I call the meeting to order.
As you see, we have two hours. In the first hour, we have Facebook Inc, with Mr. Chan and Mr. Dinsdale, and from Google Canada, we have Mr. Kee and Mr. Brindle.
As you know, you have presented to this committee before, but at the request of the committee, you have been asked to come back to answer some questions. There are things that have occurred in the interim, between when you last appeared before us and today. Things seem to be moving so rapidly that we need to clarify a couple of things with you.
You know the drill. Each group has 10 minutes to present. You can decide how to do that. At the end, we will have some questions from members of the committee.
Without any further ado, I invite Mr. Chan or Mr. Dinsdale to present on behalf of Facebook.
Madam Chair, members of the Standing Committee on Canadian Heritage, thank you for this additional opportunity to present our views as part of your study of the media and local communities.
As most of you already know, my name is Kevin Chan and I am the head of public policy for Facebook Canada. With me again today is my colleague, Marc Dinsdale, the head of media partnerships in Canada.
Since we last appeared before the standing committee in November, we have made some important announcements in our early efforts to address fake news. I am pleased to share today with the committee our progress in this area.
As Mark Zuckerberg, Facebook's founder and CEO, recently wrote:
||Giving everyone a voice increases diversity of perspectives, but there is more we can do to build a shared perspective—to reduce polarization, sensationalism and misinformation.
I am pleased to report that we are hard at work putting together initiatives and partnerships that we believe will address this issue here in our country.
On December 15 last year we announced work in a few key areas to fight fake news. Facebook strongly believes in giving people a voice and believes that we cannot become arbiters of truth ourselves. We are thus approaching this problem carefully, launching tests and learning from our experiences. We will iterate and extend them over time. We have focused our immediate efforts on the worst of the worst, on the clear hoaxes spread by spammers for their own gain, and on engaging both our community and third-party organizations.
Our areas of work consist of the following.
First is easier reporting. We are testing ways to make it easier to report a hoax if you see one on Facebook, which you can do by clicking the upper right-hand corner of a post. We have relied heavily on our community to report problematic content in other areas and we hope that reporting can also help us detect more fake news.
Second is flagging stories as disputed. We believe that providing more context can help people decide for themselves what to trust and what to share. We have started a program to work with third-party fact-checking organizations that are signatories of Poynter's international fact-checking network's code of principles, including ABC News, The Washington Post, and Snopes.com in the United States.
We use the reports from our community to send stories to these organizations. If the fact-checking organizations identify a story as fake, it will be flagged as disputed and there will be a link to the corresponding article explaining why. Stories that have been disputed will also appear lower in news feeds. Once flagged, these stories will come with a prominent warning label indicating that the story has been disputed and cannot be made into an ad and promoted.
Third is disrupting financial incentives for spammers. We have found that much fake news is financially motivated. Spammers make big money by masquerading as well-known news organizations and posting hoaxes that get people to visit their sites, which are often mostly ads.
We are doing several things to reduce the financial incentives. We have eliminated the ability to spoof domains—that is, the ability to pretend to be a legitimate website—which will reduce the prevalence of sites that pretend to be real publications. Our advertising policy also makes clear that fake news sites are barred from using Facebook ads. We are analyzing publisher sites to detect where policy enforcement actions might be necessary.
I would like to now talk a bit about the Facebook journalism project. As we take steps to address fake news on our platform, we also recognize that we need to be working even more closely with the news industry. We know that our community values sharing and discussing ideas and news, and we care a great deal about making sure that a healthy news ecosystem and journalism can thrive.
That is why we announced last month the launch of the Facebook journalism project, a continuation of the work that my colleague Marc Dinsdale is already doing with news publishers across the country, collaborating with news organizations to develop news products, to learn from journalists about ways we can be a better partner, and to work with publishers and educators on how we can equip people with the knowledge they need to be informed readers in the digital age. I will expand on each of these areas in turn.
First, on collaborative development of news products, we can better serve the needs of people on Facebook and those of our partners when we work together to develop products. While we have worked with our news partners on this in the past, as part of the Facebook journalism project we will begin an even deeper collaboration with news organizations, connecting our product and engineering teams so that we can build together from the early stages of the product development process, evolving beyond Facebook Live, Facebook 360, and Instant Articles to even better address the needs of journalists.
Honourable members, you were briefed on these three products when we first appeared in November.
We also want to explore ways in which we can support and strengthen local news on Facebook, as well as emerging business models in an Internet age. Most importantly, we want to engage in regular meetings with the media and publishing partners to listen and learn from them. We will be launching a series of listening round tables with news organizations later this spring.
