Canadian Heritage Committee on Nov. 22nd, 2022

[Thomas Owen Ripley]

Paragraph 6(b) is intended to speak to something like the advertising market in search or the advertising market in social media.

The question of a strategic advantage is whether an intermediary has a particular advantage, given its business model. One of the issues in this space is that these intermediaries often act as a distribution platform for news businesses, but they compete against those news businesses in the advertising market at the same time. It's intended to speak to that kind of concept.

[Rachael Thomas, Conservative, Lethbridge, AB]

On the term “strategic advantage”, I know that you're touching on it within that definition, but what's the threshold to determine if it's a strategic advantage?

[Thomas Owen Ripley]

The idea behind paragraph 6(b) is to articulate the particular market in which the intermediary operates. Again, the example I would give you, acknowledging that the specifics will have to be worked out through regulatory processes, would be the advertising market in both search and social media. In the Canadian context, we know that there are two companies that accrue approximately 80% of the advertising market in the digital space. That's the idea behind the notion of a strategic advantage.

Again, as I mentioned, there are particular dynamics at play in this space, where some of these intermediaries both offer a distribution platform and at the same time are competing for those advertising dollars against those who are distributing their content on their platforms.

[Rachael Thomas, Conservative, Lethbridge, AB]

Okay.

Then, paragraph 6(c) says, “whether the intermediary occupies a prominent market position.” On this phrase “prominent market position”, again, I'm not able to find a definition within the bill. I'm wondering if you can expand on that or help me understand what is meant by that phrase.

[Thomas Owen Ripley]

On paragraph 6(c), what we had in mind was the number of Canadian users, or something along those lines. The combination of paragraphs 6(a), 6(b) and 6(c) is all under the hat of, as has been pointed out.... We're talking about where a significant bargaining power exists. You're looking at something like a revenue threshold, looking at the articulation of the particular market in which you may have that strategic advantage, and looking at something like a Canadian user threshold.

[Rachael Thomas, Conservative, Lethbridge, AB]

In terms of the number of Canadian users, is that for the sake of being accessed through marketing, like advertising?

[Thomas Owen Ripley]

It speaks to there being a market presence here in the Canadian context. Otherwise, again hypothetically, if you're looking at a global revenue threshold under paragraph 6(a), you can have a strategic market advantage, but that could theoretically exist outside of being grounded in the Canadian context. Paragraph 6(c) is talking about a market presence here in Canada that would need to be met.

[Rachael Thomas, Conservative, Lethbridge, AB]

Okay.

Essentially, to be scoped in or out of this legislation, criteria will be created around each of these points (a), (b) and (c): paragraph 6(a) having to do with a revenue threshold, paragraph 6(b) having to do with advertising market and dollars that are brought in there that might give a strategic advantage, and paragraph 6(c) having to do with audience, the number of Canadians whom the platform would be able to reach.

[Thomas Owen Ripley]

It is users, or active users—again, acknowledging that the business model of digital intermediaries who may be subject to it could look different.

[Rachael Thomas, Conservative, Lethbridge, AB]

Okay.

This is my last question for you, Mr. Ripley. I've noted that clause 6, of course, as it appears here, is in addition to clause 2, where a DNI is defined. Why not just have one clause? Why have clause 2 with part of a definition of a DNI, and then clause 6 with further criteria that have to be met in order to be scoped in? Can you help me understand that mechanism? Why are there two clauses, instead of just making it one concrete, streamlined definition with regard to what a DNI is and whether or not it's scoped in or out?

[Thomas Owen Ripley]

Thank you for the question.

I would say that clause 6 is not actually about the definition of a DNI. Clause 2 sets out the definition, as we discussed the other day. Clause 6 is really a question of threshold. It recognizes that there will be entities that meet the definition of digital news intermediary that will not be subject to that bargaining obligation. Clause 6 is really about establishing those thresholds after which a platform is designated, or whatever the term is that you want to use, and subject to that bargaining framework. It sets out the process to arrive at those thresholds, which, as we talked about, is a Governor in Council regulatory process.

[The Chair, Liberal, Hedy Fry]

Thank you, Mrs. Thomas.

Mr. Julian, go ahead.

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

Thanks very much, Madam Chair.

I'm opposed to creating more loopholes. It doesn't make sense to me. We put into place legislation that community newspapers in places like Alberta and Saskatchewan have asked us to. Improving the bill doesn't mean creating more loopholes and creating more escape clauses for the web giants, so I'll be voting against this amendment.

However, Madam Chair, I know that the Conservatives have put forward five identical amendments. The only thing that has changed is the dollar figure. That, to me, is a real attempt to filibuster and stall the legislation.

