If you don't like the rules rewrite them by Duncan Cumming https://flic.kr/p/2fS1Hhe CC BY-NC 2.0

If you don't like the rules rewrite them by Duncan Cumming https://flic.kr/p/2fS1Hhe CC BY-NC 2.0

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Bill C-18 is Dead, Long Live Bill C-18: Government Rewrites Online News Act With Final Regulations

The government this morning released the final Online News Act regulations, effectively gutting the law in order to convince Google to refrain from blocking news links in Canada and to fix some of the legislative mistakes that have been apparent from the start. While proponents of the law will point to the $100 million contribution from Google as evidence of success, privately most in the industry and government acknowledge the obvious: Bill C-18 was deeply flawed and a massive miscalculation that has created far more harm than good. Canadian Heritage Minister Pascale St-Onge seemingly agrees as she was willing to make changes that were derided by the government throughout the legislative process. Indeed, by the time St-Onge took over the file that was a challenging salvage job, Meta’s $20 million in news deals were lost and blocked news links on Facebook and Instagram was a reality. The prospect of the same happening with Google was too much for the industry and the government since the lost deals would have been at least double that amount (many believe in the $40-50 million range) and lost news links in search would have been catastrophic.

As the regulatory process unfolded in the fall, the top priority was therefore to ensure Google news links did not disappear, even if that meant essentially re-writing the legislation. That is effectively what the government did with the release of today’s final regulations and regulatory impact assessment. The $100 million from Google is likely to yield relatively little new money after subtracting $20 million lost from Meta, an estimated $50 million from existing Google spending is folded into the new funding model, and $5-6 million to cover administrative costs of the new system. In other words, the entire Canadian news industry picks up roughly $25 million in new money, set against lost links on Facebook and Instagram and lost investment in the sector due to regulatory uncertainty.  That is disastrous and helps explain why the deal also comes with the government’s increased bailout for newspapers with the expanded labour journalism tax credit and the expectation that the CRTC will use Bill C-11 to funnel more money to broadcasters to cover news costs.

The relatively small amount of new money also helps explain why the government has directly engaged in determining how it will be allocated. While its Bill C-18 pitch changed over time – from payments for links to levelling the bargaining playing field – it ends with a simple shakedown. Google has money and this tax-like approach forces them to pay up to make the contentious policy battle go away. The government had claimed that it would not become directly involved in either negotiating payments or determining how the money would be allocated. It was – in the words of Rodriguez – merely setting the table for the two private sector sides to reach a deal with mandated arbitration lurking in the background.

Today’s final regulation discards both claims and overhauls the law, adding a Google-specific regulation which specifically grants it an exemption from arbitration in return for the $100 million payment and a specific reference that the payment is not about payments for links. The Google-specific provision is exhibit A for the absurdity of the legislation as it literally creates a singular exception for one company:

Despite subsection (1), in the case of the digital news intermediary that is the search engine with the greatest share of Canadian Internet advertising revenues among all search engines in respect of which the Act applies, the Commission must interpret the agreements as contributing to the sustainability of the Canadian news marketplace if and only if, for each year covered by the potential exemption order, the agreements provide for monetary compensation in accordance with the formula

The regulations also make it clear that no further “non-monetary” compensation is needed and removes the link to both links and copyright, two of the most contentious aspects of the law:

The agreement need not provide any consideration for merely facilitating access to news content or for otherwise making news content available in a manner that would fall under a limitation or exception in the Copyright Act.

Moreover, the regulations create a cap on the revenues allocated toward broadcasters and the CBC (a problem of the government’s own making), which ensures that most of the money will go to print and digital outlets (caps of 30% to broadcasters, 7% to the CBC). That’s a significant change that the government opposed for months. But not all print outlets will benefit, since the government is also tying the money to news that is “intended to made available online” and expanding the definition of “journalist” for the purposes of calculating how much each entity might receive by including “full-time equivalent employees who, in the previous calendar year, were employed by each news business for the purpose of producing, for news outlets operated by that business, original news content that is intended to be made available online.