Second is training and tools for journalists. In addition to the newsroom training we currently offer, we are conducting a series of e-learning courses on Facebook products, tools, and services for journalists. We also recently acquired CrowdTangle, a popular tool among journalists to surface stories, measure their social performance, and identify influencers on different social media platforms. Last month we announced that CrowdTangle would become a free service for all of our media partners.
Third is training and tools for everyone. As we seek to support journalism, we will also be working on new ways to help give people information so they can make smart choices about the news they read and have meaningful conversations about what they care about. Some of this we will do in direct partnership with journalists. At other points we will work with educators and researchers. Initially, our main area of focus will be promoting news literacy by working with third-party organizations on how to better understand and promote news literacy both on and off our platform to help people in our community have the information they need to make decisions about which sources to trust.
We will help organizations already doing important work in this area and bring a consortium of experts together to help decide what new research to conduct and which projects to fund. In the short term we are working with the News Literacy Project to produce a series of public service ads to help inform people on Facebook about this important issue. Our longer term goal is to support news organizations with projects and ideas aimed at improving news literacy, including with financial grants where needed.
Next month we are partnering with the Walter Cronkite school of journalism and mass communication at Arizona State University to convene a news literacy working group, bringing together top media thinkers and practitioners for a two-day, action-oriented meeting to review past news literacy research, identify new research questions, and assess projects for possible funding. I am proud that our news literacy working group will include distinguished Canadian journalist, Catherine Cano, president and general manager of the Cable Public Affairs Channel, or CPAC.
For more than a year now, people in Canada have been able to report a story is fake. Now we are engaged in preliminary conversations with potential media partners to see if we can bring our fact-checking initiative to Canada so Canadians can see which stories independent third parties have disputed. At this early stage in the process, we believe that our partnership with news publishers in Canada should be editorially unbiased and neutral, national in scope, and operate in both official languages. We would welcome feedback from the standing committee on these core principles.
I really appreciate that, Madam Chair.
Later this spring, we will also convene a gathering in Canada of major English and French news organizations as part of the Facebook journalism project's series of round tables to listen and learn from media organizations and to collaboratively begin designing new products optimized for publishers.
Finally, we will partner with key Canadian stakeholders in the development of news literacy resources to promote critical thinking and judgment when reading and consuming news content. We are pleased to announce that MediaSmarts, Canada's digital literacy organization, has agreed to work with us on this exciting new initiative, and we expect to partner with a few other leading Canadian organizations on this important project in the months ahead.
Facebook is committed to creating a more open and more connected world. We believe our mission will help people all over the world be better informed, more empathetic, and more productive.
Our responsibility as regards the spreading of false news is an integral part of this commitment and we take it very seriously. In just three months, we have taken a number of initiatives, both on our platform and in cooperation with community stakeholders through our Facebook journalism project. I am excited to be working closely with my colleague Marc Dinsdale to further these initiatives in Canada.
I want to thank the Standing Committee on Canadian Heritage for listening to our presentation, and I am now pleased to answer any questions you may have.
We're pleased to be back to contribute to this important study and discussion that you're having with respect to the evolving media ecosystem, including emerging concerns around misrepresentative content or what some refer to as fake news.
Google's mission is to organize the world's information and make it universally accessible and useful. At the heart of that mission is the firm belief that a world that is more informed makes better decisions and leads to better outcomes. Accordingly, we take our role in connecting people to the best available information online very seriously.
Our users expect us to show results that include authoritative reporting from objective and informed journalists and publishers. Hence, we constantly invest in innovation to improve the quality of our results and are deeply committed to ensuring that credible and quality news sources survive and thrive on the web. We are equally committed to the Internet as an open ecosystem for expression and knowledge.
A free and open web is a vital resource for businesses and citizens in Canada and the world, and ensures that the public has access to a range of diverse viewpoints. It enables the widest possible range of innovation, experimentation, and creativity, allowing news publishers to experiment with new business models, reach new audiences, and succeed on their own terms.
Dealing with propaganda and misinformation is a perennial challenge. Rumours, misinformation, inaccurate reporting, and propaganda have been issues for the past two centuries, from pamphlets to hoaxes, from tabloids to false accusations against opposing candidates in political campaigns. The Internet has made it easier for publishers to distribute such information, but at the same time, it has also made it easier than ever for citizens to find and access reputable sources and get more facts to counter propaganda and misinformation.
