Canadian Government Capitulates on Bill C-18 in Hopes of Getting the Platforms Back

After “hitting back” against platforms, it seems that the government is now making big compromises on Bill C-18.

Things have been going completely off the rails for the Canadian government and supporters of the Online News Act (formerly Bill C-18). After Meta and Google predictably announced that they would be dropping news links thanks to the passage of Bill C-18, the government was “surprised” by the moves and began holding last ditch talks to try and prevent that news link switch being pulled.

Well, those last ditch talks ultimately failed given that there has been no movement on the platforms part to back down and reverse course. Meta also began cancelling publisher agreements as they worked on making good with their announcement. Despite being asked repeatedly about a plan “B”, the government refused to even think about any sort of fall back plan up until now.

In response, the government was caught flat footed and left scrambling to come up with some sort of response to all of this. The government tried asking the US for help, badmouthing the platforms on international media, tried to lead a boycott that was doomed to fail even with the biggest players involved, and compared the debate to World War II. Supporters of the legislation, for their part, tried shooting the messenger by demonizing critics of the bill for good measure. In the end, the government ultimately proved that they were completely out of options as it just flailed around with any last minute ideas they could come up with.

So now, the government is doing something it said it would never do: capitulate. In an announcement, the Canadian government said it wanted to “clarify the process“. By “clarify the process”, though, they meant completely reworking the law after it was passed. Here’s part of that announcement:

Obligations under the Online News Act will come into effect no later than 180 days after June 22, 2023, the day Bill C-18 received Royal Assent. When elements of the Act come into effect will depend on regulations from the Governor in Council (GIC), and the implementation of processes by the Canadian Radio-television and Telecommunications Commission (CRTC).

The GIC, on the recommendation of the Minister of Canadian Heritage, can make regulations regarding which digital platforms the Act applies to and how the CRTC interprets the criteria in the Act for platforms to obtain an exemption from mandatory bargaining and final offer arbitration.

The Minister of Canadian Heritage intends to propose regulations that would:

• Establish a financial threshold for contributions to sustainability of the Canadian news marketplace, outlined in subparagraph 11(1)(a)(vi) of the Act. The threshold would be based on a platform’s estimated Canadian revenues and would be specific to each platform and their position within the news marketplace.
• Reaffirm language from the Act that non-monetary offerings to news organizations, such as training or other products, be included in the CRTC’s evaluation of exemption criteria.
• Consider existing agreements that the digital platforms have reached with news businesses, provided that they reflect the criteria outlined in Section 11 of the Act.
• Provide clarity on what constitutes a “significant portion” of independent local news businesses, Indigenous news outlets, and official-language minority community news outlets under subparagraphs 11(1)(a)(v), 11(1)(a)(vii), and 11(1)(a)(viii), respectively.
• Provide more details on the thresholds that fulfill the requirements outlined in section 11 of the Act.

The development of these draft regulations is currently underway. This entails a multi-step process that must be approved by the GIC and conform to the Statutory Instruments Act. Regulations are subordinate to the Online News Act and must conform to the provisions set out in the relevant sections of the Act. They will be published in the Canada Gazette Part I for a public consultation. Stakeholders, interested groups, and Canadians will have an opportunity to comment on the proposed regulations.

One easily overlooked element in this announcement is that there is now a more clear date involved with Royal Assent. 180 days after June 22 puts the coming into force timeline on December 19th of this year. As you know, the platforms said that they will begin blocking news links before the bill comes into force. So, unless the government can somehow pull off a miracle after pretty much bungling everything about this bill up to this point, then that is the absolute latest point in time that the beginning of the destruction and chaos in the Canadian news sector is just before the Christmas holidays. Talk about a lump of coal in the news sector stalking this year.

University law professor, Michael Geist, offered his assessment on what these changes mean:

Unpacking this language, the government intends to establish regulations that would set the minimum financial contribution by each company (Google and Meta) that would be based on its Canadian revenues. The companies could meet that amount by including both their existing deals and non-monetary contributions (training, free ads, etc.). This model would likely meet many of Google’s stated structural requirements, since it no longer links payments to links, caps liability, and accounts for other contributions. The company would add up its existing deals, strike new ones with broadcasters and other independent outlets (hence the clarity on what is needed), and leave it to the CRTC to grant an exemption.

