Canada Gazette, Part I, Volume 157, Number 35: Regulations Respecting the Application of the Online News Act, the Duty to Notify and the Request for Exemptions
September 2, 2023
Online News Act
Department of Canadian Heritage
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Digital platforms, such as search engines and social media networks, have emerged as common gateways Canadians use to access news content. At the same time, a small number of digital platforms have come to dominate the online advertising market. The Canadian news sector has been impacted by these developments, seeing a significant decline in advertising revenues and an increase in the closures of news businesses over the past decade. Canadian news businesses continue to produce content that attracts web traffic and adds value, while seeing their advertising revenues dwindle as a result of the market control exerted by large digital platforms. The Online News Act (the Act) intends to address the growing imbalance between digital platforms and news businesses in Canada by establishing a bargaining regime to ensure news businesses are fairly compensated for the news they produce.
Establishing a regulatory framework under the Act is critical to its effective implementation. The regulatory framework would provide clarity about the application of the Act and would also provide greater direction to the Canadian Radio-television and Telecommunications Commission (CRTC) on how to interpret the exemption criteria set out in the Act.
The Act requires that digital platforms notify the CRTC when the Act applies to them. The proposed Regulations Respecting the Application of the Online News Act, the Duty to Notify and the Request for Exemptions (the proposed Regulations) would establish clear criteria so platforms can determine if the Act applies to them. The proposed Regulations would also specify the time frame by which the platforms must notify the CRTC that the Act applies to them.
The Act provides that digital platforms may negotiate voluntary commercial agreements with news businesses to qualify for an exemption from the mandatory bargaining provisions of the Act. The exemption section is a key component of the Act as it provides digital platforms the opportunity to reach fair commercial agreements with a wide range of news businesses and contribute to the sustainability of the news marketplace. The proposed Regulations would provide more specific direction on how select exemption criteria could be met, with a view to providing greater business certainty to both platforms and news businesses.
On June 22, 2023, Bill C-18, An Act respecting online communications platforms that make news content available to persons in Canada (known as the Online News Act) received royal assent.
The intent of the Act is to ensure digital platforms contribute to the sustainability of the Canadian news marketplace, while upholding press independence and promoting diversity and innovation. The Act ensures fair revenue sharing between digital platforms and news businesses by supporting voluntary commercial agreements between the parties. It also establishes a mandatory arbitration framework as a last resort where voluntary agreements have not successfully been reached. The Act also provides that the CRTC may issue an exemption from the mandatory arbitration framework provided that the platform can demonstrate that voluntary agreements with news businesses have met the requirements of the Act. The Act allows news businesses to bargain collectively and defines the powers, duties, and functions of the CRTC as the regulator in the process.
Current state of the news sector
Many Canadians use digital platforms, like search engines and social media networks, as gateways to accessing news content. A small number of digital platforms have come to play an integral role in Canada’s news ecosystem. While the Canadian news sector has seen a significant decline in revenues and an increase in the closures of news businesses over the past decade, these digital platforms have seen their revenues increase significantly. In 2021, online advertising revenues in Canada reached $12.3 billion, with Google and Meta having a combined share of 79% of these revenues.
The Act is the culmination of years of calls for action and key government priorities. Publications from the Standing Committee on Canadian Heritage (2016–2017), the Shattered Mirror report (2017), and the Standing Committee on Industry and Technology (INDU)  reported that the news sector in Canada has been severely disrupted by digital consumption and the online sharing of news, and that further government action was needed to address the issue. In 2020, the Broadcasting and Telecommunications Legislative Review Panel’s final report recommended regulating the relationship between social media platforms that share news content and news content creators. Encouraged by international developments on the subject in early 2020, major Canadian news publishers called on the Government to implement similar measures as France and Australia to level the playing field between digital platforms and news media.
In the 2020 Speech from the Throne, the Government of Canada committed to ensuring that the revenues of web giants are shared more fairly with Canadian creators and media. The December 2021 mandate letter to the Minister of Canadian Heritage committed to introducing legislation, based on the Australian approach (which relies on a bargaining and arbitration framework), to require digital platforms that generate revenues from news content to share a portion of their revenues with Canadian news media. Bill C-18, the Online News Act, was introduced in Parliament in April 2022, reviewed by members of the Standing Committee on Canadian Heritage in fall 2022, subsequently studied by Senate members of the Standing Committee on Transport and Communications in spring 2023 and passed a vote in the House on June 22, 2023. The Online News Act received royal assent on June 22, 2023.
Designing a legislative response
The Act seeks to capture the largest and most prominent digital platforms that operate in the markets that have a strategic advantage over news businesses. The proposed Regulations specifying the application of the Act and how digital platforms can be exempted from the mandatory bargaining process are a key part of supporting this implementation process.
The Act introduces a new legislative and regulatory framework that ensures fair revenue sharing between digital platforms and news businesses. The Act is expected to enhance fairness in the Canadian news ecosystem and contribute to its sustainability. The key objective of the Act is to encourage platforms and news businesses to reach voluntary commercial agreements. Failing that, it provides for a mandatory bargaining process, backstopped by final offer arbitration. Large platforms that have a significant bargaining power imbalance with news businesses are subject to this legislation. A platform is considered to have a significant bargaining power imbalance if it is large and occupies a prominent position in a Canadian market (e.g. social media and search) that gives them a strategic advantage over news businesses. The legislation facilitates fair commercial agreements between digital platforms and news outlets while maintaining press independence, with minimal government intervention.
