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Aug. 9, 2022, 8:27 a.m.
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Canada’s Online News Act shows how other countries are learning from Australia’s news bill

The potential here is for democratic governments to evolve their digital policy models based on each other’s experiences.

While many governments around the world have begun to more actively engage in the journalism policy space in recent years, few efforts have garnered as much attention as Australia’s media bargaining code. Designed by the country’s competition authority to address a perceived market imbalance between platforms and Australian publishers, it has also become a lightning rod for wider debates over the state of journalism, the role of Facebook and Google in journalism’s decline, and whether and how governments should step in.

Enter Canada. In early April, the government introduced the Online News Act, a bill that, similar to the Australian model, would compel large platforms to negotiate with publishers about payment for the use of their content, or be forced into arbitration.

This isn’t the first time the Trudeau government has stepped into the journalism policy domain. In the last three years, it has passed legislation that allows qualified journalism organizations to receive a 25% tax credit toward editorial labor, issued a 15% tax credit on the purchase of digital subscriptions, and created a new charitable status for journalism organizations. The public debate over those measures was heated at times, but the new bargaining code has created a firestorm.

As in Australia, the platforms are lobbying aggressively against the bill. A range of academics, media critics, and journalists, including a network of small publishers, has also emerged in opposition. And Google, in particular, has taken an aggressive stance against the bill.

Why does Google care what Canada does? The answer likely lies in how this bill evolves and builds on the model implemented in Australia, and the fact that other countries around the world are watching this evolution and developing their own similar laws. The Canadian code probably won’t have a material financial impact on these platforms, but countries learning from each other, improving on the model, and it spreading globally very could.

So what does the Online News Act do, what does it get right and wrong, and should it be passed, scrapped or improved?

The reality of the Canadian media market

All things being equal, there should be no need for legislation to regulate the financial negotiations of private publishers. The code is a significant intervention in an industry that we rely on to hold governments and platforms to account. But it’s equally important to ground analysis of the code within the current realities of the Canadian media market, rather than an imagined world where publishers don’t already receive money from platforms, governments, or both.

There are four attributes of the current status quo that should be considered when weighing the merits of this legislation.

First, on the fundamentals, it’s clear that large tech platforms have absorbed journalism’s largest source of revenue (advertising), that this has negatively impacted the state of journalism in Canada, and that a healthy journalism industry is important for democratic societies.

While some believe that the journalism industry in Canada can self-correct and should be left to market forces — a view held strongly by many journalists themselves, and one that is supported by some important innovations particularly from smaller publishers — there is public and industry support for government intervention.

The Canadian government is already in the journalism policy game. The tax credit for journalistic labor, a $500 million program launched in 2019, both polarized the public debate about journalism in Canada and has broadly been a financial success. The subsidy helps the industry but, at the same time, has hurt its credibility with some audiences. This reality is further complicated by declining trust in the media in Canada.

Finally, while many, including ourselves, are uncomfortable with platforms funding journalism at all, the reality is that the platforms are already funding journalism in Canada. But the current status quo is one of opaque and unaccountable money for some journalism organizations. These deals are hidden behind NDAs and are not accountable to the Canadian public. They are also very often programmatic grants, casting legitimate questions about the independence and objectivity of the journalism initiatives they support.

Given these realities, the government is faced with several policy options.

The first is to leave the status quo untouched and continue to allow platforms to strike deals with publishers without oversight, transparency, or accountability. Publishers are faced with unequal bargaining power when they negotiate these deals, and the platforms can pick which publishers to cut deals with.

The second option is to use general revenue to further fund journalism through existing programs. But Canada’s labor tax subsidy is already 25% of editorial labor and only goes to qualifying journalism organizations. Deals between platforms and publishers arguably reach a broader range of organizations.

A third option is to create an alternative to ad-hoc platform deals, and instead force platforms to pay into a central fund that would then administer the funding to publishers via some sort of standard formula. This option standardizes payments, removes platforms from the decision of who gets what, allows money to go directly to journalism, and gives the public a clear sense of how money is supporting journalism.

We have previously argued for this model, but it has some real limitations. Though it might be administered by an arm’s-length organization, it inserts the government even further into the business of journalism. It’s also unclear how the amount of money put into the fund would be determined and what the basis would be for taxing platforms in Canada beyond what they already pay.

A fourth option is to regulate the bargaining process itself. Enter the Online News Act.

What the Act does

The Online News Act compels digital platforms to enter into financial agreements with publishers for news.

