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The government’s online news bill can’t overcome its own flawed assumptions

Commentary

The Hub has reimagined for your reading pleasure a different version of the Online News Act. Click here to read about the Horse and Buggy Act.

Late Friday afternoon, the Trudeau government released draft regulations that bring further policy expression to its controversial Bill C-18 (Online News Act).

Readers will recall that the recently-passed legislation requires that Google and Meta enter into voluntary agreements with Canadian news media organizations to “compensate” them for their content or face binding agreements imposed by the Canadian Radio-Television and Telecommunications Commission.

The much-anticipated regulations, which aim to provide greater clarity about how the legislation will be implemented, including the formula for calculating the companies’ liabilities and the parameters for their “voluntary” compliance, cannot overcome the flawed assumptions underpinning the legislation itself.

If anything, they expose an insoluble challenge for the government: prescribing in law and regulation the intricacies of business-to-business relationships effectively transform private companies into instruments of public policy which has major consequences for policy outcomes, public accountability, and the functioning of the market.

There’s a good-faith debate about whether current challenges in the world of journalism are signs of a market failure that necessitates a policy intervention or a messy yet normal market-based process of rationalizing outdated business models based on new technologies and evolving consumer preferences. We think there are useful arguments on both sides.

The government has clearly sided with the former. The fact that it itself is already providing direct subsidies to “qualified” media organizations through payroll tax relief equal to fully 25 percent of their newsroom costs is a sign that it believes there’s a need for government intervention. The twist with the Online News Act is that it effectively outsources the implementation of government policy to private platforms, including, as we’ll discuss, the selection of which media organizations ought to receive financial support.

It strikes us as a highly flawed way to solve for (perceived) inefficiencies in the market. If the government believes that there’s a role for the state to intervene in support of Canadian journalism, then it should do it. Canadians can debate the government’s decision and ultimately render their judgment as part of a future election. This is how democratic policymaking is supposed to work.

There’s something odd about outsourcing responsibility for the government’s policy decisions to two private companies based on the dubious argument that they “owe” the Canadian news media for having come to dominate the digital advertising market.

If one was to follow the government’s logic here consistently, we can envision countless instances where new start-ups that outcompete legacy players and industries could be forced to compensate those who they’ve overtaken. As we write tongue-in-cheek today at The Hub, it would be the equivalent of forcing Ford and Studebaker more than a century ago to compensate the horse and buggy industry simply because they gave consumers something better and more valuable. If we had done this, we might all be feeding horses this morning instead of relaxing from the long drive back from the cottage on the Labour Day weekend.

The “steel-manned” case on the part of the government is that the Act seeks to establish a “market mechanism” rather than solely rely on government subsidies to support the news media sector. The problem with such an argument, however, is that it conflates market-based transactions and ones mandated, overseen, and approved by the state. It’s not a “voluntary commercial agreement” if it originates and ends with the government.

The Act uses the government’s legislative and regulatory powers to essentially turn Google and Meta into instruments of public policy. Any financial agreements that they reach with publishers under the Act are hardly market arrangements since they have to conform to the government’s prescriptions and ultimately secure approval from the CRTC. Such payments should therefore be viewed as an indirect government subsidy. The only major difference with a direct subsidy is that the former depends on the legislative pen rather than the public purse.

The practical differences are otherwise mostly semantic. Just think about it. If the government legislates that the companies must enter into financial agreements with the journalism industry, and then regulates how much they must compensate the industry and the detailed parameters that dictate with whom and under what terms they must enter into agreements, and then grants itself final approval that the agreements are satisfactory based on various criteria, including if they “provide fair compensation”, “ensure an appropriate portion of the compensation is used to support the production of local, regional and national news content”, “include local and regional markets in every province and territory, anglophone and francophone communities and Black and other racialized communities”, and “ensure a significant portion of Indigenous news business”, it’s difficult to characterize such a policy regime as anything but an indirect government subsidy to particular media outlets. Google and Meta may in theory be writing the cheques, but Ottawa is, for all intents and purposes, deciding where they’re going.

This matters of course because it has consequences for public accountability and government transparency. But, more practically, it also explains some of the inherent flaws in the draft regulations themselves.

