by Howard Law. Originally published on Policy Options
October 27, 2023
Big Tech’s news throttle looks headed to a December end game when the Online News Act, Bill C-18, comes into force. Facebook has already choked off Canadian news and now Google has reissued its list of demands.
Facebook’s blocking of Canadian news harms both news outlets and readers alike, although it should be seen in the global perspective: Axios reports that post-2020 Facebook and Twitter referrals of reader traffic to top global news sites are sinking like a stone.
Most people following Meta are convinced that Canadian news on Facebook isn’t coming back. We are therefore left with the blame game as to whether CEO Mark Zuckerberg or Prime Minister Justin Trudeau ought to be held responsible.
What’s less debatable is the fact that Facebook will no longer balance its distribution of misinformation in Canada with reliable news and therefore will devolve into a platform – if you will excuse the hackneyed phrase – for fake news.
As for Google’s threats of a news throttle, it may come down to the wire: one gets the feeling from recent developments that December will see some deadline bargaining between the Canadian heritage minister, who is responsible for the act, and the Google C-suite.
At the moment, neither party is flinching.
Google can hardly impair its search product by withdrawing Canadian news, but may be agreeable if any Canadian deal doesn’t paint it into a corner in other jurisdictions, especially the United States Congress and its home state of California.
The federal government, having legislated, cannot back down to a foreign company despite the damage of a news throttle.
So, it’s a classic case of bargaining that can be resolved but will require compromise on both sides.
In Google’s response to the federal government’s draft regulations, published last month in the Canada Gazette, the sticking point is fixing a lump sum that Google would split among Canadian news outlets to earn its exemption from the regulatory scheme of formal negotiations and binding arbitration.
The Google filing is an emotional document, which is perhaps an odd thing to say. As you read through the 11-page submission, you can’t escape the feeling that Google executives are angered by the prospect of being regulated and deprived of their customary freedom to command a deal where terms are one-sided and bullet-proof.
It’s also an ideological document, so much so that you wonder if a rapprochement with the government is possible. According to Google, C-18 is irredeemable because the legislation’s keystone principle of payment for linked news content – challenging Big Tech’s countervailing principle of monetizing content without compensation in the name of public education – is bad public policy.
On that point, Google says the only remedy is to disqualify “making available” news from the scope of compensable news content in favour of “displaying” news.
What Google means by “displaying“ – news content posted in full or extensive reproduction, not just links or snippets – would exclude payment for 99.9 per cent of news linked on its platform. It’s hard to see that position as anything but imperious.
If Google can’t get past the fact Parliament does not concur that “payments for news links” are unthinkable and that public opinion supported C-18 until Meta and Google blackmailed the Canadian public with news throttles, then it seems there is no reconciliation possible and Google will block Canadian news.
As to any alternatives to what Canada legislated, Google says there should be an independent news fund underwritten not just by Google, but by “a broader class of activity,” whatever that means.
I have no bone to pick with that: I advocated for it during the public consultation at the front end of the C-18 process in 2021. But that ship has sailed. Parliament chose to replicate Australia’s successful platform-to-publisher bargaining model instead of an independent fund.
You can assume that if the federal government had gone the route of levying cash from Google for a fund, the Californian web giant would have attacked the fund just as it now opposes a levy under our digital services tax.
Google is also demanding that only online “print publishers” qualify for compensation while excluding the online operations of television companies (reducing Google’s liability by two-thirds) because “it aligns scope with the Broadcasting Act,” whatever it means by that.
Google executives may not fully appreciate that American local TV operates profitably under different copyright laws, while Canadian broadcast news is so unprofitable that it’s lost money for 11 consecutive years. So why would Parliament grant Google a free pass on monetizing the website content of Canadian broadcasters?
About halfway through its filing, Google pauses its narrative that Bill C-18 is unworkable and speaks to the draft regulations. It raises some good points about how Heritage Minister Pascale St-Onge could tweak the regulations, although technically Google isn’t asking for changes to the regulations. Its position is that only legislative amendments approved by Parliament can address its demands.
The purpose of the regulations is to set terms for Google to obtain a five-year exemption from the act’s mandatory negotiation/arbitration provisions by making a rapid-fire series of deals with eligible news businesses, disbursed out of a budget that Google must set aside for that purpose.
Google’s main grievance is that the budget set by the regulations doesn’t truly cap its liability. The regulations set a “minimum” budget of four per cent of Google’s Canadian revenues with no maximum –– the implication being Google could exceed the four per cent if it so desires.
Google thinks that establishing a minimum invites news outlets to push the outside of the bargaining envelope to obtain more. The print publishers’ organization, News Media Canada, agrees there should be both a minimum and maximum cap, so this is not a difficult fix.
