Making sense of Justin Trudeau’s showdown with Google and Facebook

Jurisdictions around the world are undoubtably watching the standoff between Canada and tech giants Google and Meta over Bill C-18, also known as the Online News Act, since it provides a potential signpost for how things might unfold should they take up a similar fight.

A confrontation between government and the tech giants has already played out in Australia, which imposed the “News Media and Digital Platforms Mandatory Bargaining Code last year. In the U.S., the California Journalism Preservation Act is closer to becoming law, while the U.K and Indonesia are contemplating similar legislation.

Bill C-18 has been a long time coming, but now that it has become law and the showdown between regulators and the tech giants has escalated, we wanted to provide an overview about why it matters to media and consumers, and what role advertisers should play.

What is Bill C-18?

Bill C-18 is technically described as “an Act respecting online communications platforms that make news content available to persons in Canada.” It’s an attempt by government to take some power away from the two tech giants, who the government says act as “gatekeepers” in Canada’s news media ecosystem. The CRTC would be responsible for enforcing the Online News Act.

In its most basic terms,C-18 requires Google and Meta to compensate publishers for the use of their content on their platforms. The Parliamentary Budget Officer estimated that news organizations could receive up to a combined $329.2 million.

“The Bill introduces a new bargaining framework intended to support news businesses to secure fair compensation when their news content is made available by dominant digital news intermediaries and generates economic gain,” reads the government’s explanation.

According to the Columbia Journalism Review, Australia’s News Media Bargaining Code has seen more than A$200 million flow towards the country’s news organizations since it was implemented last year. However, it called it a “murky deal, with critical details guarded like they’re nuclear launch codes.”

Why was C-18 created?

The crux of the Bill is that the rise of the so-called duopoly means that a large swathe of the population now gets its information via search and social, often bypassing news media sites completely. There’s some disagreement about what this actually means.

The tech giants, for instance, contend that they send vital traffic to publishers, with Meta claiming earlier this year that Facebook Feed sent Canadian publishers more than 1.9 billion clicks in the 12 months to April 2022. “This amounts to free marketing we estimate is worth more than $230 million,” it said.

Publishers, meanwhile, argue that many readers often never advance beyond the headline or preview text on the Facebook post or Google search. Meta tacitly admitted that was the case in 2021, when it introduced a feature designed to promote what it called “more informed sharing” in the form of a prompt urging them to open and read articles before sharing.

Media mogul Rupert Murdoch first voiced his concern about how the media ecosystem was structured more than a decade ago. “Right now, we have a situation where content creators bear all the costs, while aggregators enjoy many of the benefits,” he said in 2009.

What’s indisputable, however, is that in addition to being the de facto source of information for Canadians, the duopoly also controls the overwhelming majority of digital advertising dollars. For every $1 spent on digital advertising in Canada, about 80 cents goes to those two companies.

Publishers argue that the knock-on effect is that Google and Meta are starving them of revenue necessary to keep journalists employed and newsrooms open, leading to continued degradation of the press that is fundamental to preserving democracy. It’s no secret that the tech giants are awash in misinformation and disinformation, and it will only proliferate in the absence of professional journalism.

Why should advertisers care?

Simple really: They’re largely responsible for supporting the media ecosystem. Without their ad dollars, traditional media will continue to wither and die.

Some might point to subscriptions as a way of offsetting advertising declines, but the Reuters Institute’s 2022 “Digital News Report” found that only 15% of Canadians paid for online news last year—below the global average of 17% and far below markets like Norway (41%) and Sweden (33%).

Source: Reuters Institute.

Meanwhile, 55% of respondents listed social media as a news source, up from 48% in 2016, while only 16% listed print (down from 36%). In addition, only 19% of subscribers to leading Canadian operations like the Toronto Star and The Globe and Mail were under the age of 30.

Torstar owner Jordan Bitove explained the magnitude of the challenges facing traditional media in a speech to the Canadian Club earlier this year. One company that purchased $50 million of media in 2022 spent just $6,800 of that with Torstar, he said. Meanwhile, less than $400,000 of the more than $100 million spent by the federal government made its way to the company.

Well this sounds bleak for media…

No question, but the good news is that there seems to be growing awareness of the importance of supporting local media among some industry leaders.

