Canadian lawmakers are locked in a dispute with internet technology companies over a law that would compel them to pay news publishers for content, years after a similar regulatory saga played out in Australia.
Google spokesperson Zaitoon Murji told BNNBloomberg.ca in an email that the company made the “extremely difficult decision” to remove Canadian news links from its search, Google News and Google Discover platforms, calling its issues with the legislation “unworkable” and unlikely to be resolved through regulations.
“We’re disappointed it has come to this,” Murji said. “None of our suggestions for changes to C-18 were accepted.”
After Google’s move on Thursday, Heritage Minister Pablo Rodriguez sent a written statement calling the companies’ moves “deeply irresponsible and out of touch … especially when they make billions of dollars off of Canadian users” with advertising.
Australia’s regulatory experiment – the first of its kind in the world – also got off to a rocky start, but it has since seen tech companies, news publishers and the government reach a middle ground.
Canada can learn some lessons from Australia’s story, but experts who spoke with BNNBloomberg.ca cautioned that different economic, political and geographic realities could lead to a different outcome.
WHAT HAPPENED IN AUSTRALIA?
In both Australia and Canada, governments introduced legislation aimed at forcing online technology companies like Google and Facebook parent Meta into agreements to pay news producers for content shared on their platforms.
Tech companies opposed the laws in both cases.
Rob Nicholls, associate professor of regulation and governance at the University of New South Wales, explained in an email that in Australia, both Meta and Google threatened to leave the country if the law came into effect.
Google “did not change its local policies dramatically,” he said, but it does now follow a different product schedule from the U.S.
Facebook cut off access to news temporarily in 2021 in response to the legislation. Nicholls noted that it also blocked access to other pages such as health departments and charities, prompting threats from the Australian health department to pull advertising – an idea floated on Twitter by Canadian legislator Anthony Housefather in response to Meta’s latest moves here.
After a week, both Facebook and Google entered in to negotiations with news businesses in Australia and since then, the law has never had to be enforced.
The Australian government has since declared its News Media Bargaining Code “a success to date” in a December 2022 review of its first year in effect, pointing to more than 30 commercial agreements between tech companies and news producers.
Nicholls said there has been an estimated A$150 million in annual revenue from the law – though that fell short of what those in the media businesses wanted. There have also been concerns raised that smaller outlets have been shut out from receiving funds.
WHAT’S CHANGED: GEOGRAPHY, FINANCES AND THE PASSAGE OF TIME
Nicholls said geography – the proximity between Canada and other markets – is one major difference from the Australian context.
“Australia is a long way from other Meta and Google operations – there is no land border to the South,” he said.
Gavin Adamson, an associate professor in digital journalism at Toronto Metropolitan University, also said Canada’s closeness to the U.S. “adds a complication,” because tech companies “wouldn’t want to be in the position to start negotiations to pay news agencies in a country with a vastly bigger media network.”
Michael Geist, Canada research chair in internet and e-commerce law at the University of Ottawa, said another factor that has changed from the Australian context is the financial situation tech companies now find themselves in. Meta has been focused on cutting costs in its “year of efficiency,” and it may be “less willing to cut big cheques that don’t give the company much value.” Google has also made job cuts this year in the face of similar tech industry headwinds.
There is also a slight difference between the two laws. In Australia, the government has more of a say in who the law would apply to, and in Canada the CRTC makes the final call, which has the companies concerned about the process, Geist added.
Regulations are the last option to find middle ground, Geist said, but Meta and Google have both said they don’t believe regulatory tweaks will be enough to halt their plans.
Google said it hasn’t received assurance from the government that its primary concerns – forced payment for links and “uncapped financial liability” – will be resolved.
GOVERNMENTS VS BIG TECH
Beyond the issue of supporting news producers, the situation also highlights the difficulty governments face when it comes to reigning in powerful big tech companies.
Heritage Minister Pablo Rodriguez invoked that dynamic in a statement to BNNBloomberg.ca on Thursday.
“The Online News Act levels the playing field by putting the power of big tech in check,” he said in an emailed statement.”
“Big tech would rather spend money to change their platforms to block Canadians from accessing good quality and local news instead of paying their fair share to news organizations.”
The companies and the Canadian government both have a lot on the line when it comes to the law, Geist said.
For Meta, it’s an opportunity to send a signal to other governments about regulations they will tolerate, and that’s one reason Geist does not think Meta will back down from its threats.
“They would really lose pretty much all credibility with other countries at this stage if they walked away,” he said.
Meta’s decision was predictable, Geist argued, as the company had long threatened to remove links in light of the pending law. But “the Google response was always more uncertain,” he wrote in a Thursday blog post, because “it values news in a way that Meta does not.”