The Governor in Council (GIC) may issue regulations pertaining to the application (section 6), the duty to notify (section 7) and the exemption (subsection 11(1)) provisions of the Act. While the legislation outlines general factors, the proposed Regulations would establish specific criteria crucial for the implementation of the Act.
The proposed Regulations would establish the criteria that digital platforms must follow to determine when the Act applies (section 6) to them and when they are required to notify (section 7) the CRTC that the Act applies to them. The proposed Regulations would also provide details to the CRTC as to what criteria must be considered when determining if a voluntary agreement between a digital platform and news organizations satisfies the requirements of the Act and qualifies for an exemption (section 11) from mandatory bargaining.
Application (section 6)
The proposed Regulations would establish clear criteria so that digital platforms can determine if the Act applies to them. The intent is to scope into the regulatory regime the largest and most prominent digital operators that have a significant bargaining power imbalance with news businesses.
Duty to notify (section 7)
The proposed Regulations would specify the time frame for digital operators to notify the CRTC that the Act applies to them. The intent is to provide platforms with 30 days to notify the CRTC.
Exemption order (section 11)
The proposed Regulations would provide more specific direction on how select exemption criteria could be met, with a view to providing greater business certainty to both digital platforms and news businesses. The intent is to provide platforms with the opportunity to reach fair commercial agreements with a wide range of news businesses and contribute to the overall sustainability of the news marketplace. Agreements with news businesses predating the proposed Regulations coming into force, and which help establish the necessary conditions for exemption, may be used in the platforms’ application for exemption.
The proposed Regulations would provide clarity about the application of the Act and would also provide greater direction to the CRTC on how to interpret the exemption criteria set out in the Act.
Application of the “bargaining imbalance test”
The proposed Regulations would determine which digital platforms fall within the scope of the Act. The proposed Regulations would establish thresholds applicable to each legislative criterion in the application section to determine which platforms are subject to by the Act.
A digital platform must meet all the following thresholds in order to be subject to the framework:
- Earn a total global revenue of Can$1 billion or more in a calendar year.
- Operate in a search engine or social media market involving the distribution and access of online news content in Canada.
- Operate in a strategic market identified above and has 20 million or more average monthly unique visitors in Canada or average monthly active users in Canada.
These thresholds consider factors including a digital platform’s revenue, the type of market served by a digital platform and the market position of a digital platform. Together, these criteria establish when there is a significant bargaining imbalance.
Digital platforms and their operators are expected to assess whether they meet the thresholds of the application section and are required to notify the CRTC if they meet it. The CRTC will publish a list of digital platforms to which the Act applies.
Application of “duty to notify”
The notification section of the Act requires digital platforms to notify the CRTC if the Act applies to them. The proposed Regulations would establish a time frame of 30 days that takes into account the time required for platforms to compile the information necessary for assessing their application and undertaking activities related to notifying the CRTC.
Exemption of platforms from mandatory bargaining and final offer arbitration
In assessing whether a platform has met the criteria for an exemption order, the CRTC must consider
- whether agreements provide fair compensation;
- whether agreements sufficiently ensure that an appropriate portion of the compensation be used to support the production of local, regional, and national news content;
- whether agreements sufficiently uphold the freedom of expression and journalistic independence enjoyed by news outlets;
- whether agreements sufficiently contribute to the sustainability of the Canadian news marketplace;
- whether agreements sufficiently ensure a significant portion of independent local news businesses operating news outlets in smaller size markets benefit from them;
- whether agreements sufficiently involve a range of news outlets in both the non-profit and for-profit sectors, and they were entered into with news businesses that reflect a diversity of business models that provide services to all markets and diverse populations, including local and regional markets in every province and territory, anglophone and francophone communities, and Black and other racialized communities;
- whether agreements sufficiently ensure a significant portion of Indigenous news businesses benefit from them;
- whether agreements sufficiently ensure a significant portion of OLMC news businesses benefit from them.
The proposed Regulations would provide more specific direction on how certain exemption criteria could be met.
Fair compensation: Agreements would meet this criterion if compensation was within 20% of the average relative compensation of all agreements. The intent of the criterion is to promote equity across news agreements while preserving a degree of flexibility. Additional provisions in the Act, such as the Code of Conduct, offer assurance as to fair dealing in the bargaining process.
Supporting news: The proposed criteria would require agreements to include a commitment from news businesses to use a portion of the compensation received from an agreement to produce news content. The intention is to ensure news businesses are using compensation to invest in Canadian newsrooms.
Protecting editorial independence: Agreements would be required to include a commitment from platforms that no retaliatory action will be taken in response to an editorial decision taken by a news business. The criteria would ensure agreements uphold the principles of journalistic independence and freedom of expression.
Contribution to the sustainability of the Canadian news marketplace: As part of the CRTC’s exemption assessment, it would be sufficient that agreements, in total, provide compensation that exceeds the amount prescribed by the formula included in the proposed Regulations. The intention is to ensure a meaningful contribution to the sustainability of the Canadian news marketplace, while also providing platforms with sufficient a degree of business certainty.
