As is commonly known, the use of the internet in general, and social networks in particular, has generated practices that are based on the creation of content, or the reproduction, re-use or transformation of third -party content. Sometimes these dynamics imply obtaining a direct or indirect profit. Some examples are the creation of memes, sharing GIFs, those unavoidable loops of animation, or retweeting the status of another user, uploading stories to social networks such as Instagram or Twitter in which third-party songs are incorporated and the streaming of e-sport games on platforms such as Twitch or YouTube.

Thus, while a user of social media platforms is potentially the author of copyright--protected content, he or she, in turn, is a possible infringer of copyrights that belong to third parties.

In this context, one considers whether these dynamics carried out on the internet are adequately regulated by the same principles that apply to activities carried out in our analog, offline environment. Are our Latin American *droit d'auteur* laws outdated?

Most scholars in Latin America agree that local copyright laws can be applied to content in social networks, although not specifically mentioned in the norms, when such content fulfills copyrightability standards, such as originality.

To cite an example, several scholars have maintained that though Law 11,723, the main legal provision on authors' rights in Argentina, is almost one hundred years old, its broad wording, complemented with the international treaties to which Argentina is a party, allow it to achieve a comprehensive copyright protection applicable in the digital age.57

Other authors like Busaniche, consider that Law 11,723 regulates copyright through a highly restrictive model that, consequently, curtails circulation and makes common practices of socialization of culture illegal, affecting essential tasks and social practices of democracy, such as access to culture and information, the work of teachers and students and their

57 Carlos A. Villalba and Delia Lipszyc, *El derecho de autor en la Argentina* (Ciudad Autónoma de Buenos Aires, Argentina: La Ley 2009); Ariel Alberto Neuman, "Derechos de autor y era digital", *El Cronista*, June 6, 2018, https://www.cronista.c om/legales/Derechos-de-autor-y-era-digital-20180606-0011.html.

access to educational materials, and the work of libraries. She argues that in today's digital environments, this system, in which the conditions that gave meaning to copyright are completely modified, needs a structural transformation.58

It is important to clarify that using or reproducing third-party content is not always illegal. As mentioned, limitations and exceptions are a fundamental part of the copyright system, and allow the use and disclosure of content, provided the use is deemed permissible under the three-step rule.

Yet, in order to permit the aforementioned socialization of culture, when thinking about copyright rules in the digital era, we must pay as much attention to addressing limitations and exceptions, as to enhancing copyright protection. Are the existing limitations and exceptions to copyright in Latin America suitable to permit the regular interactions taking place on today's social media? More importantly, what about the access to culture and circulation of information in the digital environment? It does not seem clear that many of these acts will be permissible under the present limitations and exceptions system, which has a very narrow and limited scope.

As user-generated content flourishes, Elkin-Koren argues that users play a critical role in copyright law, and makes a fascinating case for the "user rights approach".59 Observing the user's interests only through the spectacles of limitations and exceptions, is far too narrow, and overlooks the vital role users play in the copyright system. Elkin-Koren makes the thought-provoking suggestion that permissible uses under copyright law should be articulated and treated as rights.

58 Beatriz Busaniche, "Argentina Copyleft. La crisis del modelo de derechos de autor y las prácticas para democratizar la cultura", Fundación Via Libre, September 10, 2010, https://www.vialibre.org.ar/argentina-copyleft-la-crisis-del-modelo-de-derech os-de-autor-y-las-practicas-para-democratizar-la-cultura/.

59 Niva Elkin-Koren, "Copyright in a Digital Ecosystem: A User-Rights Approach", Forthcoming in RUTH OKEDIJI, COPYRIGHT IN AN AGE OF LIMITATIONS AND EXCEPTIONS, July 28, 2015, https://ssrn.com/abstract=2637027.

*Should exceptions and limitations in Latin America be reformed in order to adapt to the common practices in the digital environment? Is there a possibility of incorporating broader criteria, such as the Copyright Fair Use factors? c)*

Questions arise as to how to adapt our Latin American authors' rights frameworks to better suit the digital environment.

Limitations to authors' rights in the laws of Latin American countries are lists of very specifically defined, and narrowly constructed exceptions to the exclusivity granted to authors by law. These are exhaustive, closed lists; if a use of copyrighted content does not fall into one of these very specific categories, it will be considered an infringement. In contrast, the four statutory factors of fair use in U.S, copyright law, and the fifth factor of "transformative use" introduced by courts, provide more flexible criteria that can be used by courts to decide whether a specific use is permissible on a case-by-case basis.

The idea of adopting the Fair Use interpretation criteria has not, as of yet, been a viable alternative for Latin American countries. There is a certain fear of the unpredictability associated with the application of the fair use criteria, and the traditional rule in countries, including those of the European and Latin America, is that copyright limitations and exceptions must be narrowly defined.

Nevertheless, it is surprising that the international three-step test, which has been incorporated into Latin American legislations through the adoption of the Berne Convention as well as other treaties, is in fact rooted in the Anglo-American copyright tradition.60

It has often been considered that the three-step test in international copyright law is is an obstacle to the adoption of more flexible criteria at the national level, yet, Geiger, Gervais & Senftleben have considered that the test was actually intended to serve as a more flexible balancing tool, offering national policy makers the possibility to adopt a flexible system of limitations and exceptions. 61

60 Christophe Geiger, Daniel J. Gervais and Martin Senftleben, "The Three-Step-Test Revisited: How to Use the Test's Flexibility in National Copyright Law", (November 18, 2013) *American University International Law Review*, Vol. 29, No. 3 (2014), pp. 581-626, https://ssrn.com/abstract=2356619 or http://dx.doi.org/10.2139/ssrn.2 356619

61 Christophe Geiger, Daniel J. Gervais and Martin Senftleben. "The Three-Step-Test Revisited: How to Use the Test's Flexibility in National Copyright Law", *American University International Law Review* 29 no. 3 (2014):581-626.

Among the treaties signed by many Latin American nations are the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT). In order to consider the possibility of Latin American countries to reform their legislations regarding limitations and exceptions, it is particularly noteworthy to highlight certain provisions of the WIPO Copyright Treaty and its "Agreed Statements". The details of these treaties is beyond the scope of this overview, but suffice it to mention that some provisions therein, indicate quite specifically that the function of the three-step test is to serve as a flexible framework for the adoption of limitations and exceptions at the national level.

Article 10(1) of the WCT is a direct application of the three-step test to WCT rights:

"Contracting Parties may, in their national legislation, provide for limitations of or exceptions to the **rights granted to authors of literary and artistic works under this Treaty** in **certain special cases** that do **not conflict with a normal exploitation** of the work and **do not unreasonably prejudice the legitimate interests of the author**."

The Agreed Statement Concerning Article 10 WCT states: 62

"It is understood that the provisions of Article 10 permit Contracting Parties to carry forward and appropriately extent into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network environment. It is also understood that Article 10(2) neither reduces nor extends the scope of applicability of the limitations and exceptions permitted by the Berne Convention."

This statement is between all parties to the WCT, prepared at the same time as the Convention, which makes it an important context for the interpretation of article 10.

