The next owner is legally responsible for maintaining it? When does this courtesy ever end? Give your head a shake.

      I didn’t force you into relying solely on my billboard for your profit. You did that of your own free will, laziness and nearsightedness.

    • There is no legal requirement that I have ever heard of for Facebook to provide a place for an individual to post, much less a business. In fact, they are expected to shut down accounts of people that don’t comply with FB policies, and have been called on to remove postings and even shut down the accounts of those accused of posting mis- and dis-information. Based on complaints, even if the information is in fact true; it could simply be a difference of opinion or even inconvenient to others.

      That you put so much money into that line of communication with your readers is on you; you are out that money in the same way as if FB had closed up shop. If you want to go after anyone, I would suggest it should be the government and the news media lobby group, since they are the ones that caused FB to do what they did. The fact that you didn’t like what FB did doesn’t automatically make it a violation of something. If it was so, then the same argument could be made by your advertisers if you increased the price that you charged them, since they wouldn’t like it.

      • We invested in our Facebook page, following all the rules, for 10 years, with no problems. This isn’t about us breaking the rules or using it for free, because we don’t. We pay as all advertisers pay. You have to buy ads in order to communicate widely with your followers.

        The issue is whether or not they broke the law by disabling our page before the legislation came into effect.

        Believe me, I’m on the side of social and online media not the governments. But we have been a victim of Bill C-18 even though we are not a news media company, try very hard not to be a news media company, and do not want to be regarded as a news media company. In fact, Unpublished Media started because we believed news media was failing Canadians. Which should be obvious to everyone now.

        • You paid for ads. Your ads were run. That’s the end of that obligation on FB’s part.

          > The issue is whether or not they broke the law by disabling our page before the legislation came into effect.

          Really, which law exactly? Were you paying for the page in some way (buying ads is not paying for a page) for some period of time that FB did not fulfil?

          > But we have been a victim of Bill C-18

          Facebook had nothing to do with the making of Bill C-18. They had to deal with a bill that news media and/or broadcasting lobbies wrote for their Liberal puppets.

          Sounds to me like your gripe is unofficially with them and officially with the government for writing a bad bill that had deleterious effects on your (bad IMHO) business plan.

          I have often wondered what is going to happen to all of these businesses who think FB is a place to build a business presence when FB finally dies. I wonder this every time I find myself on a FB page (i.e. rather than a properly, independently owned and hosted presence) when I am looking for information about a business.

          Maybe the death spiral will be slow enough that some people will see the writing on the wall and move their presence before it impacts them — assuming their presence on FB isn’t their entire business model. Those people are just screwed.

        • Your most sensitive course of action would be contact all the candidates in your riding and pledge the support of yourself and all the people you can convince to the the one who will promise to repeal the law and renegotiate with Facebook.

    • If you really are hell-bent on trying to sue somebody about your situation, why don’t you go after the responsible party and launch a constitutional challenge?

    • James: “I’ll sue! That’s what I’ll do!”

      Facebook’s terms of service:

      “We also can remove or restrict access to content features, services, or information if we determine that doing so is reasonably necessary to avoid or mitigate misuse of our services or adverse legal or regulatory impacts to Meta.”

      https://www.facebook.com/legal/terms?paipv=0&eav=AfYwY4AMBcx93uwyQiN9aibr2bUoffYIOZL9Rcdx1KaSiA2biJkkG6JW4rKpa_IiTOc&_rdr

      Me: “Have fun fighting Meta’s ToS!”

    • James: “I’ll sue! That’s what I’ll do!”

      Facebook’s terms of service:

      “We also can remove or restrict access to content features, services, or information if we determine that doing so is reasonably necessary to avoid or mitigate misuse of our services or adverse legal or regulatory impacts to Meta.”

      https://www.facebook.com/legal/terms?paipv=0&eav=AfYwY4AMBcx93uwyQiN9aibr2bUoffYIOZL9Rcdx1KaSiA2biJkkG6JW4rKpa_IiTOc&_rdr

      Me: “Have fun fighting Facebook’s ToS!”

  7. What I cannot understand is that there is a law on the books that says that Google has to pay for links to news, which they are apparently going to continue to do under this “new deal”.

    It’s a law that legally binds them to pay for links. How do they get some magical exemption from that law? Is that law going to be repealed?

    How do I get an exemption from laws that I am otherwise legally bound by?

    • It’s regulation alchemy. Somehow they’ve come up with new regulations that completely change the intent of the bill. I don’t understand how this is possible either, but they claim to have done it. We’ll see if anyone like Torstar challenges it in court.

    • Become a gigantic company, ideally one that employs people living in electorally important ridings or supports an industry that the government is scared to death of crossing, then threaten to leave when the government starts extorting you. You will get all sorts of exemptions from the law, especially if you keep reminding them of that threat on occasion they will stay. It is known as the “Quebec” model.

  8. Pingback: The government guts the Online News Act in an attempt to fix a mess of its own making - The Hub

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