I just come back to the witnesses who came back to us: the Alberta Weekly Newspapers Association and the Saskatchewan Weekly Newspapers Association. These are newspapers that basically provide important journalism for communities and that represent nearly half of the Conservative caucus. I don't understand how any member of Parliament, when the community newspapers come forward and say this legislation needs to be improved and this legislation is needed, would then put forward amendments that are clearly designed just to stall the legislation from being adopted. It doesn't make sense to me. I think it's disrespectful to Alberta community newspapers and Saskatchewan community newspapers, which do such an important job in providing communities across Alberta and Saskatchewan with the kind of journalism that is so important to bringing together a community.

I would hope that my Conservative colleagues would withdraw the other amendments, which are basically just carbon copies with just one dollar figure changed, rather than stalling the bill. We have important work to do to move forward on this bill, to improve it for sure, but in this case we have five amendments that are identical, in which only the dollar figure changes, in what is clearly an attempt to stall, clearly an attempt to block the legislation. That's not what Alberta community newspapers and Saskatchewan community newspapers want, and I think we should abide by their testimony.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Julian.

Ms. Gladu, go ahead.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Thank you, Chair.

First of all, I want to clearly say that I am not trying to stall the bill, and I think it's unhelpful for Mr. Julian to malign the intentions of the Conservatives here. We're trying to improve the bill. We've expressed our concerns numerous times, and that's what we're trying to do.

Now, case in point, Mr. Ripley has actually said that in order to apply clause 6, they will have to do some kind of revenue level, and that will be done in regulations. So this concept is going to happen. It's just a question of....

First of all, I don't like it when the Governor in Council determines in regulations with no parliamentary oversight what the thing is, so I'd rather have it in the legislation. I believe that in Australia they had the same thought pattern and they did define something and created a list of who those people are, which they've made public. This has merit, but I do respect what Mr. Housefather said. He always brings his law experience to the table. I do see the point in making sure it's not a loophole that people can crawl out of.

I would be open to the concept of amending this amendment with a subamendment saying that the revenue was generated in Canada, so then people couldn't move it around the world. I don't know whether that would be palatable to the members opposite.

Thank you.

[The Chair, Liberal, Hedy Fry]

If you're moving that subamendment, Ms. Gladu, where exactly in that amendment would you move it?

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I would put it right after “that generates at least $100 million per year in advertising, subscription, usage or membership revenue”, and then insert “generated in Canada”, so it's clear that we're trying to set a target based on what they're doing, their activity, here and we don't want people playing any games with moving money around the world in order to avoid having to pay up.

Thank you.

[The Chair, Liberal, Hedy Fry]

Thank you.

Now we have a subamendment. As you see, it's pretty simple. After “subscription, usage or membership revenue”, it adds the word “generated” before “in Canada”, etc.

Is there any discussion on that subamendment?

[The Clerk]

Mr. Bittle has his hand up, Dr. Fry.

[The Chair, Liberal, Hedy Fry]

Chris, go ahead.

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

Thank you, Madam Chair.

I really think it's ironic that after protesting that they're not filibustering, they're filibustering their own amendment by adding something that really won't do anything and still allows this massive loophole to exist.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Bittle.

I wonder, once again, Mr. Coteau, if everyone is seeing that hand in front of your chin. Or is it just me?

[Michael Coteau, Liberal, Don Valley East, ON]

I think what you are seeing is that when I go to touch my chin, there is a hand. It's just my regular hand.

[The Chair, Liberal, Hedy Fry]

No, I'm sorry. I'm just seeing this silly little hand. It's okay.

Mr. Housefather, go ahead.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you so much, Madam Chair.

First of all, I want to thank Ms. Gladu for saying that. I always appreciate working with her.

I don't think the amendment that she proposes would change anything—adding “generated” before “in Canada”. Again, if I say, in a contract, that I sell x number of ads in Canada, and I take a small amount of money for that and put that money into my U.S. revenues by saying that in the U.S. I'm charging you more for ads, knowing it's a global deal, we would never be able to know that or understand it. Adding the word “generated” there wouldn't change anything.

I think the issue is, again, as Mr. Bittle said, that if you're going to use revenues, and I'm not 100% sure that's the ideal way of measuring this.... I understand Ms. Gladu's comments about accountability to Parliament and not just having orders in council come up with numbers without parliamentary supervision. I'm not sure that numbers are the most effective way of measuring this at all. I don't know that Mr. Ripley said they would have to go that route. I think it was an option, but I think you'd need to look at worldwide revenues as well as Canadian in order to have the ability to ascertain it and to avoid revenues being disguised by being put internationally.

I don't think anybody here right now has thought this through in a manner that would be comprehensive enough to look at how best to create that kind of revenue dynamic or threshold so that we can just, on the spur of the moment, throw out a number at the committee. I just don't think any of us have done that analysis in depth to know what the right numbers would be and what the best way would be to avoid the ability to use subterfuge by the large multinationals to avoid getting caught by the bill. I just note the way it's being suggested here. I can see lots of ways around that.

That's what my comments are, but I thank my friend Marilyn, again and always.