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The JCPA Hasn’t Improved with Age

· September 1, 2022

Business newspaper article

After an initial introduction in 2018 and reintroduction in March 2021, Congressional sponsors released the revised version of S. 673, the Journalism Competition and Preservation Act (“JCPA”) on August 23, 2022.  What began as an effort to give journalism organizations an antitrust “get-out-of-jail-free” card has morphed into a vast link-tax-and-spend scheme under which leading digital services would be compelled to distribute and subsidize online content publishers, at prices set by a government-mandated panel of arbitrators. 

There are numerous reasons why this effort is misguided.  First, it is constitutionally unsound in multiple ways.  Second, it prohibits content moderation practices that are used to remove hate speech and fight misinformation online.  Third, the bill runs afoul of existing U.S. copyright law, with a ‘savings clause’ too narrow to save anything.  Fourth, the JCPA remixes two failed 20th century competition policies: it grants a special interest antitrust exemption in a government-guided effort to make prices subjectively “fair”. Yet, antitrust exemptions have historically fallen flat, including one specifically given to journalism producers, and the government’s New Deal foray in “fairness” regulation for pricing is widely regarded as a disaster.  Finally, national and international experience shows that special treatment for news publishers has done little for independent journalists and instead resulted in government-mandated negotiations controlled by large and influential publishers.  Each of these problems are discussed below. 

Whom Does the JCPA Regulate, and What Does It Do?

The JCPA applies to ‘“online platforms” that are defined expansively to include any large digital or online service that “aggregates, displays, provides, distributes, or directs users to news articles, works of journalism, or other content, or portions thereof” (emphasis added), if that content was created or is owned by an eligible publisher.  While the bill sponsors have been explicit about their desire to target Google and Meta, the sweeping nature of the bill’s “platform” definition ensures that digital or online businesses that reach a certain size will be compelled to subsidize the beneficiary publishers.   

There are various requirements for publishers to qualify for subsidies and other special treatment under the JCPA.  “Qualifying publications” are those U.S.-oriented producers of “original content concerning regional, national, or international matters of public interest” who employ journalists and other creative roles, of a certain size.  Qualifying publications cannot employ too many: in a likely effort to avoid criticism for subsidizing highly successful publications, JCPA beneficiaries cannot have more than 1,500 employees.¹

The exceptions to who is subsidized are also telling: the bill expressly carves out publications associated with, designated as, or convicted of terrorism-related charges.  The fact that the bill sponsors saw fit to exclude terrorists from receiving subsidies indicates just how large it expects the universe of subsidy recipients to be.  Rather than funding producers of objective journalism, the JCPA can be expected to create subsidies for a large universe of online content.

Why Is the JCPA Unconstitutional?

The government cannot force a private actor to carry others’ speech.  Just as the government cannot force a person or business to say a thing, it cannot force them to subsidize something else saying that thing.     

The JCPA bans regulated platforms from removing links to publishers demanding to be paid for the traffic they receive (Sec. 6(a)(2) and Sec. 6(b)(1)).  Platforms are therefore forced to display user-posted content from publishers, but upon doing so, must pay that publisher.  As currently drafted, this scheme is hopelessly unconstitutional.  It forces private actors to publish others’ speech, and to subsidize that speech.  Both actions are independent First Amendment landmines, which the JCPA stomps on with vigor. 

The Supreme Court has repeatedly knocked down regulatory schemes to force someone to distribute another’s expression.  It rejected a state law mandating a ‘right of reply’ to newspaper editorials.  It overturned a mandate that a private parade include a parade float whose message the parade organizers disagreed with.  It reversed a requirement that an electrical utility include in its billing envelopes third-party advocacy that the utility did not agree with.  

Another, separate constitutional problem with the JCPA is its obligation to subsidize others’ speech.  For example, the Supreme Court has ruled that an agribusiness could not be forced to chip into a cooperative produce marketing campaign.  More recently, the Court held in a case called Janus v. AFSCME that a public employee could not be forced to pay dues to a union with whom they disagreed.  

The notion that compulsory speech subsidies are inimical to democracy is not new.  The Janus Court quoted Thomas Jefferson, who wrote, “to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhor[s] is sinful and tyrannical.”

There’s no precedent for such a regime of compelling a private actor to both distribute and subsidize the speech of another speaker.  The current scheme that mandates cable companies carry the signals of broadcasters who demand carriage is the nearest approximation, but it isn’t even close.  Under the cable “must-carry” scheme, when broadcasters demand carriage there’s no payment.  The carriage itself is the benefit.  Broadcasters cannot demand both.   

