Canadian Heritage Committee on June 14th, 2022

[The Chair, Liberal, Hedy Fry]

Yes, I'm going to ask for that unanimous consent now.

Is there anyone opposing this?

Mr. Waugh.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes. I'm on virtual. I have a meeting. In fact, I have people in my office already here. Unfortunately, I can't continue.

[The Chair, Liberal, Hedy Fry]

Mr. Waugh, you know what happens if you have to take a break. Is there somebody to cover for you, to vote for you and take your place at the committee?

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

There isn't right now, but I guess I can put it on mute and do that.

That's fine, then.

[The Chair, Liberal, Hedy Fry]

All right, there is obviously unanimous consent that we continue until 1:30.

The next amendment is going to be CPC-1.01, and I wanted to say that if it is adopted, then CPC-1.02 to CPC-1.04, which are immediately following CPC-1.01 in the package, will become moot, as the question will already have been decided.

Is everyone clear on that? Would anyone like to ask Mr. Méla why they become moot?

[John Nater, Conservative, Perth—Wellington, ON]

Madam Chair, can we get clarification from the legislative clerk on that one?

[Philippe Méla]

Thank you, Madam Chair and Mr. Nater.

The three amendments—CPC-1.01, 1.02 and 1.03—try to do the same thing, but with different numbers, so if the first one is adopted, the other ones become moot because one was adopted. If it's defeated, we go to the next one and so on.

[The Chair, Liberal, Hedy Fry]

Are there any further questions, Mr. Nater? Are you comfortable with that?

[John Nater, Conservative, Perth—Wellington, ON]

Thank you, Madam Chair.

I'm prepared to move my amendments if I have the floor.

As has been foreshadowed, there are a few amendments here related to this act. As a point of reference from the start, we want to see major foreign streamers—the big guys, for lack of a better phrase, the large enterprises—subject to Canadian rules, but at the same time, I don't want to see small start-ups, small enterprises that are trying to get off the ground, be captured by this act.

I think we need to have an open, vibrant sector online, and I think to do that we need to have some forms of thresholds so the CRTC is dealing with the Disneys, the Netflixes, the Amazon Primes of the world rather than some of the new start-ups, the small enterprises, and frankly, in some cases, some exciting niche specialty streamers.

What I try to do with this amendment and the other amendments is pick a figure that would capture the large foreign streamers but would also allow room and scope for the small enterprises. CPC-1.01 sets a threshold that—and I can explain it—would create a new 2(2.4) in this act, creates an exclusion: “This Act does not apply to an online undertaking whose revenues in Canada from paid subscriptions and embedded advertising do not exceed $150,000,000.” That number was chosen to ensure that Disney, Netflix, and those types of enterprises are included, while leaving out the small individual ones that are starting out. You'll see the subsequent amendments with different amounts. I'm happy to move those if the time comes, but I think this is the most logical amount at this point.

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Nater.

Is there any discussion on this amendment?

Mrs. Thomas.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you.

I have a question for Mr. Ripley. I'm curious if, within Bill C-11, the term “commercial content” is used, and if so, how that might be defined.

[Thomas Owen Ripley]

No, the term “commercial content” is not used. When the government uses the term “commercial content”, the concept to which it's referring is the factors set out in section 4.2.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you.

I appreciate the clarification, Mr. Ripley, because, as the members around this committee table will recall, when the heritage minister was here at this committee he continually used the term “commercial content”. You'll also recall that I asked him to define that term. You'll also recall that he wasn't able to. It's now been clarified that the term doesn't actually exist in the legislation.

What we are trying to get at with this amendment, CPC-1.01, is in fact a definition around the type of content that would be captured by this legislation. If it is supposed to be what the minister is referring to as commercial content—which, again, isn't a definition or a term that appears in this legislation—then it would seem that a financial threshold should be set.

You'll also recall that at that same committee meeting, when the minister was here, I asked him what that threshold or monetary intake might be. He was not able to define it. In fact, he continually went in circles, bringing me back to the fact that the CRTC would consider proposed section 4.1(2) and from there make a decision as to whether or not certain content would be regulated by this legislation or if it would be left out.

