Ottawa's targeting web giants, not media licences, says Minister Guilbeault. But what's his plan? – iPolitics.ca

Canadian Heritage Minister Steven Guilbeault is ploughing ahead with his plan to have big tech “pay their fair share,” but says he isn’t sure why there’s a lingering perception that his government is looking to censor, or regulate media. 

Since taking over the Heritage portfolio after the 2019 federal election, Guilbeault has sought to introduce help for media companies struggling from declining advertising revenue. 

“I have said a number of times we’re not going to license media,” he told iPolitics. “We don’t think (web giants) are paying their fair share when it comes to compensating media for the use of Canadian media’s content.” 

Guilbeault first came under fire just weeks into his mandate, for what was perceived to be an effort on his part to credential media, following the release of the Broadcasting and Telecommunications Legislative Review Panel’s report in January. The highly-anticipated report, dubbed the Yale Report, included a recommendation that the Canadian Radio-television and Telecommunications Commission’s (CRTC) determine which news aggregators are trustworthy, and require links to those sites, with rules to ensure the links are prominently displayed.

The minister responded to this recommendation on CTV’s Question Period, saying that the government would look to “proportionally” license media organizations.

Following criticism to his remarks, Guilbeault was quick to walk back his comments, clarifying the government has no intention to license media — a position he’s since retained. 

The minister also told iPolitics that while the Yale Report maintains the recommendation for media licensing, it’s not a “government position,” adding that he’s clearly explained his intentions to have web giants pay through a regulatory framework that would fund Canadian media, rather than taxes collected by the feds. 

READ MORE: Feds have no intentions to license news organizations, Heritage Minister clarifies

Last month, Guilbeault held a town hall on “how to reset the journalism industry,” described as an opportunity for stakeholders to share ideas for reviving the journalism sector in the context of the COVID-19 pandemic, which has caused a further loss of advertising revenue.

The minister also fielded questions about whether the government has more plans to regulate or create licences for Canadian media companies, following last month’s throne speech which signalled intentions to make web giants pay.

“Things must change, and will change,” Gov. Gen. Payette said. “The Government will act to ensure their revenue is shared more fairly with our creators and media, and will also require them to contribute to the creation, production, and distribution of our stories, on screen, in lyrics, in music, and in writing.”

“I’m not sure where you saw in the speech from the throne were some of my comments with anything regarding censorship or licensing,” Guilbeault responded to one question in the town hall. “I mean, some on the right have claimed that this is what we were doing — it’s not.”

READ MORE: News media industry’s troubles intensify during COVID-19 pandemic

The federal government has already announced some $595 million in tax measures for the journalism sector. This includes a Journalism Labour Tax Credit, which allows any Qualified Canadian Journalism Organization (QCJO) to apply for a 25 per cent refundable tax credit on salaries or wages of eligible newsroom employees for periods beginning, on or after Jan. 1, 2019.

Another new measure from the federal government, which came into effect Jan. 1, 2020, allows not-for-profit news organizations to apply for charitable status, meaning they can receive donations and issue tax receipts to donors.

The third credit encourages Canadians to pay for online news through a 15 per cent non-refundable personal income tax credit for digital news subscription costs paid by an individual to a QCJO, which applies to qualifying amounts paid after 2019 and before 2025.

These measures sought to shore up the newspaper industry sector, which, according to a report from Statista, has seen its ad revenue decline by more than half over the past 15 years, standing at $3.43 billion in 2003 and dropping to $1.63 billion by 2018.

In March, as the pandemic saw more ad revenue dry the up, Ottawa made further promises to invest money from the government’s $33-million national pandemic awareness campaign in Canadian media outlets.

Guilbeault’s long-standing pledge to have web giants pay will be the newest measure from Ottawa seeking to help keep some Canadian media outlets afloat.

The minister has so far declined to share information on the specifics, telling iPolitics the department hasn’t figured out the mechanics. He’s been transparent about studying models in Australia and France, saying he’s been “inspired” by what action these countries are taking around neighbouring rights, which generally refers to the rights of creators to receive payment for redistribution of their work.

In France, copyright changes on neighbouring rights have sought to have online newspaper publishers be remunerated for publishing extracts of their articles on Google News. 

Australia, meanwhile, is in the midst of implementing a tax policy putting in place a regulatory framework so there can be a bargaining agreement between media and companies like Facebook and Google.

Due to the type of regime being developed, Guilbeault urged that the proposed framework should not be considered a big tech tax. He said the government needs to intervene and create a regulatory framework, after which the government only needs to get involved if one of the web giants doesn’t abide by the ruling, in which case Ottawa would step in and impose fines. 

The policy would allow royalties to be collected and distributed directly to news media organizations, according to tariffs established by the federal Copyright Board. The government would not be collecting any of the money.

“Some people think every time the government acts, it’s a tax,” he said. “What I’m working on has nothing to do with tax.” 