This is an issue that needs to be addressed properly. Drawing a line between what constitutes fake news and what is otherwise shoddy or inaccurate reporting, opinion, or advocacy can be arbitrary and challenging. Facts are often hard to verify and even reputable sources can provide varied and inaccurate accounts.
Google favours an approach built on maximizing access to information to users rather than acting as arbiters of truth. This is a challenge that's at the very core of our corporate mission and values. As our CEO, Sundar Pichai said, we will “work hard to make sure we drive news to its more trusted sources”. We understand that this is a complex issue and want to be thoughtful in any of our responses.
There are a number of ways in which Google is working to ensure users have access to high-quality information on the web. We respect that same old, same old isn't good enough. We want to keep pioneering efforts to serve the best possible results to users and support the success of the news ecosystem.
Today, I want to highlight three approaches to this issue that we think are the most pertinent to this committee's investigation. First is a collaborative approach with news organizations driving traffic to news sites through Google News and initiatives like Google's News Lab. Second is our recently announced labelling of fact-checked articles, and third is our efforts to tackle the issue at the source, targeting bad ads, sites, and scammers online.
This committee heard previously from us about our various collaborations with news publishers in Canada and around the world. Collaboration and partnership are central to our approach to the news. Globally, Google Search and Google News send over 10 billion clicks a month to publishers' websites for free, representing an opportunity for publishers to grow and monetize their audience.
Google News, our service that aggregates news headlines and links to sources, is a white-list service. Publishers are reviewed and approved before they are eligible to be featured as part of our news corpus. Google News features over 75,000 publishers globally, including almost 2,000 Canadian publishers. Our review process is rigorous and is aimed at separating news websites that conduct original journalism and analysis from non-news websites such as pure news aggregators, marketing, content not dealing with current events, or websites that deceive users about their ownership or their primary purpose.
To be clear, reviewers do not assess the quality or accuracy of each news website nor do they assess or rank political viewpoint or ideology.
Google News aims to provide diverse perspectives on news stories. Under each news story, Google News offers links to several other articles from different news publishers on the same story. This exposes users to different perspectives on the subjects that interest them and allows them to select for themselves which publishers' accounts they wish to read.
Further, Google News highlights content from local news sources by including a “local source” tag to showcase local coverage of major stories. Not only does this allow for the local section in Google News to link to stories in regional papers, it ensures that national or international stories include a local perspective where available, and it is consistent with our goal to surface diverse perspectives.
We don't just work with publishers on Google News. We help them leverage the best of the web. News Lab is an initiative from Google that is wholly dedicated to helping news publishers make the most of digital opportunities.
To do this, we offer face-to-face training in newsrooms, online resources for journalists—notably, including Google Trends, which we provide based on input from many publishers—and we support research that can be of help for publishers.
We've also been partnering with the broader news industry to work on the problem of verification for several years now. For instance, we are a founding member of the First Draft News coalition, an organization that is helping efforts to improve social news gathering and verification. We also support the Trust Project, which is investigating ways to distinguish authoritative journalism from promotional content and fakery, and effectively signal its trustworthiness.
For many years, Google News has marked links with specific source labels such as “opinion content”, “user-generated content”, or “satire”, which help readers understand what they are about to read and encourage them to consider the source and nature of the information. More recently, we launched a new label in Google News for fact-checking. This tag highlights news that's been fact-checked and verified by authoritative organizations, including news publishers and independent fact-checking organizations. The tag is currently available in the U.S., the U.K., Germany, and France, with more countries, including Canada, soon to come.
The fact-check industry has reached a level of growth that makes this kind of work possible and we are strong supporters of fact-checking initiatives. Google has provided support for more than 10 different efforts looking at fact-checking and authentication, adding six new projects at the end of last year. We are very enthusiastic about the future of our collaboration with this growing fact-check community and its implementation across our platforms.
We look forward to sharing more with the committee about our progress on this front at a future meeting.
This leads us to our last point.
Google does a lot to combat bad ads and bad sites online. In 2016, we took down 1.7 billion ads that violated our advertising policies, more than double the number of bad ads in 2015.
Our publisher partners use our AdSense platform to make money by running ads on their sites and content. We have strict policies in place to keep Google's platforms and networks a safe environment for our advertisers, users, and publishers. When a publisher violates our policies, we can stop showing ads on their site or even terminate their account.
We've had long-standing policies prohibiting AdSense publishers from running ads on sites that help people deceive others. In November, we expanded on these policies, introducing a new AdSense policy directed at misrepresentative content. This policy helps us to take action against website owners who misrepresent who they are and deceive people with their content.