“Meta pointed to data demonstrating that news contributed little to user news feeds and that was highly substitutable. By contrast, Google search results are its bread and butter and removing Canadian news results makes its flagship product undeniably worse,” Geist wrote.
“That surely presented an unwelcome choice either way: agree to flawed legislation that creates a dangerous precedent on paying for links or knowingly decrease the value of its own service.”
The federal Liberal government has “backed itself into a corner” with its positioning on the law, he noted in Monday’s interview, because they went ahead with their plan despite having other options to help the news sector. If tech giants pull news, news publishers would take a significant financial hit, he added.
“Both their policy measures and the government’s own credibility on this is at stake,” he said by phone.
Adamson pointed to mounting “bad PR” when it comes to the tech companies’ corporate citizenship, and said companies “have to see the benefits of a strong democracy and with that included a healthy media ecosystem.”
“That includes a bit of a financial hit, but it also boosts your financial outlook from a social governance perspective,” he told BNNBloomberg.ca in an email. “If I was the government, I would just keep underlining that point.”
WHAT HAPPENS NEXT?
Rodriguez told the media this week that the government will offer unspecified support for news producers should Meta and Google block local news. The government on Thursday said it was working with Google to get clarity on its next steps.
Google spokesperson Murji said the company is “concerned” about how the law could reduce access to news in Canada, and it plans to participate in the regulatory process.
“We hope that the Government will be able to outline a viable path forward,” Murji said.
Nicholls said the threats by both Meta and Google are “credible,” and both companies could feasibly follow through.
Adamson said he expects a “political stand-off” between the companies and the government for the next little while.
“I would still be surprised to see Alphabet and Meta back out of Canada altogether with respect to news content on their platforms but it’s hard to know,” he said.
Geist, meanwhile, said he disagrees with those who sees Meta’s repeated threats to pull news as a bluff.
“Part of their goal may now well be to make it clear it was not a bluff,” Geist said.
If news is pulled from online platforms in Canada, he said advocates may stop pushing the Australian model for making tech pay for news, and Canada could become a cautionary tale for what can go wrong.
“We may end up with others saying ‘Don’t be like Canada,’ where you find major social networks cutting off news within the country.”
Demands for government intervention in Air Canada labour talks could negatively affect airline competition in Canada, the CEO of travel company Transat AT Inc. said.
“The extension of such an extraordinary intervention to Air Canada would be an undeniable competitive advantage to the detriment of other Canadian airlines,” Annick Guérard told analysts on an earnings conference call on Thursday.
“The time and urgency is now. It is time to restore healthy competition in Canada,” she added.
Air Canada has asked the federal government to be ready to intervene and request arbitration as early as this weekend to avoid disruptions.
Comments on the potential Air Canada pilot strike or lock out came as Transat reported third-quarter financial results.
Guérard recalled Transat’s labour negotiations with its flight attendants earlier this year, which the company said it handled without asking for government intervention.
The airline’s 2,100 flight attendants voted 99 per cent in favour of a strike mandate and twice rejected tentative deals before approving a new collective agreement in late February.
As the collective agreement for Air Transat pilots ends in June next year, Guérard anticipates similar pressure to increase overall wages as seen in Air Canada’s negotiations, but reckons it will come out “as a win, win, win deal.”
“The pilots are preparing on their side, we are preparing on our side and we’re confident that we’re going to come up with a reasonable deal,” she told analysts when asked about the upcoming negotiations.
The parent company of Air Transat reported it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31. The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
It attributed reduced revenues to lower airline unit revenues, competition, industry-wide overcapacity and economic uncertainty.
Air Transat is also among the airlines facing challenges related to the recall of Pratt & Whitney turbofan jet engines for inspection and repair.
The recall has so far grounded six aircraft, Guérard said on the call.
“We have agreed to financial compensation for grounded aircraft during the 2023-2024 period,” she said. “Alongside this financial compensation, Pratt & Whitney will provide us with two additional spare engines, which we intend to monetize through a sell and lease back transaction.”
Looking ahead, the CEO said she expects consumer demand to remain somewhat uncertain amid high interest rates.
“We are currently seeing ongoing pricing pressure extending into the winter season,” she added. Air Transat is not planning on adding additional aircraft next year but anticipates stability.
“(2025) for us will be much more stable than 2024 in terms of fleet movements and operation, and this will definitely have a positive effect on cost and customer satisfaction as well,” the CEO told analysts.
“We are more and more moving away from all the disruption that we had to go through early in 2024,” she added.
This report by The Canadian Press was first published Sept. 12, 2024.
