Bad News: Proposed Online News Act Trades on Myths and Misconceptions

Last week, the Liberal Government introduced the Online News Act. The Act’s main aim is to redress the dominant market power that Google and Facebook have amassed by building an online advertising system around third-party content, including news, and people’s online activities.

Canada is not alone in taking steps to rein in “big tech”. In fact, this bill is modeled on the News Media Bargaining Code adopted in Australia last year. In addition, public inquiries and regulators in Australia, the European Commission, France, Germany, the United Kingdom, the United States and elsewhere have all concluded that Google and Facebook have monopoly power: the long-term ability to set the prices and terms of trade in the online advertising marketplace (for a running tally of such efforts, see Winseck & Puppis).

This is especially true of Google, which dominates the buying and selling of Internet advertising while also controlling its own online advertising exchange through which much of the buying and selling of advertising online takes place. Those inquiries have also found that the online advertising system is inscrutable to businesses and Internet users alike, coursing with dirty and unreliable data, at odds with European and UK data and privacy protection laws, and free of democratic regulatory oversight (UK ICO, 2019; Belgium DPA, 2022).

As a result of their stranglehold on the key elements of the online advertising system, by 2020, the Google and Facebook had carved out an 80% share of the $9.7 billion online advertising market in Canada.

This is the reality to which the Online News Act, ostensibly, responds. Other governments are taking similar steps to do counteract this state of affairs.

In an ideal world, the Online News Act could help give news media a bigger cut of the dollars and help improve the terms of trade upon which the future of the news media and journalism depend. It could also help give us all a clearer view of the complex black box technical systems upon which the online advertising marketplace is built. Doing so could improve not just journalism but also help to repair the “broken Internet”, an Internet that a small number of international Internet giants have colonized and remade in their image.

In sum, there are good reasons why digital platform regulation could be a good thing. Here’s some of the highlights of what the Online News Act could do well, followed by a list of the ugly parts of the bill that lead me to conclude that it falls far short of its potential.

One, the Online News Act does not impose a link tax on Google and Facebook for linking to news. While France and Spain, for example, have pursued this option, the link tax is a bad idea because it relies on untenable and undesirable changes to copyright law, strikes at a basic technical building block of the Internet (hyperlinks), and rests on the faulty premise that it is possible to attach a clear price to the news. This latter idea has never been possible, and is why we are struggling to find a viable framework to support journalism in the first place.

Second, the Online News Act bill contains a powerful set of tools to strike at the heart of dominant market and gatekeeping power drawn from over a century of antitrust and telecoms regulation history: measures that prohibit Google and Facebook from giving one news provider undue preference over another (or to unjustly discriminate between different services) and a code of conduct that is tantamount to a “fair carriage” regime for all news media services made available over the platforms.

Not only are these measures amongst the best bits of this bill, the Government would do well to put similar measures in the Online Streaming Act, which currently does nothing to deal with these issues of dominant market and gatekeeping power (as I have written elsewhere).

Third, unlike the Australian model which gives a government minister the power to designate which digital platforms will be covered, the Online News Act bill gives the Canadian Radio-television and Telecommunications Commission (CRTC) the power to make the call. The has the obvious advantage of creating a shield against direct political interference by the Minister in charge (i.e. Heritage Minister Pablo Rodriguez, at the moment).

Fourth, the Online News Act opens two options for platforms to strike deals with news media providers operating in Canada, either individually or collectively: the first option encourages voluntary deals; the second imposes final offer arbitration overseen by the CRTC.

In Australia, Google and Facebook have avoided being designated under the News Code altogether by striking voluntary, multi-year deals with the three biggest commercial media conglomerates, one of the country’s two public service media outlets (the Australian Broadcasting Corporation but not SBS), and some smaller regional and local news sources.

The problem, however, is that nobody knows anything about these deals because the Code does not apply to voluntary deals. Did Rupert Murdoch’s media empire (News Corp/Sky) and the country’s two other biggest media groups—Seven West Media and Fairfax Media-Nine—do better than one another or the ABC or any of the smaller media groups? How much of the money agreed upon will be used to hire journalists, expand newsrooms and support international news bureaus versus padding corporate profits? Who knows! 

The drafters of Online News Act have wisely made sure that even voluntary deals struck between platforms and news publishers/broadcasters will be subject to review to ensure they are fair and support original journalism versus lining investors’ pockets. 

Fifth, that process of review is also a key part of one of the bill’s other potential strengths: its information disclosure and audit requirements. The premise is simple: effective regulation hinges on knowing about the entities to be regulated.

That we have got this far already without Google, Facebook, Amazon, Netflix, Apple, etc. not being subject to such minimal requirements speaks volumes about how much power they have obtained without any real public responsibilities.  The Online News Act would help fix that. Furthermore, the idea that regulated companies have an obligation to disclose information to regulators has been a bare minimum part of the regulatory tradition in Canada since the creation of the Board of Railway Commissioners way back in 1903.