From November to December 2016 we reviewed 550 sites that were suspected of misrepresenting content, including cases of impersonating news organizations. We took action against both misrepresentation and other offences, and nearly 200 publishers were kicked off our network permanently.
In conclusion, this is a challenging issue. We don't have all the answers, which is why we host events such as the News Lab Summit and Newsgeist. Both are important forums that bring together people across the news industry with technologists to discuss issues like these and to generate new ideas.
We thank you again for the opportunity to contribute to this important discussion. We look forward to answering your questions today and continuing this important dialogue with the committee and members beyond today's meeting.
Madam Dabrusin just talked about satire. I think of Sarah Palin being labelled as having said, as we all famously know, “I can see Canada from my house”. If you really know, it was never her who said that. That was Saturday Night Live's Tina Fey satirizing her, but most people think that's what she actually said.
That was well before the current controversies we're facing. In fact, I've pointed out that whether you're looking at the old tabloids or old newspapers that used to write from clear perspective.... Mr. Greenspon's Globe and Mail was constantly filled with stuff about Sir John A. Macdonald that was patently false, a lot of which is used as sources in our history books these days, because it was writing from a perspective
I'm of the view that because we're dealing with new technologies and new forms, the problems people point to about so-called fake news are problems of people adapting their media literacy. People are pretty good skeptics. I think historically they've been able to sort that out, getting the information. The challenge now is some people who, dealing with new technology, can't discern credible from non-credible sources.
I look at my own feed, and I was just looking through it now, and I went through about seven stories where someone corrected why that wasn't true or why that was satire or so on. People are picking that up and they're learning it from others. People are posting the alternate information, alternate facts, which has now become satire as well, but are giving the sources of information that prove why that story may not be true. People can assess.
What I enjoy hearing from you is the suggestion that part of what you're trying to do is focus a bit on encouraging the new media literacy. I think it will come on its own naturally, but anything done to encourage it is good.
What troubles me is the notion that you, I think, are viewed largely as a neutral infrastructure for information. Where do you cross over into becoming a controller of information and deciding, as editors, what is and isn't available? People are complaining from time to time that they get blocked and so on. I come down more on the side of freedom, and let the marketplace of ideas play itself out.
Thank you, Madam Chair.
First of all, thank you for coming back to take part in our study. We are very pleased.
You must know that, in the view of everyone around the table, you have been real agents of change in recent years. Some companies are now facing competition that they might not have seen coming.
As to advertising revenues, while I was listening to the conversation, I was surfing the Internet and found that Facebook's advertising revenues rose from roughly $7.8 billion in 2013 to nearly $18 billion in 2015. I also found that your shareholder documents have reported that your advertising sales have recently shot up by close to 57%. So you are doing well financially speaking.
Did you anticipate that kind of growth at Facebook? I have heard you talk about this before and I got the sense that you were a bit surprised. Being able to print money is great thing, if I may say so, but it comes with a heavy responsibility to society.
Did your business plans at Facebook anticipate that you would make so much money, from advertising in particular? In any case, those are your only revenues, are they not?
Thank you, Madam Chair.
Gentlemen, thank you for being here today for a second time.
I would also like to talk about the issues surrounding advertising that my colleague Mr. Nantel raised.
You know of course that our current study pertains to the media and local communities. I heard my colleague say that advertising revenues had skyrocketed. Congratulations, that is great news for you. Moreover, we also learned this past year that, in most communities, local media have seen a 50% drop in their advertising revenues, which is what yours have risen by. Advertising is the main revenue source for them as well, and they are now in a very precarious position.
You surely know as well that this generates a lot of jobs right across Canada. I don't have the figures, I don't know how many jobs exactly, but you mentioned 1,000 people at Google. We have not necessarily heard about the number of employees at Facebook, but I would guess there are easily tens of thousands in Canada in various local communities. Several witnesses over the past year have suggested that the Income Tax Act should be amended to favour the local media since these advertising revenues are going to American companies.
I would like to hear from each of you about these various suggestions that have been made to us by the majority of representatives from the media, unions, business and organizations that have appeared before us over the past year.
It depends a lot on the individual proposal. As you know, there have been quite a number of them.
With respect to the issue around the tax treatment of advertising expenses, which is probably one of the more prominent ones that have been raised, we have concerns about it just because of the way it would be implemented.