News outlets — either singularly or collectively — initiate bargaining. Platforms have to participate in the bargaining process, though if they believe the news outlet doesn’t meet the criteria to be subject to the Act, they can contest it. If an agreement can’t be reached by all parties within “a period that the Commission considers reasonable,” mediation occurs; if an agreement is still not reached, a panel of three arbitrators selected by the Canadian Radio Television and Communications Commission (CRTC) chooses a final offer made by one of the parties.

The bill builds on the Australian model in some important ways, most notably around the exemption criteria. Platforms can only be exempted from being designated for arbitration if the deals they have made with publishers meet the following criteria:

  • They provide for fair compensation to the news businesses for the news content.
  • They ensure that an appropriate portion of the compensation will be used by the news businesses to support the production of local, regional, and national news content.
  • They don’t let corporate influence undermine the freedom of expression and journalistic independence enjoyed by news outlets.
  • They contribute to the sustainability of the Canadian news marketplace.
  • They ensure that a significant portion of independent local news businesses benefit from them, they contribute to the sustainability of those businesses, and they encourage innovative business models in the Canadian news marketplace.
  • They involve a range of news outlets that reflect the diversity of the Canadian news marketplace, including diversity with respect to language, race, Indigenous communities, local news, and business models.

These criteria are immensely important, because they are the primary regulatory mechanism of the Act.

The bill also provides a degree of transparency into the deals that the Australian code lacked. The CRTC must be provided with details of the deals in order to access exemptions and will issue an annual audit of the aggregated deals and their impact on the journalism market in Canada.

Mischaracterizations

While the Act seems to have public support, it has spurred debate among journalists, academics, politicians, publishers, and platforms.

As during the Australia debate, the claim that this bill will “break the internet” is pervasive. Conflating “the internet” with platforms like Google and Facebook propagates a narrative that platform lobbyists have been trying to craft for years. Platforms are intermediaries whose design shapes the way we experience much of the internet, and that is a deviation from the open web.

A related argument against the Act is that it imposes a “link tax” for hyperlinking to news articles. Google said, “This is what’s known as a ‘link tax’ and it fundamentally breaks the way search (and the internet) have always worked.”

But the term “tax” implies that the money will be collected by the government, which is not the case with the Online News Act. Deals are made between private entities.

More fundamentally, the bill doesn’t necessitate that deals between platforms and publishers ascribe value to links at all. It doesn’t specify how value is determined, only that use of news content be compensated.

Others have claimed that the bill threatens journalistic independence. But tech platforms like Google and Facebook have already signed deals with several publishers in Canada, for undisclosed sums of money, with no oversight or accountability.

Another concern, reflected in a recent statement from a coalition of independent Canadian publishers, is that the bill would disproportionately benefit legacy outlets, stifling innovation in Canadian journalism.

It’s true that in Australia, deals were at least initially skewed in favor of legacy media outlets like Rupert Murdoch’s News Corp. But the Canadian bill has evolved from the Australian model, and allows for small publishers to band together. Organizations can be added to collectives after deals are done. Deal reporting will ensure that they and the regulator know the broad terms of the deals others are getting. Most critically, the exemption criteria specifies that deals must be made with independent publishers.

Again, the status quo is important to consider. Currently, we have left it solely to the whims of the big tech platforms like Facebook and Google to pick the winners and losers in Canadian journalism – The Globe and Mail, Toronto Star, and Postmedia all have deals, the details of which are hidden from the public. The vast majority of independent publishers do not. Ensuring that smaller outlets are included in a system that they are currently largely left out of arguably evens the playing field.

The oft-repeated claim that this bill won’t fix the crisis facing journalism is, of course, true: There is no one silver policy bullet that will save the entirety of the news industry. The decline of journalism and the hollowing out of newsrooms across the country are multi-faceted in nature. The Act addresses one element of the issue.

What should change

There are indeed legitimate and substantive criticisms of the Act that in our view could be addressed in amendments.

For starters, the Act expressly prohibits platforms from providing undue privilege to or discrimination against certain news content or news businesses and sets out a complaint mechanism for publishers to achieve redress. This is included in order to prevent any platform from responding in a retaliatory manner to a news outlet because of coverage that was deemed unfavorable. The problem, however, is that a strict and literal interpretation of the text could potentially prohibit the ability of a platform from ranking higher-quality content such as fact-based reporting or verified government information over lower-quality content. The legislation would benefit from clearer wording in this section.