So, if there’s all this good stuff in the Online News Act, why should we still put a stake through its heart? Let me count the ways.

For one, rather than trying to counteract the source of Google and Facebook’s market dominance and gatekeeping power, the Online News Act tries to leverage their market dominance for public policy ends: saving journalism. In so doing, if adopted, the act ties the future of journalism to a steady flow of money from Google and Facebook, thereby increasing the dependence of journalism on both firms. It also fails to include one of the best parts of early drafts of Australian Code: a requirement that the US tech giants give news outlets advance-notice of big changes that could up-end the latters’ operations.  

Second, the Online News Act mechanics are all about transferring dollars from Google and Facebook to news media operating in Canada through corporatist bargaining arrangements with no seat at the table for rivals, advertisers, experts, academics or anybody else to articulate the “public’s interests” in these matters. In contrast, the public has had a seat in CRTC telecoms and broadcasting proceedings since 1976! Freezing the public out in this way is a profound act of depoliticizing platform regulation and is anti-democratic.

Third, the Online News Act does not tackle the taproots of Google and Facebook’s dominance: i.e. control of the online advertising system, cross-market consolidation of activities across digital markets, and business models driven by the unlimited harvesting of personal information. The last of these points reveals a major reason why Canada has such weak privacy and data protection laws: the big international digital platforms and domestic communications and media firms such as BCE, Rogers, Postmedia, Quebecor, Shaw, Telus, etc. are all joined at the hip in wanting to expand their intensive harvesting of people’s data.

In the context of the Online News Act, and just like in Australia, domestic news media companies don’t want strong privacy and data protection rules for just that reason. Instead, they want a bigger slice of the big data pie. The Trudeau Government is helping to give them what they want with this bill–at the expense of protecting Canadians’ privacy and personal information.

Fourth, while the crisis of journalism that the Online News Act tries to solve is real, the bill is built on a severe misdiagnosis of the problems we face and incessant pleading by Canadian media groups, think tanks, lobbyists as well as the platforms themselves. In fact, the crisis of journalism is the result of a confluence of events that have unfolded for decades, and years before either Google and Facebook had consolidated their dominance in the last ten years. We have reported on these factors for years as part of our research at the Canadian Media Concentration Research Project:

• declining per capita and per household circulation since the early 1970s;
• an orgy of debt-addled consolidation from the mid-1990s until 2010 that put some media firms into bankruptcy (e.g. Canwest, whose broadcasting and newspaper assets were acquired by Shaw and Postmedia, respectively) while leaving many others on shaky financial grounds ever since;
• wild swings in journalist employment levels over the same period and a precipitous drop since 2013;
• revenues for newspapers and broadcast news media companies that peaked in the mid-2000s but which have collapsed since, especially after the bottom fell out for advertising spending across the economy after the financial crisis of 2008. 

While casting Google at Facebook as the main villains in the piece might make for a good story, it does not reflect an accurate or holistic view of the problems and is misleading. Having fundamentally misdiagnosed the issues, the idea that the Online News Act will solve the problems is wishful thinking.

Fifth, the Online News Act also anticipates a role for the CRTC as a kind of super-regulator. To do that, however, is to ignore the reality that the Commission has proven itself to be ill-equipped to handle its existing mandate, especially under its current leadership. Furthermore, while the bill is said to be about redressing market power imbalances, the CRTC has been extremely timid about tackling such issues in telecoms & broadcasting. Its approval of the Rogers’ blockbuster bid to acquire Shaw’s broadcasting assets—the sixth largest acquisition in Canadian history—last month is just the latest example of this. For it to now turn around and turn the screws on Google and Facebook would be seen as anomalous, even unjust. This is especially so, given that a combined Rogers-Shaw, if approved by the Competition Bureau and ISED, would become Canada’s largest communications and media conglomerate with revenues that would be single-handedly more than three times Google and Facebook’s revenue from Canada, combined.

Finally, while the CRTC’s newfound powers to review deals made under the Online News Act, compel information disclosure and conduct annual audits would be improvements on the “Australian model”, those measures are vague and the details punted to the Commission itself to work out. That problem also plagues the government’s Online Streaming Act (for my analysis of that bill, see here). In both cases, this puts too much trust in the CRTC that it does not deserve and also moves the issues out of the public spotlight and Parliament into the bowels of an agency that has a spotty track record on these matters.

In sum, while the Online News Act has been wrapped in noble cloth, from conception to now, it stands as a massive missed opportunity. Instead of a model to embrace it offers valuable lessons of how not to regulate digital platforms and Internet-based services. Time to go back to the drawing board.