Canadian Heritage Committee on Oct. 28th, 2022

[The Chair, Liberal, Hedy Fry]

I call this meeting to order.

Good afternoon, everyone, and welcome to meeting number 50 of the House of Commons Standing Committee on Canadian Heritage.

I'd like to acknowledge that we're meeting on the unceded traditional territory of the Algonquin Anishinabe people.

In keeping with the order of reference adopted by the House on Tuesday, May 31, 2022, the committee is meeting on the study of Bill C-18, an act respecting online communications platforms that make news content available to persons in Canada.

Today's meeting is taking place in a hybrid format, pursuant to the order of Thursday, June 22, 2022.

Members here in person in the room know how to access their interpretation and what to do. For those attending virtually, I'd like to make a few comments for the benefit of the witnesses who are attending.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon at the very bottom of your screen to activate your mike, and mute when you are not speaking. For interpretation for those on Zoom, you have a choice at the bottom of your screen. It is a little globe. You can press that and get your interpretation in English or French. I remind you that all comments should be addressed through the chair.

That's enough for housekeeping.

In accordance with our routine motion, I'm informing the committee that all witnesses have completed the required connection test in advance of the meeting and are using the House of Commons-approved equipment.

Thank you very much.

I will quickly let you know about the list of witnesses—and I will leave Ms. Charette for last, because she's not here yet.

What I will say to the witnesses is this: You each have five minutes. Even if you come as an organization, you still only have five minutes, so you can pick whoever you want to speak on your behalf. I will give you a 31-second shout-out, which is literally a shout. I will shout out to you when you have 31 seconds left. We need to stick to times, here, because we will not be able to get the number of questions and answers in or get everybody to do what they can do.

Here we go. I'm going to begin.

We have, as our panel, Konrad von Finckenstein, former chair of the Canadian Radio-Television and Telecommunications Commission, and Annick Charette, president of the Fédération nationale des communications et de la culture. Representing Meta Platforms, Kevin Chan is global policy director and Marc Dinsdale is head of media partnerships in Canada. OpenMedia is represented by Matthew Hatfield, campaigns director, here by video conference.

I will start with Mr. von Finckenstein.

Mr. von Finckenstein, could you please begin? You have five minutes.

Thank you.

[Konrad von Finckenstein, Former Chair, Canadian Radio-television and Telecommunications Commission, As an Individual]

Thank you, Madam Chair, for inviting me to comment on Bill C-18.

As you know, the stated purpose of the bill is to regulate digital news intermediaries, with a view to enhancing fairness in the Canadian digital news marketplace while contributing to its sustainability. The underlying rationale of this bill can be summed up very simply: Local news publishers do not get appropriate compensation for news they produce that reaches the public via digital platforms.

To rectify the situation, the act contemplates a mandatory bargaining process between the platforms, called digital news intermediaries or DNIs, and news publishers, called ENBs. The process is very simple. DNIs have to identify themselves; ENBs are qualified by the CRTC. They have to bargain. The bargaining is mandatory. It has to be done in good faith. If the bargaining fails, there is mediation. Finally, if mediation fails, there is a final offer of arbitration. All of this is to be done under the auspices of the CRTC, which designates the parties, manages the process, furnishes a panel of arbitrators, and advises throughout.

I am not here to question the rationale of the legislation nor the method adopted. Rather, I would like to share with you some problems I see in implementing this legislation. This should not be taken to mean that I support this legislation, however.

It goes without saying that implementing this bill will present the CRTC with a huge new challenge. I look at these issues from the perspective of former chair of the CRTC. When you implement a bill, the legislation should be specific and objective. That is very helpful to the administrator, while vagueness and overly broad discretion mean numerous demands, contestations and delays.

There are five points I would like to bring to your attention.

First, whom does this act apply to? How do you identify the DNIs? The bill requires DNIs to self-identify and notify the CRTC. The criteria are based on whether there is a significant bargaining power imbalance between the operator and the news business. It is based on such criteria as the size of the intermediary, whether the market gives the intermediary strategic advantage, and whether the intermediary occupies a prominent market position.

