The government’s deeply flawed attempt to force tech platforms to pay Canadian news outlets for linking to news is nearing its payout. The CRTC this week formally exempted Google from negotiating individual agreements and facing a potential mandated arbitration system in return for a lump sum $100 million annual payment. The $100 million deal was the government’s last ditch attempt to salvage the Online News Act as its insistence that tech platforms would never walk away from news proved to be disastrously wrong. Within weeks of the former Bill C-18 receiving royal assent in June 2023, Meta blocked news links on its Facebook and Instagram platforms. The block has remained in place for more than a year, causing significant harm to news outlets and sparking a CRTC investigation into whether user attempts to evade the block bring the company within the scope of the law.

The Meta news link block not only resulted in lost traffic for Canadian news outlets, but it also led to the cancellation of deals worth millions of dollars. With fears that Google might follow the same path, the government scrambled to find a compromise by dispensing with foundational principles of the law to negotiate a custom deal with the search giant that traded a negotiation exemption in return for a $100 million payment. Since Google was able to fold its existing deals worth millions into the $100 million payment, the actual new money was considerably less than advertised.

The Online News Act administrative process required the CRTC to review Google’s request for an exemption, but that outcome was never really in doubt since the government regulation left it no choice. This remarkable exception – tailor made for Google – stated that the Commission must interpret paying $100 million as meeting the standard for an exemption:

(2) 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

$100 million × CPIx ÷ CPI2023 where CPIx is the highest Consumer Price Index for any calendar year beginning with 2023 and ending with the calendar year before the year for which the compensation is paid;

and CPI2023 is the Consumer Price Index for 2023.

As a result of the exemption, Google will not face a mandated arbitration system and can comply with the law for the next five years by paying the $100 million annually. While Google is exempted from arbitration, the CRTC ruled that it is still subject to other provisions in the Act, notably one prohibiting unjust discrimination and undue preferences. The law gave the CRTC the power to issue an exemption for any provision in the Act, but it chose to keep the conduct-related rules in place.

The exemption may have been a foregone conclusion, but there were several other notable issues for the CRTC to consider that will impact the distribution of the money.  First, the Commission sided with the larger media outlets in limiting the calculation of employees to those receiving T4 tax slips. That approach excludes freelancers, who typically are more important to smaller, independent outlets. The decision will leave more money for bigger outlets and negatively impact the independents. The law has been disastrous for many independents, who were more reliant on the lost Facebook referral traffic and now find that many of their journalists do not count for the purposes of Google money.

Second, there were several decisions involving governance by the Canadian Journalism Collective, the collective formed by independent outlets to distribute the funds (my recent Law Bytes podcast with Erin Millar, one of the founders of the collective, provides further details). The CJC’s 2% admin fee was approved (the CRTC noted that other systems often have 5% fees) and the Commission declined to intervene in the CJC’s governance structure, ruling that its oversight role can be addressed through transparency provisions that will require annual reports from the collective.

There are a few other elements to the decision (the CRTC declined to address concerns about copyright and limited the scope of indemnity), but the key takeaway is that the last major administrative hurdle for the Online News Act has been cleared. By the end of the year, Google will have paid the $100 million and the CJC will distribute the funding. The money will no doubt be welcomed by recipients, but at a steep price: lost deals, lost links, and lost trust. Indeed, many now acknowledge that Bill C-18 was a major miscalculation that has caused more harm than good.