It is incredibly disingenuous of the minister to use “commercial content” when it doesn't exist in the legislation. It's dangerous for Canadians not to have a clear threshold laid out in terms of who is going to be captured and who is not. For individuals who are perhaps making an income “directly or indirectly”, as the legislation says, then instead of allowing the CRTC to go after an individual who might be making $5, $10, $15, $100 or maybe even $1,000 directly or indirectly from the content that they're generating, perhaps this committee should act with the appropriateness required and put a monetary threshold in place in order to protect individuals who are simply using TikTok, YouTube or Spotify to get a message out as an individual.

To capture in this legislation individuals who are simply trying to make a name for themselves—make a go of it—and who are small pieces of the puzzle, if you will, to ensure that they pay, for example, 30% of their revenue to the art fund is absolutely ludicrous. Again, it's incredibly irresponsible for this committee to let this legislation go through without any further definition around that.

If, in fact, the minister is truthful in wanting to level the playing field and go after large streaming companies to make sure that they “pay their fair share”, then he should go after the large streaming companies. Leave the individuals who are trying to make a go of it on YouTube, TikTok, Spotify or Twitch alone. Stop punishing them.

The way we ensure that is by creating a threshold as to who is in and who is out. If an individual makes $150 million, that's fine. I guess they can be captured by this legislation. If it is someone making a few thousand dollars, please do the respectful thing and leave them alone. It's up to the members of this committee to make that decision.

The members of this committee have a decision in front of them. They can go after individual Canadians who are making a go of it within new media spaces, which is incredibly harmful—it's punitive in nature—or they can set a financial threshold and go only after the large streaming companies, which is what the minister has stated his intent is. Unfortunately, however, it appears to be incredibly disingenuous, because the language is not reflected in this legislation.

[The Chair, Liberal, Hedy Fry]

Thank you.

I have Mr. Housefather.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you so much, Madam Chair.

I just want to say that even this amendment, let alone the bill, deals only with “undertakings”. It doesn't deal with individual users, creators or consumers, and the bill doesn't cover them either. A lot of what we've been hearing is, I think, a bit out of the scope of what this amendment does.

I want also remind you that the bill specifically instructs the CRTC to

avoid...imposing obligations on any class of broadcasting undertakings if that imposition will not contribute in a material manner to the implementation of the broadcasting policy

Small and niche services are not going to face these types of obligations. Also, on a monetary limit, if it were going to be a reasonable one.... This is an incredibly high one, at $150 million, and it should be regulatory. I don't think it should be in the law, because it prevents us from adopting at any point in time....

I also want to point out that this doesn't say when these revenues are earned. Are these supposed to be annual revenues? Are they lifetime revenues? For clarity, I would invite my friend Mr. Nater to clarify that in his amendment if it's actually adopted, because there should be a clarity as to how the revenues are derived. I think that this is an incredibly high threshold, and I don't agree with this amendment.

Thank you.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Housefather.

Go ahead, Mr. Nater.

[John Nater, Conservative, Perth—Wellington, ON]

Thank you, Madam Chair.

The good news for my friends is that if they think this one is too high, we have more amendments that may be more appropriate to our friends. I know that Ms. Thomas wants to speak and perhaps make a small amendment to address the issue of Mr. Housefather, which I take. It should be clarified that it should be “annual”. I can't amend my own amendment, so I appreciate the addition that it is an “annual” amount.

I want to address very quickly the point made by Mr. Housefather about whether this ought to be regulatory in approach, and the fact that we don't want to see small and niche enterprises captured. I agree. That's why we did this. The challenge we have is that we don't have the policy directive. We don't have the direction to the CRTC of how this ought to be moving forward.

We've heard pronouncements, obviously, and I know there's the clause or the commentary on material impact, material benefit. I accept that. The challenge is that this is obviously a once-in-a-generation update to the Broadcasting Act of 1991. That's a long time, and if we go another 30-plus years, this is something that has to be done right and done correctly now. In the absence of a policy directive and in the absence of the draft regulations from the CRTC or the directive from the minister, we are resorting to this option to put it in the legislation to ensure that these enterprises aren't affected.

I accept some of the comments. I accept some of the commentary. In a perfect world, we would have had the opportunity to see that policy directive and to see the direction that would be given, so that we could have assurances that those small enterprises aren't there.

I just want to make one final point. I don't want to talk specifics, as we have a stack ahead of us. I was talking to a small independent streamer in my riding. I want to see them excel. I want to see them thrive, go forth and spread their content across Canada and around the world and not be caught up in regulatory messes.

I'm going to leave my comments there. I know Ms. Thomas wants to make a small amendment to clarify that. I will yield the floor.