62 Sam Ricketson, "WIPO Study on Limitations and Exceptions of Copyright and Related Rights in the Digital Environment", March 3, 2008.

#### *Notice and Take-Down: Content Filtering in Latin America Chapter 3.b.*

In order to protect copyright online, notice and take-down procedures and content filtering systems work in tandem, allowing the copyright owner to request the removal of the infringing content, while the filtering systems serve to ensure that the offending content does not re-upload on the internet. Systems such as these are provided for in the U.S. DMCA,63 implemented in 1998 and the Directive of the European Union64 of 2000.

In Latin America, many have argued that in practice these systems have been used to generate acts of censorship of opponents, as tools to control reputation and public image, as well as to manipulate or modify the publicly accessible information that is hosted on the internet.65 All of the above, based on the filing of claims for alleged invasions of copyright online.66 For example, in Ecuador, some years back, copyright laws were used to remove content criticizing the government.67

The creation of these systems has close ties to the creation of the WIPO internet treaties (WCT) and (WPPT) in 1996. As mentioned, most countries in Latin America are party to the WIPO treaties (WCT and WPPT), which establish the obligation to have effective measures to avoid the execution of infringing actions on the internet.

In Chile these mechanisms were established through Law 20,435 of 2010.68 In Costa Rica through Regulation 36880-COMEX-JP of 2011 and in Paraguay through Law 4,868 of Electronic Commerce of 201369 and more recently in Mexico with the reforms to the Federal Copyright Law of 2020.

63 See https://www.law.cornell.edu/uscode/text/17/512

64 «Directiva sobre el comercio electrónico 2000/31/CE.» 2000. https://eur-lex.europ a.eu/legal-content/ES/TXT/HTML/?uri=CELEX:32000L0031&from=ET (accessed: 2021).

65 Reseña del Tratado de la OMPI sobre Derecho de Autor (WCT) (1996)," Organización Mundial de la Propiedad Intelectual", accessed June 22, 2021, https://www. wipo.int/treaties/es/ip/wct/summary\_wct.html.

66 Alejandro Aréchiga Morales, "Sistema de notificación y retirada en México: los derechos en juego", Centro de Política Digital para América Latina, 2021 .

67 Derechos Digitales, "The various paths of Internet censorship in Latin America", IFEX, November 14, 2014, accessed 10 July, 2021, https://ifex.org/the-various-path s-of-internet-censorship-in-latin-america/.

68 See Article 14 WCT and Article 23 WPPT, Provisions on Enforcement of Rights.

69 Rodrigo Vargas Acosta, "Responsabilidad de intermediarios por infracciones a los derechos de autor en Chile, Paraguay y Costa Rica: Un análisis desde la libertad de expresión", *Revista chilena de derecho y tecnología*, Vol. 5, no. 1 (2016), https://do i.org/10.5354/0719-2584.2016.41782.

#### *The particular case of the new law in Mexico a)*

A particular case study in Latin America is that of the new Mexican Federal Copyright Law. In response to the United States-Mexico-Canada Agreement (USMCA in the US, T-MEC in Mexico) which took effect on July 1, 2020, the Mexican government reformed its intellectual property legislation, including amendments to its Federal Copyright Law, effective July 2, 2020.

Among the provisions that were amended, is the addition of a notification and withdrawal system that enables Mexican Internet users to file claims when they consider that their copyright is affected by a third party.70

The implementation of the notification and withdrawal system generated concern among interested parties, with several civil organizations publicly arguing that these measures affect the exercise of other rights on the internet, for example, freedom of expression, access to culture or information.71

Among the main criticisms that the notification and withdrawal system received are the speed with which the reform was approved, due to the pressure to comply in time with the commitments and negotiations derived from the T-MEC. Likewise, the effects that it can generate on the exercise of other rights on the Internet and the errors with which it was incorporated into the LFDA were criticized.

Naturally, the reform was defended by the government and other interested parties. Discussions on the legality of the system by the academic sector and media became more compelling when the National Commission of Human Rights (CNDH), an autonomous constitutional body of Mexico, filed a claim of unconstitutionality before the Supreme Court of Justice of the Nation (SCJN) on the grounds that the notification and withdrawal system may affect the exercise of fundamental rights on the internet.72

70 Consult articles 114 septies and octies of the Federal Law of Copyright of Mexico http://www.diputados.gob.mx/LeyesBiblio/pdf\_mov/Ley\_Federal\_de\_Derechos.p df

71 "Red de defensa de los derechos digitales. Ni censura ni candados", R3D, accessed June 22, 2021 https://participa.nicensuranicandados.org/.

72 Consult Action of Unconstitutionality 217/2020, https://www.cndh.org.mx/tipo/2 09/accion-de-inconstitucionalidad?field\_fecha\_creacion\_value%5Bmin%5D=&fiel d\_fecha\_creacion\_value%5Bmax%5D=&keys=217%2F2020&items\_per\_page=10.

In addition, in the action of unconstitutionality, the Supreme Court pointed out deficiencies, errors and omissions with which the system was incorporated into the Federal Copyright Law. This claim has not yet been resolved.

#### *Conclusion Chapter 4.*

In a region with glaring economic and political inequalities such as Latin America, digital transformation will have a strong impact on inclusiveness, and social media can provide empowerment and, help shape users to progress socially, economically, educationally, and politically.

When the state gives companies more faculties to moderate content, greater control of the public debate falls on the private sector. Yet, is it counterproductive that content can only be moderated if the state allows it? There are models of moderation in online communities, where users decide what kind of content should be filtered, based on the interest of maintaining a healthy dialogue. Ideally, companies could maintain a certain flexibility to decide what content to allow on their platform, but with clear and transparent rules. A social media platform should have to report to the user the reasons a certain expression is being restricted, and there should be appeal mechanisms. Regulation would have to focus on making the exercise of that power accountable.

The challenge for Latin America will be to provide regulation for these activities, whilst crafting rules that safeguard freedom of expression, appropriate to each country's particular domestic social, legal and political contexts, while securing privacy and facilitating civic and social engagement.

### *Bibliography*

https://doi.org/10.5771/9783748929789, am 27.04.2022, 15:24:38 Open Access – - http://www.nomos-elibrary.de/agb

Topic-based Regulation: Media Law and Data Protection

https://doi.org/10.5771/9783748929789, am 27.04.2022, 15:24:38 Open Access – - http://www.nomos-elibrary.de/agb

# Media Law Regulation of Social Networks - Country Report: Germany

*Bernd Holznagel, Jan Christopher Kalbhenn*

**Abstract:** In 2018, the German Federal Constitutional Court identified dangers in digitalisation of the media. This leads to "increased difficulty in the separation of fact from opinion, content from advertisement, as well as to new uncertainties regarding the credibility of sources and assessments. Individual users themselves must now process and assess the information provided by the mass media, which would traditionally have passed through the filter of professional selection in the spirit of responsible journalism." German lawmakers have responded to this with the Interstate Media Treaty. For the first time, this treaty sets requirements for content providers on social networks and addresses platforms as content distributors. Supplementary requirements result from the recent case law of the civil courts. The legislature is placing high demands on digital offerings by public broadcasters, who are no less required to provide a counterweight to the dangers of the network and platform economy.

