Radio & Television

COMMENTARY (part one): Implementing Bill C-18 will be problematic for the CRTC


By Konrad von Finckenstein

THE STATED PURPOSE of Bill C-18, the Online News Act, “is to regulate digital news intermediaries with a view to enhancing fairness in the Canadian digital news marketplace and contributing to its sustainability, including the sustainability of independent local news businesses.”

The motivation for the act stems from the idea that local newspapers do not get the appropriate recompense for news that they produce but that reaches the public via digital platforms. These platforms are considered to have inordinate market power that can be misused.

Scheme of the act

To rectify the situation, the act contemplates a mandatory bargaining process between platforms called Digital News Intermediaries (DNIs) and news organizations called Eligible News Businesses (ENBs).

The process commences with an ENB or (group of ENBs) notifying a DNI that it wants to bargain. The bargaining process is limited to matters related to the making available, by the DNI in question, of news content produced by an ENB. The process will be conducted to pursuant regulations and a code of conduct to be issued by the CRTC.

The DNI and ENB are obliged to bargain in good faith.

The bargaining process can involve up to three steps:

  1. bargaining; if that fails,
  2. mediation; if mediation fails,
  3. final offer arbitration.

The CRTC:

  • designates the parties, manages the process, furnishes a panel of arbitrators, provides secretarial assistance and advice to arbitrators and gets consulted before a final offer is accepted.
  • is given vast powers to ask for information (s. 53).
  • is given powers to issue administrative monetary penalties up to $15 million per violation (s. 60).
  • may provide exemption orders for agreements reached that meet stated objectives.

To implement Bill C-18 with respect to sustainability the CRTC will have difficult and critical but problematic functions to perform. This includes:

Maintaining a list of DNIs

Issue: The act considers a communications platform a DNI

… if, having regard to the following factors, there is a significant bargaining power imbalance between its operator and news businesses:

(a) the size of the intermediary or the operator;

(b) whether the market for the intermediary gives the operator a strategic advantage over news businesses; and

(c) whether the intermediary occupies a prominent market position.

DNIs are obliged to self-identify. The CRTC can demand information from an online communication platform including any information it requires to verify compliance with self-assessment and notification.

Points of concern:

  • The definition of online communication platform is so broad, it effectively gives the CRTC authority to demand information from any company that operates any Internet product or service, for the purpose of “verifying” they are not subject to the act. Failure to notify is a violation of the bill and subject to sanctions, including administrative monetary penalties.
  • ‘Significant bargaining power imbalance’, ‘size’, ‘strategic advantage’ or ‘prominent market position’ are not defined thus giving a wide and unpredictable discretion to the CRTC. These are terms borrowed from competition law, which the CRTC has no experience in applying and thus it is impossible to predict who will be considered a DNI.

Designating ENBs

Issue: On request the CRTC must designate a business as an eligible ENI if it

(a) is a qualified Canadian journalism organization as defined in subsection 248(1) of the Income Tax Act; or

(b) produces news content that is primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes, and

(i) regularly employs two or more journalists in Canada,

(ii) operates in Canada, including having content edited and designed in Canada, and

(iii) produces news content that is not primarily focused on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment.

Points of concern:

  • The definition of “ENB” is very broad, and includes any outlet that is “primarily focused on matters of general interest and reports of current events”, which would encompass opinion and commentary. There is no requirement to adhere to accepted journalistic standards to qualify. So, any outlet qualifies provided it opines on current events, operates in Canada and employs two or more “journalists” in Canada, even if they are not Canadian.
  • The bill does not adopt the ‘Qualified Canadian Journalism Organization’ criteria already in use for other media support programs. The definition in the bill will seemingly allow any opinion blog that employs a few content producers to qualify.
  • Furthermore, this definition does not exclude government or overt political actors from qualifying. Consequently, DNIs could be compelled to financially support content from these sources, and treat them equally as content from authoritative news sources.

Granting exemptions

Issue: The bill allows for DNIs to apply for an exemption order from the mandatory obligation to bargain, provided they meet all the established criteria to be set out in agreements between a DNI and ENB. Agreements qualify if

(i) they provide for fair compensation to the news businesses for the news content that is made available by the intermediary,

(ii) 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,

(iii) they do not allow corporate influence to undermine the freedom of expression and journalistic independence enjoyed by news outlets,

(iv) they contribute to the sustainability of the Canadian news marketplace,

(v) they ensure 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, and

(vi) they involve a range of news outlets that reflect the diversity of the Canadian news marketplace, including diversity with respect to language, racialized groups, Indigenous communities, local news and business models; and

(b) any condition set out in regulations made by the Governor in Council.”

It is not clear who will monitor these agreements and how. However, the CRTC can repeal an exemption order if

(a) the Commission is of the opinion that the operator of the digital news intermediary in question is acting in a manner that is inconsistent with this Act;

(b) a condition referred to in subsection 11(1) is no longer met; or

(c) a condition contained in the exemption order is not met.

Points of concern:

  • The vagueness of these exemption criteria offers little objective guidance to the CRTC and make it impossible for any DNI to know what it needs to do to satisfy the criteria, or if its voluntary agreements and support programs are sufficient, until the CRTC issues a ruling. The CRTC will have to develop a scheme for monitoring compliance or at least investigate when receiving complaints.
  • These convoluted provisions will undoubtedly act as significant disincentive to enter into voluntary agreements.