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. Nater.

I'm going to go to Ms. Thomas, please.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you.

I would offer a friendly amendment. I'll read the amendment:

This Act does not apply to an online undertaking whose revenues in Canada from paid subscriptions and embedded advertising do not exceed $150,000,000 annually.

That is adding the word “annually” at the end.

[The Chair, Liberal, Hedy Fry]

Thank you.

If there's someone who wishes to suspend so that they can get that small subamendment looked at, please indicate it now.

Hearing none, I will move to the discussion of the subamendment.

Mr. Julian.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Chair, can we just do it on consent, so that—if Mr. Julian's okay—we don't have to vote on the subamendment and it can be part of their amendment?

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Yes, absolutely. I think that's a good suggestion. It clarifies things. If it was $150 million a month, it would have been $2 billion a year. I'm glad that the Conservatives have clarified it.

I wanted to ask our officials, after thanking and praising them for being here through the long hours—we'll be saying the same things and complimenting you at three in the morning tomorrow.... This particular amendment does not appear to apply to individuals. I want to clarify that, because Ms. Thomas's comments seemed to indicate that, in some way, it exempted individuals. I was very confused about that.

I want to know, first off, what the impact of the amendment might be and, second, whether it applies to individuals, as I understood Ms. Thomas was suggesting.

Third, in a case where you exempt a $150-million annual corporation with those kinds of subscriptions and embedded advertising, how long is that exemption in effect? In other words, would it be years for the organization, even if that company, in subsequent years, had extraordinarily large revenues? How long would it take before the applications of this amendment would apply? I'm assuming potentially at least two fiscal years, but I want to get a sense back from you of what you thought the lag would be and how long the exemption might end up being.

[Thomas Owen Ripley]

In terms of impact, I think Mr. Nater explained it in that the act would not apply to certain online undertakings unless they surpassed that threshold.

Mr. Housefather, I believe, referenced the current standard in the act, which is the assessment of whether material contribution can be made.

Online undertakings include both Canadian and non-Canadian online undertakings. One consideration I would bring to the committee's attention is that it would also.... We've been discussing community organizations. There are also public broadcasters in Canada that could operate online undertakings. This exclusion would apply to any online undertaking, regardless of who operates it, if it falls below that financial threshold. Some of those organizations may be very well equipped—again, thinking of public broadcasters—to contribute to the policy objectives of the act, but this would potentially exclude them.

With respect to your questions about individuals, the way the act is structured is that this applies to online undertakings. Then proposed subsection 2(2.1) of the act indicates that individuals are not to be considered online undertakings for the purposes of the act. That means that no individual can be taken before the CRTC and subject to regulation or contributions to the system unless they're acting as a mandatary or an affiliate of an online undertaking.

In terms of your question about the effect on timelines, if I understand it correctly, it's what happens if eventually an online undertaking surpasses that and how that would come into play. The answer is that it would depend. It could be that there would be certain regulations that the CRTC has enforced, that there are certain thresholds established and therefore, if an online undertaking surpassed that threshold, they'd immediately be subject to certain obligations. Alternatively, it may be that, given the kind of service, yes, the CRTC would have to do a regulatory proceeding and look at what contributions that service could make. There would have to be a regulatory proceeding that would take some time to put into place.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you for your answers. That is very helpful, and I guess you've clarified the red herring that Ms. Thomas put out: Individuals are not impacted.

Setting that aside, this appears to me to be a massive loophole, then, for foreign entities, if all they would need to do is claim exemption that they're under the $150-million threshold. If they are not filing in Canada, there would be no way to prove or disprove that. Is that correct?

We have a massive problem with overseas tax havens in this country. The Parliamentary Budget Officer estimates that we lose $25 billion of tax revenues each and every year to overseas tax havens.

If we have a foreign entity that doesn't file in Canada and that just claims the exemption, with the way you see this amendment, would they be able to do that?

[Thomas Owen Ripley]

The provision as drafted says that the act does not apply to an online undertaking, which means none of the provisions of the act would apply if a service fell under that threshold.

The CRTC does have information-gathering powers precisely to be able to assess questions around thresholds. In practice the CRTC should be able to go to a service and ask it to document or show evidence about its revenues in Canada. If that service refused on the basis that by its own assessment it was below this and therefore not subject to the CRTC's information-gathering powers, that would be a question that could potentially be litigated, and I'm not in a position to say how that would necessarily play out in court.