How Bill C-18 Violates CUSMA/USMCA, Berne Convention According to the CCIA

Following a particularly hilarious op-ed, we decided to go ahead and lay out exactly why Bill C-18 violates CUSMA/Berne Convention according to the CCIA.

Yesterday, we noted the hilarious op-ed trying to explain away the threats of trade retaliation. The author of the piece basically offered the counter arguments that it won’t happen because… he had a good feeling it won’t and because it hasn’t happened yet, then it will never happen. The rest was basically a very wordy way of saying “I dunno” (hence the use of ¯\_(ツ)_/¯ in the headline yesterday).

To say the wishful thinking was unconvincing would be an understatement. Of course, the inevitable response is probably going to revolve around “OK smart guy, how do YOU think Bill c-18 WILL violate CUSMA?” Thanks for asking because my job is now very easy.

This is thanks to the CCIA white paper on Bill C-18 which lays out a considerable case for it. Contrary to the aforementioned op-ed authors word twisting, the complaints and arguments easily go far beyond comparisons to maple syrup. For those who want to read along with the paper itself, you can find it here (PDF). Additionally, since there is going to be numerous references, you can follow along the text of CUSMA here for quite reference.

The reason for using this white paper is for very sound reasons: this trade organization would be the ones driving the calls to issue the trade tariffs in the first place. It’s ultimately not me you would have to convince there is no CUSMA trade issue, but them. So, what did the white paper really say?

The Discrimination Against US Companies

A chief argument against Bill C-18 as a violation of CUSMA is the fact that it discriminates against US companies. On page 5, this was laid out quite thoroughly. Here’s a sample of this:

Designated “digital news intermediary”

A digital news intermediary is broadly defined as an “online communications platform, including a search engine or social media service . . . that makes news content produced by news outlets available to persons in Canada.”

However, Bill C-18 includes vague criteria for “designating” specific suppliers that are likely to be used to target primarily U.S.-based companies. Namely, designation applies to:

… [A] digital news intermediary if, having regard to the following factors, there is a significant bargaining power imbalance between its operator and news businesses: (a) the size of the intermediary or the operator; (b) whether the market for the intermediary gives the operator a strategic advantage over news businesses; and (c) whether the intermediary occupies a prominent market position.

These factors (“significant bargaining power imbalance,” “size,” “strategic advantage,” and “prominent market position”) all suffer from a common flaw: since intermediaries and news businesses are not actually in direct competition with each other and there is no compelling basis for mandating bargaining in the first place (e.g., evidence of systemic market failure), using such factors to identify a target for application of the law makes little sense, other than as an arbitrary mechanism for identifying lucrative targets for transfer payments.

So, what articles does all of this violate? According to footnote 20, the following:

USMCA Articles 14.4, 14.5, 15.3, and 15.4.

For those who are trying to argue that Bill C-18 doesn’t violate CUSMA, a convincing argument has to be made why all four of these articles are not relevant to this.

Eligibility of News Organizations

Moving on to page 7 and the next issue the CCIA takes issue with is with provisions about eligible news organizations. The CCIA cites Bill C-18’s provision about this in this manner:

A qualified Canadian eligible news business, the intended beneficiary of this proposal, is—if not already designated as a “qualified Canadian journalism organization” under Canada’s Income Tax Act—defined as an entity that, inter alia, per Article 27

(i) regularly employs two or more journalists in Canada,
(ii) operates in Canada, including having content edited and designed in Canada, [and]
(iii) produces news content that is not primarily focused on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment.

The CCIA says that this raises trade issue because Canadian outlets, as a general rule, would most likely gain from this law while making it harder for foreign news organizations to compete in Canada. This is a CUSMA trade violation for the following reasons:

While some foreign news organizations could conceivably qualify under this definition, most likely would not, putting them at a clear disadvantage as compared to their Canadian competitors with respect to the benefits Bill C-18 offers. Such discriminatory treatment raises additional questions regarding compliance with trade obligations, as either investors (USMCA Article 14.4), cross-border service suppliers (USMCA Article 15.3) or suppliers of digital products (USMCA Article 19.4). In short, the effect of Bill C-18 with respect to U.S. (and third-country) news businesses is clearly to provide an unjustified advantage to Canadian suppliers, thereby harming foreign suppliers seeking to compete in the Canadian market for news.

Some may look at this and say that they wouldn’t have a problem with this because Canada should be looking out for their own. The argument has nothing to do with the idea of maybe this is a good policy or a bad policy to have, but rather, whether it violates CUSMA. What the CCIA lays out here is quite convincing that this is a trade violation.