The concepts of size, market, strategic advantage and prominent position are all borrowed from competition law and very much depend on context. They do not have an objective meaning. Rather, it seems to me that it will be a dog's breakfast trying to identify DNIs. They are asking companies to self-identify and giving the CRTC power to compel information to decide if the respondent is a DNI. The bill should be amended and provide that the minister, by regulation, and after consultation with the commissioner of competition, designate the DNIs.

Second, who benefits? On request, the CRTC must designate a business as an ENB if it is a “qualified Canadian journalism organization”, as per the Income Tax Act—that's fine—and produces news content “primarily focused on matters of general interest and reports of current events”, “regularly employs two or more journalists” in Canada, operates in Canada, and produces news content that is “not primarily focused on a particular topic.”

That is a very wide definition. It does not exclude government, overt political actors or foreign actors. It has no reference to journalistic standards and would even seem to include broadcasters, who are obviously regulated by another statute. In my view, this section should be amended to provide that ENBs have to be Canadian-owned and Canadian-controlled, must adhere to journalistic standards as set out in the code of ethics of the Society of Professional Journalists, and should not include licensed broadcasters and their affiliates or government actors.

Third, the bill allows the CRTC to exempt a DNI if it has an agreement with an ENB. That agreement must provide fair compensation to the news businesses for the news content. That is fair ball. That is what it is all about.

Then it goes on to say “ensure that an appropriate portion of the compensation will be used by the news businesses to support the production of local, regional and national news content” and that it does “not allow corporate influence”, etc. There are all these points. If you look at them together, they're really purposes. They should not be here; they should be in the purpose section.

[The Chair, Liberal, Hedy Fry]

You have 30 seconds.

[Konrad von Finckenstein]

Lastly, there is an undue preference and reverse onus provision. Basically, any ENB that feels it is discriminated against by a DNI can complain to the CRTC. It will investigate, and it can then give penalties for a violation. This is a complete misunderstanding of what a DNI does. It makes millions of decisions each day. It makes—

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. von Finckenstein.

I would hope that you would wrap up because you are going a little over your time.

[Konrad von Finckenstein]

Okay, thank you.

This is a misunderstanding of the DNI. It's a very simple thing that's done. It's a computer decision. There are millions of them. What should be done is that, if there's a complaint, the DNI should explain how its algorithm works: that it's fair, that it's not unjust, that it's not undue, etc. In that case, the reverse onus that is in the legislation—which means the allegation is true unless rebutted—makes sense because it's the algorithm of the DNI that we're talking about. They create it and set it up, and they should be able to show that it doesn't discriminate against or disadvantage anybody.

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. von Finckenstein.

Madam Clerk, I wonder if you could let me know when Ms. Charette comes on. I don't see her yet, so maybe you could just give me a heads-up.

I would now like to move to Meta Platforms.

Mr. Chan and Mr. Dinsdale, I don't know which one of you is doing the speaking.

[Kevin Chan, Global Policy Director, Meta Platforms Inc.]

It's going to be me, Madam Chair.

[The Chair, Liberal, Hedy Fry]

All right. Go ahead for five minutes, Mr. Chan.

[Kevin Chan]

Madam Chair, members of the committee, thank you for inviting me to speak today to Bill C‑18, the online news act.

Today we want to share directly with the committee our concerns about this draft legislation and the unintended consequences we worry may flow from it in the fullness of time.

We have three main concerns: the true division of value between platforms and publishers, the unintended consequences of payment for free marketing, and the stifling of innovation.

First, the framework of the current legislation presumes that Meta unfairly benefits from its relationships with publishers when, in fact, the reverse is true. The Facebook platform helps publishers. Meta does not scrape or index news content or links. Like any business, non-profit, public or political organization, Canadian news publishers choose to share links from their websites on Facebook to reach a wider audience, which leads to increased readership of their stories. This, in turn, allows them to sell more subscriptions and advertising.