And the cable must-carry scheme is a unique case.  It narrowly survived Supreme Court review in 1997 in the Turner II case, for reasons that don’t apply to the JCPA.  First, the Court pointed to the fact that absent must-carry, “a cable operator can prevent its subscribers from obtaining access to programming it chooses to exclude.”  This isn’t the case with platform must-carry.  Certainly, a digital platform might remove content from its own site, but unlike the cable context, when a digital platform declines to link to a news publisher, that publisher’s website is not removed from the Internet.  

Another reason Turner demonstrates the unconstitutionality of platform must-carry is that the Supreme Court concluded that cable must-carry rules were “content-neutral”, meaning that the regulations applied without reference to the content of the speech.  As a result, the cable must-carry rules were held to a lower standard of scrutiny.  But the JCPA subsidizes a particular set of publishers: U.S.-oriented producers of “original content concerning regional, national, or international matters of public interest.”  The JCPA confers advantages on a specific group of content producers, of a specific size, that meet the bill sponsors’ idiosyncratic definition of “news.”  This makes the JCPA a content-based regulation, subjected to the strictest constitutional review.  

The Supreme Court also concluded that no television viewer would associate their cable company with the broadcast programming sent over the cable network.  That’s not the case with online platforms.  Many people — even sponsors of the JCPA — attribute to digital services the content posted by third parties.  Platforms perform content moderation or “trust & safety” operations because they recognize a responsibility to their communities that cable companies do not shoulder.  

The platform must-carry rules may also be an unconstitutional “Taking.”  Legal scholars have previously questioned whether the expansion of cable must-carry rules to digital television runs afoul of the Fifth Amendment, which prohibits the government from taking property without just compensation.  Whether the JCPA constitutes a taking likely depends on the ultimate structure of the JCPA’s must-carry obligations, but the current draft expressly forbids digital platforms from accounting for “any value conferred upon the eligible digital journalism providers . . . by the covered platform for aggregating or distributing their content”.  (Sec. 3(b)(4)(b)).  In short, platforms must carry content, but in the mandatory negotiations over that carriage, they cannot claim that their service confers any value.  Of course, if that were the case, publishers would not be demanding it.  This express prohibition from claiming any value-add interferes with platforms’ reasonable expectations regarding past investments in their services, and the Supreme Court held in the 1978 Penn Central case that such interference was prohibited by the Fifth Amendment.

Finally, the arbitration regime created by the JCPA is so one-sided that it constitutes an unprecedented government intervention in the operation of the marketplace.  Under Sec. 3(b)(4), the offer for the price of access to the news content must reflect a fair market value of the access to the platform, without any offset for the value the publishers receive from the platform accessing their content, such as the ad revenue the publishers receive from the traffic the platform directs to the publishers’ sites.  As a result, under the JCPA, the offer reflects the benefit to only one party of the transaction, while completely ignoring the benefit to the other party. 

This decidedly non-economic approach continues in the arbitration that would follow an unsuccessful negotiation.  Under Sec. 4(e)(2), which sets forth the requirements for a decision by the arbitrators, the arbitration panel “may not consider any value conferred upon any eligible publisher by the covered platform for distributing or aggregating its content as an offset to the value created by such eligible publisher.”  What makes putting blinders on the arbitrators particularly offensive is that in all likelihood, the access to news websites provided by platforms is significantly more valuable to the new publishers than to the platforms. 

Concerns Regarding Content Moderation

The JCPA compels online platforms to bargain with and pay publishers.  In Sec. 6(a)(2), it explicitly prohibits covered platforms from “discriminating” against covered publishers based on that publisher’s size, or the views the publisher expresses.  In Sec. 6(b)(1), it further prohibits platforms from retaliating against those demanding subsidies “by refusing to index content or changing the . . . placement of the content of the eligible digital journalism provider on the covered platform.”  In addition, the JCPA prohibits “refusing to negotiate”. 

This means that “covered platforms” must ensure both links and revenue payments to all publishers that are eligible to get paid according to the bill, with no exception.  

This provision would directly affect current content moderation practices by inhibiting platforms’ ability to take down dangerous information and protect their users.  The way it is drafted, the JCPA will lead to prohibiting important content moderation practices that are used to remove hate speech and fight misinformation online.  

Although objective journalism is critical to informing users, policymakers should not interfere with the ability of platforms to engage in First Amendment-protected editorial discretion and following specific guidelines and policies.  To the contrary — Congress should carefully consider the importance of content moderation and continue promoting moderation of dangerous content online. 

