The Canada-Google News compensation deal won't fix a bad business like the CBC
On Nov. 30, Canada finally struck a deal with Google over the Online News Act, under which Google will pay $73.6 million annually to Canadian news publishers.
This was certainly unexpected, as Big Tech companies such as Meta and Google had been showing no signs of capitulating back in July. At that time, it seemed a win for both Canadian news companies and Prime Minister Trudeau’s reputation. However, on Dec. 4, the Canadian Broadcasting Corporation (CBC) News announced plans to “cut 600 jobs and not fill 200 vacancies over the next year,” amounting to a 10 percent slash to the workforce.
As such, it has become clear that the Google deal is simply a move to buy time for an increasingly outdated business model, operating at the expense of consumer preferences. The Canadian government is overriding market preferences and competition with political power: a win for Trudeau and his friends in CBC News leadership, but a loss for Canadian consumers and American Big Tech companies.
In the past few years, anti-Big Tech sentiment has grown rapidly. This trend is primarily fueled by concerns around balancing market power and protecting smaller local businesses. Regardless, the result of the Canadian deal does not make sense. Instead of implementing a pay structure based on clicks or an evidence-based compensation framework, Google is paying a lump sum to local news companies. In essence, it is almost like a highly extortive legal settlement.
Market dynamics reward well-run businesses. In interfering, Trudeau is rewarding and preserving inefficiency. On Dec. 15, Heritage Minister Pascale St.-Onge said she thinks the regulations are “extremely good” for Canadians and the sustainability of Canadian newsrooms. But if CBC News cannot sustain itself, then Google’s annual $100 million payment will not change that, especially considering that the CBC already receives around $1 billion in federal funding each year.
Canada’s win against Google follows in the footsteps of Australia’s accomplishment in 2021, after a standoff over a similar media law resulted in the tech giant voluntarily striking payment deals with Australian news agencies. Back in 2020, Canberra, under the leadership of Communications Minister Paul Fletcher, tasked its antitrust regulators with devising the News Media Bargaining Code which mandated that digital platforms like Google and Meta compensate news outlets appearing in their search results.
The law came into effect on March 2, 2022, empowering the Treasurer to designate liability for specific companies when there was any “bargaining power imbalance between the platform and Australian news businesses.”
However, to this date, no platform has been designated under the Code because of similar concerns over fundamentally “breaking the internet” and business models of firms like Google. In the end, as with the Canadian deal, the Australian government proclaimed victory by extracting a lump sum payment from the tech firms.
The adversarial back and forth between large American tech platforms and foreign governments is not a new phenomenon but a growing one. The incentives to target American tech firms with regulation are clear. Firms like Google and Meta are impossible to ignore and have an outsized effect on the economy. Thus, preserving domestic industry at the expense of foreign tech giants bolsters national pride and self sufficiency while pleasing constituents. Moreover, extracting concessions from American firms like Google provides concentrated political benefits at home while dispersing heightened compliance costs abroad.
The EU has also touted digital antitrust laws such as the Digital Markets Act as necessary for economic sovereignty, while its American counterparts slam the law as blatant protectionism. Additionally, on Nov. 27, the EU announced the adoption of its new Data Act, which aims to increase the portability of personal and company data. These new obligations disproportionately hamstring American digital platforms, to the benefit of smaller firms abroad that possess far smaller market shares.
In Canada, the EU, and Australia, national governments are finding it increasingly politically attractive to target large American companies to the benefit of domestic businesses. Although these policies are branded as creating a level playing field against Big Tech, they ultimately make it more difficult for such platforms to offer desirable services to consumers. This reality is what led to the standoffs in Australia and Canada, ending in deals akin to legal settlement agreements and a victory for both governments.
Such agreements ultimately benefit entrenched domestic players to the detriment of robust competition standards. With Australia and now Canada’s deal being struck, other jurisdictions see an easy method to shake down U.S. companies. They will likely look to extract blatantly biased concessions from large American tech firms — an approach devoid of any benefit to their own citizens, who just want to use the internet as they please.
April Liu is an associate at National Journal in Washington, specializing in data privacy, tech, and AI regulation. Ethan Yang is a legal fellow at Tech Freedom and an adjunct research fellow at the American Institute for Economic Research.