In Canada, we estimate that Facebook feeds sent registered publishers more than 1.9 billion clicks in a single year. That's free marketing for their content in the form of link posts that has an estimated value of more than $230 million. Simply put, this is what it would have cost news publishers to achieve the same outcome on Facebook if that space wasn't provided to them for free.

We can see that Facebook already helps Canadian publishers to the tune of hundreds of millions of dollars a year.

Second, the online news act would force Meta to pay news organizations for content that publishers voluntarily place on Facebook. In blunt terms, we would be forced to pay publishers for giving them free marketing on Facebook, which I just noted was valued at $230 million last year. This would be a most peculiar and unorthodox arrangement.

In the current economic climate, and as we prioritize long-term investments in the metaverse and in the growth of short-form video in response to competition and user preferences, we are being asked to acquiesce to a system that lets publishers charge us for as much content as they want to supply at a price with no clear limits. I hope you will agree with me that no business can operate this way.

Third, successful regulation must be grounded in fact. We have long supported regulation that sets clear and fair rules for everyone and an open Internet where creativity and competition can thrive. But as independent experts have warned, a policy that unfairly subsidizes legacy media companies now struggling to adapt to the online environment is an approach that will harm competition, reduce trust in media and make the transition to digital models even more difficult.

A recent report by the Parliamentary Budget Officer only underscores these real concerns. According to the PBO's analysis, it is broadcasters, including the public broadcaster, that will receive the lion's share of transfers, leaving less than 25% for newspapers. Also, as someone who has spent over five years listening, learning and supporting digital news entrepreneurs, it is concerning that Bill C-18 is seemingly even less helpful to them. We encourage the committee to find more opportunities to hear from the next generation of Canadian digital news innovators.

Let me be clear: Canada is incredibly important to Meta.

Canadians will always be able to use Facebook to connect with friends and family, to help build communities and to grow their businesses.

However, faced with adverse legislation based on false assumptions that defy the logic of how Facebook works, which, if passed, will create globally unprecedented forms of financial liability for news links and content, we feel it is important to be transparent about the possibility that we may be forced to consider whether we continue to allow the sharing of news content on Facebook in Canada.

As always, we remain open to working with this committee and the government on solutions that are fact-based and reflect the interests of all Canadians.

Thank you.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. Chan.

Now we'll go to Mr. Hatfield.

You have five minutes, please.

[Matthew Hatfield, Campaigns Director, OpenMedia]

Thank you.

Good afternoon. I'm Matt Hatfield and I'm the campaigns director of OpenMedia, a grassroots community of nearly 220,000 people in Canada who work together for an open, accessible and surveillance-free Internet.

I am speaking to you from the unceded territory of the Stó:lo, Tsleil-Waututh, Squamish and Musqueam nations.

My question today is this: Who's in Bill C-18 and who's out? Who is producing high-quality journalism that deserves government-mandated subsidy and promotion, and who isn't? How much are they entitled to, and will the public ever have transparency to see that these questions are being answered fairly?

We believe the government is trying to dodge responsibility for answering these highly sensitive questions, yet Bill C-18 still answers them. Burying these questions just means its answers are more obscure, secretive, unequal and potentially damaging to trust in journalism.

There's a real problem that Bill C-18 is trying to solve. Canadians need high-quality, trusted, fact-checked journalism, and lots of it. Our democracy depends on it.

It's true that huge online platforms—Google and Meta chief among them—are collecting a lot of revenue in Canada. It's fair to ask them to contribute more of that revenue back to things that Canadians need. That's why we support the digital services tax, and that's why we wish we were debating a much simpler version of this bill that directly taxed them.

Linking news revenue primarily to the spread of news content on platforms is a toxic poison pill. News simply isn't a primary revenue driver on platforms—that's a fact—and a lot of the reporting of great importance to society is least likely to go socially viral.