There are several aspects of this proposed regulatory process that merit comment. First, there is no deal yet. The Parliamentary Budget Officer estimated hundreds of millions for links from these two companies annually. If the government is still thinking in those terms, it may have a better structure, but wildly unreasonable expectations that keeps the door open to blocked news links or sharing. The Canadian precedent will involve more than just payments for links. It also includes what amounts to a tax on revenues to support the news sector and a big number could lead to billions in liability globally.

Second, even if the government manages to find a compromise with Google, it seems unlikely that there will be one with Meta. Meta has left no doubt that it will not pay for links and that news has limited value on its platform. With the government suspending its advertising on the platform (even as the Liberal party continues to advertise and MPs race to create Threads accounts), it is hard to see a road back for Meta. If that is the case, Bill C-18 is already a disaster as the lost links and cancellation of existing deals mean that Bill C-18 may result in a net loss for the media sector.

Third, the role of the CRTC as independent arbiter is basically eliminated by government with these regulations. The Commission is supposed to determine what is needed to qualify for an exemption from final offer arbitration. If these regulations take this structure, the government is telling the CRTC what spending is needed to obtain an exemption and its role is limited largely to being a bean counter.

Fourth, this quagmire is entirely the government’s own making. There were alternative options proposed that look much like this structure. Those were consistently rejected and those proposing the alternatives dismissed as shills. Yet faced with emerging disaster that is Bill C-18, the government seems prepared to ditch the principles it said were critical in its news bill in the hope of a face-saving compromise. Whether it is also willing to drop the visions of hundreds of millions for the sector will likely determine whether it can convince at least one of the platforms to drop their plans to block news links or news sharing in Canada.

There is, of course, another risk to consider in all of this. If the government is willing to suddenly, out of the blue, completely rework the law to suit its immediate agenda like this, what exactly is stopping the government from doing so again at a later time? The government could be, today, saying that there will be a cap on liabilities. The problem is, what is stopping the government from waiting things out after the platforms return, negotiate deals, have everything all but in place, and the government turning around and saying, “you know what? I changed my mind. Unlimited liabilities it is!” After all, the government has proven to be walking in lock-step with corporate lobbyists all this time up to now, who’s to say they won’t do so again later and claim that the platforms are breaking their deals?

If I was the platforms right now, this alone would spark a great big “nope” on my part. This isn’t even getting into the fact that the government is basically overstepping the CRTC and doing things for them right now which is ridiculous in and of itself. It’s an extremely big risk to go along with this in the first place when the government can just change their mind on a whim as they have proven to have done in this case. The concept of bait and switch probably should be high on the radar with the platforms right now when seeing this.

Ultimately, this kind of compromise and thinking should have happened when the bill was before the House of Commons, let along the Canadian Senate. That never happened. Instead, those raising such concerns were treated like paid shills that should be ignored and demonized in the newspapers and broadcast TV afterwards. The “no compromise” attitude of the bills supporters and the government ultimately led to this moment. While this is a positive direction, it is coming far too late in the process to be really taken seriously.

The window of opportunity to find compromise in this bill closed the moment it received royal assent. With the timing of this, the government is just showing that the law is very malleable and can be changed on a whim. This should raise a big red flag right from the get go. The reason is because there’s nothing seemingly stopping the government from saying, “you know what? Inflation is kind of high right now and while both parties agreed to this particular deal, we no longer think its a fair one and we’ll veto it in one of our review processes. Come up with a better deal or face our wrath.”

At he end of the day, the government is now desperate to find some sort of solution to salvage the situation. They’ve seemingly done everything they can think of at this point, but the truth is, they have no options to salvage the situation. The only thing I can see that could save the whole sector from total ruin at this point is to just repeal the Online News Act and start over from scratch again. Anything short of that is delaying the inevitable. The platforms have no real good reason to go along with this and, so far, the government is still trying to entice the platforms back to talking again. We’re not familiar with any reports at this moment saying that the platforms are talking again.

Drew Wilson on Twitter: @icecube85 and Facebook.