Another area of ambiguity is the inclusion criteria. To benefit from the Act, news businesses must be designated as Qualified Canadian Journalism Organizations under the Income Tax Act, or must operate in Canada, produce news content, and regularly employ two or more journalists in Canada.

As the coalition of independent publishers has pointed out, this could mean smaller players are left out of deals altogether. In our view, the bill should err on the side of being maximally inclusive. For example, the wording of the section could be amended to include freelance journalists.

However, in order to ensure a measure of quality control on those that are funded, the definition of eligible news business could be amended to ensure that outlets are adhering to basic journalistic standards — such as fact-based analysis and reporting and having a standard procedure for issuing corrections or clarifications — as well as producing original reported pieces.

Given that one of the key concerns with the Australian model was that it was overly opaque by design, the bill in Canada needs to do a better job of being as transparent as legally possible. Transparency requirements are peppered throughout the Act but could be improved upon by ensuring that the broad metrics used by the platforms to determine the value of the deals is made available to the regulator. Also, the act could require aggregated, audited metric and market data be released at more frequent intervals. particularly in the early stages of the act’s enforcement, so that those making initial deals can benefit from knowledge of pre-existing or earlier negotiated terms.

Concerns regarding fairness and clarity over the funding formula for deals are also valid. Recently, the coalition of independent publishers suggested that the act provide a universal funding formula that would be applied consistently to all news outlets that qualify. The challenge with this is that without collective bargaining and the threat of forced arbitration, it is unclear how the terms of compensation would be established.

Perhaps a better model was proposed by the trade association News Media Canada. It would form a collective of qualified Canadian journalism organizations that would each provide their editorial expenses (total salaries and wages paid to eligible newsroom employees) confidentially to a law firm. The collective would negotiate with the platforms, and any settlements from collective negotiation would be shared among publishers on a pro rata basis.

This is a clear example of how collective bargaining can bring the accountability and equity that many critics of both the status quo and the bill rightly seek. 

The Act needs to be explicit in terms of where the extra revenue generated by these deals with the platforms will go. While the Act requires an annual report by the independent auditor to examine the expenditures on newsrooms, it should be explicit in its aims to reallocate revenues such that it results in more and better public service journalism.

More broadly, proponents of the Act need to be mindful of the fact that there is a distinct possibility the Act will result in Canadian news outlets receiving upwards of 50% of their editorial costs from a combination of government and platforms. This is the most concerning aspect of the Act, and is not a sustainable model. It is particularly worrying because platforms and governments are the two of the principle actors in our society that journalism needs to hold to account. However, the status quo must again be considered. Major publishers in Canada already get a good deal of support from a combination of government grants and deals with platforms, but with little democratic oversight and uneven distribution. This Act will at least provide a measure of equity and transparency to the funding from platforms.

A necessary evil?

There is no doubt that this bill is both complicated and controversial. Precisely because journalism is foundational to our democratic society, it is critical that we get it right. One thing is certain, however, the status quo is not serving citizens. We need to have greater accountability and transparency over the deals that are already funding Canadian journalism. While imperfect, an amended version of this bill is in our view necessary.

We saw how far the platforms were willing to go in Australia to avoid frameworks like this. Google publicly threatened to remove its search from Australia and Facebook took down all news from its platform for Australians. In doing so, they received some concessions from the government, but also created a public relations crisis that has spurred other governments, such as Canada to act. And a meaningful consequence of their over-reaction in Australia is that the Canadian bill has evolved considerably. The exemption criteria and the collective bargaining provisions alone will fundamentally change how the platforms can respond. Taking their ball and going home might have been possible in Australia, but it will not be possible if Canada, the UK, and Germany all have codes that each build and learn from each other. And that is the potential here. That democratic governments evolve their digital policy models based on the experiences of each other. This policy snowball effect is likely what worries the platforms most about the Canadian bill.

In our view, a market failure of journalism is not an acceptable risk for democratic societies. This means that journalism may, at least in the short term, need to be subsidized. While there are risks to this particular model, when considered as part of a wider policy package to support journalism in Canada, we think that at least for now, it is a risk worth taking. Perhaps more importantly, by taking many of the concerns of the Australian model seriously, this bill advances a policy approach that other countries can learn from and build on.

Taylor Owen is the Beaverbrook Chair in media, ethics, and communications and the director of the Centre for Media, Technology and Democracy at McGill University. Supriya Dwivedi is the director of policy and engagement there.

Photo of Canadian flag by Lori & Todd used under a Creative Commons license.

POSTED     Aug. 9, 2022, 8:27 a.m.
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