(Intermediary global revenue) × (Canadian share of global GDP [≈2%]) × (Contribution rate [4%])
Proxy for “Canadian revenue”
Intermediary global revenue
- This figure refers to the annual global revenue of a digital news intermediary. It excludes other unrelated revenues from the company operating the intermediary.
Canadian share of global GDP
- To approximate the revenue that intermediaries generate in Canada alone, the formula multiplies the digital intermediary’s global revenue by Canada’s share of global GDP. Estimates for Canada’s share of global GDP can be calculated by dividing Canada’s GDP by global GDP using World Bank data.
- The proposed contribution rate is aligned with contribution rates used in other sectors. For example, the CRTC has imposed licensing conditions requiring financial contributions of up to 5% to support the creation of Canadian content in the broadcasting context.
- A contribution rate of 4% would yield compensation figures broadly consistent with the outcomes from the Australian Bargaining Code, which is the model for the Online News Act.
The proposed formula was created based on available information on the Canadian news marketplace. Canadian Heritage welcomes feedback on the proposed formula.
The assessment provided by the CRTC on agreements presented for an exemption would be valid for the entire lifespan of an exemption order. If the annual compensation paid out in the aggregated deals drops below the value of the formula threshold established at the time a digital platform is applying for the exemption, the CRTC may revoke the exemption order. Changes in a platform’s global revenue and its impact on the compensation formula could be reassessed upon the end of an exemption’s term.
Final compensation amounts in agreements will be determined through negotiations between platforms and news businesses. The regulatory framework does not establish an exact process for how negotiating parties determine a final compensation amount. Rather, the framework provides a set of criteria an agreement must meet for a platform to obtain an exemption.
Significant portion of independent local news: The proposed criterion establishes the conditions for the CRTC to determine whether agreements reflect a significant portion of independent news businesses in local markets. Namely, the digital platform must reach deals with all collectives representing a certain number of independent local news businesses. The news industry does not commonly refer to news businesses as “independent local news businesses” but as “independent news businesses that operate locally.” In interpreting the proposed Regulation, the CRTC would need to take into account the definition of “independent news business” provided in the definitions section of the proposed Regulations.
Significant portion of Indigenous news outlets: The proposed criterion establishes the conditions for the CRTC to conclude if agreements reflect a “significant portion” of Indigenous news outlets, namely agreements with all collectives representing a certain number of Indigenous news outlets.
Significant portion of official language minority communities (OLMCs) news business: The proposed criterion establishes the conditions for the CRTC to conclude if agreements reflect a “significant portion” of OLMC news outlets, namely agreements with all collectives representing a certain number of OLMC news outlets.
Canadian Heritage welcomes feedback on the nature of the Canadian news marketplace, including Indigenous, local and OLMC outlets, to inform the proposed regulatory framework.
To ensure news businesses are notified of opportunities to bargain with digital platforms, the proposed Regulations require, as a condition under the authority of paragraph 11(1)(b) of the Act, that platforms use an open call process whereby platforms would publicly solicit engagement from news businesses by posting notices on their platforms. Platforms would also request that the CRTC post a notice on its website. These public notices would have to be published for at least 60 days and news entities would have 60 days to respond to the open call.
The proposed regulatory framework does not include a regulation respecting the interpretation of the criteria in subparagraph 11(1)(a)(vi), since the case to be met is sufficiently clear when reading the text of paragraph 11(1)(a) in context. Canadian Heritage welcomes feedback as to the regulatory approach on this exemption factor.
Canadian Heritage has engaged with stakeholders during the policy development process of the Act. In the spring of 2021, Canadian Heritage initiated a phased approach to stakeholder engagement, beginning with targeted engagement with existing contacts and planned engagement activities with Indigenous organizations and partners. During the initial engagement, Canadian Heritage reached out to a variety of stakeholders within the Canadian news and information sector, including a number of publishers, broadcasters, digital platforms, academics, unions, journalist associations and organizations representing the interests of racialized communities, official language minority communities (OLMCs), remote communities and persons with disabilities.
Stakeholders were asked to provide feedback on two approaches for how digital platform revenues could be shared more fairly with Canadian news media, (1) mandatory code and arbitration regime and (2) mandatory financial contributions from platforms distributed by an independent fund. Feedback provided by stakeholders were summarized into a report entitled “What We Heard.” Following the release of the report, Canadian Heritage began the next engagement phase by launching a public consultation where stakeholders and the public could comment on the report and conclusions reached following the initial engagement phase.
The feedback Canadian Heritage received during the engagement was used to inform the design and objectives of the proposed regulatory approach. Following the conclusion of the public consultation, the Government announced intentions to proceed with developing a mandatory bargaining and final-offer arbitration approach.
Throughout the parliamentary process, Canadian Heritage continued to engage with stakeholders on the application and exemption sections of the Act to gain feedback to incorporate in the drafting of the regulatory framework.
Modern treaty obligations and Indigenous engagement and consultation
The initial assessment of modern treaty implications examined the geographical scope and subject matter of the initiative in relation to modern treaties in effect and did not identify any potential modern treaty implications or duty to consult with any Indigenous rights holders.