**Keywords:** content moderation; due diligence; media law; disinformation; hate speech; algorithmic transparency; filter systems; recommendation systems; public service broadcaster; social media; public European space; design specifications

#### *Increased need for truthful information on the Internet Chapter 1.*

Initially, there was little knowledge about the novel Corona virus. At the same time, strategies to contain the pandemic required the cooperation of citizens and affected everyone's daily lives. This triggered an increased need for information. Without the filtering function of professional journalism, individuals would have been lost in the flood of news and information. Consequently, the first lockdown was also accompanied by an increase in media usage. The internet had the highest gains (19 percentage points) in informative daily reach. This includes informative use of algorithmic-driven online platforms. One in two people used Google, Facebook and the like to obtain information during the Corona pandemic (increase: 22 percentage points). In Germany, public information and news services are also represented there and generate high demand figures.1 Since the outbreak of the pandemic, the podcast charts have frequently been topped by the "Coronavirus Update." In it, virologist Christian Drosten regularly explains the latest scientific findings. At the same time, however, offers that spread misinformation also gained in reach. For the German-speaking world, these include the YouTube channels of CompactTV, SCHRANG TV and Games of Truth, which attempted to prove connections between the Corona outbreak and the expansion of the new 5G mobile communications standard. False information spread via social networks, such as that Corona immunity could be obtained injecting disinfectant. Internationally active is the conspiracy theorist network QAnon, which spreads the theory that Bill Gates, the Rothschild family and others have invented Corona as a bioweapon.

#### *State duty to protect the democratic discourse Chapter 2.*

The discourse model of the German Constitution (*Grundgesetz*) can only function if political will is formed on the basis of arguments. Social, economic and cultural challenges can only be solved on the basis of facts. In a battle of opinions, the better arguments should win. The German constitution also assumes that public opinion is formed through speech and counter-speech. This takes place through argumentative disputes in the public sphere. The state must stay out of it. However, it has a constitutional duty to protect. 2 Thus, it must shape a positive media order in such a way that the "diversity of existing opinions finds expression in the broadest possible range and completeness." The word 'diversity' in this context is by no means to be equated with the word 'multiplicity'.3

It is questionable whether current media law legislation is able to ensure that the public is also supplied with factually correct and credible information on the internet and in social media. It is true that the possibilities of digital distribution channels such as social networks have led

1 Data for Germany in Bernd Holznagel and Jan Kalbhenn, *Monitoring Media Pluralism in the digital Era – Country Report Germany* (2021).

2 Steinebach et al., *Desinformation aufdecken und bekämpfen*, (Baden-Baden: Nomos, 2020).

3 Horst Röper, *Konzentration und Vielfalt im deutschen Rundfunk*, UVK Medien, 1997.

to a differentiation and multiplication of offerings. In this regard, the *Bundesverfassungsgericht* (German Federal Constitutional Court) also states that offerings are often not aimed at diversity of opinion, but are "determined by one-sided interests or the economic rationality of a business model, namely to maximise the time users spend on pages as much as possible and thereby increase the advertising value of the platform for customers." The highest German court also sees a danger in the fact that content is specifically tailored to the interests and inclinations of users by algorithmic means. In this respect, results in search engines are also pre-filtered and partly financed by advertising, partly dependent on "click numbers".4

As a result, the Federal Constitutional Court states that digitisation of the media leads "to increased difficulty in the separation of fact from opinion, content from advertisement, as well as to new uncertainties regarding the credibility of sources and assessments. Individual users themselves must now process and assess the information provided by the mass media, which would traditionally have passed through the filter of professional selection in the spirit of responsible journalism."

When the highest court points out such dangers to democratic discourse, it is tantamount to a mandate for legislators to address the problems and consider whether they must fulfil their duty to protect. At the end of 2020, the German states, which are responsible for media law, adopted the Medienstaatsvertrag (Interstate Media Treaty, in short: MStV).5 For the first time, this sets specifications for content providers on social networks (III.). Platforms as content distributors are also addressed, with additional requirements arising from the recent case law of the civil courts (IV.). The legislator places high demands on the digital offerings of public service broadcasters, who are expected to do no less than act as a counterweight to the dangers of the network and platform economy (V.).

4 *Bundesverfassungsgericht*, Decision from 18 July 2018 – BVerfGE 149, 222 ("Rundfunkbeitrag").

5 English version of the Interstate Media Treaty under https://www.die-medienanstal ten.de/fileadmin/user\_upload/Rechtsgrundlagen/Gesetze\_Staatsvertraege/Interstate \_Media\_Treaty\_en.pdf.

#### *Media law requirements for content on social networks Chapter 3.*

#### *Journalistic standards of due diligence Chapter 3.a.*

Due diligence obligations for the press and broadcasting have long been known in German media law. These providers must check news for content, origin and truth with the due diligence required by the circumstances before disseminating it. The German Press Code serves as a benchmark in this regard. 6 In it, the German Press Council sets out guidelines aimed at truthfully informing the public and enhancing the credibility and reputation of the media. The Press Code also includes the requirement to treat facts as such with care and the requirement to separate editorial and advertising publications. In connection with reporting on a study on the Corona infectivity of children, the Press Council reprimanded the biggest national (boulevard) newspaper BILD in 2020 for breaches of the duty of care. The paper had suppressed several facts important for understanding the study and had obscured a study result that was unpopular in some political circles, namely that children also transmit the Corona virus.

These journalistic standards of care have so far applied on the internet only to the offerings of radio stations and press publishers. Other providers, such as offerings distributed as podcasts or via YouTube by digital native news providers, were not bound by standards and appropriate oversight. Misrepresenting a study here would not be reprimanded on the basis of a journalistic due diligence violation. However, much false information is disseminated via channels whose presentation can hardly be distinguished at first glance from news sources operating according to high standards. Such offerings are widely disseminated via platforms such as YouTube and Instagram. The Interstate Media Treaty extended the obligation to observe journalistic standards to this area as well.7 Now the rules also apply to "other journalistic-editorial telemedia which regularly contain news or political information".