Must-Carry Obligations

Another point of contention is the “Must-Carry” obligations. The CCIA points out that such provisions also violate Canada’s international trade obligations through CUSMA:

When other countries have introduced payment mechanisms such as through compulsory licenses pursuant to ancillary copyright provisions, some intermediaries have responded by simply exiting the specific affected market (e.g., news aggregation for a specific market). This is a rational choice where a payment demand does not prove economically justifiable.21 To avoid such a scenario (e.g., an intermediary choosing not to index Canadian news, or a social media platform declining to host a news organization’s page), Canada has proposed a disingenuously-termed “non-discrimination” provision. Article 51 states:

In relation to news content that is produced primarily for the Canadian news marketplace by a news outlet operated by an eligible news business and that is made available by a digital news intermediary, the operator of the intermediary is prohibited from acting in any way that
(a) unjustly discriminates against the business; (b) gives undue or unreasonable preference to any individual or entity, including itself; or
(c) subjects the business to an undue or unreasonable disadvantage.

So, how do these provisions violate CUSMA? In the following manner:

The result, a de facto “must-carry” obligation forcing designated intermediaries to carry Canadian news, appears inconsistent with commitments in USMCA. In the Investment Chapter of USMCA (Article 14), Canada undertook an obligation to avoid performance requirements with respect to U.S. investors and investment—i.e., a prohibition on requirements “to purchase, use, or accord a preference to a good produced or a service supplied in its territory, or to purchase a good or a service from a person in its territory.” The de facto obligation to carry Canadian news content that is at the heart of Bill C-18 cannot be squared with this commitment.

Violations of the Berne Convention

Shortly after, the CCIA also noted that Bill C-18 violates the Berne Convention. They state the following:

Through a combination of a broad definition of the term “making available” and an exclusion of copyright limitations and exceptions, Bill C-18 ensures that the merest fragment of Canadian content carried by an intermediary (typically, as noted previously, at the news organization’s direction) suffices to justify imposing obligation pursuant to this measure. The definition of “making available” in Article 2 of Bill C-18 specifies that:

news content is made available if (a) the news content, or any portion of it, is reproduced; or (b) access to the news content, or any portion of it, is facilitated by any means, including an index, aggregation or ranking of news content.(emphasis added)

Additionally, an explicit exclusion of copyright exceptions and limitations closes off the right to quotation (Article 10(1) of the Berne Convention, to which Canada is a party) or to use minimal content that might be indexed or linked to.24 Article 24 of Bill C-18, Limitations and Exceptions, states: “For greater certainty, limitations and exceptions to copyright under the Copyright Act do not limit the scope of the bargaining process.”

A complete elimination of fair use/fair dealing, consistent with the three-step test memorialized in Berne, could open Canada up to potential litigation.25 Accordingly, Bill C-18 significantly broadens the basis for asserting a claim for compensation as compared to countries who have sought similarly extractive policies through expanded intellectual property rights (which generally cannot override treaty-based exceptions and limitations). Additionally, this scope significantly lowers the threshold for being able to set up a business designed to facilitate access to mandatory payments. If the analogous phenomenon of “clickbait” is any guide, it is doubtful that incentivizing broad compensation claims will do anything to promote quality journalism and may well have the opposite effect.

So, it’s not just one trade agreement that Bill C-18 violates, it’s two. Once again, the case is pretty darn compelling. The Berne Convention does require minimums for quotation and Bill C-18 clearly violates those norms and standards.

Conclusions

Looking through the paper in great detail, if there is a compelling counterargument to this, I’m not seeing it. It’s no wonder the columnist refused to address any of these points and, instead, chose to rewrite what was said as little more than a comparison to maple syrup. He didn’t have any real response to the overwhelming evidence that Bill C-18 is a violation of Canada’s international trade obligations and, more likely, there is no real response. Canada is in the wrong on Bill C-18 in this angle.

Seeing the CCIA raise the issue about how most international news sources would be unfairly discriminated against is an angle I hadn’t exactly considered yet. In my defence, there’s so many things wrong with Bill C-18, it’s difficult to identify every angle in which Bill C-18 is wrong morally, ethically, and legally among other things. Ultimately, it’s a really good point that I can’t really find any flaws in.

The case that Bill C-18 is a violation of Canada’s international trade obligations is overwhelming. What is particularly amusing is the fact that Bill C-18 supporters had a long time to respond. The white paper in question has been available since September of last year. The best supporters could come up with is calling it “entertaining” and pretending 99% of the text doesn’t exist. That may work with some of the readers mainstream media outlets intentionally scammed into believing, but shrugging off legal arguments is not likely going to fly with a reasonable judge – something this dispute is likely to head to.

Bill C-18 supporters are going to have to come up with a significantly better response then that columnist. After all, their response so far is comically inadequate.

Drew Wilson on Twitter: @icecube85 and Facebook.



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