Solution to levelling the digital economy playing field may rest with Ottawa – Financial Post

The federal government is studying how Australia and France are levelling the playing field between news producers and global online aggregators such as Facebook Inc. and Google LLC, but grafting one of those models onto Canada may not be a simple endeavour.

Canada’s Commissioner of Competition Matthew Boswell said governments in Australia and the European Union have spent years laying significant groundwork.

“The Australian government has taken various steps … to give the Australian Competition Consumer Commission, the ACCC, various powers in the last few years to deal with multiple issues in the digital and data-driven economy,” he said.

As a result, the ACCC is rolling out a mandatory code of conduct that governs, among other things, payments Facebook and Google must make for news featured on their online platforms.

Canada’s competition authority does not have such powers.

“The bureau doesn’t have the authority to impose any type of code of conduct on a sector of business within Canada,” Boswell said. “That’s just not something that’s within the Competition Act or other laws that we administer and enforce.”

France, too, is building on government-laid groundwork, after the European Parliament approved a new copyright directive last year that includes a “link tax,” which requires publishers, including news producers, be paid for online use of their content.

“These are policy and legislative choices that aren’t in the bureau’s control in Canada,” Boswell said.

The bureau doesn’t have the authority to impose any type of code of conduct on a sector of business within Canada

Matthew Boswell

But changes could be forthcoming. Minister of Canadian Heritage Steven Guilbeault told an audience at the Banff World Media Festival this week that he thinks “those who benefit from the media content” of this country’s news and information agencies “should be paying their fair share.”

Guilbeault said the government’s current support of the domestic news industry through tax credits and other relief is simply a quick fix to an “emergency” or “crisis.”

He added that he is looking at the models in France and Australia to find a “longer-term” solution for the declining revenues that are challenging the domestic news and media sector as an increasing share of advertising goes to large online platforms such as Facebook and Google. 

The minister, who is responsible for a wide media portfolio including the federal broadcast regulator, said he has spoken with his counterpart in France and plans to contact Australian officials as well, with an eye to developing a plan by this fall to level the playing field for the Canadian news and information industry.

Melanie Aitken, who was Canada’s Competition Commissioner from 2009 to 2012 and is now a global antitrust and competition lawyer at Bennett Jones LLP in Washington, D.C., suggested the road to a Canadian solution is likely to be much longer and more complicated. Most importantly, she said, it would require significant and widespread political will.

“There is many a slip between lip and cup,” Aitken said. 

Michael Geist, a law professor at the University of Ottawa and Canada Research Chair in Internet and E-commerce Law, said he was surprised to hear the Canadian government was looking at the French model, which is based on EU copyright reforms, since the most recent review of Canadian copyright law did not recommend adopting similar reforms.

He added the federal Liberal party might prefer large internet companies pay the domestic news industry, reducing the need for government support, but any move to force this is “risky” because it could lead to trade challenges, or the online platforms might simply stop linking to Canadian news media, “which would hurt both the media organizations and Canadians more broadly.”

Excluding news from a single country in online news feeds isn’t an idle threat, said Sarah Ganter, an assistant professor in the School of Communication at Simon Fraser University in Burnaby, B.C.

“In Spain, where in 2014 (there was) the establishment of a strict law requiring payment of a daily fee, and where a violation of the law could result in fines of up to 600,000 euros per violation, Google News decided to leave the Spanish market,” she said.

Despite these risks, Australia and Europe aren’t alone in challenging the market power and revenue models of tech giants including Facebook and Google. Authorities in the United States, too, appear poised to take on the powerful platforms after taking a “more reserved” approach over the past decade, Ganter said.

News reports suggest U.S. authorities, including the Department of Justice, plan to go after the tech platforms — possibly including Amazon.com Inc. and Apple Inc. as well — through antitrust probes and litigation.

Such an approach would be different from the Australian and European models, which themselves differ in that the former focuses on a competition code of conduct and the latter on copyright enforcement.

“The approach towards these mega companies is changing towards a more proactive approach,” Ganter said, even though efforts to “cut back on the power that these companies were able to develop over the last decades are being diversified across different jurisdictions and policy fields.”

Canada’s Competition Bureau does not have the powers some regulators have elsewhere, but it can take action against companies for anti-competitive behaviour, including price fixing, deceptive marketing and abuse of market dominance.

The latter “are among the most complex cases we investigate,” Boswell said. “But that is the tool we have, outside advocacy and competition promotion.”

The record on cases of market dominance abuse is mixed. Last year, the Competition Tribunal rejected the bureau’s application to stop the Vancouver Airport Authority from decreasing competition by restricting the number of in-flight catering companies given access to the airport.

The tech giants haven’t faced such a test in Canada, which requires the Competition Bureau to prove a particular practice has led to a substantial lessening or prevention of competition, but they have faced scrutiny from the competition authority in the past.

A wide-ranging investigation into Google probed allegations of anti‑competitive business practices related to online search, search advertising and display advertising services. However, the probe was discontinued in 2016 with Google agreeing to remove certain clauses from an advertising interface that the bureau concluded was intended to exclude rivals and negatively affected advertisers.

Boswell said he could not comment on whether there has been a subsequent investigation into the online search giant since then.

More recently, Facebook in May agreed to pay a $9-million penalty after the Competition Bureau concluded the company had made false or misleading claims about the privacy of Canadians’ personal information on the social media platform and its messaging system.

The financial penalty was dwarfed by the fine meted out in a similar action taken by the U.S. Federal Trade Commission, but Boswell pointed out that it came very close to the maximum $10 million allowed in this country.

He said he is keeping a close eye on what is going on in other jurisdictions, and has a “pick up the phone” relationship with a number of foreign enforcement agencies, including the U.S. Federal Trade Commission, U.S. Department of Justice and U.S. Postal Service.

Boswell could not comment on whether there is any current cooperation between the Canadian and U.S. authorities on investigations, but he has made policing the digital economy a priority.

Last fall, the Competition Bureau put out a call to businesses and others to report “potentially anti-competitive conduct” in areas including online search, social media, display advertising and online marketplaces.

The call drew 15 formal submissions outlining “various concerns,” Boswell said, as well as informal ones that continue to roll in from businesses, trade associations and consumers.

“We have identified some issues that we are looking at very closely from an enforcement perspective,” he said, adding the bureau is boosting its investigative powers by listening to those with a “very sophisticated understanding” of how the digital economy works.

We have identified some issues that we are looking at very closely from an enforcement perspective

Matthew Boswell

Boswell said much of the interplay between buyers, sellers, and third parties in the digital economy happens through complex dealings that aren’t as transparent as looking at the price of consumer goods such as bread or beer, which are easily compared.

Moreover, he added, the workings of online platforms can rapidly evolve, so it can take an “inside baseball understanding” to unravel moves and then counteract them if necessary.

In a paper published last month, Yale economics professor and Barack Obama-era competition expert Fiona Scott Morton suggested Google maintains a dominant position in search advertising and creates and maintains power in display advertising, in part, by keeping “key market information hidden.”

This is an element of the search giant’s strategy that allows it “to shield itself from scrutiny … suppressing otherwise natural competitive forces,” Morton argued in her paper with co-author David Dinielli, a senior adviser at the Omidyar Network.

Financial Post

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