Things now get complicated when it comes to supervising compliance with these standards. In contrast to the other information services, the online offerings of the press are generally exempt from supervision by the state media authorities. Self-regulation is given priority for information services. They are given the option of joining the Press Council or a volun-

6 Press code of the German Press Council https://www.presserat.de/pressekodex.htm l.

7 § 19 MStV.

tary self-regulation institution. Nevertheless, supervision by the competent state media authority will take place alongside. Voluntary self-regulatory bodies require approval by the state media authorities, and their decisions are subject to review and objection by those authorities. For services not affiliated with voluntary self-regulation, the state media authorities are directly responsible.8

#### *Labelling of social bots Chapter 3.b.*

In the debate about disinformation, the role of social bots is regularly emphasised. This refers to computer programs that are used on social networks to produce automated content and messages and that appear to originate from a human. To be sure, opinions still differ on the extent to which such computer programs are already being used effectively. However, a new study on media education in Germany shows that digital media education is in a poor state and that many digital phenomena cannot be classified.9 Social bot programs, for example, are in danger of jeopardizing democratic discourse.10 Bots can be used to distort public opinion by pushing certain content *en masse*. Bots can also simply disseminate false information and support the virality of certain harmful content. The Interstate Media Treaty now introduces mandatory labelling for providers of social bots on social networks such as Facebook, TikTok, Twitter and YouTube. If such accounts are operated there, the account holders must make the fact of automation known. This is intended to take account of the fundamental potential of these programs to influence individual and public opinion-forming, without completely banning the use of such services. A complete ban on social bots can probably not be justified, if only because they can also be used for harmless and non-political purposes, such as customer advice. In the implementation of these new rules, it will be important that the labels are made in such a way that they are effective and that the users of social networks can classify the accounts accordingly. In practice, this will require the expertise of media designers and media

8 Bernd Holznagel and Jan Christopher Kalbhenn' "Journalistische Sorgfaltspflichten auf YouTube und Instagram", in *Festschrift für Jürgen Taeger,* ed. Specht-Riemenschneider et al. (Frankfurt: R&W, 2020), 589-608.

9 https://www.stiftung-nv.de/sites/default/files/studie\_quelleinternet.pdf (last accessed: 15 April 2021).

10 Christian Grimme et al., "Demystifying Social Bots: On the Intelligence of Automated Social Media Actors", *Social Media & Society* Vol. 6, Nr. 3 (2020) 1-14.

psychologists. Through statutes and case law, concrete requirements for the interface design of social networks can develop from this (design requirements).

The addressees of these obligations are also the social networks. They must ensure that service providers comply with the labelling obligation. How they do this is up to the networks to decide. The only rule is that they must do so carefully.11

#### *Labelling of political advertising Chapter 3.c.*

The business model of many open platforms, such as social networks, is based substantially to exclusively on advertising. This business model allows the reach of content to be scaled in return for monetary payments. Micro-targeting is considered particularly effective in this context. The advertiser can then have its advertising message displayed to a target group that it can precisely determine in advance on the basis of individual criteria. This is possible because the platforms create incredibly detailed profiles of their users. To advertise baby food, it then makes sense for the advertiser to target young mothers with a certain income. In the analog world, this would require advertising in an appropriate magazine or in the context of an appropriate TV show without the involvement of personal data.12

A further risk situation that must be taken into account first arises in the case of political advertising.13 For example, micro-targeting can be used by a political party to make different 'election promises' to certain selected groups of voters. Young families can be promised more child benefit, while the same party promises to cut child benefit for another voter group and to do more for the care of dogs and cats (dark ads).

Classic media law recognises that political advertising on TV and radio has long been a particularly sensitive category of advertising. It is only permitted under strict conditions in a short period before elections. Otherwise, a strict ban applies. The possibility of banning political advertising on social networks also presented itself with the Interstate Media Treaty, which for the first time contains rules for political advertising in the digital

11 § 18 Sec. 3 MStV.

12 Shoshana Zuboff, *The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power* (New York: PublicAffairs*,* 2019).

13 Judit Bayer, "Double harm to voters: data-driven micro-targeting and democratic public discourse", *Internet Policy Review 9(1)* (2020).

realm.14 To avert danger, however, the initial focus is on transparency. A labelling obligation for political, ideological and religious advertising will be introduced for all telemedia. This transparency obligation is intended to provide better information about the origin and financing of such advertising. For this reason, the relevant advertisers or clients must be clearly indicated in an appropriate manner. The state media authorities are responsible in each case. The specific dangers of microtargeting are not addressed. The regulation applies to this type of advertising just as it does to such advertising that is displayed to all users of a platform or website. To be fruitful as a tool in the fight against disinformation and contradictory campaign promises, the concept of advertising in this context must be interpreted widely. It must cover all political content whose relevance is promoted by payments to the networks. Otherwise, difficult demarcations may arise. For example, parties and politicians are increasingly using layouted messages that cannot initially be distinguished from paid advertising in purely visual terms.

#### *Interim conclusion Chapter 3.d.*

The regulations presented are a clear step forward in combating the spread of disinformation. In the 2016 US election campaign and the Brexit referendum in the same year, so-called dark ads, non-transparent micro-targeting, and social bots in particular were identified as influencing public opinion. With labelling requirements for social bots and political advertising, transparency rules for these problems are now available for the first time. However, the regulations found by the legislature are quite challenging in terms of oversight and enforcement. Many demarcation issues will arise, so that an intensive learning process lies ahead for those involved. This becomes particularly clear in the area of supervision of compliance with journalistic due diligence obligations. Here, the circle of obligated parties is greatly expanded with the information services in the Interstate Media Treaty.15 But in supervision, too, the state media authorities and institutions of voluntary self-regulation join the Press Council. The regula-

14 § 22 Sec. 3 MStV.

15 § 19 Sec. 1 MStV.

tions proposed by the European Commission in the Digital Services Act go much further, especially in the area of advertising.16

#### *Media law requirements for content moderation on social networks Chapter 4.*

More and more people are turning to platforms such as Facebook and YouTube for information or news. Just under one in two adult Germans (48 %) has also obtained information about the virus from social media. In the 18- to 24-year-old group, the figure is 72 percent. 17 Journalistic editorial content is also displayed in the Facebook newsfeed or on YouTube. The success or dissemination of disinformation, but also of truthful information, on the internet depends in many cases on platform content moderation. Central to the architecture of the platforms are the filtering and recommendation systems that decide which content comes onto the platforms and which users are shown which content. The programming and the underlying relevance criteria of algorithms thus determine the visibility and reach of content. Content that is recommended by algorithms and also shared by people has a strong chance of becoming viral and achieving an extraordinary reach. Filtering systems that suppress, devalue or delete illegal and harmful content have the effect of curbing reach. For the first time, the new Interstate Media Treaty lays down regulations regarding these systems and thus also regarding content moderation on social networks, as well as flanking design specifications. Particularly harmful and criminal content must be deleted quickly under the rules of the Netzwerkdurchsetzungsgesetz (Network Enforcement Act, in short: NetzDG). Initial legal guidelines for the measures used by platforms to combat disinformation on the basis of their general terms and conditions and community standards can be taken from civil court case law. For the first time, the Interstate Media Treaty also formulates positive findability rules for public value content on digital platforms.

16 Jan Kalbhenn and Maximilian Hemmert-Halswick, "EU-weite Vorgaben zur Content-Moderation auf sozialen Netzwerken", *ZUM – Zeitschrift für Urheber- und Medienrecht* No. 3 (2021), 184.

17 Sascha Hölig and Uwe Hasebrink, *Digital News Report – Germany* (20220) https:// www.hans-bredow-institut.de/uploads/media/default/cms/media/66q2yde\_AP50\_ RIDNR20\_Deutschland.pdf.