Creating a more targeted definition of news content

Issue: The definition of “news content” and news outlet are extremely broad.

According to s. 2(1), “news content means content — in any format, including an audio or audiovisual format — that reports on, investigates or explains current issues or events of public interest,” and “news outlet means an undertaking or any distinct part of an undertaking, such as a section of a newspaper, the primary purpose of which is to produce news content.”

Points of concern:

  • Given that DNI means an online communications platform … “that makes news content produced by news outlets available to persons in Canada…” the concept of digital news intermediaries is not limited to search engines, news aggregators and social media. It could also include podcasts services and voice assistants.
  • A scoping and limiting of these definitions will be a must to develop a manageable universe for the CRTC and avoid being overwhelmed by entities claiming to meet the definitions.

Establishing the collective bargaining process

The bare bones of the bargaining process are set out in the act

(1) The bargaining process consists of

(a) bargaining sessions;

(b) if the parties are unable, within a period that the Commission considers reasonable, to reach an agreement in the bargaining sessions, mediation sessions; and

(c) if the parties are unable, within a period that the Commission considers reasonable, to reach an agreement in the mediation sessions and at least one of the parties wishes to initiate arbitration, final offer arbitration.

The scope of the process is explained as being “limited to matters related to the making available, by the digital news intermediary in question, of news content produced by a news outlet that is identified under section 30 as a subject of the bargaining process and, if an application is made under subsection 31(1), determined by the Commission to be a subject of the bargaining process.”

The act also specifies “Any final offer arbitration under the bargaining process is limited to monetary disputes.”

The exact details are to be set out by regulation. In addition, the CRTC is empowered to issue a code of conduct.

Points of concern:

  • This is essentially a bargaining process between private parties. However, the CRTC has a large role, it sets out the process by regulation, it provides a code of conduct, it sets up a roster of arbitrators, it can dismiss arbitrators for conflict of interest, it will provide administrative and technical assistance and, on request, it can provide submissions to the panel. Final offers of arbitration that do not meet standards set out in the Act can only be dismissed after consultation with the CRTC.
  • To make the process work and keep it free from challenges great care will have to be exercised that the CRTC’s role remains constrained and the bargaining process is not unduly influenced or driven by CRTC inputs.
  • To manage the process successfully and in a timely manner, procedures within the CRTC will have to be established to make decisions on all points of procedure. No such provisions exist right now and the CRTC has no experience in supervising such processes.

Payment for links

Issue: The bill applies to any platform that makes news content available to Canadians, including merely facilitating access to news “by any means, including an index, aggregation or ranking of news content.” (It requires DNIs to negotiate payments for this activity). Linking clearly falls into this definition. In short, DNIs are required to pay for linking.

Points of concern:

  • The act expressly strips DNIs of any copyright limitation and exceptions. This includes fair dealing, which is what allows platforms and publishers of all kinds to include short snippets and quotes in publications, and provisions limiting the liability of information location tools (i.e., search engines) and hosting services. The Supreme Court of Canada has ruled that copyright limitations and exceptions are “user rights” integral to the balance of copyright law. By expressly stripping DNIs of all copyright limitations and exceptions, the bill denies DNIs access to basic rights under copyright.
  • The ability to freely link is foundational to the open web. It’s what enables journalists to link to others’ content and quote without obtaining permission. Everyone can link to websites, and no one is required to be paid for the privilege. The act suspends this basic right for DNIs and requires them to pay for something that no one else is required to pay for. This sets a worrisome precedent and could open the door to undermining net neutrality.
  • This provision is also most likely in violation of the USMCA. To avoid provoking a strong response from USTR, prior consultations and careful drafting is required.

Decisions based on values

While the goal of Bill C-18 is considered by many to establish a laudable scheme, it is unnecessarily complex, vaguely drafted and leaves a host of difficult decision to the CRTC. Although the Governor in Council may make regulations regarding such matters as factors to be considered when identifying DNIs, time periods for notification by DNIs and criteria used to apply exemption provisions, the key decisions are left to the CRTC. There is very little legislative guidance regarding many decisions to be made – these decisions are mostly based on values rather than objective facts.

Formulation of powers

In addition, many of the decisions to be are expressed not as enabling powers but as obligations. For instance, the CRTC must:

  • maintain a list of DNI’s,
  • make exemptions orders,
  • on request designate qualifying ENB’s,
  • publish a list ENB’s,
  • publish qualifications for arbitrators and maintain a roster of qualifying arbitrators,
  • establish a code of conduct respecting bargaining

This means decisions will have to be made in terms of rights not policy or regulatory goals. Exemption is a perfect example. Every claim for exemption will have to be examined and submissions examined before a reasoned decision is rendered.

Summary

The CRTC in its present structure and present resources will be completely overwhelmed by the combined effect of a complex scheme, vague definitions, unfamiliar concepts, the need to set up a whole new process and the exercise of new powers and duties expressed as obligations. Needless to say, all these factors also open the door to possibly successful contestation at every stage.

Implementation of the bill will require new resources, acquisition of new skills and time. Any mention of quick implementation and speedy payment of substantial funds to ENIs, as its promoters constantly claim, is completely illusory.

This is the first of a two-part series. Part two will address how Bill C-18 attempts to address the issue of fairness.

Konrad von Finckenstein is a past president of the CRTC and commissioner of competition.

 

 

 

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