E-commerce law expert warns ‘link tax’ could hurt, not help publishers

Representatives for Canada’s news media industry are pushing for the federal Liberals to allow news outlets to charge licensing fees to websites posting links to their work, though a prominent copyright expert says that might do more harm than good. 

John Hinds, CEO of industry association News Media Canada, said he’s excited at the prospect of seeing a so-called “link tax” included in legislation expected to be introduced by the government this fall that would amend the Copyright Act. 

“If you want a sustainable media industry, you have to create the market conditions where that will happen and the [link tax] is one of the ways that will do that,” he told iPolitics. 

LOBBY WRAPNews Media Canada lobbying on compensation rights

Erin Finlay of Stohn Hay Cafazzo Dembroski Richmond LLP registered last week for News Media Canada to lobby on copyrights and remuneration rights for news media organizations in the Copyright Act.

Heritage Minister Stephen Guilbeault has said that the Liberal government is looking at ways to make sure large tech companies – such as industry superpowers like Google and Facebook – pay their “fair share” when profiting from content being created by Canadian media companies.

However, Michael Geist, a law professor at the University of Ottawa, said a link tax rule could further damage the hurting news media industry if tech companies like Google and Facebook change their policies to opt out of link sharing, in turn diverting valuable page visits away from publishers. 

“If implemented, it is entirely possible, if not likely, that the [link tax] will actually hurt the industry, not help it,” he said in an interview with iPolitics. 

At the Banff World Media Festival in June, Guilbeault said he’s monitoring developments in France and Australia, two countries that are in the midst of implementing a similar link tax policy, and that he had already spoken to his counterpart in France and planned to consult with Australian officials. He also said legislation amending the Copyright Act could be introduced as early as this fall.

Camille Gagné-Raynauld, press secretary for Minister Guilbeault, said in an email the minister is currently looking at models adopted in other countries on remuneration for news content and will come back with new proposals in due course.

A comprehensive study of the Copyright Act was finished in June of last year by the House Industry Committee, with the body making 36 recommendations – none of which advised implementing a link tax. If the tax link policy was adopted, the royalties would be collected and distributed directly to news media organizations, according to tariffs established by a Copyright Board. The federal government would not be collecting any of the money.

Geist, who is also a Canada Research Chair in internet and e-commerce law, said it is more likely that Google and Facebook will replace an article written by a Canadian news company with an article written by a publisher in another country without a fee, if the rule is legislated. For example, he noted in a blog post that Google responded to a new law on linking and article summaries in France by eliminating article summaries and providing only a link, to which the French competition regulator responded by ordering Google to negotiate a linking licence.

As well, Geist said the news content isn’t financially material, pointing to an argument Facebook made in Australia when the policy was created. The social media giant argued that between posts on personal photos and information, linking to a news article didn’t amount to much from a financial perspective. Facebook is in the midst of an argument with the federal regulator that it doesn’t earn much from the links, but sent over two billion clicks to Australian publishers in the first five months of 2020 — at a benefit of hundreds of millions of dollars to these media companies. 

“This notion that Facebook or Google is getting rich off this content just isn’t the case,” Geist said. 

And while the content might not amount to much of a financial margin for social media giants, news organizations can benefit from the number of times their links are shared and their articles are opened. The more website traffic a publication has, the more they can charge for advertising on their sites. They also stand to benefit from receiving more subscribers through their articles being shared. 

For media publishers who think they aren’t benefiting, Geist said, the option to opt out of link sharing already exists. He said they can choose not to have their content indexed on a search program, and Google will stop linking to it.

“If this is harming the industry, and they don’t want the links, there is a ready solution available,” he said.

Hinds said the exact method of remuneration is an issue they’re hoping to discuss with the government, but noted that the revenue from a link tax could be significant for Canada’s media industry, with Australia’s media industry standing to reap anywhere from $600 million to $1 billion from its new tax. 

BACKGROUNDER:

News Media Canada has been vocal in the push for government aid to shore up the country’s struggling news media, which has struggled with precipitously falling advertising revenue. A report from Statista found that advertising revenue for the newspaper industry stood at $3.43 billion in 2003 but had more than halved to $1.63 billion by 2018, and publishers have taken an additional hit from the COVID-19 pandemic.

Geist said Guilbeault might be looking at the policy as a means to support the media sector without public dollars after the minister announced last month that the government shouldn’t be funding Canadian media outlets. Guilbeault also said the federal government only rolled out measures to support the media sector in recent years because of the crisis the industry is facing.

Geist described the minister’s new stance as “shocking,” saying Guilbeault has spent most of his tenure as minister defending new federal programs to support the sector. As well, Geist said the minister should follow through on his commitments to implement measures like the Journalism Labour Tax Credit, which allows qualified Canadian journalism organizations to apply for a 25-per-cent refundable tax credit on salaries or wages of eligible newsroom employees for periods beginning on or after Jan. 1, 2019, and a digital news subscription tax credit.

These programs, along with a new policy that allows not-for-profit news organizations to apply for charitable status, were announced by the feds in 2018 at a cost of $595 million, but industry proponents say problems in the way the legislation was written has kept the money from being doled out. 

READ MORE: News media industry’s troubles intensify during COVID-19 pandemic

“I think that the starting point is to follow through on the commitments that [the federal government] made,” Geist said.

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