By Ahmad Hathout
Canada’s largest broadcasters are asking the nation’s highest court to determine whether the Federal Court of Appeal (FCA) overstepped its authority when it effectively supplanted the Copyright Board’s decision in setting rates for the retransmission of distant signals.
Rogers, Bell, Telus, Videotron, Cogeco and the Canadian Communication Systems Alliance (CCSA) are named as applicants on a leave to appeal application, filed late last week, which seeks clarification about whether a relatively new judicial standard of review called Vavilov — which prioritizes the reasonableness of a tribunal’s decision on review and restrains courts from immediately jumping to correct issues — should also applies to a second look at said issues.
At the centre of the dispute is the Copyright Board’s setting of the rates these broadcasters pay rightsholders to retransmit signals in the period between 2014 and 2018. The board determined that the best way to go about this calculation is to use proxies – 20 U.S. and three Canadian specialty television services – and then figure out what broadcasters pay this group of services, with adjustments, on a per subscriber basis. In other words, the board added the total amount paid for these services by Bell, Rogers, Telus and a then-independent Shaw and divided it by the number of subscribers.
In the first decision, the FCA found that the board made two errors: a math mistake related to its use of incomplete payment data, and an unreasonable reading of an expert’s opinion that allowed it to set a profit margin adjustment for the proxies at 25 per cent, instead of 10 per cent across the board. That meant the broadcasters would have to pay millions more in royalties, they claim.
Crucially, according to the applicants, the court in that first decision did not use its authority under Section 18.1(3)(b) to bind the board to reach a particular conclusion in its redetermination of the matter. The board went back for a second look.
During that redetermination review, the board unveiled its process in recalculating the proxy price. That’s when the broadcasters spotted another math error: the board double-counted payments made by broadcasters for both high-definition and standard-definition versions of the same specialty services, when they pay only one rate for both. The board also found a new missing payment in the proxy calculation. It corrected the errors, maintained the 25 per cent profit margin, made some tweaks and determined a final tariff of $1.12 for broadcasters with more than 6,000 subscribers – lower than the original determination.
The copyright holders were stunned. They had initially argued that the board did not have the jurisdiction to correct the new errors it found because the appeal court limited its focus. Besides failing to correct the profit margin calculation, they said the broadcasters didn’t raise the new errors in the first determination. The broadcasters retorted by saying they didn’t get to see the process, and therefore the errors, before then. The broadcasters further argued there was nothing in the first FCA decision that precluded the fixing of these errors.
Still, the FCA ruled the way of the rightsholders. “I see no rational basis for concluding that this Court contemplated that the Board’s redetermination would go beyond the issues addressed in the [original court decision] and revisit issues that had not been addressed before it,” the court ruled at the time, adding a conclusion that a second decision allowed for corrections beyond the two errors “is unreasonable, and smacks of goal-oriented reasoning.”
While the appeal court sent the initial decision to the board for review, it ordered certain rates to be set by the board after the second review.
The broadcasters are alleging the FCA — in not invoking its Section 18 powers — made its own error when it came to that second decision: it abandoned a reasons-first review — per Vavilov — and defaulted to a correctness review of the decision, which they said would be the exception in these cases.
“The FCA applied a ‘simpler analysis’ by asking two questions: (1) what did this Court direct on redetermination; and (2) did the Board follow those directions? This is correctness review,” the broadcasters argue.
Any effort, they further argue, that the court went to make a reasonableness analysis “just reiterates its interpretation of the previous panel’s judgment” in the first court’s decision. “This approach neither gives the Board any scope to interpret the [first court] Judgment, nor respects the Board’s finding that the double counting error could not have been identified before the redetermination.
“Instead, it quashed the Redetermination Decision and substituted its own decision on these factual issues,” they add. “The proxy price imposed by the FCA therefore includes the double counting error identified by the Board, and the profit margin remains at 10%, even though the Board determined on all the evidence that 25% was the appropriate U.S. profit margin.
“The outcome is a tariff effectively set by the Court, not the Board, that will result in tens of millions of dollars more royalties being paid over the term of the tariff than what the Board believes is “fair and equitable.”