To make a long story short, it's effectively a tax on Canadian advertisers. It assumes that there's a direct relationship between the advertiser and the publisher, the buyer and the seller—which doesn't actually exist in a lot of digital advertising anymore—mostly because it was the policy of the day in the 1960s. It also assumes that there's a direct substitution between the ability to find something on an online service, like a Google, a Facebook, or a Twitter, and a Canadian equivalent that you could actually invest in alternatively, which actually isn't the case.
When the policy was developed in the 1960s, there was clearly a similarity between foreign broadcasters and Canadian broadcasters, and between foreign newspapers and Canadian newspapers. That doesn't exist online. If you want to advertise a beauty product to a certain audience in mobile apps, there may not be a Canadian equivalent to approach. As a result, changing tax treatment could actually be punitive. There just may not be an alternative.
Again, I think there are some significant challenges with that approach.
I can start, and maybe my colleague Marc can fill in some of the details.
In general, as I indicated back in November, the principle it operates on is that people and organizations are able to publish what they wish on the platform. I would say that the vast majority of this content is what people, organizations, newspapers, other local news outlets, and broadcasters themselves publish directly onto the platform. We do not have, in any way, a relationship in that regard.
As I also indicated—and maybe here I'll turn to my colleague Marc—where there are specific products that they wish to publish their content through, such as Instant Articles, which loads faster, as you'll recall, sir, and where they reap the majority of the revenue from these products, then I believe that we do and we will work with them in partnership.
I'll turn to Marc.
As my colleague just said, any amount of content can be published on Facebook. People and companies can publish as much or as little strategic content as they wish. Most of the time, they want to increase their audience and their distribution.
In the case of La Presse+, the promotion strategy was to present it as a new service. I worked with them to formulate recommendations to better direct the public to La Presse+ in order to boost revenues in its environment.
There are programs that are starting in beta format, in a limited way. The Instant Articles program started with two or three partners. The partners in this program can put their own ads in their content in the Facebook environment and retain 100% of the revenues. If they do not have direct advertising of that kind, they can use our Audience Network program, which offers shared revenues.
For the most part, the service we offer our partners in Canada is content distribution; they can then direct users to their own platform and thereby increase their distribution and subscription numbers. We can also offer them a Facebook environment where they can collect their advertising profits directly.
We may not be able to do a second round because the votes moved us forward. We have about three-quarters of an hour to deal with our second hour. I thought we would end this round.
Mr. Van Loan, stop looking so disappointed. We will have to end this hour.
I want to thank Google and Facebook for being here.
There is one thing I wanted to ask you, which is something that has always interested me. As you well know, for any other platform for communications, whether it's telephone, telecommunications, TV broadcasts, radio, or print news, including letters to the editor, etc., if these spread false messages, or if libel is spread by any of these platforms, they're liable under the Criminal Code. This is why you'll have editors at newspapers tell you that they need to check what is put into a letter before they put it in: because they're responsible.
The only platform that has not been deemed to be responsible in a real way for both of those things—false messages and libel—is the digital media. Your platform has not been moved into that. Is this something that you feel would help you ensure that the kind of “news aggregations” you're putting forward are subject to the same rigour that other platforms are subject to? Do you have a comment on any of that?
Actually, I will tell you that I am not wrong. I'm just reading the Criminal Code, and subsection 372(1) is about “false information”.
As well, subsection 298(1) reads as follows:
||A defamatory libel is matter published, without lawful justification or excuse, that is likely to injure the reputation of any person by exposing him
|| to hatred, contempt or ridicule, or that is designed to insult the person of or concerning whom it is published.
There are some clear pieces. By using the telephone to do such a thing, the telephone company has a liability under law to be able to find out who that person was, etc. There is some clear content in the Criminal Code.
What I'm saying is that other groups are responsible. They have to verify and be responsible for what goes on. This is really what we're asking about today, about the fact that if you're going to call something “news” or if you're going to spread false messages that harm someone.... I mean, I would never say “poor Ms. Palin”, but there you go. She's now saddled with having said the most idiotic thing, but she didn't say it. Tina Fey said it on Saturday Night Live.
I think there is responsibility on...which is where the term “false news” is coming out now, that it is in fact occurring. You can sue a newspaper. You can sue television. You can sue for any of that in the Criminal Code.
Is that going to make a level playing field? Should there be a level playing field? I'm not saying that it's my opinion one way or another. I have been asking this question. It is a confusing question for me, and I'd like to hear your take on it.
At any rate, you said it would be impossible for you to do, but it is something I wanted to put on the record—that I don't understand and am confused about it, and I wanted to have some clarification on it.