Second, Google sees a timing problem where parallel negotiating paths to resolution are ongoing happening simultaneously. One road is to an exemption deal sanctified by the Canadian Radio-television and Telecommunications Commission while the other is to formal negotiation/arbitration.
Google reasonably fears time-wasting bargaining tactics from some Canadian news outlets trying to game the match as “holdouts.” Again, there are pragmatic workarounds for this problem.
Third, Google wants more elbow room in negotiating an exemption to compensate news outlets with “non-monetary” considerations, something that the regulation allows but does not define, other than to exclude traffic referrals to news sites.
Google wants to pay for the exemption by including the value of traffic referrals from Google search and its News Showcase site in the coin it has to pay to Canadian news outlets.
This goes to the heart of how Google characterizes – in fact mischaracterizes – what the regulatory exemption is all about. The five-year exemption from regulation is available only if Google acknowledges that the net outcome of the new value exchange between Google and Canadian news outlets, which is calculated by subtracting the value of traffic referral from Google’s monetization of news content, favours the news outlets overall.
What Google gets out of conceding this point is the certainty of a fixed budget for compensating news outlets and relief from further regulatory scrutiny.
The important caveat is that to get the exemption, Google must meet a list of public policy objectives governing how the money is to be distributed among the news outlets that are sure to vie for it like noisy chicks in the nest.
That includes a fair shake for news outlets that are independents or non-profits, and for those that are sufficiently representative of local, regional, Indigenous, anglophone, francophone and racialized communities. All of that must pass muster with the CRTC.
If Google can’t live with making the admission of net exchange value favouring the news outlets and wants to pursue a lower price (or even zero), the bill offers Google the option of seeking vindication in binding arbitration.
It’s Google’s choice: exemption with limited liability or rolling the dice at arbitration. But it can’t have both.
It doesn’t require brilliant insight to conclude this is all about price. The four-per-cent figure in the draft regulations will change if Google is willing to play ball in December.
Google hasn’t counterbid, at least not publicly. To the extent that Google is thinking about a price at all, it alludes to the deal it made in Europe. The EU law seems to exclude payments for news linking and, perhaps as a result, the financial settlements with French news sites appear to be quite modest (and inconveniently undisclosed).
Of course, Google neglects to mention Australia where it now pays $120 million annually to stave off regulation under the New Media Bargaining Code (NMBC). That’s roughly proportional to the current $170-million price tag for a proposed exemption in Canada – which has a population of 40 million to Australia’s 26 million– under the draft regulations.
Google’s deal with Australian news outlets is a clue to its dogged resistance in Canada, and not just on price. The Australian NMBC and Canada’s Bill C-18 are very similar.
But a big difference is that in Australia the “exemption” is in fact “non-designation.” The finance minister is authorized to suspend the NMBC from applying to Facebook and Google, provided they make deals with news outlets.
It’s obvious why Google vastly prefers non-designation to exemption. Under non-designation, Google must satisfy only one person, a politician, that it has paid enough compensation to enough news outlets.
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There’s also very little in the way of public policy requirements in the NMBC’s non-designation. That’s far different from the expectations in C-18 that Google must satisfy a diverse array of news outlets in a very structured, transparent and binding set of rules administered and enforced by an independent regulator.
This goes to the heart of C-18’s public policy conundrum: it is effectively two pieces of legislation living in the body of one bill.
Canada’s Online News Act was modelled on the Australian code’s premise of correcting market power, meaning the imbalance in bargaining power between Big Tech and news outlets for fair compensation of news content.
Beyond that correction, the Australian code says little about how the money should be distributed or whether every news outlet gets a share.
It simply authorizes news outlets to combine together for more bargaining power and further boosts that bargaining power through binding arbitration. In theory, news outlets get paid for what their content deserves in a rebalanced market – no more, no less.
In Canada, Parliament chose to impose far more structure, transparency and the rule of law on top of the Australian model. It chose more than rebalancing commercial bargaining power. It chose to distribute the compensation fairly among the noisy chicks.
Despite the important differences between the Australian code and C-18, the draft federal regulations lean in Google’s direction on the public policy requirements for the five-year exemption in a couple of ways.
First, the regulations permit Google to meter its per-journalist payments to news outlets at different rates, granting a 20-per-cent corridor in the value of compensation.
That means Google could cut a richer deal with The Globe and Mail than either The Tyee or The Swift Current Southwest Booster, bringing Google closer to the unstructured exemption it got in Australia.
Second, the regulations give Google leeway not to sign deals with every news outlet. No endorsement from this writer, but these are two significant concessions to Google.
We’ll see in December, but in the end it is about price – fixing a level of compensation that Google can live with if it’s scaled up in bigger markets such as the United States (although that prospect is years away).
If the price is right, then who knows? Maybe Facebook comes back.
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This article first appeared on Policy Options and is republished here under a Creative Commons license.