READ MORE: E-commerce law expert warns ‘link tax’ could hurt, not help publishers

Michael Geist, a law professor at the University of Ottawa, observed that the processes in Australia and France have led to a host of problems. In Australia, for example, Facebook has said they would be willing to walk away from news sharing altogether rather than pay fees for link sharing. 

Geist said the Australian approach to mandate a licensing system imposed by the government is grounded in competition law — which seeks to maintain market competition by regulating anti-competitive conduct by companies — rather than the copyright approach taken by France, the same direction Guilbeault signalled he’s headed in. 

France has also ran into its fair share of problems with Google choosing to instead display only headlines and URL links, rather than being caught under the new regulations and paying for news snippets. The French competition regulator responded by ordering Google to negotiate a linking licence.

“When the minister starts making promises about copyright reform…there’s a sense he’s writing cheques that he may not be able to cash,” Geist said. 

A comprehensive study of the Copyright Act was finished in June of last year by the House Industry Committee, with the body making 36 recommendations – none of which advised implementing the so-called “link tax.”

READ MORE: Telecommunications review includes ‘extreme’ recommendations, warns expert

As well, Geist, who is also a Canada Research Chair in internet and e-commerce law, previously told iPolitics it is more likely that Google and Facebook will replace an article written by a Canadian news company with an article written by a publisher in another country without a fee, if the rule is legislated. 

He said the news content isn’t financially material, pointing to an argument Facebook made in Australia when they were pressured to pay for link sharing. The social media giant argued that between posts on personal photos and information, linking to a news article didn’t amount to much from a financial perspective. Facebook said it doesn’t earn much from the links, but sent over two billion clicks to Australian publishers in the first five months of 2020 — at a benefit of hundreds of millions of dollars to media companies. 

In a statement just last month, Google made a similar argument, saying it sends Canadians to news sites millions of times a day for free — “providing news companies the opportunity to make money and grow their business and audience by showing people the publisher’s own ads, directing readers to other articles and to offers that convert people into new paying subscribers.”

“Globally, on average, we send users to news sites 24 billion times a month,” Google said. 

For media publishers who think they aren’t benefiting, Geist said, the option to opt out of link sharing already exists. He said they can choose not to have their content indexed on a search program, and Google will stop linking to it.

Google also announced an initial $1 billion investment to partner with news publishers to create Google News Showcase, “a different kind of online news experience.” The product, Google said, will give readers more insight on the stories that matter and help publishers develop deeper relationships with their audiences.

And while the content might not amount to much of a financial margin for social media giants, news organizations can benefit from the number of times their links are shared and their articles are opened. The more website traffic a publication has, the more they can charge for advertising on their sites. They also stand to benefit from receiving more subscribers through their articles being shared. 

READ MORE: Telecommunications review calls for big changes to CRTC, CBC

But Guilbeault said the criticism of the proposed regulatory framework “makes no sense,” adding that the government is not punishing “anybody for anything.” He said there’s lot of free market people who think the government shouldn’t intervene.

“That’s not our approach,” he said. “But to say that because we are intervening, we’re penalizing these companies, which are, by the way, some of the most lucrative and powerful companies in the world, frankly that’s a bit of a stretch for me.” 

Conservative industry critic James Cumming said corporations should pay taxes when operating in Canada, and that he’s looking forward to seeing the government’s plan and whether it’s good public policy. He pointed to Conservative Leader Erin O’Toole’s platform proposal which would eliminate GST on Canadian digital programs to promote more online cultural content.

“We think it’s a good step forward to try and create that environment where there’s more Canadian content,” he said.

But the minister’s efforts, Cumming said, are long overdue, like “every file the Liberal government has failed to move along.” The sector changes rapidly, he said, and the government must adapt. 

“They keep kicking the ball down the hall,” he said. 

When the minister appeared before the parliamentary committee on Canadian Heritage in February to answer questions about his mandate letter, he appeared confident that mechanisms to support the creation of Canadians content could be employed within the year, as would sales taxes for Facebook.

Now, Guilbeault said there’s more work to do on neighbouring rights, saying the legislation will be ready to be tabled in the House of Commons in the “coming months. 

Both Cumming and Geist also said they were unsure how the plan to create a regulatory framework for web giants has fallen under the Canadian Heritage portfolio, rather than being studied under the finance or industry departments. 

According to its mandate, the Department of Canadian Heritage and its portfolio organizations exist to play a vital role in the cultural, civic and economic life of Canadians. 

“Our policies and programs promote an environment where Canadians can experience dynamic cultural expressions, celebrate our history and heritage and build strong communities,” it says. “The Department invests in the future by supporting the arts, our official and indigenous languages and our athletes and the sport system.”

Guilbeault says there’s no question that this task falls under his mandate, as a copyright issue.

“There’s nothing unusual about my ministry and myself being responsible for those issues,” he said.

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