While the proposal would not have any treaty implications that would trigger a duty to consult, the Nunavut Land Claims Agreement states that “Inuit have the right … to participate in the development of social and cultural policies, and in the design of social and cultural programs and services, including their method of delivery, within the Nunavut Settlement Area” (32.1.1). As legislation implementing a bargaining framework for news businesses would impact the Canadian North, including Nunavut, Canadian Heritage has engaged Nunavut Tunngavik Incorporated (NTI) during the development process of the legislation and regulatory framework to ensure that the provisions of the Nunavut Land Claims Agreement are honoured.
Prior to introducing legislation, Canadian Heritage engaged with Indigenous organizations and news businesses during the development phase of the Act to hear more about their unique needs and perspectives in relation to the news media ecosystem. In January 2022, Canadian Heritage contracted a facilitator who conducted a series of roundtables with Indigenous news businesses and organizations. The sessions revealed a general support for measures within the news media ecosystem that could provide publishers with increased funding. Participants highlighted barriers that could stymie their ability to benefit from the proposed regime, including limited financial and human resources. They expressed concerns about how this might hinder negotiating and collective bargaining in particular. There were also concerns about the regime being implemented by a regulator without consideration or representation of Indigenous voices.
The issues raised by and on behalf of Indigenous peoples are particularly important and were considered in developing the Online News Act. Engagement with Indigenous publishers continued as the Act proceeded through the parliamentary process. Definitions and an exemption criterion relating to Indigenous news were proposed by Indigenous stakeholders and were added to the Act.
Indigenous news businesses may face resource barriers to negotiating with digital platforms. Provisions in the Act and the proposed Regulations serve to mitigate potential power imbalances by allowing collectives of news businesses to pool resources and encourage digital platforms to reach agreements with those collectives in order to obtain an exemption.
Canadian Heritage will continue to engage with Indigenous publishers and national Indigenous organizations during the regulatory development process to further reduce barriers to participating in the new legislative regime and ensure Indigenous perspectives are reflected in the regulatory framework.
After the proposed Regulations are published in the Canada Gazette, Part I, Indigenous individuals and organizations will have the opportunity to provide further feedback to ensure their perspectives can inform the final version of the proposed Regulations.
The Act received royal assent on June 22 and will come into force on December 19, 2023. This aggressive implementation timeline requires Canadian Heritage to seek prepublication of the regulatory proposal as soon as possible in order for all parties to have the opportunity to review and comment on the proposed regulatory text. The regulatory proposal will be prepublished in the Canada Gazette, Part I, for a period of 30 days. During this period, interested parties will be able to provide comments about the regulatory proposal.
This accelerated timeline limited Canadian Heritage’s ability to consult during the development of the regulatory proposal. Canadian Heritage is committed to continuing to work with all interested parties throughout the prepublication period to further refine the regulatory text as needed. Stakeholders are encouraged to provide comments to assist with this process.
The proposed Regulations were chosen to ensure clarity and effectiveness during the implementation of the application, notification, and exemption sections of the Act.
Section 6: Bargaining imbalance test metrics
Clear thresholds were chosen for the bargaining test in the application section to provide platforms with an objective set of criteria to assess their eligibility to the Act. Total global revenue was selected as a metric to scope in large digital platforms to the Act. The threshold amount of $1 billion (Can$) was chosen as it aligned with the revenue threshold proposed in Canada’s digital services tax and follows similar regulatory thresholds used internationally, including the European Union’s Digital Markets Act.
Monthly unique visitors (MUV) were selected as a metric to measure site traffic for search engine platforms and monthly active users (MAU) were selected for social media platforms as both metrics are widely used across digital services industries and both metrics attempt to mitigate the risk of double-counting visitors present in other metrics such as total site views. There is not currently an industry standard for defining and calculating “monthly active users.” MAU is calculated using internal business data and can be defined differently across platforms. MUV is commonly calculated by measuring the number of unique visitors to a site within a specific period.
The threshold of 20 million visitors and users was chosen to ensure platforms that are visited by a significant portion of the Canadian digital audience would be subject to the Act.
Section 7: Duty to notify time frame
A 30-day time frame was chosen for the notification section to ensure platform assessments were completed and reported in a timely manner. Different time frames for the notification section were considered. A time frame of less than 30 days was deemed to be too short for platforms to reasonably notify the CRTC of their application to the Act. A time frame greater than 30 days risked prolonging uncertainty for news businesses about which platforms are required to bargain under the Act.
Section 11: Exemption criteria
The proposed Regulations use both qualitative and quantitative criteria to reflect the legislative factors prescribed in the exemption section of the Act. Criteria using only qualitative factors were considered but presented the risk that the criteria would not reflect the full intent of the legislative principles set out in the Act. Metrics used in the regulatory criteria were chosen based on information available on the digital news landscape in Canada. Canadian Heritage welcomes stakeholder feedback on the Canadian news marketplace.
Benefits and costs
The cost-benefit analysis measures impacts as incremental differences between forecasted outcomes without the proposal (baseline scenario) versus with it (regulatory scenario). This allows a focus on results that are directly attributable to the proposal versus unrelated ones. Costs of the proposal include both incremental resources committed to achieving the desired outcome and the opportunity cost of alternative uses of those resources.