*Specifications for recommendation and filtering systems Chapter 4.a.*

#### *Transparent recommendation algorithms a)*

For the first time, the new Interstate Media Treaty takes a look at content moderation by recommendation systems. It requires certain platforms to make the central criteria of aggregation, selection, and presentation of content visible.18 However, this obligation under media law applies to those platforms "which also aggregate, sort and publicly disseminate thirdparty editorial content".19 Journalistically editorial offers, i.e. those that contribute to the formation of opinion through a planned activity with the aim of producing and promptly passing on an offer, are disseminated by all common social networks. These must disclose the sorting criteria. This transparency obligation is limited by protection of trade and business secrets, which is why, according to the explanatory memorandum to the law, the algorithm itself does not have to be published. The precise formulation of the transparency rule is left to the state media authorities. They must specify the requirements in statutes that apply nationwide.20 They will require that the relative weighting of the individual criteria be described. The platforms' optimisation goals should also be transparent. Social networks must then also specify how exactly the findability of content can be influenced by monetary payments and what role profiling plays in this. Information on the architecture and design of the platforms will also be necessary, namely to disclose what influence the functions available to users (sharing, liking, and the like) have.

#### *Transparent filter algorithms b)*

Before content can even be captured by recommendation systems, it must first be posted on the platforms. During this process, they are already checked by the social network filter systems and, if necessary, not published at all. These filter systems are particularly advanced in the area of copyright. YouTube's content management system has long been con-

18 § 93 MStV.

19 § 2 MStV.

20 "Satzung der Landesmedienanstalten über die Regulierung von Medienintermediären gemäß § 96 Medienstaatsvertrag" Draft of the Statue notified at the Commission can be found in the database https://ec.europa.eu/growth/tools-databases/ tris/en/search/.

sidered particularly sophisticated and detects possible copyright infringements within a few seconds by comparing uploaded content with content already known in the archive. Systems for detecting "harmful" content that is not tolerated according to platform community standards also filter out content that constitutes hate speech, terrorism, or similar content on a large scale. The Interstate Media Treaty also responds to the use of such filtering systems with a transparency requirement. The social networks must disclose the criteria that determine whether a piece of content can be accessed and remain on the platform. These might, for example, be technical, economic, provider-related, user-related and content-related requirements. Information on content categories, the purpose of the measures, and possibilities of influence through payment must also be made transparent.

#### *Prohibition of discrimination of journalistic content c)*

Both the recommendation systems and the filtering systems are subject to a new prohibition of discrimination in favour of journalistic and editorial offerings in the Interstate Media Treaty. 21 This is intended to prevent certain offerings from being over- or under-represented in comparison to other editorial offerings, for example, due to their political orientation or organisational form (private or public) of the provider, and to directly or indirectly impair access or findability.

However, the threshold for the existence of discrimination under the Interstate Media Treaty is quite high; only discrimination of a systematic nature is prohibited. The duration, regularity, possible repetition and systematic nature of the discrimination must be taken into account. A distinction is drawn between two groups of cases of discrimination. Firstly, if the criteria to be published in accordance with the transparency requirements are deviated from without objective reason in favour of or to the detriment of a specific offer. Secondly, if bids are directly or indirectly unfairly systematically impeded by these criteria.

Discrimination may be justified in individual cases. In addition to technical reasons (e.g., displayability of the offering on mobile devices), justification can also be based on lawful conduct. For example, copyright assessments.

21 § 94 MStV.

#### *Design specifications d)*

The Interstate Media Treaty stipulates that information on recommendation systems and filtering systems must be "easily perceivable, immediately accessible and constantly available". How this is to be understood will become clear in the medium term. If criteria for easy perceptibility emerge through statutes and case law, this will result in concrete requirements for the design of social networks. The NetzDG makes similar design specifications for the discoverability of complaint options.22 Here, experience shows that some networks in practice tend to hide the possibility to use the Network-Enforcement-Act-complaint-tools in their design of the user interface. As a consequence, the legislator could feel compelled to set stricter criteria for "easy noticeability", which would then have to be implemented by (product) designers.

#### *Expeditious deletion of certain criminal content Chapter 4.b.*

Legal concretisations for the rapid deletion of content are contained in the NetzDG. The law is intended to safeguard rational discourse online and combat the spread of false news via social networks. However, the specified deadlines for deleting illegal content only apply to the catalogue of 22 criminal offences defined in the NetzDG, only a few of which in turn relate to the potential spread of false news (e.g. defamation under Section 187 of the Criminal Code).

Deletions under the NetzDG have so far been of little consequence for Facebook. In the first half of 2020, Facebook deleted 3,913 pieces of content, Twitter 122,302 on the basis of the NetzDG.23 With the amendment to the NetzDG, the legislator is attempting to push back deletions according to community standards by making it easier to find the complaint option under the NetzDG and expanding reporting obligations. A "put-back" procedure is introduced to safeguard the rights of data subjects under Article 5 (1) of the *Grundgesetz*. In the future, a position will also be taken

22 Jan Kalbhenn and Maximilian Hemmert-Halswick, "Netzwerkdurchsetzungsgesetz"in: *Handbuch Multimedia-Recht*, ed. Hoeren/Holznagel/Sieber (München: C. H. Beck, 2021), part 21.3.

23 "NetzDG Transparenzbericht July 2020" Facebook https://about.fb.com/wp-con tent/uploads/2020/07/facebook\_netzdg\_July\_2020\_German.pdf; "Community Standards Enforcement Report, Third Quarter 2020," Facebook, https://transpare ncy.facebook.com/community-standards-enforcement.

on the use of automated procedures for finding content in transparency reports. Another new way of monitoring content is for those affected to go before a conciliation body. These bodies, which have yet to be established, are to mediate as a low-threshold service for those affected and open up the possibility of involving civil society. This regulatory regime is becoming more differentiated.24

#### *Establishment of voluntary self-regulation a)*

For example, the first recognised institution of voluntary self-regulation, Voluntary Self-Regulation of Media Service Providers (FSM), has been available since March 2020 for the area of content monitoring under the NetzDG. FSM is a non-profit association and membership is open to companies from the Online Media Sector. In the case of illegality that is difficult to assess, network providers are to be able to consult the FSM. For example, in cases of satire and political opinion campaigns, the limits of freedom of expression are traditionally more difficult to fathom. It is therefore not surprising that this group of cases is frequently represented among the FSM's first cases. Most recently, the panel of 50 lawyers had to judge a comment on Facebook explaining how a standard text can be used to circumvent the mask requirement when shopping. Here, the FSM denied the offence of public solicitation to commit a crime. All decisions are available online.25 This is how a canon for content control on social networks can be created.

