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Regulating news media vs digital platforms: Canada throws its hat into the ring

Posted on    by Ula Furgal

Regulating news media vs digital platforms: Canada throws its hat into the ring

By 27 May 2022No Comments

How did we get here? The Australian inspiration

On 5th April 2022 the Canadian government unveiled Bill C-18, the Online News Act (the Act), its attempt to make digital platforms pay media organisations for the use of news content. The Act has been a long time coming, with Canada closely watching the press publishers’ right implementation in France, and the adoption of the News Media Bargaining Code in Australia (the Code). Canadian media have been actively advocating for a regulatory intervention to aid the economically troubled news industry. In September 2021, News Media Canada, a press publishers’ trade association, published a report under a much telling title “Levelling the Digital Playing Field” where it argued for the implementation of “the Australia Precedent” in Canada to address Facebook’s and Google’s dominance on the digital ads market and threat it poses to the access to credible news.

While hesitant at first, the Canadian government started to hint at the impending regulatory intervention in June 2020, and committed to it later that year. As the Canadian Heritage-led stakeholder engagement shows, the government was initially considering two different approaches to ensure “fair revenue sharing between digital platforms and news media”. First, the adoption of the Australian-style mandatory code and arbitration. Secondly, platforms’ mandatory financial contributions administered by an independent fund. The former became imminent when Prime Minister Justine Trudeau pledged to introduce a media bargaining code within 100 days of being sworn in during his re-election campaign in late 2021.

While there was no doubt that the Canadian regulation would be modelled on the Australian Code, the hope was that it will tackle the Code’s (many) shortcomings, particularly those regarding transparency, journalists’ remuneration and small publishers. Does the Act fulfil this hope?

The Act’s core: who needs to pay whom for what

Both the Act and the Code are based on the same premise that selected digital platforms are obligated to negotiate with registered news businesses on the remuneration for making news content available, and in case no agreement is reached, the remuneration will be decided in the final offer arbitration. Both belong to the realm of competition law and they are to apply to digital platforms which enjoy “significant bargaining power imbalance” over news businesses. Like the Code, the Act focuses on establishing a negotiation framework, and does not provide legal basis for this negotiation beyond obligation to negotiate itself (unlike the press publishers’ right which provides basis for negotiation, without specifying the process).

In the Act, the relevant digital platforms are named “digital news intermediaries”, which is somewhat misleading as there is no requirement that news is the only or crucial content available on those platforms. A news intermediary is defined quite broadly as an “online communication platform […] that make[s] news content available to persons in Canada” (sec. 2). The Act singles out social media services and search engines as examples and excludes message services from its scope.

Unlike Australia, there is no ministerial act of designation of a digital news intermediary for the Act to apply. Whereas the Canadian Radio-television and Telecommunications Commission (the Commission) is obliged to keep and make available a list of digital news intermediaries subject to the Act (sec. 8), it seems that it is the intermediaries themselves which need to self-assess whether they enjoy a “significant bargaining power imbalance” over news business and notify the Commission if they do (sec. 7). When making the assessment, they are required to consider their size, whether they occupy a prominent market position and whether they enjoy a strategic advantage over news businesses due to the market they belong to. The Act does not provide for a mechanism to re-evaluate or contest the inclusion of an intermediary on the list.

On the other side of the bargaining table are eligible news businesses, which need to be designated by the Commission. This designation, however, can happen on the Commission’s own initiative (sec. 27). A news business is considered eligible if it is either a qualified Canadian journalism organisation under income tax law or it meets requirements set by the Act. Whereas the Code covers all news content no matter its form, and the press publishers’ right applies only to press publications (which are predominantly literary), the Canadian solution sits somewhere in the middle. To be eligible, a news business has to produce news content, in any format (not only literary), which reports, investigates or explains current issues or events of public interest (this mimics the Code’s definition of covered news content). However, the Act does not apply to specialised publications (e.g. concerning sport, arts, or entertainment, like the Code) and broadcasting organisations (unlike the Code), but only with respect to broadcasting. This means that broadcasting organisations are covered by the Act, just not all of their activities are. Regrettably, the Act does not replicate the Code’s requirement that an eligible news organisation needs to comply with a relevant professional standards code.