Linking news support to links and clicks gives both platforms and news publishers strong incentives to cheat the system in ways that discourage the spread of quality news. It fails to target the resulting funds where they're actually most needed, subsidizing today's biggest winners in news production while not bringing back lost outlets or supporting the emergence of new ones. It makes news outlets dependent on the continued success of online platforms to survive, which is a dangerous weakening of their credibility and independence.

Also, because Bill C-18 uses links and clicks as a substitute for stronger evidence of public interest journalism, Bill C-18 sets such a low bar for identifying a qualified news outlet—lower than the already flawed QCJO system—that low-quality outlets, click farms and even malicious foreign actors could potentially qualify for mandatory promotion and subsidy.

For these reasons, we believe that without substantial amendment, Bill C-18 will be enormously destructive to the quality of, distribution of and public trust in Canadian journalism.

The money is not going where it needs to. Minister Rodriguez has told us that small news publishers aren't really interested in Bill C-18's support—despite hundreds of publishers who have said otherwise. Canada's news problem is largest in small communities that have lost their primary outlets and in hollowed-out, downsized regional newsrooms.

Will Bill C-18 do anything to bring dead local outlets back? No. It does nothing today for communities with no existing news source, and if a small local outlet reopens, it locks them out from support until they hit a significant and possibly unattainable size.

Will it induce major news chains to restaff downsized local divisions? How and why would they do that? What rational business will staff up the slow and expensive local accountability beat when your new primary revenue stream is the most viral and clickbaity of social media content? And that's before we consider that 75% of Bill C-18's revenue is predicted to go to TV and radio broadcast, predominantly to giants like Bell, Rogers and the CBC.

This committee has criticized the secrecy of the deals Google and Meta make with publishers. Fair enough, so why doesn't Bill C-18 fix that? You can't rejuvenate public trust in journalism by making these problematic secret revenue deals larger and more secret, with more opportunity for the CRTC, government and platforms themselves to quietly influence them. Under Bill C-18, negotiated deals are still secret, as is the process for assessing eligibility for QCJO status and the reason for accepting or rejecting applicants. That's not a recipe for building trust in the news.

Our biggest concern is what Bill C-18 will do to our online feeds. What kind of content do you think gets the most Facebook shares or the most retweets on Twitter? Do you think it is the in-depth, long-form investigative—

[Martin Champoux, Bloc, Drummond, QC]

A point of order, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Let me just stop my clock for a second so that I don't eat into somebody's time.

Go ahead, Martin.

[Martin Champoux, Bloc, Drummond, QC]

I'm sorry and I beg Mr. Hatfield's forgiveness for the interruption, but the interpreters are saying they're having a hard time keeping up because he's speaking extremely fast.

Would it be possible, Madam Chair, to ask Mr. Hatfield to slow down his delivery a bit so that the interpreters can do their job? Thank you.

[Matthew Hatfield]

My apologies, Mr. Champoux. I'll speak more slowly.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Champoux.

[Matthew Hatfield]

Our biggest concern is what Bill C-18 will do to our online feeds. What kind of content do you think will get the most Facebook shares or the most retweets on Twitter? Do you think it is the in-depth, long-read investigative journalism that holds our leaders accountable, or do you think it is puff pieces, fiery unsourced op-eds and outright misleading clickbait?

Bill C-18 triples down on this kind of content. It nudges legitimate news outlets to make more of it, to see their shares grow and earn more compensation. It offers yellow journalists and content-mill click farms a real possibility of qualifying for guaranteed mandatory platform subsidy and promotion. It forbids platforms from taking any steps that would prioritize content from higher-quality outlets—like the National Post or The Globe and Mail—above that of any other qualifying publication.

[The Chair, Liberal, Hedy Fry]

You have 30 seconds.

[Matthew Hatfield]

I don't always love my platform feed, but I don't want our government knowingly making it worse. That's what Bill C-18 currently does.

OpenMedia community members have sent nearly 8,000 emails to MPs asking for fixes to Bill C-18. Every one of us wants to see a flourishing Canadian news ecosystem, but without extensive amendment, there's a considerable risk that Bill C-18 will make that news ecosystem worse, not better.