#### *Case Study "Liberation of Germany from the Merkel Regime" b)*

A post on Facebook was calling for action against the "Merkel Regime".26 It reads as follows: "Half a million to a million Germans plan to demonstrate on August 1 in Berlin, a great opportunity to liberate Germany from the Merkel regime (Freemasons' puppet). Tens of thousands of Germans must storm into the Chancellery, occupy entire buildings, and the Committee to Rescue Germany takes over government. (…) The parliamentary

24 Kalbhenn and Hemmert-Halswick, *Netzwerkdurchsetzungsgesetz*.

25 Online Archive of FSM to be accessed under https://www.fsm.de/de.

26 FSM "Entscheidung Aktenzeichen NetzDG0092020" https://www.fsm.de/de, (translation by the authors).

party system is past and finished, now the people, parliament and the Committee to rescue Germany decide on a future Germany. Merkel and the whole cabinet and colleagues, all party functionaries of the CDU, CSU, FDP, SPD, Greens and the LEFT, all constitutional judges, ARD ZDF directors and moderators, all the lying press (newspapers) owners and reporters, fascist terrorist Antifa groups, all must be arrested immediately for high treason, and a military court must decide on the fate of these traitors. (...) destroy all Masonic Lodges with their members – Soros - Bill Gates-Antifa-Greta-EU-NATO, destroy all Anti-Christian Party politicians, Islamists, Anti-Christian leaders (Cardinals, Bishops) in the Vatican official church who are Freemasons' puppets (...)".

This post could qualify as public provocation to commit crimes under the German Criminal Code. Then the content would be unlawful in the sense of the NetzDG and would have to be deleted. But this decision is not easy. Facebook also did not find the assessment easy and made use of the option to submit the case to the FSM. In order to be recognised as a self-regulatory body, institutions must meet a number of requirements. The installation of such self-regulated bodies is provided for in the NetzDG. These bodies must meet certain requirements prescribed by law to be recognised by the Federal Office of Justice. These lawyers are paid by the FSM. For example, they have to secure proper equipment for the examiners, guarantee a rapid testing within seven days and provide transparent rules of procedure. According to its procedural rules the FSM works in several "Audit Committees". These Audit Committees are composed of three persons, who appoint a chairman from among themselves. They work in line with a schedule of responsibilities. The Committee members are installed for at least one year, and must have the qualification for the office of a judge. Incompatibility rules define who is not allowed for the task, for example lawyers working for the same law firm representing the company, lawyers appointed by social networks, and employees of media authorities. Only social networks that are members of the FSM are entitled to submit applications. The procedure to be followed is prescribed as well. Social networks can request the FSM to decide on a case by email. These applications must meet formal requirements, for example in regard to their completeness. The FSM administrative office forwards the case to the competent audit committee, which has to decide within seven days. The committee can decide by telephone or in writing. The final decision must be submitted in writing and contain facts and reasons. It must state whether submitted content is unlawful in the sense of the NetzDG. All decisions must be published. If the submitted content is unlawful, the social network must take immediate action. The FSM procedure also has complaint options. The uploader can request a review of the FSM decision. The deadline for this is two weeks and it may lead to a new decision. FSM decisions must be based on current German jurisdiction. The examination is limited to the question whether content is unlawful in the sense of NetzDG.

It was according to these rules that this self-regulated body dealt with the "The Merkel Regime" case. The FSM considered human rights and the jurisprudence of Federal Constitutional Court.

In this case the FSM considered and weighted the fundamental right of freedom of expression (Art. 5 Grundgesetz) and used leading judgements of the Federal Constitutional Court as a benchmark for its examination. It recalled the Federal Constitutional Court and said: "when interpreting expressions of opinion that aim to influence the opinion-forming process and are subject to freedom of opinion, the content of the declaration must also be determined against the background of social and political events". The FSM decided in favour of the User, namely that the post on Facebook does not constitute unlawful content in the sense of the NetzDG.

#### *Civil court requirements for content moderation according to community standards Chapter 4.c.*

According to its community standards, Facebook took action against 22.5 million pieces of content globally for hate speech from April to June 2020.27 This may also affect content that is still protected by freedom of expression, such as certain forms of conspiracy theories or fake news. This raises the question of the extent to which private platforms are bound by freedom of expression when providing a public communication space. With regard to Facebook, the Federal Constitutional Court has already stated that it is "precisely for the dissemination of political programmes and ideas [...] a medium of paramount importance that is not readily replaceable" and that exclusion from the platform denies an essential opportunity to disseminate political messages and actively engage in discourse with users.28

27 "NetzDG Transparenzbericht July 2020" Facebook https://about.fb.com/wp-con tent/uploads/2020/07/facebook\_netzdg\_July\_2020\_German.pdf; "Community Standards Enforcement Report, Third Quarter 2020," Facebook, https://transpare ncy.facebook.com/community-standards-enforcement.

28 *Bundesverfassungsgericht*, Decision from 22 May 2019 – 1 BvQ 42/19 ("III. Weg").

#### *Hate speech a)*

Community standards and platform content deletions based on them are fully reviewable in the German civil courts. There is already a broad canon of case law on paragraph 12 of community standards (hate speech). When examining the legality of the deletion decision in civil court, the courts first deal with the effectiveness of the platform Terms of Service. In Clause 12, Facebook reserves the right to delete hate speech, which it defines "as a direct attack on individuals based on protected characteristics: ethnicity, national origin, religious affiliation, sexual orientation, caste, gender, gender identity, serious illness or serious disability." The majority of courts consider Clause 12 (hate speech) to be a permissible contractual clause. Under German constitutional law, fundamental rights also apply between private actors. The courts then weigh the fundamental rights positions of the users (freedom of expression and the principle of equality) against those of the platforms (fundamental economic rights). Emphasis is placed on Facebook's interest in structuring its terms of use in its own business interests in such a way that people with different backgrounds and different values and moral concepts feel as unaffected and comfortable as possible. The restriction on users' freedom of expression is mitigated by the fact that, in principle, "humour and social criticism," among other things, are permitted in connection with topics covered by hate speech. Occasionally, courts recognise in the community standards an unreasonable disadvantage contrary to good faith, because operators of a public marketplace for information such as Facebook must ensure that a lawful expression of opinion is not removed. 29 Deletion can then only be considered if content is illegal, for example, if it violates one of the provisions of Section 1 (3) NetzDG.

#### *Fact-checking b)*

So-called fact-checking in particular is sometimes seen as a proven antidote to disinformation. Paragraph 21 of Facebook's Community Standards states: "We want to help people stay informed without hindering productive public discussion." Following a partially automated process established by Facebook, potential fake reports are identified and submitted to

29 Kalbhenn and Hemmert-Halswick, *Netzwerkdurchsetzungsgesetz* for an overview on Jurisprudence of German Courts.

service providers for review. They can then flag the report accordingly, triggering a significant reach restriction. By default, the fact-checker's website is also linked to a call for donations.

The Karlsruhe Higher Regional Court (Oberlandesgericht) had to decide on a specific case of fact-checking on Facebook. An article by a medium called Tichys Einblick linked on Facebook had the headline "500 scientists declare: 'There is no climate emergency'." Facebook's fact-checking service provider 'Correctiv' inextricably linked the corresponding post with the note "fact-check" and "assertion partly false." The reasoning for that labelling was that not all signatories of the declaration mentioned in the article were "scientists".