Start with the funding formula. The formula is there because the companies complained that they didn’t want an indeterminate liability with the industry. Fair enough. Yet the proposed formula contains such odd assumptions that we cannot help but think it was reverse engineered to produce a particular outcome.

Under the federal government’s current policy model for supporting the journalism industry, its labour tax credit again provides up to 25 percent of payroll costs for media organizations which have been vetted and approved by a government-appointed committee of journalists. The formula set out in the regulations just happens to result in nearly matching support from Google and Meta. What a coincidence.

In order to reach that outcome, the regulations have to account for the companies’ global revenues and Canada’s share of global GDP and 4-percent contribution rate from the platforms which it calls “broadly consistent” with the Australian model. It’s far from obvious why the formula wouldn’t be limited to Google and Meta’s Canadian-based revenues and based on the journalism sector’s share of Canada’s GDP. The result is that the companies are in theory responsible to compensate the Canadian news media with revenues earned elsewhere based on economic activity created in the oil and gas sector or manufacturing or retail or any other part of the national economy.

It’s such an odd methodology that we assume the real goal here is to produce an outcome that essentially doubles the level of public subsidies to media organizations to almost half of all newsroom payroll costs. If so, the government should have just made the case that the platforms must match its own contributions to qualified media organizations rather than invent out of whole cloth a funding formula to reach the same goal—all overseen by a completely different federal body from the one currently managing the government’s own direct subsidies to media outlets. It’s frankly hard to think a more convoluted policy process if we tried.

The next flaw, as we alluded to earlier, is the process for Google and Meta to obtain exemptions from the Act’s mandatory arbitration if the companies conform to its expectations on a voluntary basis. What it essentially does is to force the companies to pick winners and losers in the media market and then still leaves them to the whims of the CRTC to determine if their choices are satisfactory in the eyes of the government. Hanging over the whole exercise of course is the threat of mandatory arbitration and even financial penalties. It represents a unique definition of “voluntary” to say the least.

We get the sense that what’s really happening here is that the government would prefer that the platforms own the responsibility to decide which media organizations to support but still reserve the right to intervene if it’s not satisfied that certain voices, audiences, or whatever are underrepresented. The exemption criteria grant considerable discretion to the CRTC, including the ability to revoke exemptions if something changes.

It reinforces the point about the Act’s inherent confusion about the role of markets and the role of government. The “grey zone” between the discretion of the companies to voluntarily enter into agreements and the government’s approval of the agreements effectively forces Google and Meta to try to anticipate the types of media organizations that would satisfy the CRTC. It risks creating an inherent incentive for platforms to preference high profile, politically salient, and generally non-controversial media organizations. The predictable result will be a policy outcome that fails to address a market failure with neutral, broad-based support for the journalism industry.

There’s a genuine issue to tackle here if we agree as a country that news journalism, especially at the local level, is a public good. But outsourcing this responsibility to two technologies companies which understandably have no experience or demonstrated competency in running large-scale industry subsidy schemes for governments strikes us an awfully circuitous and highly flawed policy path. If the government indeed believes that there’s an existential need to support the industry, then it should say so and take ownership of the issue.

That of course comes with its own trade-offs and challenges. It forces the government into the uncomfortable position of policing what journalism is and by extension who is and isn’t a media outlet but it’s already crossed this threshold with its pre-existing subsidies and is now basically doing the same with the Online News Act in all but name. As the draft regulations demonstrate, while the intention may be for “commercial” solutions, the government cannot help but put itself between the devil and the details, so to speak.

From our perspective, the Online News Act is a worse outcome than direct government intervention itself for how we make public policy, for the future of journalism in Canada, and the public trust that citizens must ultimately have in the news media in order to have a healthy and thriving civic life.

Stuart Thomson: Reporters should take Poilievre’s combativeness as a challenge

Commentary

One of my best memories from journalism school was when John Baird visited for a Q&A session and had the time of his life.

Baird was the infrastructure minister and in the early stages of rolling out the government’s economic action plan, a massive stimulus program designed to jolt the economy out of the doldrums that followed the Great Recession.

He stood in front of 30 or so bright-eyed journalism students, all keen to pin him down on something or another, and ripped us to shreds one by one.