In the absence of regulations, the CRTC would have to commit additional resources to collect information on the news market and develop a regulatory process to implement the legislative criteria presently in the application, notification, and exemptions sections. This process would impact the implementation timeline of the Act as the CRTC would need to take additional actions to implement the proposed Regulations under the Act. This delay would also risk impacting the effectiveness of the Act in supporting the Canadian news sector.
Under the proposed GIC regulatory framework, the CRTC would require fewer resources to develop its own regulatory process. The regulatory scenario would also mean a shorter timeline to reaching agreements, reducing uncertainty and costs for all parties.
The costs for platforms to negotiate with news businesses and to engage with the CRTC are low and are expected to be less than $1 million (Can$) annually. The proposed Regulations are intended to clarify the Act in a way that minimizes transaction costs. The proposed Regulations provide concrete details to reduce uncertainty for all parties in the regime and provide details to the CRTC in its implementation of the eligibility and exemption provisions of the Act.
Compliance with the proposed Regulations would entail a cost to both digital platforms and the CRTC. Digital platforms would need to designate resources and undertake actions to assess and notify the CRTC about whether the Act applies to them. For example, platforms would have to deploy resources to notify the CRTC about the number of monthly active users they have. These costs would be low and are outlined in the “One-for-one rule” section below.
The costs to the CRTC include those related to implementing the proposed Regulations.
The proposed regulatory framework would provide clarity to all parties affected by the Act, including the CRTC, large digital platforms, and news businesses operating in Canada. The regulatory framework would provide the CRTC with details about how to implement the legislative criteria for the application and exemption components of the Act. The proposed regulatory framework would clarify which digital platforms would be included in the Act, when they need to notify the CRTC, and how they can meet the criteria for exemption from mandatory bargaining and final offer arbitration. Finally, the proposed regulatory framework, by laying out timelines for notification and criteria for exemption, also informs news businesses about which platforms will be included in the Act, the types of agreements platforms will be seeking, and when they may be able to reach out to platforms to express interest in bargaining.
Anticipated benefits for parties include the following:
Addressing bargaining imbalances between digital platforms and news businesses
The proposed application factors aim to ensure digital platforms with the largest power imbalances within the news sector are subject to the Act. News businesses would then have opportunities to engage with large platforms in negotiations to receive fair compensation for the news content they produce.
Providing clarity on platform application
The proposed Regulations would provide clarity to digital platforms on whether they are subject to the Act and on the specific notification timeline to inform the CRTC.
Supporting Canadian news businesses
The proposed Regulations establish sufficient clarity for meeting the exemption criteria set out in the Act. The criteria would benefit Canadian news outlets of all sizes, including local, independent news businesses. The criteria would ensure that a range of news businesses have an opportunity to enter into agreements and that the agreements contribute to the sustainability of the sector. The criteria would also ensure that agreements with platforms do not infringe upon the journalistic independence of news outlets.
Promoting diversity within the news sector
The proposed exemption criteria would promote diversity within the news sector by ensuring agreements take into account Canada’s geographic, linguistic, cultural and demographic diversity. The criteria would benefit Canadian news outlets of all sizes, including local, independent news businesses. The criteria would also provide guidance to the CRTC on ensuring that news agreements include official language minority communities and First Nations, Inuit and Métis peoples.
Small business lens
Analysis under the small business lens concluded that the proposed Regulations will not impose administrative or compliance requirements on Canadian small businesses.
The proposed Regulations target large digital platforms. However, there may be indirect impacts on smaller news businesses hoping to benefit from agreements with platforms. Smaller news businesses may have limited resources to engage in negotiations with digital platforms. To limit negative impacts on smaller news businesses, the proposed Regulations would require that digital platforms publicly solicit applications of interest in pursuing negotiations. Promoting awareness among businesses of all sizes that negotiations are underway helps promote fairness.
The proposed Regulations encourage platforms to bargain with collectives of news businesses. For small news businesses that may have limited resources to engage in negotiations, the opportunity to pool resources and bargain via a larger collective presents a greater opportunity to benefit from the proposed Regulations. Specific obligations on platforms to engage with certain types of bargaining collectives support the legislation’s goal of addressing bargaining power imbalances between news businesses, particularly small news businesses, and large digital platforms.
The one-for-one rule applies since there would be an incremental increase in the administrative burden on business, and a new regulatory title (Regulations Respecting the Application of the Online News Act, the Duty to Notify and the Request for Exemptions) would be introduced.
Section 7: Duty to notify
This regulatory proposal entails an administrative burden on platforms by requiring them to self-identify to the CRTC, as per the notification section of the Act. This requires platforms to verify whether they meet the criteria established in the application section.
The administrative burden posed by collecting the required information for the application section is expected to be small, as it requires information that is readily available to platforms.
The costing exercise was based on the following assumptions:
- The number of digital news intermediaries (DNIs) subject to the Act is small.
- One week (37.5 hours) of person hours is required to verify the thresholds are met and notify the CRTC.
- The cost of labour is $53/hour, based on the national average hourly wage for National Occupational Classification (NOC) code 02 (Management occupations). The parameters for this estimate (time required, hourly wages) will be verified with the affected companies through engagement.