The Oberlandesgericht Karlsruhe assumed an anti-competitive business act here since both Tichys Einblick and Correctiv were media outlets competing for attention.30 Because freedom of opinion also applies between private actors under German constitutional law, the court consequently sets standards for fact-checking that would apply accordingly to a state actor. Thus, in journalistic competition, the duty of neutrality must be observed: Certain opinions or tendencies may not be favoured or disadvantaged by promotion. The principle of equal opportunity in communication must be observed: If the credibility of a particular participant in journalistic competition is particularly emphasised or publications would always include a reference to the opposing view or even all competing views, this would require special justification. The fact-checker must be particularly careful to avoid any misunderstanding as to which statement their criticism refers to, who made the statement, and whether the criticism is primarily evaluative or factual in nature. Incorrect information does not constitute an asset worthy of protection from the point of view of opinion formation.

#### *Findability of truthful content in user interfaces Chapter 4.d.*

In view of the flood of information, it is important that socially significant information and news offerings in particular can be found by the user community at all. Media policy has long called for making it easier to find public value offerings. The Interstate Media Treaty now introduces findability rules, but only for smart TV devices, streaming sticks and smart

30 *Oberlandesgericht Karlsruhe*, Decision from 09 September 2020, - 6 U 38/19 ("Tichys Einblick").

speakers. 31 Public value offerings must be made easy to find through a highlighted presentation. These are primarily offerings by public broadcasters. Commercial offerings can also be specified by the state media authorities. This is intended to take into account the increasing importance of findability and positively ensure diversity.

Netflix and Amazon Prime, which are in particularly high demand among young people, are not subject to any obligations to make certain content easy to find or to grant access to the offering in the first place. This recognises the editorial sovereignty and programming of these services, as is familiar with other final media products (newspapers, TV programming). Facebook Newsfeed, Google Search or YouTube are also not subject to any discoverability rules as so-called media intermediaries. Corresponding demands failed in the countries where these companies have their German headquarters. Here, trust is still placed in self-regulation by providers. However, architecture specifications for the platforms are also possible. Under certain conditions, they could be required to programme their algorithms for diversity.

#### *Interim conclusion Chapter 5.*

Digital platforms are the main channel for dissemination of fake news, because the effects of communication based on algorithms can increase the spread enormously ("viral effects"). Regulation in this area is just becoming more differentiated in Germany. On the one hand, this applies to the Interstate Media Treaty, which provides transparency and non-discrimination rules for recommendation systems and filtering systems, but which only protects journalistic and editorial content. For content that is found to be criminal, the NetzDG requires expeditious deletion, but the decision-making process for this is distributed among various pillars and all parties involved are protected by procedural rules. The Digital Services Act also follows these regulatory approaches, even in some cases going beyond them.32 Furthermore, the platforms have plenty of room to shape their content moderation and also align it with their economic goals. The case law of the civil courts provides some initial guidelines in this regard. In July 2021, the Federal Court of Justice ruled that it is necessary for Facebook to undertake in its terms and conditions to inform the user

31 § 84 MStV.

32 Kalbhenn and Hemmert-Halswick, *EU-weite Vorgaben zur Content-Moderation*.

### *Bernd Holznagel, Jan Christopher Kalbhenn*

concerned about the removal of a post at least retrospectively and about an intended blocking of his user account in advance, to inform him of the reason for this and to give him an opportunity to respond, followed by a new decision.33 What is sorely lacking for digital platforms is, above all, discoverability rules for high-quality content, such as that of public broadcasters.

#### *High requirements as to content of public service media Chapter 6.*

The services provided by public broadcasters continue to enjoy high priority in Germany. In addition to a nationwide TV service (ZDF) and radio service (Deutschlandradio), public broadcasting is organised on a federal basis. Nine broadcasters distribute TV and radio programmes. Since 2019, broadcasters have also been increasingly active on the internet. The broadcasters' Corona coverage has been well received and approval ratings are at a high level. 34 However, rapid developments in the area of digital platform competition are causing problems. The development of public broadcasting is regularly driven by the case law of the Federal Constitutional Court. In 2018, the court defined the mission of public broadcasting in the digital world and also positioned it against disinformation and other threats fuelled by the network and platform economy.

#### *Public service broadcaster as "counterweight" Chapter 6.a.*

In 2018, the Federal Constitutional Court had to rule on a completely different question, but did not miss the opportunity to define the role of contribution-financed public broadcasting in the digital media world. The network and platform economy of the internet, including social networks, leads to "increasingly difficult separability between facts and opinion, content and advertising, as well as to new uncertainties regarding the credibility of sources and evaluations. The individual user must take over the processing and mass media evaluation that traditionally takes place

33 Bundesgerichtshof Decision from 29 July 2021 - III ZR 179/20 und III ZR 192/20, press release unter https://www.bundesgerichtshof.de/SharedDocs/Pressemitteilu ngen/DE/2021/2021149.html.

34 Nationwide survey Infratest Dimap, "Glaubwürdigkeit der Medien 2020" *Auftraggeber: WDR* https://www1.wdr.de/unternehmen/der-wdr/unternehmen/studie -deutsche-medien-glaubwuerdig-106.html.

through the filter of professional selections and responsible journalistic action."35 For the court, it follows that in view of this development, the importance of the task incumbent on contribution-financed public broadcasting grows "through authentic, carefully researched information that keeps facts and opinions apart, does not present reality in a distorted way and does not put the sensational in the foreground, but rather forms a counterweight that ensures diversity and offers guidance."36

#### *Expansion of entitlements for online program Chapter 6.b.*

For a long time, the public broadcaster was only allowed to post in its media libraries the programmes already broadcast linearly, limited to seven days. In order to be able to form the counterweight demanded by the Federal Constitutional Court, a significant expansion of the public broadcaster's scope for action was created in 2019.37 The core point of the reform was to mandate broadcasters to produce and distribute content that is oriented to the specifics of the internet and social media (i.e., online only). Thus, the mandatory reference of online offerings to a previously linear broadcast was abandoned. Content in media libraries can now also be available for longer than a week. In addition, broadcasters are authorised to network their content with each other. They are also to do this with the digital offerings of public cultural and educational services. Furthermore, the online offerings of broadcasters are to provide guidance, enable all population groups to participate in the information society, offer interactive communication, and promote the technical and content-related media competence of all generations and minorities. Information, education and advice are among the legal core tasks of public service telemedia as well. In this context, the principles of objectivity and impartiality of reporting, diversity of opinion, and balance of offerings must be taken into account.

Nevertheless, it is questionable whether public broadcasting can hold its own against international streaming platforms from Hollywood or Silicon

35 *Bundesverfassungsgericht*, Decision July 18 2018 – BVerfGE 149, 222 ("Rundfunkbeitrag").

36 *Bundesverfassungsgericht*, Decision July 18 2018 – BVerfGE 149, 222 ("Rundfunkbeitrag").

37 Jan Kalbhenn and Christian Schepers, "Öffentlich-rechtliche Telemedien und digitale Kommunikationsplattformen – Die digitalen Angebote von ARD, ZDF und Deutschlandradio auf Instagram, Netflix und Spotify", *K&R – Kommunikation und Recht*, No. 5 (2021), 316-322.

