Heritage MPs debate C-18 “link taxes” and the theory of one waterhole

 Internet Society President Philip Palmer appeared before the Heritage Committee on November 1st.

November 1, 2022

The dark cloud of Meta’s threat to impose a blackout of Canadian news on Facebook will linger over the Heritage Committee’s study of the Online News Act Bill C-18 for weeks to come. 

But the good news is that this morning’s line up of witnesses sharpened some of the policy and implementation issues in legislation that is aimed at better recognizing the value exchange between Facebook, Google and Canadian news organizations.

The big idea that some C-18 critics have begun to rally around as a deflection to the Bill is that the government should dump its scheme to rebalance bargaining power between platforms and news organizations in favour of imposing a special tax on digital platforms and then allocating the funds to Canadian journalism outlets in a manner similar to the federal government’s 2019 aid to journalism program.

Such a journalism fund bankrolled by a “FaceGoogle tax” might be a more elegant idea than C-18 in both policy and implementation. MediaPolicy.ca and other advocates such as Unifor have long supported it. Unfortunately the vehicle for that levy, the Digital Services Tax, is unlikely to come into effect because of its entanglement with multi-lateral discussions on minimum global corporate taxes.

Even so, the chances of the Conservatives holding fire on another government-administered fund to support journalism are precisely zero. Heck, they want to defund the CBC. This might be one reason the Liberals went with C-18’s regulation of bilateral commercial negotiations instead.

Here are some issues debated today in Committee:

Payments for Links.

FaceGoogle insists that forcing them to pay compensation for news content “made available” through hyperlinks (accompanied by titles and text snippets) is alien to how the Internet works, or more precisely how the Internet ought to work.

It’s a self-interested argument when made by Google and Facebook. After all Google already contributes millions to Wikipedia, its biggest contributor of Search replies, in what very much looks like pay for links. You don’t hear much about that breaking the Internet.

Other critics of C-18 such as the Internet Society (“extortion by legislation”), Michael Geist, or Open Media fear that once a precedent is set by paying news organizations for posting content on the Internet, every content creator posting to the web will lobby for equal legislative treatment and, at some point, the cost of that will drive digital platforms to charge user fees for content that has been free. 

Of course that would require government giving a C-18 to anyone who asked. 

But more importantly, given that in pre-Internet days our media platforms thrived on advertising-only business models, it seems a speculative point that Facebook and Google would undermine their immensely profitable digital advertising business by charging link fees.

Another FaceGoogle objection is that payment for links posted by content creators means unlimited liability for the platforms. In other words, if payment is trigged by publishing a link, news organizations will milk the platforms by posting an endless stream of worthless content or clickbait and then claim compensation.

There is a reason that didn’t happen in Australia and won’t happen under C-18. When FaceGoogle bargains with news organizations, the platforms will be sure to negotiate a fixed or capped payment for news content. Even if the parties end up in arbitration, the same result will prevail. 

Small News Organizations.

Small news organizations are the lovable underdogs in this debate, but the legislation does not shortchange them in any significant way. Any amendments will be incremental (perhaps a change to the two-journalist rule) or symbolic.

Internet Society President Philip Palmer suggested to MPs that small news organizations would be out gunned by FaceGoogle in negotiations or arbitrations under C-18 because of the lack of resources to pay lawyers, economists and digital experts.

However almost all of the smaller organizations belong either to Newsmedia Canada or the Canadian Association of Broadcasters. As well, the CRTC will have the power under sections 44 and 80 to award them costs.

In Australia, the philanthropic public interest organization Minderoo successfully coordinated and resourced FaceGoogle bargaining on behalf small news organizations.

Big News Organizations.

The Conservatives have discovered Canada’s worst kept political secret, that Telco bashing always pays. 

MP Kevin Waugh doubled down yesterday on his theory that large and small news organizations are gathered around the same FaceGoogle waterhole and that the telco TV companies Bell and Rogers (with the CBC thrown in for good measure) will drink it dry.

The inconvenient truth is that there is not one waterhole. 

Each news organization entering the C-18 bargaining scheme, whether it’s a big or small broadcaster or a big or small publisher, will have to negotiate with Facebook and Google for what their own content is worth, not someone else’s. Section 38 of the Act compels an arbitrator to focus exclusively on the value exchange between the news organization and the platform: how much or little the platform has already spent on other deals will be inadmissible. 

But the platforms will undoubtedly try to satisfy all of their C-18 obligations by negotiating a comprehensive series of voluntary agreements and then approaching the CRTC for an “exemption” from the Act. 

The criteria for that exemption is found in section 11(1) and the language suggests the CRTC must ensure that news businesses receive fair compensation, not that Google or Facebook merely create an adequate pot of money:

Exemption order

11 (1) The Commission must make an exemption order in relation to a digital news intermediary if its operator requests the exemption and the following conditions are met:

(a) the operator has entered into agreements with news businesses that operate news outlets that produce news content primarily for the Canadian news marketplace and the Commission is of the opinion that, taken as a whole, the agreements satisfy the following criteria:

(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.

Journalist Headcount.

Bloc MP Martin Champoux has been a dog with a bone on quality journalism.

He’s been determined to link the eligibility of news organizations to professional standards and today he focussed on journalist headcount as a metric of quality journalism. 

The existing federal aid to journalism is tied to such a headcount because the labour subsidy is per editorial employee. 

That headcount could be replicated under C-18 in its provisions instructing the CRTC to certify voluntary agreements, in particular section 11(1)(a)(ii) quoted above, but it should be more explicit if headcount is a key metric.

Unlike the criteria in section 11(1) dealing with voluntary agreements, there is no indication in section 38 of the Act that the arbitrator should concern itself with quality journalism:

Factors

38 An arbitration panel must take the following factors into account in making its decision:

a) the value added, monetary and otherwise, to the news content in question by each party, as assessed in terms of their investments, expenditures and other actions in relation to that content; and

b) the benefits, monetary and otherwise, that each party receives from the content being made available by the digital news intermediary in question.

By contrast, the Australian Newsmedia Bargaining Code adds at least one criterion relevant to quality journalism in the arbitrator’s mandate:

 (c)  the reasonable cost to the registered news business of producing covered news content;

That text introduces the notion of newsgathering costs. If the Heritage Committee adopts journalist headcount as a key arbitral criterion, it should be even more explicit.

The Committee resumes on C-18 hearings on Friday and then will begin debate on amendments on November 18^th.

Also on MediaPolicy.ca:

Canadian MPs confront, supplicate Meta over threat of C-18 retaliation

Must it be war? A peace proposal for Bill C-18

Google takes the C-18 heat at Heritage Committee

The error-riddled C-18 Abacus Poll commissioned by Google tells us nothing.