Bill C-18, the Online News Act: Does it Violate Canada’s Trade Agreement Obligations?

From Hugh Stephens Blog:

As Bill C-18 continues its deliberate journey down the Canadian Parliamentary legislative track on its way toward enactment, the Bill’s prime targets (Alphabet, in the form of Google Search and Meta in the form of Facebook) continue to deploy the full force of their lobbying efforts to derail the legislation. Their most recent effort is a White Paper released earlier this month by Washington DC-based tech industry lobby group, the Computer & Communications Industry Association (CCIA). In a valiant but scarcely credible effort the CCIA attempts to argue that if enacted, C-18 would violate Canada’s international trade obligations, specifically commitments it made in the recently updated NAFTA accord (USCMA/CUSMA) and those required by virtue of its membership in the international copyright treaty, the Berne Convention.

In the process, the paper rolls out a number of other arguments against the legislation, such as claiming that it will benefit only a “select few large and powerful media companies” and will “do little or nothing to support sustainable or quality journalism in Canada”, while claiming that it will promote disinformation and content from untrusted third parties. The paper’s authors even claim that any payment from the digital intermediaries, who have scooped up the lion’s share of ad revenues (largely through leveraging content produced by others, usually without any payment), will “jeopardize the long-term viability of the (media) sector”. How will this happen? I guess it is supposed to make them fat and lazy. I will give the authors an “A” for creativity in terms of the range of objections they manage to roll out, but an “F” for making a convincing argument.

What readers should know is that the legislation is currently targeted primarily at two major US-based internet platforms, “digital news intermediaries” in the words of the legislation, just as Australia’s recent legislation to enact a News Media Bargaining Code aimed at the same two companies (Google and Facebook). However, they are not named in the Bill which, if passed, will apply to a;

“…digital news intermediary 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.”

Intermediaries have to self-designate, and the definition is generic, but it is clear who we are talking about. The CCIA paper goes to great lengths to quote Canadian politicians to show that Google and Facebook are the main targets although there are also references to “GAFAM”. (Google, Apple, Facebook, Amazon, Microsoft). If the shoe fits, wear it. No one has ever denied where the problem lies. And yes, they happen to be all US companies—for the moment.

The CCIA paper argues that if Alphabet and Meta are the only companies captured by the legislation, this amounts to a denial of national treatment (treating entities of your trading partners in an equivalent manner to domestic entities) and would be a USMCA/CUSMA treaty violation. But is this true? Hardly. Unless a measure is proven to be a disguised barrier to trade, as long as it applies to all companies, domestic or foreign, it will be difficult to substantiate a national treatment violation even if at the moment it affects only certain companies because of their size, market dominance or some other reason. Just because the affected companies happen to be headquartered in the US, it does not follow that this is an action targeted exclusively at US or foreign companies. For example, given the growing use of its platform for news distribution, it is possible that a platform like TikTok could fall within the ambit of the legislation.

C-18 is no more a violation of the national treatment principle than the EU’s Digital Markets Act (DMA), which targets the anti-competitive behaviour of “internet gatekeepers”, who happen to be prominently represented among the GAFAM US-based companies. 

. . . .

Just as the Bill contains a definition for digital intermediaries that are subject to the legislation, so too it defines an “eligible news business”. An eligible business, one that can enter bargaining with the platforms for compensation for use of Canadian news content, is any entity producing news content that receives the journalism tax credit or which has a minimum of two journalists in Canada and operates and edits material in Canada. That hardly limits the benefit to “large and powerful media companies”. The CCIA paper goes on to argue that the definition of an eligible news business will make it difficult for Canada to avoid a charge of unjustified discrimination against US media organizations. This argument must truly be galling to US news producers, none of whom belong to the CCIA and most of whom are engaged in trying to bring about the same legislation in the US as Canada is proposing.

Link to the rest at Hugh Stephens Blog and thanks to C. for the tip.

PG is certain that Canadians are regularly and justifiably aggravated by their southern neighbor, its businesses and citizens.

However, the internet and information flowing on it are not the easiest things to legislate. This is by design. As PG has mentioned before, one of the fundamental characteristics of the internet’s structure is that it’s pretty much impossible to prevent information from flowing wherever consumers want to use it.

For instance, without moving from his keyboard at Casa PG, PG can log onto the internet from a whole bunch of locations from Albania to Vietnam using a VPN (Virtual Private Network) service, of which there are many.

China has spent a large amount of money and effort to create what is generically called, “The Great Firewall of China,” to prevent internet access to non-Chinese websites, but there are reportedly several ways of circumventing the Great Firewall for those who really want to do so. PG won’t speculate about how dangerous such circumvention may or may not be.

1 thought on “Bill C-18, the Online News Act: Does it Violate Canada’s Trade Agreement Obligations?”

  1. As a Canadian, former law student, and monitor of all things digital etc, I can tell you that:

    a) Hugh Stephens is a trade commissioner by training, and rarely finds anything harmful to trade or from trade for that matter, and much of what he professes should be taken with large shakers of salt when it gets to the detail stage;

    b) We are, as a country, a bit loonie on these issues.

    In almost all fora related to IP and content/digital, one of our real problems is that we are a small market (<40M people) next to a very large market (hello down there!). Which means, things that make sense in the US for the market to self-regulate may or may not work in Canada in the same way. For example, there are more people in California than all of Canada, and yet we're roughly 24K times the size of California. That messes up most investment calculations that are tied to things that require cable to be laid, physical connections, etc. and per capita calculations, combined with much higher income taxes to pay for health care, etc.

    The two giant concerns domestically are:

    1. Most of Canada doesn't give a rat's patootie about our domestic broadband or internet or TV companies. If we had direct access to American packages, we'd jettison a bunch of Canadian content in a heartbeat. But it would decimate the domestic industry to create anything "uniquely Canadian" … we look a little European on these issues, and that is NOT a good thing for anyone. We have Amazon, Netflix, Disney, etc., but many of them are pale imitations of the original and companies basically have to build local offices to be allowed to be present. Publishers (for books) have to contribute to local funds. Psst…in some cultures, if it's done by private citizens, it's called extortion, but this is done by the state, so it's called burden sharing or something like that.

    2. If the state doesn't do something, they can't get any of the revenue from media sharing blah blah blah that happens on large-scale platforms, giving even more clout to the large US companies against little Canadian companies. Don't even ask about streaming platforms with live broadcasts (like Hulu offerings), ours are pitiful imitations at almost twice the price.

    We love free trade until it kicks our butts and then we're protectionist like everyone else. Ask the author, he helped craft some of those protections.

    P

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