Section 11: Exemption order
The Act provides the CRTC the authority to grant an exemption to platforms that reach an agreement with news businesses, provided certain conditions are met. The proposed Regulations would provide more specific direction on how select exemption criteria could be met. Administrative burden related to this regulatory proposal includes compiling information about the agreements that are reached and communicating that information to the CRTC. The cost of this administrative burden is estimated based on the following assumptions:
- The number of DNIs subject to the Act is small.
- Two weeks (75 hours) are required to compile the information about the deals and convey this information to the CRTC.
- The cost of labour is $53/hour, based on the national average hourly wage for NOC code 02 (Management occupations).
The total annualized administrative cost for completing both tasks related to the notification and exemption sections described above is estimated to be $801.00 (2012 Canadian dollars, a 7% discount rate, and a 2012 present value base year) and the annualized administrative cost per business is estimated to be $400.60.
Regulatory cooperation and alignment
The proposal is not related to a work plan or commitment under a formal regulatory cooperation forum. The proposal itself would not directly create new regulations applying to platforms. Rather, it would provide details to inform the CRTC on the regulation of the application, duty to notify, and exemptions sections of the Act. As an independent regulator, the CRTC would develop and issue further regulations that apply directly to platforms for those respective sections of the Act.
This type of relationship between the regulator and Cabinet is specific to the federal legislative and machinery context of Canada, and therefore, alignment of this specific instrument to other jurisdictions is not directly applicable. However, given that the proposed Regulations give details to the CRTC regarding the application of a broader regulatory regime to platforms within the news sector, analysis on how Canada’s general approach to news regulation compares to other jurisdictions is still relevant.
Linkages to international agreements
At this time, it is expected that the proposed Regulations would only apply to major U.S. search engines and social media platforms offering their services in Canada that meet the thresholds set out in the application section. It is expected that some stakeholders may believe that the regulatory framework engages Canada’s commitments under CUSMA. The Government has considered its commitments and developed the proposal in a way consistent with them.
Alignment with other jurisdictions
The Act builds on international approaches that have succeeded in achieving fair compensation for news media. International examples of intervention in this space have primarily focused on ensuring platforms compensate news media for content. Jurisdictions including Australia, the European Commission, Spain, and the United Kingdom have sought to enact legislation and regulatory codes involving the news sector. The example of the News Media Bargaining Code in Australia illustrates how legislation can have a positive impact on the health of the online news ecosystem. One research report showed that journalism job advertisement numbers increased 46% after their mandatory bargaining code was introduced.
In December 2022, New Zealand announced intentions to introduce a bargaining code which, similar to the Online News Act, would incentivize voluntary agreements between digital platforms and local news outlets. In the United States, California recently introduced the California Journalism Competition and Preservation Act, which, if approved, would direct large digital companies to pay news outlets a “journalism usage fee” when they sell advertising alongside news content.
The policy approach taken by Canada is modelled most closely on the Australian approach, which, thus far, has resulted in deals that represent a meaningful amount of editorial expenses. There are, however, notable differences between the Australian approach and the proposed regulatory approach. The Australian approach allows the Minister to designate which digital platforms are captured in the act. Canada’s approach to designating which platforms are captured in the Act is based on establishing clear criteria in the application section. In the Australian approach, exemptions are granted by the Minister following the determination that a digital platform has significantly contributed to the sustainability of the Australian news industry. The exemption process in Canada’s proposal is novel and based on regulatory criteria set in GIC regulations. These GIC regulations provide details to the CRTC about the application of the exemptions section of the Act. Lastly, the bargaining framework in the Australian model is set out in legislation. In the Online News Act, the framework would be set out in regulations made by the CRTC and directed by a timeline established in the Act.
Strategic environmental assessment
A strategic environmental assessment preliminary scan concluded that this proposal, which is administrative in nature, would not generate environmental effects. A detailed analysis was deemed not to be required. Subject to the Prime Minister’s prerogative over the machinery of government, the proposal would largely be implemented by the CRTC, an administrative tribunal that regulates and supervises Canadian broadcasting and telecommunications. The CRTC’s plans, programs and policies are not subject to strategic environmental assessments.
Gender-based analysis plus
While women, trans, and non-binary people are employed in journalism at rates on par with census population data, research shows that newsrooms continue to not be representative of the racial diversity of the communities they serve, particularly in smaller local markets. Women, trans, and non-binary people are overrepresented in part-time and internship roles. Newsrooms that reflect population diversity are more likely to produce news content that reflects the social and political concerns of all Canadians.
An annual national survey conducted by the Canadian Association of Journalists reports that in 2022, 8 out of 10 Canadian newsrooms do not have Latin American, Middle Eastern or mixed-race journalists on staff. Seventy-seven per cent of newsrooms report having no visible minorities or Indigenous people in top 3 leadership roles in newsrooms. Most Black, Indigenous, Middle Eastern, Latin American, and mixed-race journalists are employed by a small handful of large newsrooms and are further underrepresented within smaller newsrooms.
