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Examining Canada’s Online News Act, Bill C-18, In Light of Its USMCA Commitments

· September 7, 2022

Canada flag waving during daytime

Canada is expected to soon renew debate on Bill C-18 “An Act respecting online communications platforms that make news content available to persons in Canada” (the “Online News Act”).  Project Disco has previously covered the current text of the draft bill, and examined potential conflicts with Canada’s international commitments. 

This post dives deeper into Canada’s trade commitments under the U.S.-Mexico Canada Agreement (USMCA) that are implicated if Canada enacts the flawed approach to compensating Canadian news publishers. Further analysis of the negative implications of C-18 is included in a white paper released today. 

First, C-18 may conflict with USMCA Articles 14.4 (Investment); and 15.3 (Cross-border Services) regarding National Treatment 

 Article 14.4 states: 

Each Party shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments in its territory of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments 

Articles 15.3, 15.4 state: 

Each Party shall accord to services or service suppliers of another Party treatment no less favorable than that it accords, in like circumstances, to its own services and service suppliers… [and] to services and service suppliers of another Party or a non-Party.

Based on these national treatment rules, Canada has an obligation to ensure that the treatment it accords U.S. investors and U.S. investments, and cross-border service suppliers, is no less favorable than that extended to comparable investors, investments and service suppliers of Canada.  Accordingly, if Canadian social media companies, news aggregators, or search services (e.g. Urban Toronto, Loonie Politics, Daveberta) are not designated and required to compensate Canadian news businesses the way a U.S. business could be, Canada could be in breach of this obligation.  It is notable that during the debate held on the bill in the House of Commons, Canadian lawmakers did not mention a non-U.S. company in reference to the proposed obligations under C-18 once, while U.S. tech companies were referenced over 70 times.

Second, C-18 may conflict with USMCA Articles 14.5 (Investment) and 15.4 (Cross-border Services) regarding Most-Favored Nation Treatment (MFN) 

Art. 14.5 states: 

    1. Each Party shall accord to investors of another Party treatment no less favorable than the treatment it accords, in like circumstances, to investors of any other Party or of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

Art. 15.4 states: 

    1. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments in its territory of investors of any other Party or of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments

Based on this rule, Canada has an obligation to ensure that the treatment it accords U.S. investors and U.S. investments, and cross-border service suppliers is no less favorable than that extended to comparable investors, investments and service suppliers of third-countries.  Accordingly, if a social media company like OK.RU or Wechat, or a search company like Naver, Baidu, Yandex, or Qwant (all of which do business in Canada) are not designated and required to compensate Canadian news businesses the way a U.S. business could be, Canada could be in breach of this obligation.

Third, C-18 may conflict with USMCA Article 14.10 regarding Performance requirements. 

Art. 14.10 states: 

No Party shall, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory, impose or enforce any requirement, or enforce any commitment or undertaking:

(a) to export a given level or percentage of goods or services;

(b) to achieve a given level or percentage of domestic content;

(c) 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; 

Based on subparagraph (c) of this rule, a U.S. investor or investment cannot be required to buy, use or accord a preference to a Canadian service.  Accordingly, if a U.S. platform is required to carry and/or license Canadian news content pursuant to a governmental measure (e.g., C-18), Canada could be in breach of this obligation.

Finally, C-18 may conflict with USMCA Article 19.4 regarding Non-Discriminatory Treatment of Digital Products.

Art. 19.4 states: 

No Party shall accord less favorable treatment to a digital product created, produced, published, contracted for, commissioned, or first made available on commercial terms in the territory of another Party, or to a digital product of which the author, performer, producer, developer, or owner is a person of another Party, than it accords to other like digital products.

Based on this rule, Canada cannot extend a preference to a Canadian digital product (which clearly covers news in textual, audio, or video form) not also extended U.S. suppliers.  Accordingly, if a U.S. news company cannot qualify for the benefits of C-18 based on failure to employ Canadian journalists or perform editing in Canada, Canada could be in breach of this obligation.

Digital Trade

Companies rely on clear, predictable rules that facilitate digital trade to export their products and services around the world. These rules include balancing the competing interests between encouraging investment and enabling information access; promoting the free flow of information online; and maintaining balanced intermediary liability regimes.