When it was my turn to ask him a question I had already seen several of my classmates go down in a blaze of glory so I wrote out my question and tried to find the exact wording that would stump the minister.

I asked him if he was worried about cost overruns or scandals arising from this massive blast of infrastructure spending and before I’d finished my sentence Baird cut me off.

“Do you have any examples of what you’re talking about?” he said.

I groped for examples and came up with a newsy U.S. scandal about a “bridge to nowhere” in Alaska. That allowed Baird to pontificate about the differences between the U.S. system and the Canadian one and my question mostly went unanswered.

To be entirely truthful, I considered it a victory. I got out of there alive without looking too stupid.

At the time, it felt like a reality check. Baird’s performance seemed like a preview of what life would be like if I reached my goal of someday covering politics for a living.

Don’t ask a lazy or unfocused question, I told myself, because these people will absolutely pounce on you.

But strangely, those responses from Baird were some of the most intense I’ve ever seen in journalism. And to be clear, Baird had a smile on his face for much of it. He was just having fun in a low-stakes situation.

I have seen reporters get extremely heated with politicians and other public figures, sometimes to a degree that I considered unprofessional or excessive. I’ve also seen flashes of ire behind a politician’s eyes in response to my questions, but it always subsides into a calm and measured response.

Until Pierre Poilievre came along, anyway.

When Poilievre cut a reporter off mid-sentence last week to clarify an accusation that he was “dog-whistling to the far Right,” it brought me back to that day in journalism class.

Poilievre asked who was making that accusation and when informed by the reporter that it was unnamed experts, he asked which ones. After a brief back-and-forth, Poilievre told the reporter that her question was based on a false premise and seemed, to him, like a “CBC smear job.”

Up until that last part (it wasn’t even a CBC reporter), Poilievre seemed to be on solid ground. If he is to respond to accusations that he is either an extremist or courting extremists, it seems perfectly reasonable to ask for an example or some evidence.

But of course, like anything in politics, it shouldn’t just be taken at face value.

For Poilievre, the short-term benefits of this strategy are obvious: his supporters dislike the media and it’s fun to watch him take on reporters like this. Clips of Poilievre raking journalists over the coals are especially popular on YouTube.

The long-term benefits are harder to see, though. Poilievre has been undergoing a “softening” of his image lately, and these prosecutorial exchanges seem to conflict with that. Swing voters usually don’t like argumentative people, even if they are right (and sometimes especially when they are right).

The other effect for Poilievre might be that reporters start doing what I unsuccessfully tried to do once I realized Baird was going to interrogate me. I put a little more effort into my question and I started to think about my strategy for getting a good answer.

It’s easy to see why most politicians don’t argue with bad or lazy questions, though. Instead, they nod sagely, as if they are impressed with it, and then rumble through their talking points. Pushing for a better question actually makes their job harder.

As it says in the Bible, and in every NFL training camp since time immemorial, iron sharpens iron. Poilievre may be inadvertently forcing reporters to think twice as hard about their questions and their story premises, pushing them into a little more research than they may otherwise do and generally making his life more difficult.

It’s also worth considering that the social media world, and the way it divides us into ideological tribes, provides bad incentives to reporters the same way it does for politicians. For a journalist courting a left-wing audience, sparring with Poilievre is valuable, the same way heckling Prime Minister Justin Trudeau would be for a journalist seeking a right-wing audience. These tribal social media incentives tend to be contrary to the health of our democracy and its institutions.

It also puts more emphasis on the process of journalism than its result. Because scrums and interviews are such a big part of a journalist’s day, and because they can be exciting, adrenaline-pumping moments, it’s easy to put too much importance on them.

Of course, it’s vital to get politicians on the record, and to report on it when they don’t answer our questions, but the key mechanism for accountability is not the question screamed at a hapless politician or its tepid response, it’s the news stories that get written afterward.

Most big scandals start off with a “no comment,” or a talking point, or a flimsy denial“The allegations in the Globe story this morning are false.” and the bickering in the scrums isn’t even a footnote.

There is a temptation among reporters to see any kind of pushback or criticism as an assault on our role in the democratic process. We should be careful about that. It’s worth considering that the kind of spirited exchanges we’re used to seeing in question period might be good for us in scrums and interviews.

And anyway, the YouTube content will be great.