The same study found that over half of Black, Middle Eastern and Latin American journalists work at CBC or Radio-Canada, where 55% of Middle Eastern journalists, 51% of Latin American journalists and 62% of Black journalists work. Of the Indigenous journalists represented in the survey, 63% of them are employed at CBC or the Aboriginal Peoples Television Network. Studies have also shown that when persons with disabilities are employed in the news sector, they are at increased risk of losing their job if the news sector downsizes.
During consultations held in advance of tabling the Act, stakeholders raised concerns that this regime could create outcomes more favourable to larger national news businesses that have more bargaining power. Smaller news businesses that often serve specific communities (e.g. Indigenous, local, and ethnic communities, OLMCs) raised concerns that they might benefit less than larger businesses. The proposed Regulations under the exemption section would address these concerns by ensuring that agreements are made with news businesses that are diverse in terms of size, business model, language, communities served and geographical area.
The application section and notification section of the Act would have a neutral impact across different populations as these sections pertain to providing greater clarity in identifying which digital platforms the Act applies to. Regulations in either section would only directly impact digital platforms and will not have either a positive or negative impact on unrepresented communities or equity-seeking groups.
The legislative criteria in the exemption section of the Act stipulate that agreements meet key requirements, including providing compensation to support local, regional, and national news content; contributing to the sustainability of the Canadian news sector; and ensuring agreements include outlets that provide services to Canada’s diverse communities. Specifically, agreements must also support the production of news content for Indigenous and official language minority communities. The proposed regulatory framework establishes clear criteria for the CRTC to assess whether agreements meet the legislative requirements for the exemption section and provide digital platforms with the necessary information to seek out agreements with Canadian news publishers. Subsequently, Canadians from underrepresented groups and equity-seeking populations may benefit from the increased funds news businesses gain from reaching agreements with platforms.
The absence of agreements between digital platforms and news businesses would likely have negative impacts on equity-deserving communities because of the continued downsizing of newsrooms within the sector. Regulations can positively impact the issue of representation within the news sector.
Annual survey results on newsroom diversity, such as that undertaken by the Canadian Association of Journalists, provide an opportunity for Canadian Heritage to monitor any gender-based analysis plus (GBA+) factor impacts of the proposed Regulations.
Implementation, compliance and enforcement, and service standards
The proposed regulatory framework would come into force 180 days after the day on which The Online News Act received royal assent. The CRTC is responsible for determining how to implement the detailed interpretation provided in the regulatory framework and is required to hold public consultations to determine whether news agreements between digital platforms and news businesses meet the requirements of the exemption criteria. It is anticipated that the CRTC will begin public consultations on its regulatory approach in the near future.
Compliance and enforcement
The Act prescribes the powers and scope of the CRTC in enforcing the regulatory framework. Digital platforms are required to provide information to the CRTC if requested for the purpose of verifying whether a digital platform has followed the requirements outlined in the notification section. In instances where a platform meets the requirements of the application section but does not notify, the CRTC can issue a notice of violation to a platform requesting compliance and informing the digital news intermediary of the proposed monetary penalty if the platform does not comply.
The CRTC may issue an interim exemption order if a platform has met conditions prescribed in the interim order section of the Act. The CRTC can review exemption and interim exemption orders and repeal such an order if the circumstances satisfy the conditions prescribed in the review section of the Act. The CRTC is required to publish on its website any issuance or repeal of an exemption or interim exemption order and the reasons for the decision.
Digital and Creative Marketplace Frameworks Branch
Department of Canadian Heritage
25 Eddy Street
PROPOSED REGULATORY TEXT
Notice is given that the Governor in Council proposes to make the annexed Regulations Respecting the Application of the Online News Act, the Duty to Notify and the Request for Exemptions under section 84 of the Online News Act .footnote a
Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the following email: firstname.lastname@example.org.
Ottawa, August 4, 2023
Assistant Clerk of the Privy Council
Regulations Respecting the Application of the Online News Act, the Duty to Notify and the Request for Exemptions
1 The following definitions apply in these Regulations.
- means the Online News Act. (Loi)
- means the dollar value of the monetary and non-monetary consideration provided to a news business or group of news businesses, as the case may be, under the agreement between the operator and the news business or group of news businesses. It does not include any value assigned to merely making news available online. (indemnisation)
Imbalance — Factors
2 For the purposes of section 6 of the Act, there is a significant bargaining power imbalance between the operator and news businesses only if
- (a) with respect to the factor set out in paragraph 6(a) of the Act, the operator’s total revenue from all sources in the previous calendar year is greater than $1 billion;
- (b) with respect to the factor set out in paragraph 6(b) of the Act, the digital news intermediary offers one of the following online news communications platforms that make news content produced by news outlets available to persons in Canada:
- (i) a search engine that aggregates news content and pathways to the content of the news outlets corresponding to search queries made by visitors; and
- (ii) a social media service that facilitates interactions between users and news content through a social network; and
- (c) with respect to the factor set out in paragraph 6(c) of the Act, the digital news intermediary had, during the previous calendar year, an average of
- (i) at least 20 million unique visitors in Canada per month to the search engine referred to in subparagraph (b)(i), or
- (ii) at least 20 million active users in Canada per month to the social media service referred to in subparagraph (b)(ii).
Notification — Commission
3 An operator that is required to notify the Commission under subsection 7(1) of the Act must do so within 30 calendar days of the day on which the Act begins to apply to the digital news intermediary.