The worrisome part of the Act is the scope of activities which intermediaries need to remunerate news businesses for. As in Australia, the Act provides its own definition of making content available, which is separate from the right of making available we know in copyright. According to sec. 2, the news content is made available if any portion of it is reproduced, or access to it is facilitated by any means, including indexing, aggregation and ranking. This definition is considerably broader than that provided in the Code (not to mention copyright), as it seems to capture not only acts involving news content as such, but news outlets in general. The broad term of “facilitation of access” is likely to cover not only links referring to particular news content e.g. a news article, but also those which point to the main page of a news outlet. Since making content available includes indexing and ranking, the same argument can be made for websites which simply provide a list of Canadian news organisations. Such a broad definition of making content available makes the Act far-reaching, putting it in a stark contrast with internet freedoms.

Transparency of agreements?

One of the biggest issues with the current licensing deals being struck between digital platforms and news organisations, in Australia and Europe alike, is that they are not transparent. We might have some idea about the money being paid for the use of news content, however, the exact terms of those deals are unknown. Pablo Rodriguez, the minister of Canadian Heritage, has repetitively emphasised that the Canadian solution will provide for more transparency. The Act indeed requires disclosure of information concerning the deals, but it is not entirely clear whether the information will be publicly accessible or provided solely to the Commission.

First, a digital news intermediary can apply to the Commission for an exemption from the bargaining obligation (sec. 11). In order to receive an exemption, the Commission needs to make an assessment of agreements which an intermediary already signed with news businesses. The assessment concerns agreements “as a whole” which means it will be carried in aggregate, and not involve examination of each deal separately. The Act lists six criteria which need to be fulfilled for an intermediary to receive the exemption, concerning the amount of remuneration, its use, beneficiaries and effect of agreements on the Canadian media ecosystem as a whole. The Commission is obliged to publish on its website all exemption orders it makes, together with reasons for granting or not granting an exception (sec. 15 and 17), but not the agreements themselves.

Secondly, groups of eligible news businesses need to file deals they conclude with the Commission within 15 days after the day they entered into force (sec. 32). No publication requirements are attached to this obligation.

Thirdly, the Act requires that the Commission appoints an independent auditor to conduct an annual review of the Act’s impact on “the Canadian digital news marketplace” (sec. 86). The Act requires that the auditor’s report discloses information on the total commercial value of concluded agreements, the distribution of this value between eligible news businesses and how it impacts news businesses’ expenditures. No provision on publication of the report is included in the Act.

The Act definitely makes a step in the right direction, providing for the disclosure of information. However, only when information is available to the public (government, news organisations, journalists and citizens alike) can transparency be truly guaranteed. In Australia, Rod Sims, former ACCC Chairmen and the Code’s father, has argued that the lack of transparency is not a drawback of the Code. In his opinion, since it is not public money that is being spent, there is no need to keep the public in the loop. However, we need to remember that both Australian and Canadian regulatory intervention are justified by the concerns for sustainability of the press sector and the role it plays in democratic societies. And if the government intervenes in commercial relationships under the public policy flag, shouldn’t the public know what is done in its name?

The role of the Commission

When commenting on the Act, Minister Pablo Rodriguez has been emphasising that the Act relies on the market and that governmental intervention is limited (even though this is the state which mandates bargaining in the first place). While the government itself might not play a role beyond adoption of the Act (which by itself is a significant intervention), the Canadian Radio-television and Telecommunications Commission, will be granted some noteworthy powers not only to oversee functioning of the Act, but also to regulate the bargaining process.

First, the Commission is to enact a code of conduct governing the bargaining process between news businesses and digital news intermediaries (sec. 49). This code will, among others, set “reasonable” periods for bargaining, so how long the parties have to reach an agreement before mediation or arbitration procedure can be triggered (sec. 19). The Commission also decides what qualifications arbitrators included in the roster must have (sec. 33). Additionally, it needs to be consulted by the arbitration panel when it wants to dismiss an offer during the final arbitration (sec. 39). This means there is no clear separation between the Commission and arbitration panel.