The combined effect of this regulation should be obvious: excluding some smaller and ethnic outlets altogether while reserving most of the remaining money for larger entities such as Torstar or Postmedia who employ more journalist-adjacent personnel. I suspect many of the smaller players could see this coming, but they’ve been tossed under the bus in the effort to send more money to bigger outlets who stood to lose the most from Bill C-18 (and who incidentally lobbied the most for the legislation).

While not in the regulations, added to the mix is a battle to become the new fund manager. The regulations speak to “reasonable administrative expenses”, which I understand may in the 5-6% range or $5-6 million. Since Google need only negotiate with one such fund, look for a major battle between News Media Canada, the Canadian Association of Broadcasters, and perhaps other players for the shot at the administration money.

There should be credit to St-Onge for sensible changes to the law (certainly politicians from all parties will be outraged to learn their local publications get nothing), but to be clear, it means the government has not only negotiated the actual payment but now largely determined how the money will be allocated, eliminated provisions that only months ago were deemed essential, and literally created a regulation exempting a single company. Together they effectively bury the original Bill C-18 and resurrect it as the law the government spent months rejecting.

12 Comments

  1. And now the shakedown focuses on American streamers – some of which are the key content providers for Canadian broadcasters. Can’t wait to see how they react. They have many options to try and recoup any money they are forced to pay or to punish those who pushed for this legislation. These options include:

    Doubling the price of their content. What would CTV, Global and City do? Make their own content?

    Kill simultaneous substitution by releasing new episodes the day after they air in the US.

    Not sell content to Canadian broadcasters. Instead, only make their content available on their streaming services. Advertisers would, therefore, follow the content from CTV, Global and City to Disney and Paramount.

    Blowing up the Canadian broadcast system by completely exiting it – stop selling content to Canadian broadcasters, exit the Canadian streaming market, and stop making content in Canada. To mitigate some of their financial losses from exiting the market they could announce that Canadian visitors to the US will be able to use Canadian credit cards to subscribe to American streaming services. In other words, use a VPN to sign up for our American service. You won’t have to pay the HST!

  2. I am not a lawyer, but how is this even legal? How can the government create regulations that are completely contrary to the wording of the law passed by Parliament?

    This country is such a mess.

    • It really just begs for other search engines to file a grievance lawsuit doesn’t it. Ditto for the small news organizations who had their agreements with Google cancelled as a result of the Online News Act.

      At the end of the day though this demonstrates how governments in Canada can, and will, use regulation to change the impact of a law. And how, even though the regulation creating organizations are supposed to operate at arm’s length from the government for the purposes of creating the regulations, they are at the mercy of the Cabinet and PMO directives.

  3. I just got paid 7268 Dollars Working off my Laptop this month. And if you think that’s cool, My Divorced friend has twin toddlers and made 0ver $ 13892 her first m0nth. It feels so good making so much money when other people be02 have to work for so much less.
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  4. I’m also a little confused about how the government can negotiate regulations completely at odds with the wording of the legislation the regulations are intended to clarify.

    Bill C-18 needs to be tested in the courts and (perhaps) ruled unconstitutional.

    • How can they negotiate the regulations that are at odds with the regulations? Simple. The chair, vice-chairs, and commissioners of the CRTC are appointed by Governor in Council for 5 year terms (renewable).

      This means if they want another term, if they don’t do what the government of the day wants they risk not being reappointed.

      Not sure if it cold be declared unconstitutional, however.

  5. “New” money? All government monies are derived from individuals (ironically most of whom were declared inessential) who get up every day and go to work. We could save the news industry a billion a year simply by rewriting the Access to Information Act and forcing public officials to answer reporters’ questions. I don’t watch news because it’s now a fashion and style show…

  6. I’m a bit puzzled by how the government is able to negotiate regulations that are in direct contradiction with the language of the legislation they are supposed to clarify.

  7. What about paid links?
    Say an online news website buys an advertisement on Meta, shown to Canadian audiences. If clicked, it leads to a news article of said website.

    Wouldn’t that trigger the linktax for Meta? The law does not seem to distinguish between “organic” content and ads.

  8. I am actually scared what is happening with the world right now.
    Gravity Retaining Walls

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