4 For the purposes of paragraph 11(1)(b) of the Act, the following are conditions:
- (a) the agreements referred to in paragraph 11(1)(a) of the Act were reached following an open call process in which:
- (i) the digital news intermediary made a public open call notice available on their online communications platforms for a period of at least 60 days and requested that the Commission make the notice available on the Commission’s website for that same period, and
- (ii) the digital news intermediary gave a period of at least 60 days for news businesses, or groups of news businesses, to respond to the open call notice;
- (b) the operator has provided the Commission with any information in respect of the open call process, relevant to the making of the exemption order, including a list of the news businesses and the groups of news businesses who responded to the open call notice within the period set out in that notice and, if applicable, the number of journalists referred to in subsection 6(2); and
- (c) the agreements referred to in paragraph 11(1)(a) of the Act, set out the value, in dollars, of any non-monetary consideration provided to a news business or group of news businesses, as the case may be.
5 Any agreement to which section 13 of the Act applies is deemed to have been reached following the open call process referred to in paragraph 4(a).
Interpretation — fair compensation
6 (1) For the purposes of subparagraph 11(1)(a)(i) of the Act, if the relative compensation provided for in each of the agreements, submitted by the operator with its request for an exemption, is within 20% of the average relative compensation of all of the agreements submitted with that request, the Commission must interpret the agreements as providing for “fair compensation”.
Definition of relative compensation
(2) For the purposes of subsection (1), relative compensation means the ratio of compensation relative to the number of full-time equivalent journalists paid by a news business or group of news businesses, as the case may be, in the previous calendar year.
Interpretation — appropriate portion
7 For the purposes of subparagraph 11(1)(a)(ii) of the Act, if the agreements submitted by the operator with its request for an exemption include a commitment by the news businesses or group of news businesses, as the case may be, that are party to the agreements to use some or all of the compensation provided under the agreements for the production of local, regional and national news content, the Commission must interpret the agreements as providing that an “appropriate portion of the compensation will be used for the production of local, regional and national news content”.
Interpretation — freedom and independence
8 For the purposes of subparagraph 11(1)(a)(iii) of the Act, if the agreements submitted by the operator with its request for an exemption include a commitment that the operator, directly or through its digital news intermediary, will not take actions that undermine freedom of expression and journalistic independence, the Commission must interpret that “they do not allow corporate influence to undermine the freedom of expression and journalistic independence”. The agreement must prohibit at least the following:
- (a) taking retaliatory action in response to an editorial decision of a news business;
- (b) restricting actions a news business may take to protect journalistic independence; and
- (c) intervening in a news business’s editorial process.
Interpretation — sustainability
9 (1) For the purposes of subparagraph 11(1)(a)(iv) of the Act, if the compensation provided for in the agreements submitted by the operator with its request for an exemption exceeds the amount determined by the following formula, the Commission must interpret that “they contribute to the sustainability of the Canadian news market”:
- A x B x 4%
- is the digital news intermediary’s global revenue from all sources in the previous calendar year, in the currency in which they typically reports; and
- is the quotient obtained by dividing Canada’s gross domestic product, in current US dollars, by the World gross domestic product, in current US dollars, using the most recent data from the World Bank.
(2) The result of the calculation in subsection (1) must be converted into Canadian dollars using the average exchange rate for the calendar year prior to the calendar year in which the exemption is requested, published by the Bank of Canada for that currency.
For greater certainty
(3) For greater certainty, as long as the compensation provided to the news businesses or group of news businesses, as the case may be, is equal to or greater than the value of the compensation set out in the agreements, the Commission must continue to interpret that the agreements “contribute to the sustainability of the Canadian news market” for the duration of the exemption order for which the agreements were submitted.
Interpretation — significant portion
10 (1) For the purposes of subparagraph 11(1)(a)(v) of the Act, if the agreements submitted by the operator with its request for exemption do not exclude any group of 10 or more independent news businesses operating local news outlets, the Commission must interpret the agreements as providing that a “significant portion of independent local news businesses benefit from them”.
Definition of independent
(2) For the purposes of subsection (1), independent means, with respect to a news business, one that operates five or fewer news outlets.
Interpretation — significant portion
11 For the purposes of subparagraph 11(1)(a)(vii) of the Act, if the agreements submitted by the operator with its request for an exemption do not exclude any group of five or more indigenous news outlets, the Commission must interpret the agreements as providing that a “significant portion of Indigenous news outlets benefit from them”.
Interpretation — significant portion
12 For the purposes of subparagraph 11(1)(a)(viii) of the Act, if the agreements submitted by the operator with its request for an exemption do not exclude any group of 10 or more official language minority community news outlets, the Commission must interpret the agreements as providing that a “significant portion of official language minority community news outlets benefit from them”.
For greater certainty
13 For greater certainty, when evaluating whether a news business or group of news businesses is excluded for the purposes of sections 10 to 12, the Commission is only required to take into account the news businesses and groups of news businesses that respond to the notice referred to in subparagraph 4(a)(i) within the period set out in that notice.
Coming into Force
S.C. 2023, c. 23
14 These Regulations come into force 180 days after the day on which the Act received royal assent.
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