Did you have something you wanted to say?
Welcome. I'm sorry you don't have an hour because of the votes. We've been cut down to size here.
I want to thank Mr. Brazeau from the Competition Bureau for coming.
I know both of you are here. We just wanted to clarify some of the information you gave us at the beginning of this study, because one of the things the study was mandated to look at was the effect of media consolidation.
At the time we spoke to you, there had just been the consolidation of the newspapers not long prior to that, so you commented then. Since then, a year has gone by, and some new things have surfaced with regard to the result of that consolidation. We just wanted to know if you had any update or other commentary to give us, or if you felt there were some things you could enlighten us on regarding this issue.
You have 10 minutes, please, and then we will go to a question and answer period.
Thank you, Madam Chair, and good afternoon.
As you have mentioned, my name is Julien Brazeau. I am associate deputy commissioner at the Competition Bureau, and I'm joined by my colleague, Anthony Durocher, who is deputy commissioner of the mergers and monopolistic practices branch at the Competition Bureau.
My understanding is that the committee does have some outstanding issues or questions regarding the Postmedia-Sun transaction, as well as the “no action” letter the bureau released upon concluding its review.
During our previous two appearances before the committee, my colleagues and I outlined the manner in which the bureau conducts merger reviews, as well as the factors that are taken into consideration.
It is important to reiterate that in the context of merger reviews we take a look at a number of factors, including the level of economic concentration in a given market and the market shares of the merging parties, the degree to which the merging parties compete with one another, as well as the presence or absence of legitimate and effective competitors that can curtail the exercise of market power by the merging entity.
In examining a merger, the bureau obtains information from a wide variety of market participants, including suppliers, customers, regulators, and competitors.
I would stress that when reviewing mergers, the bureau's focus is on economic competition and efficiencies related issues such as the impact of the merger on prices or, in the case of media mergers, advertising rates and readership. As you well know, in conducting our analysis, we are bound by the four corners of the Competition Act. The factors that are to be considered in a competition analysis are set out in section 93 of the act, as we stated during our last appearance. It is important to note that it is the combination of factors—not the presence or absence of a single factor—that is determinative in the bureau's assessment.
While the bureau's focus is primarily on price and output, we also consider the proposed merger's likely effects on non-price dimensions of competition such as quality, choice, service, and innovation. These factors are approached from an economic lens and considered especially in markets in which there is significant non-price competition.
Let me now turn to what occurs when the commissioner decides not to challenge a transaction. This is done when, after a thorough review of the evidence, the commissioner is satisfied there will be no substantial lessening or prevention of competition, or that there are efficiencies which are greater than and offset any anti-competitive effects. In such a situation, the commissioner may issue a no action letter, indicating that he has decided not to challenge the transaction at that time but reserving the right to do so within one year following closing of the transaction. That is the statutory limit in this regard.
As a practical matter, given the extensive collection and analysis of information in a complex investigation such as Sun/Postmedia, a no action letter is regarded as an effective form of clearance on which parties can rely to close their transactions. To reopen a merger investigation in a case where the bureau has already provided the parties a no action letter, the bureau would likely require some new evidence, within the first year post-closing of the transaction, which materially affects the bureau's competitive assessment in the first instance.
I know that the committee is well aware of the March 25, 2015, statement regarding the commissioner's decision to issue a “no action” letter in his review of the Postmedia-Sun transaction. That statement contained the information that the bureau was able to publicly disclose at the time of the merger review.
It's worth repeating that the bureau conducts its investigations in a confidential manner and that all information that's gathered, whether it be through voluntary disclosure or through formal powers, is kept confidential. The law requires that we do not comment publicly until certain steps have been taken, such as the issuance of a “no action” letter. Even in those instances, we are required to keep confidential any information that is not public. This is to ensure the integrity of our investigations and to ensure that information provided to us by the parties or third parties, information that can be sensitive at times, is kept confidential.
Finally, I'm aware that this committee has expressed concerns over job losses that have occurred, especially follow the Postmedia-Sun transaction. While we recognize that mergers can unfortunately have a negative impact on jobs, the purpose of the bureau's review of a merger is to determine whether it's likely to result in a substantial lessening of competition or prevention of competition in a given market. That is, it's a market-power based analysis focused on price, output, and non-price dimensions of competition.
In the Postmedia matter, the bureau found that the print newspapers and the markets in question were facing a steady and continuing decline in readership and that the parties' ability to exercise market power was constrained by existing market conditions. Under such conditions, job losses, while painful to those who are impacted, are often the result of a competitive process as firms work to align costs with demand or realize efficiency gains.