Serious Copyright-related Issues Remain

In addition to its constitutional and competition-related infirmities, the latest text of the JCPA continues to raise serious free expression concerns at the nexus of copyright and the First Amendment.

A unanimous Supreme Court has held that no one can own facts because of the First Amendment, yet that is exactly what the JCPA does: it gives publishers an ownership right in facts.  So requiring the platforms to pay for facts also violates the First Amendment.

Furthermore, as DisCo has previously discussed, under international copyright treaties, copyright protection does not extend to short phrases or facts, and mandates that the ability to quote is not abridged.  Most jurisdictions view displaying a short quotation or snippet to be permissible because it may be too short to qualify for copyright protection, or it may fall under an exception to copyright law like fair use or fair dealing, including exceptions mandated by Art. 10(1) of the Berne Convention, which prohibits nations from restricting the right to quote. 

Civil society organizations have repeatedly raised copyright-related concerns with the JCPA, noting that it conflicts with key principles like fair use, and threatens to impede linking on the Internet.  As Public Knowledge explains, “This would represent a major shift in copyright law (not to mention the nature of the internet, which is fundamentally built on links to content).”  Public Knowledge also raises that, “[t]o the extent that this creates a new substantive right to demand that material not be linked to, this is unwise; to the extent that it interferes with fair use rights, particularly of the rights of users of platforms, it is unconstitutional and violates our international obligations.”  According to EFF, the JCPA “risks creating a new quasi-copyright law for linking, or even leading the courts to extend copyright law to cover some forms of linking.”  R Street notes that “functionally a link tax would once again help the larger news conglomerates and not local outlets, as has been the case in other countries.”

The fact that the newest text of the JCPA now contains a savings clause in Sec. 9(b) citing the Copyright Act has led some to claim that the bill would not affect the operation of copyright law.  Unfortunately, the savings clause is sufficiently ambiguous such that a court could misinterpret it and render it ineffective.  When the clause says rights under Title 17 aren’t modified or expanded, that means that exceptions aren’t contracted.  Rights and exceptions are two sides of the same coin.  But a court could misinterpret the clause, noting that it makes no reference to remedies, limitations and exceptions, or defenses, unlike copyright savings clauses in the U.S. Code (see, e.g., 17 U.S.C. § 1201(c)(1)).  

Contrast the JCPA’s narrow copyright savings clause in Sec. 9(b) with the antitrust savings clause in the JCPA’s immediately preceding section, Sec. 9(a), which simply states that the JCPA shall not “modify, impair, or supersede the operation” of antitrust law.  An unambiguous copyright savings clause would resemble this.  The unclear scope of the copyright ‘savings’ clause means that many concerns raised about the JCPA’s impact on copyright all remain valid.

Legal and Policy Concerns from an Antitrust Perspective

Under the JCPA, news publishers and broadcasters would receive a free pass to collude against digital advertising services.  The bill would clearly shield price fixing and legalize collusion, the “supreme evil of antitrust.”  The likely and unfortunate consequence of this would be advertisers ending up paying higher prices, which would be consistent with the results of antitrust exemptions in other sectors and industries.  Generally speaking, most antitrust exemptions are disfavored by experts, who regard similar permissions to form a cartel as “a product of special interest pressure within the legislature.”

The objective of U.S. antitrust law is to preserve incentives for companies to compete on the merits.  The antitrust rules include obligations that only apply in specific situations to successful firms that possess market power in a defined relevant market.  For antitrust law purposes, relevant markets are not defined on a subjective, ad hoc basis, or by arbitrary line-drawing.  Rather, a relevant market is defined by using economic analysis of the elasticity of demand; that is, how significantly consumers respond to price changes in light of factors like other competitors and substitutes.  Enforcers and courts then assess whether or not a firm has the power to unilaterally raise prices in the relevant market.  This economic analysis is crucial to understanding complex market dynamics, including those occurring in the digital or “connected” sector.

However, permitting favored businesses to form cartels runs counter to U.S. antitrust principles and would disrupt an otherwise well-functioning market economy.  Antitrust exemptions have generally had limited success in achieving their stated goals; as such, they have been frequently criticized and generally disfavored.  These exemptions or immunities typically invite competitors to form cartels and engage in price fixing or collusive bargaining.  They distort the free market and impair its efficiency.  When competitors collude to collectively set prices or agree on terms against other relevant market players, prices tend to be higher and quality decreases for lack of a competitive incentive to improve.  As such, the JCPA would not only foster harmful collusive pricing, but it would also significantly harm its beneficiaries as it would allow them to avoid necessary steps to modernize and render themselves more efficient companies.