Secondly, the Commission is responsible for granting an intermediary an exception from the bargaining obligation (sec. 11). Whereas the Act outlines the criteria which need to be considered by the Commission, some of them are not described in much detail. Consequently, the Commission will need to unilaterally determine whether agreements provide for “fair remuneration” for news businesses, and whether an “appropriate portion” of that remuneration will be used to support production of local, regional and national news content. Considering the fact that unlike the Australian Code, Canadian solution is focused solely on remuneration (there is no equivalent of minimum standards in the Act), it is surprising that it does not list factors which should be taken under consideration when assessing whether remuneration is fair. Only in the part of the Act concerning final offer arbitration we see the factors which the panel should consider when making a selection between the offers (value added by each party to the news content and benefits received by each party due to content being made available by an intermediary). The Act lacks a similar provision with respect of the Commission’s decision-making process.

Thirdly, the Commission enjoys broad information powers. It can request any information both from the intermediary and the news business, which it requires in order to exercise its duties and functions under the Act (sec. 53).

The role granted to the Commission, which currently act as a telecommunications and broadcasting regulator, has led some of the Act’s critics to question its capacity to fulfil this role. An analogue role of a single regulatory body has not been included in the Code.

Journalists and small publishers

Once of the Code’s drawbacks (and one of not many advantages of the EU press publishers’ right) is the lack of guarantee that journalists will receive a part of the remuneration news businesses acquire from platforms. The Act does not amend the Code’s flaw. In fact, it refers to “journalists” only once, as a part of a news business definition, since an eligible business needs to regularly employ at least two journalists in Canada (sec. 27). One would hope that a guarantee of journalists’ share is added to the list of criteria the Commission needs to take under consideration while granting an intermediary an exception from bargaining obligation. Alas, it is not the case, and interests of journalists and news businesses are treated synonymously throughout the Act.

What did make it to the list of criteria the Commission needs to consider while granting an exemption, is a guarantee that a significant proportion of independent and local news businesses benefits from the agreements made by an intermediary, contributing to their sustainability (sec. 11). While it is not necessarily clear how this criterion will be assessed, its inclusion is definitely a step in the right direction, and likely a reaction to difficulties smaller news outlets are currently having in Australia.  Additionally, as in the Australian Code, eligible news business can bargain collectively with news intermediaries (sec. 47).

Did Canada make the Code better?

While the Canadian Act differs from the Code, different does not necessarily mean better. The Act offers valuable fixes to the negotiation framework first introduced by the Code, especially those concerning transparency of agreements and independent news organisations. However, it is not free from deficiencies. The definition of making content available is far-reaching and appears simply not to be thought through. The Act is silent on the journalists’ issue and does not specify the legal basis for negotiation beyond an obligation to negotiate itself.

Disappointingly, the Act focuses only on remuneration. As already mentioned, it does not include an equivalent of minimum standards stipulated in the Code. The standards set the non-monetary obligations for platforms concerning advance notification of algorithmic changes effecting distribution of news content and referral traffic, as well as a supply of news readers’ data, making the Code (at least on paper) a more comprehensive solution than the EU press publishers right. In Australia, those obligations do not apply in practice, since to date no platform has been designated by the Australian government. In Canada, since a requirement of ministerial designation has been removed, application of similar obligations would not be an issue as they would apply to all news intermediaries included in the list.

With the Australian Code largely heralded as success, it is likely we will see more countries taking a similar route. The UK and US are already considering adoption of a similar solution, and Italy took a page from the Australian Code when implementing the EU press publishers’ right by introducing (questionable) obligation to bargain. While the Code might have led to money transfers between platforms and news organisations, it is certainly not a panacea to all ills of the news industry. Regulatory intervention which allows platforms to pick and choose with whom they contract, linking remuneration to the presence of news organisations on the platforms is likely to contribute to already existing platform dependency. Not to mention the broad way “making content available” is being defined, which is bound to set both copyright scholars’ and internet freedom activists’ teeth on edge. The relationship between news media organisations and digital platforms is considerably more complex than the image of “make platforms pay” that the Code and the Act paint.