I would also note that the bureau's release made reference to the parties maintaining separate editorial boards. However, this was not a factor in the commissioner's decision to issue the “no action” letter. Rather, these facts were included as information in our position statement on the review.
The focus of the bureau's review was not on what the parties said they would do, but rather on whether they would have enhanced market power. Based on a review, the evidence and economic analysis did not establish that the merged entity would have enhanced market power, and no subsequent information or evidence has caused us to re-examine that conclusion.
Following the conclusion of a merger review, companies involved are not required to consult the bureau on their future business decisions unless they've entered into an agreement to remedy an anti-competitive harm found during the review. In the case of the Postmedia-Sun transaction, we did not find a need for a remedy, and they are therefore not obligated to consult with the bureau on business decisions, including those related to staffing.
Of course, the commissioner of competition is able to address abuses of market power and other anti-competitive conduct or information or evidence that raise competition issues and come to light, including after the completion of a merger.
I know there are many other issues of concern, as you've raised already, Madam Chair. I'll conclude my remarks here, and my colleague Anthony and I will do our best to answer your questions at this time.
It's good to see you both again.
We did bring up the sale of the National Post to the Sun, and the issue of all the editorial decisions being made in one room, but supposedly, were too different. We did talk about Bell and Astral, and so on. We've seen a lot of the bigger newspapers swallow up the medium or low ones in small cities, and then all of a sudden, when things are bad in that market, they just throw that away.
What are your thoughts on that and what you have seen? There is nobody lining up to do a newspaper in any city in this country right now. We've seen the charts here for the last year. There is no competition, because who the hell wants to buy a newspaper other than the National Post?
Do you want to buy one? No, nobody wants to buy them. It's a dying breed. Just look—every day, it doesn't matter if it's Guelph or Nanaimo or wherever, right? Eventually there will be no work for you because there'll be no newspapers. I'm serious on this.
As the Competition Bureau, have you changed the way you look at it? Do your guys go back every five years? What is the procedure if you do that?
Maybe I'll put it in some context. The Competition Act is a law of general application. We look at mergers in every industry you can imagine under the sun. In a given year, we would review anywhere from 200 to 250 mergers. Every single one of those cases is evaluated based on the facts and evidence we get from the marketplace. For any given merger review, we would interview all sorts of relevant stakeholders, review internal company business records, and when required, look at the data to inform our decision.
With respect to the newspaper industry in particular, like a lot of other industries in Canada, it has evolved. You're right. Market forces are such that companies need to innovate and change. Consumers' habits are changing as well, and we're seeing shifts. I can tell you that, at the bureau, we try to stay on top of those changes as much as we possibly can so that every single one of our merger reviews is well informed as to where the market is now and where it could be headed in the future.
Changing consumer habits are something that impacts a lot of industries outside of newspapers as well. The best we can do is make the most informed decision we can at that point in time regarding the competitive impact of a merger. A large part of that involves defining the relevant markets as well, which enables us to calculate market shares. Under the law, we cannot challenge a merger on market shares alone. We have to look at barriers to entry, the nature of effective remaining competition, and the nature of change and innovation in the marketplace, and ultimately come to a landing with respect to a merger of whether it substantially lessens or prevents competition. Our mandate is to look at a merger, answer that question, and react accordingly.
The newspaper industry is one where we've had recent experience reviewing transactions, and I think we are very mindful of the changing nature of the marketplace.
Of course you work on a wide range of subjects. I could cut you some slack since everyone is surprised by the vulnerability of our regional media and local production. Organizations that provide over-the-top services have set up shop here and now it is the law of the jungle. Everyone has been caught off guard. Let me say, however, that the Competition Bureau should be on high alert.
Perhaps you need to develop new areas of expertise. What you are looking at is a far cry from the stamping of steel girders by Dominion Steel and U.S. Steel. This is quite different. Metal is very important, but the democratic voices that are expressed through the news media are crucial.
Not to be disagreeable, but you just have to look at the front page of the Ottawa Sun, with the headline “Fatal distraction”. The front page of the Ottawa Citizen has the exact same headline, in the same type, as does the front page of the National Post. If you go into a smoke shop in Ottawa, you see three different newspapers with the same front page. How can someone say then that they prefer the National Post? It is not possible.
We heard Mr. Godfrey say that the print media are in danger. It is true, but then he received a $2.3 million bonus. I think that would be enough to keep a newsroom going for a long time, and employ a lot of people. It is hard to figure out.