It’s the basis of the Canadian Media Manifesto, an initiative spearheaded by the Canadian Media Directors’ Council—whose member agencies account for 96% of all Canadian media investment—that is calling for more “intentional spend” of clients’ ad dollars and includes an investment of $380 million.

“While recognizing the significance of legislation supporting local journalism, we firmly believe that a collaborative approach involving all stakeholders is the key to success,” said CMDC president Shannon Lewis. “By working together, we can actively shape a thriving Canadian media landscape that not only sustains journalism, but also caters to the diverse informational needs of our society.”

And in a statement Wednesday, the Association of Creative Communication Agencies (A2C), the industry association representing more than 100 agencies in Quebec, said that it is more important than ever for advertisers to support local media “in order to ensure the preservation of essential content that informs us, nourishes our democracy, and our culture.”

How’s Bill C-18 being regarded?

In an essay last week, Chris Pedigo, senior vice-president, government affairs, for Digital Content Next, a trade association representing more than 60 media companies including Bloomberg, The New York Times and the Washington Post, called Bill C-18 a “reasonable and necessary reform,” and said that blocking news content is the latest example of how the tech giants “use their dominance to try to intimidate sovereign governments and news publishers.”

Writing in the Los Angeles Times, columnist Brian Merchant said that jurisdictions like Canada and California “must absolutely not give in to the tech giants’ tantrum” for the sake of “beleaguered” news industries. “Over the years, the value that news has brought to Google and Facebook (not to mention to Twitter, Reddit and other major social platforms) is staggering,” he wrote. “Journalism has bolstered the value proposition of these platforms considerably.”

Elsewhere, 18 organizations including News Media Canada, News Media Media, the Danish Media Association and the European Newspaper Publishers’ Association issued a strong rebuke of Google and Facebook in a joint statement on Wednesday.

“While governments around the world are recognizing the immense importance of protecting high-quality journalism for future generations—trustworthy and reliable content that keeps our communities and lawmakers informed, accountable, engaged, and entertained—Google and Meta are fighting tooth and nail against efforts to ensure news publishers get paid for the content they invest considerable time and resources in to produce,” it reads in part.

But the Online News Act also has its detractors beyond the duopoly. Noted media and legal expert Michael Geist, for example, has called it a “massive own-goal” for the government, one that will have “lasting and enormously damaging consequences” for Canadians.

And writing on her website The Line, former Postmedia journalist Jen Gerson called it “a hot mess created by a clearly well-intentioned government that appears to have been bamboozled by a group of media industry lobbyists helmed by organizations like Postmedia and Torstar,” which have failed to adequately pivot towards a digital media environment.

In other words, lots of people have opinions on this piece of legislation.

So where are we at now?

Bill C-18 received royal assent last month, prompting an immediate response from Meta and Google.

After originally announcing its intention to block news content for 5% of Canadian users on June 5, Meta announced on June 22 that news availability would be ended for all Facebook and Instagram users in Canada prior to the Online News Act taking effect.

Then, last week, Google announced that it would block news links in Canada, with Kent Walker, president of global affairs for Google and Alphabet, calling the Online News Act “unworkable,” and saying it creates “uncertainty for our products and exposes us to uncapped financial liability simply for facilitating Canadians’ access to news from Canadian publishers.”

Meta’s actions led the federal government to announce that it would halt all advertising activity on Meta. It was joined by the Quebec media company Quebecor, which said that Meta’s actions constituted an “abuse of [its] dominant position,” as well as the province of Quebec, and the city of Montreal.

In a statement on Twitter (translated from French) announcing the decision to halt the city’s advertising, Montreal mayor Valérie Plante called Meta’s refusal to share journalistic information “concerning,” adding that “access to verified and qualified information is essential.”

The federal government is one of the country’s largest advertisers, and its spend with Meta has been pegged at more than $100 million. It’s a vast sum, but a mere rounding error for Meta— which controls one fifth of the global ad market, with projected revenues of $120.8 billion this year, according to Digiday.

Prime Minister Justin Trudeau, however, was vociferous in his criticism of the tech giants, and Meta in particular. “We are not backing down on this,” he said during a press conference in Quebec on Wednesday. “This goes to the core of a free and informed society that is able to take responsible decisions in a democracy.

“The fact that Facebook doesn’t want to recognize the hard work of professional journalists across the country is something that undermines the very fabric of our democracy at a time we’re seeing democracy backslide around the world.”

—Photo from CPAC

Chris Powell