Thank you.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Hatfield.

Now we go to Annick Charette, president of Fédération nationale des communications et de la culture.

Ms. Charette, you have five minutes, please. I'll give you a 30-second shout-out. Thank you.

[Annick Charette, President, Fédération nationale des communications et de la culture]

Good afternoon.

The Fédération nationale des communications et de la culture represents 86 unions in the field of culture and information in Quebec, including the major news media unions.

From the outset, I'd like to say that our primary concern is the preservation of a strong, professional, independent, diverse and financially healthy press in Quebec. We also want the press to maintain the ability to offer a diversity of viewpoints that reflect not only the regions but the multidimensional fabric of the Canadian population. We also want it to be present in all its forms across the country.

Far too many media outlets have already closed up shop, in large part due to the fact that advertising revenues—news media's traditional revenue source—have been siphoned off by digital platforms.

To meet these objectives, it's imperative that we address the failures in the market, namely, the considerable leverage that digital platforms have over news media outlets by taking the lion's share of advertising revenues derived from journalistic information. That's why we believe these legislative provisions are necessary to adequately regulate and balance the commercial relationship between the news media and the almighty—and, might I add, somewhat threatening as of late—digital platforms.

The Fédération nationale des communications et de la culture supports Bill C‑18 in the name of its members, but also in the name of all Canadians, because professional information is a pillar of democracy. A well-informed population is a population that makes informed choices, which is what we all want, I believe.

Nevertheless, we'd like to bring to the attention of legislators some aspects of the legislation that could be improved.

First, the CRTC's proposed exemption order powers, which allow platforms to be exempt and to negotiate new agreements, are too broad and risk seriously compromising Bill C‑18's effective contribution to strengthening the diversity of voices in the field of news media.

We're absolutely committed to the preservation of smaller media outlets that, among other things, meet the specific needs of certain communities and regions. A few major agreements with national media shouldn't undermine the ability of smaller actors to exercise their rights.

Second, Bill C‑18 should provide for negotiations for a greater number of news media, including local media with only one full-time journalist and emerging digital media, which aren't based on the same structure as traditional print media. We also believe that media companies that deal in specialized journalism should be taken into consideration.

[Chris Bittle, Liberal, St. Catharines, ON]

I have a point of order, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Yes, thank you.

Ms. Charette, I'd like to let you know that the interpreters think you are speaking too quickly. Could you slow down a little bit, please?

Thank you.

[Annick Charette]

However, the act should only apply to those media companies that meet certain criteria in terms of journalistic ethics. I'm thinking, among others, of such things as presenting several opposing viewpoints on matters of public interest, verifying the validity and veracity of the information conveyed, and correcting information later determined to be false. Adherence to a code of journalistic ethics widely accepted by western media is a reliable indicator of a news outlet's professionalism. The act should finally treat public broadcasters the same way as private news companies.

Third, we believe it is necessary to prevent digital platforms from taking retaliatory action that could impede negotiations and arbitration.

Lastly, our brief contains some recommendations concerning the arbitration process and the powers of the independent auditor. In our view, these powers are absolutely essential in order to guarantee that the benefits of the bill will percolate directly into the newsroom, improving journalism as a whole.

This reinvesting of new money in journalistic work is essential if we want to ensure access to quality information over the long term. The powers of the auditor could even be expanded to include, for example, the ability to report on the effects of exemption orders on the Canadian digital news market.

The act should also apply to all of the companies that operate social media platforms or search engines that publish news content.

In conclusion, I'd like to emphasize that digital platforms have a moral obligation to return a portion of the profits generated by the work of other companies. In what system is the exploitation of another's property a right?

Furthermore, any decent corporate citizen that derives substantial profits from such a foundational element of democratic society as a professional press has a duty to reinvest a portion of those profits in the vitality of the journalistic organizations that generate those profits.

The extraordinary economic power and uneven balance of power brought about by the proliferation of information technologies should never take precedence over the greater national interest and regulatory sovereignty.

Thank you for your time.