What would you like to have? What could we do? For our part, we have to find solutions.
You maintain that Google and Facebook have monopolies right now. Do you know if anyone at all has raised that issue as regards Google and Facebook? They can lead people as they wish, since they are alone in their respective niches.
Moreover, what could we do to revitalize you or, alternately, to create a separate entity?
Thank you for being here, and for your comments.
I'll be honest with you, I am perplexed. In the bureau's description, it says that the organization is independent, and I quote:
||The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
For years and years, books have been written on the importance of competition, and yet here we are ranking first for our low level of competition.
Our country is enormous; it includes rural regions, diversity, minorities and new developments, but these are not criteria to be considered. Saying that the only question to be considered is the economic one constitutes a problem, I think.
I don't know about you, but I was saying to my colleague that we were elected to make changes and come up with recommendations to improve things. So, what happened over the past 50 years? No one else talked about it? These criteria that are important in Canadian society were always there and things have not changed that much. I find this quite problematical.
I would like to know what criteria and best practices the other countries use, as opposed to us, to ensure competition and not find themselves at the top of the list, but rather in 17th or 21st place among the list of countries with low levels of competition. Help me to understand.
I would like to pose one question to you, if I may.
One of the things there was agreement on when you allowed the Sun and National Post to merge was not editorials, but it was that they wouldn't combine their newsrooms. Well, they have. I just thought you should know that in Canada today, 99 dailies exist. This has been a drop in the amount of dailies. Of those 99 dailies, 45 are owned by Postmedia.
If we talk about competition, where is that competition when they own the majority of dailies? You're getting the same information going out to people and that's one of the problems.
I want to quickly add one thing, and then maybe you can answer. We talked a little about Google and Facebook. They have moved into something new. They have become news aggregators, and therefore, they are in direct competition now with people who do the news—newspapers, television, or radio. They are in direct competition. We now see that 21% of Canadians rely on both Google and Facebook to get their news, and 29% rely on TV. That tells you that competition has been dampened. That tells you there's a monopoly going on in these news aggregators, and there are problems that come as a result of this.
Those are two questions about the not combining newsrooms. What happens if a group agrees with you, under your decision-making, that they shouldn't do certain things and then they ignore it and do it anyway? What do you do? What is your recourse? How do you move that forward?
I think that this has been anti-competition, when you close down.... When you are now responsible for almost half the number of dailies in this country, that is saying a great deal. There is no competition for news, or the one competition that's come about is Google and Facebook, who are in direct competition and becoming monopolies.
Perhaps you could answer that, and also let us know whether you think there's anything we could recommend to maybe broaden.... The fact that you wanted them to have separate newsrooms means that you were concerned about more than just money, more than just markets, more than just financial implications. You were concerned about the diversity of news. That was underlying what you said originally.
I just wonder how you would answer that. Thanks.
Thank you for that question.
I just want to clarify one thing in terms of what was in the bureau's release on March 25 and what information the bureau relied upon in reviewing the Postmedia transaction. Certainly we did mention this idea of having the two separate editorial boards, that this was a representation that the parties made, but as I mentioned to Monsieur Nantel, it was not a criterion that was considered as part of our review or a factor that was determinative in our review. That was information that was provided because we like to be as transparent as possible, and that was information that the parties had agreed to release publicly. That was not a specific undertaking.
When the bureau issues a “no action” letter, it's a bit different from when we enter into a consent agreement with parties. When we review a transaction and we think there could be an anti-competitive effect, but there is a potential remedy or the parties agree to certain behaviour to remedy what we think could be an anti-competitive effect, then the bureau can negotiate a consent agreement with them that is registered with the tribunal. The bureau would continue to monitor to ensure that the parties don't run offside of that consent agreement. To the extent that they do, we could reopen the investigation and seek to proceed that way.
In this circumstance, because it was a “no action” letter and we hadn't relied on those representations on the newsrooms, given that the parties ultimately decided to merge those newsrooms, that fell outside of the scope. It was not a remedy that the bureau had relied upon in coming to its determination. That did not give rise to a need, in our view, to reopen the review and the transaction.
In terms of the effect on Google and Facebook, this is an industry that's changing quickly, as everyone has noted. Even since our last review, the market has evolved significantly as well. To the extent that another transaction were to present itself, we would certainly take a look at the landscape as it is now and make a determination on what the competition is. I couldn't provide hindsight in terms of the transaction based on the current situation of the market now.