Social media regulation, failure to address vertical integration, among Bill C-11's issues: lawyers

The federal government’s ability to regulate user-generated social media content and its implications for freedom of expression, as well as the “missed opportunity” in not addressing the anti-competitive tendencies of vertically integrated media companies, are two areas of concern with bill C-11, the recently tabled Online Streaming Act, say lawyers.

The Minister of Canadian Heritage, Pablo Rodriguez, introduced the Online Streaming Act on Feb. 2. The proposed law would amend the Broadcasting Act to put online streaming services — Netflix, YouTube, etc. — under its domain and require them to contribute to the creation of Canadian content.

The Act aims to correct the regulatory imbalance that has accompanied the rise of digital media, says Antoine Malek, director of regulatory affairs at TELUS Communications. Currently, traditional broadcasters and distributors are subject to “significant regulatory obligations and fees” to support Canadian programming and culture, and streaming services are not, he says.

“I think that’s a good thing,” he says. “It’s not been a level playing field at all.”

However, Malek says the proposed bill fails to address another decade-long trend: the domestic concentration of vertically integrated media companies.

In the broadcast sector, vertical integration is when a company owns both the broadcasting distribution undertaking (BDU) and the commercial programming undertakings that supply BDUs content. “When you have one company that owns both, it creates some anti-competitive incentives,” he says.

The vertically integrated company may favour its own programming over competing broadcasters in programming. Distribution may raise a competitor’s costs or deny them popular programming controlled by the vertically integrated company.

The CRTC has addressed vertical integration’s anti-competitive incentives with safeguards such as the wholesale code, says Malek. The wholesale code prohibits tide selling, restricting BDUs’ ability to offer customers choice and flexibility and requires programming rates based on fair market value. The CRTC also created the standstill rule, which prevents customers from experiencing service blackouts — common in the U.S. — which arise when there is a dispute between a broadcaster and a BDU, he says.

“But over the past five years, what you’ve seen is vertically integrated companies have been challenging the CRTC’s jurisdiction to impose these types of safeguards or to intervene at all in the economic relationship between broadcasters and BDUs,” says Malek. Both the wholesale code and standstill rule have been challenged in the courts.

“The challenges obviously create some uncertainty — a great deal of uncertainty — and Bill C-11 could address those by explicitly granting the CRTC the jurisdiction to regulate the wholesale relationship between broadcasting undertakings,” he says. “And that would allow it to address issues that relate to market power and anti-competitive conduct. But right now, in its current form, C-11, doesn’t do that, which, in my view, is a missed opportunity.”

According to Heritage Canada, the Online Streaming Act would improve the inclusiveness of broadcasting and regulatory policies, reflect Indigenous cultures, reinforce the commitment to minority languages and enhance accessibility for Canadians with disabilities.

Heritage Canada said the bill gives the Canadian Radio-television and Telecommunications Commission new enforcement powers through an “administrative monetary penalty scheme.” The bill proposes a “flexible approach to legislation,” which allows the CRTC to “tailor the conditions of service and other regulatory requirements” while considering the legislation’s policy and regulatory objectives, the different types of broadcasters involved and “what is fair and equitable depending on the circumstances.”

Heritage Canada’s backgrounder notes that the Online Streaming Act will not apply to “individual users of social media services or amateur programs uploaded by those users” and that only the platforms, not the “online creators,” will be regulated.

Bill C-11 is an updated version of bill C-10, which died in the Senate when Parliament dissolved for the election last year. Mark Mancini is an administrative law scholar and doctoral student at the University of British Columbia and former national director of the Runnymede Society. The power bill C-10 vested in the CRTC to regulate content uploaded on social media apps by individual users raised issues concerning freedom of expression, he says. And despite the carve-out for individual users in C-11, Mancini says those concerns have not died with C-10.

“If you look a little bit deeper into the law, and if you go past the background, you see that actually the CRTC has been given the power to treat users as subject to the law if it makes a regulation saying so,” he says. “So, rather than the government taking responsibility for choosing to regulate users or taking heat for the potential scope of this law, it just punted that problem to the CRTC.”

With bill C-11, the federal government “leave[s] the door open” on regulating user-generated content with the “legislative pretzel” contained in ss. 4.1(2) and 4.2 of the Act, said a blog post by Professor Michael Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa.

Section 4.1(2) states the act applies to “programs as prescribed by regulations that may be created by the CRTC,” said Geist. Then, s. 4.2 sets out three factors the CRTC must consider when creating regulations to treat social media content as such a “program:” whether the content directly or indirectly generates revenue, if it has been broadcast by an entity licensed or registered with the CRTC and if an international standards system has assigned the content a unique identifier.

Geist adds that the law does not instruct the CRTC on weighing the factors. There is also an exclusion for content where neither the user nor the copyright owner receives revenue, and for visual images. But the three criteria could “be applied broadly” to other online content, including YouTube and TikTok videos and podcasts.

Bill C-11 also expands CRTC power by removing provisions that were added to bill C-10 to “limit the scope of CRTC orders and regulations over online undertakings and user-generated content,” said Geist.