The JCPA’s effort to structure how competitive markets operate echoes the Depression-era Robinson-Patman Act and its troubled history.  In 1936, with the purpose of protecting competition, Congress enacted the Robinson-Patman Act to prohibit price discrimination in an era when new methods of competition had disrupted the retail status quo, upsetting wholesalers and small retailers.  The Act was designed to protect small retail shops against competition from chain stores by fixing a minimum price for retail products.  The results did not turn out to be as expected.  The Act ended up harming consumers, proved impossible to administer, and led the Antitrust Modernization Commission to call for its repeal in 2007.  Adopting the industrial policy envisioned by the JCPA would lead to similarly problematic and harmful results. 

Further Lessons Learned from National and International Experience

Given the widely-shared objective of preserving news media production, two key questions are: (1) will the JCPA approach of creating a safe harbor from antitrust laws for news content creators obtain those results in practice; and (2) could that desired objective be obtained in accordance with existing U.S. antitrust policy?  

It is important to note that newspapers in the United States have already had a partial antitrust exemption for over 50 years.  Unfortunately, the Newspaper Preservation Act of 1970 (“NPA”) failed to achieve Congress’ stated goal to maintain independent competing voices.  In fact, historians and journalists have argued that the NPA fostered monopolies and chains instead of producing independent voices.  Given the cautionary history of the previous exemption for local newspapers, the implementation of another exemption is obviously ill-advised. 

As U.S. legislators are reviewing these issues, they should closely look at international experience and lessons learned from controversial laws from other jurisdictions.  The JCPA tracks closely with the recently adopted Australian and Canadian frameworks on news media as well as those of the EU.  Specifically, in February 2021, Australia adopted a news media bargaining code requiring “designated digital platforms” to negotiate with press publishers over compensation for the value the publishers’ stories generate on the companies’ platforms.  If, after three months of bargaining, the parties have not reached an agreement, an arbitration panel makes a binding decision on the rate of remuneration.  Following Australia’s proposal, in April 2021, Canada released Bill C-18, which would force digital news intermediaries into negotiation with Canadian news companies to make those intermediaries pay to carry news content onto the intermediary’s platform.  Both initiatives build off provisions introduced by the European Union’s Directive on Copyright in the Digital Single Market, which was adopted in 2019.  Article 15 of the EU Directive creates a neighboring right that effectively requires leading U.S. digital services to pay news publishers for any incidental use of their content other than a bare link.  

This strategy of seeking to redistribute funds from the U.S. tech sector to foreign news conglomerates has proven controversial in both the European Union and Australia.  Although this model tries to eliminate the need to consolidate by allowing for collective bargaining by publishers, the international experience has indicated that the real effect of its implementation is that large players control these negotiations instead of the smaller actors.  The big publishers will capture most of the revenue.  There are enough loopholes in the JCPA’s 1,500 employee threshold that most of the revenue will go to the larger media conglomerates, and local journalism will not be helped. 

As an alternative, studies have suggested other policy options that may be considered.  For example, a 2009 FTC staff discussion draft on this topic explored various measures to promote public interest news reporting in the Internet era that are less problematic, more effective, and more consistent with the U.S. framework.  These include, among others, federal tax deductions and grants to universities to conduct investigative journalism.

As the JCPA has grown, so too have the problems it raised.  Ultimately, mandating subsidies from one industry to another is not the way to find a viable business model for news producers.

Objective journalism is critical to informing users, and it should be considered a public good.  However, giving an antitrust exemption to a host of online content publishers in the hopes that this inures to the benefit of producers of objective journalism is doubling down on failed policies.  Congress can learn from the history of its previous efforts and not repeat this mistake.


¹The employee limitation is a peculiar constraint.  First, when the bill creates size thresholds for digital services, it uses revenues and monthly active users.  But when creating thresholds for news producers, it uses headcount.  If the intent of the JCPA is to promote journalism, it is counter-productive to incentivize firing reporters or replacing employees with contractors.  In any event, this threshold, like all size-based regulatory thresholds, induces inefficient behavior.  Just as regulations aimed at restricting the growth of successful digital services would create distortions around the arbitrary threshold, news producers below the threshold will be encouraged to stop growing as they approach it, and those above it will be encouraged to reduce personnel to qualify for subsidies.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.