Valley despite these possibilities.38 In the medium term, this would probably require the development of a platform of its own.

#### *Further development into a public interest-oriented platform Chapter 6.c.*

Even before Netflix launched its service in Germany, ARD and ZDF had plans for a joint VOD streaming portal by 2014. These public broadcasters wanted to build a joint platform for accessing movies, series and other programmes. To this end, their own pool of content was to be supplemented by third-party content. A subscription model and an advertising-financed variant were planned. However, the German Federal Cartel Office was sceptical about the concept and expressed concern that the planned platform would have prevented other alternative platforms from entering the market. Just a few years later, this legal opinion would have been dismissed as absurd. As a result, there are increasing calls for a platform under public law that is to be oriented toward the common good. In the European context, plans are afoot for a digital platform for quality content.39 In essence, this is an alternative to the existing monopoly providers Facebook and Google. The platform is to bring together the media libraries of public and private broadcasters, portals of publishers and cultural institutions such as universities, museums, and archives. In addition to this curated part, the platform is also to include various aggregating functions: in addition to search engines, these could also be 'citizen accounts' for mutual exchange. It should promote social cohesion and be committed to a citizen-friendly approach to Big Data. On the content side, competition is to prevail. A concept for this is now available. According to this, the "European Public Sphere" is to be designated as an open digital ecosystem divided into different levels and components. The basic technology is a cloud infrastructure as the foundation of the ecosystem. On top of this, on a second level, technology platforms are to provide applications such as "video player," "search," "translation," and "identity" as building blocks. Levels one and two form central elements for an open and digital ecosystem. Thus, a third

38 Hennig-Thurau et al., *Angriff aus Hollywood. Was es für den deutschen Streamingund Fernsehmarkt bedeutet, wenn Hollywood-Studios zu Konkurrenten werden*, 2021, 26, https://www.marketingcenter.de/sites/mcm/files/downloads/news/2021/lmm\_ angriff\_aus\_hollywood.pdf.

39 Henning Kagermann and Ulrich Wilhelm (publisher), "European Public Sphere. Gestaltung der digitalen Souveränität Europas", *acatech* (2020).

level should be able to provide a variety of offerings. Public services can use the infrastructure to offer smart city or e-school applications.40

*Graphics from Henning Kagermann and Ulrich Wilhelm (publisher), 'European Public Sphere. Gestaltung der digitalen Souveränität Europas', acatech (2020). 1. Figure:*

One focus of the model is on digital media. The concept paper states that the "European Public Sphere" is characterised in the area of digital media by offerings whose content and functionality can keep pace with today's content offerings. In addition, users should be offered new opportunities to form their own and public opinions. International diversity through European content should enable citizens to develop broader perspectives on diverse topics. Finally, the concept states, "Transparent rules of conduct and control mechanisms will prevent fake news and filter bubbles and enable open, democratic discourse. At all times, there is trust in the protection of one's own data."

40 Graphics taken from Kagermann and Wilhelm, "European Public Sphere. Gestaltung der digitalen Souveränität Europas".

The state must lead the way in such a solution. The digital infrastructure can only be created via a state effort. But the political will must be there. At the very least, existing public offerings at national and European levels should be linked to each other and to offerings from the fields of culture and science. These are not platform solutions, but they are better than nothing in view of rapid developments. How such a solution is to be financed has not yet been clarified. At present, the financing of the conventional offering is being put to the test.

#### *Funding of public service content Chapter 6.d.*

In Germany, public broadcasters have a constitutional right to funding in line with their needs. The structural and programming decisions of broadcasters in connection with provision of telemedia services and the associated cost requirements therefore also enjoy constitutional protection. For the years 2021 to 2024, this amounts to a fixed EUR 1371.1 million.41 The independent expert panel of the KEF (Commission to Determine the Financial Requirements of Public Service Broadcasting) has recommended raising the broadcasting contribution by 86 cents from EUR 17.50 to a total of EUR 18.36 per household per month from January 1, 2021. The state governments of all the federal states must agree to this. At the end of 2020, this failed in the state parliament of Saxony-Anhalt. The broadcasters initiated proceedings before the Federal Constitutional Court, in which many legal questions will be raised but also the future impact of digital public value offerings as a counterweight will be decided.

*Overview of instruments Chapter 7.*

41 See 22. KEF-Bericht, Rn. 56., https://kef-online.de/fileadmin/KEF/Dateien/Bericht e/22.\_Bericht.pdf.

#### *Conclusion Chapter 8.*

False information poses a risk to society as well as to the individual. The media legislator has recognised this and consequently introduced initial instruments. However, blanket solutions are not offered. The regulations presented concern a differentiated group of obligated parties and, in addition to transparency and due diligence obligations, also strive for discoverability privileges for certain content. A valuable asset in the fight against misinformation is Germany's strong public broadcasting system. It is mandated and empowered to act as a counterweight on the internet. It is impossible to predict whether the rules in the Interstate Media Treaty will be effective in ensuring credible information, especially since enforceability will be challenging. Initial experience with the instruments can be fruitful in the discussions about the Digital Services Act and the Artificial Intelligence Act,42 whose draft contains similar instruments, some of which go further.43

The synopsis of the instruments and measures presented should be understood as a learning system. A wide variety of factors play a role in the spread of misinformation. In addition to a wide variety of actors (states, organisations, individuals) with different interests (economic, racial, polit-

42 Jan Kalbhenn, "Designvorgaben für Chatbots, Deepfakes und Emotionserkennungssysteme: Der Vorschlag der Europäischen Kommission zu einer KI-VO als Erweiterung der medienrechtlichen Plattformregulierung", ZUM *– Zeitschrift für Urheber- und Medienrecht,* No. 8/9 (2021).

43 See Chapter of Jan Kalbhenn "European legislative initiative for very large communication platforms".

ical), technology is the most important factor. This, however, is subject to continuous change. According to Moore's Law, the complexity of integrated circuits doubles every 12 months. The platform-dominated and algorithm-driven world of communication also comes up with new technologies and tools at ever shorter intervals. Platforms are continuously changing their design and their architecture, drawing on the insights of leading cognitive psychologists. In the Netflix documentary "The Social Media Dilemma," design ethicist Tristan Harris, formerly of Google, explains that many design features of social media are borrowed directly from the gambling industry's Las Vegas experience. This does not make the difficult undertaking of guaranteeing supply of trustworthy information any easier. Rather, it should be an incentive to defend the public debate space on the internet against commercial interests with a digital platform oriented toward the common good under the strong leadership of public broadcasting. This is an inter- and transdisciplinary task with computer scientists, designers, cognitive scientists and economists to be involved.

### *Bibliography*

https://doi.org/10.5771/9783748929789, am 27.04.2022, 15:24:38 Open Access – - http://www.nomos-elibrary.de/agb

# Reshaping Canada's Broadcasting Act: Solutions in Search of a Problem?

*Michael Geist*

**Abstract**: The Canadian government introduced much-anticipated reforms to Canada's national broadcasting legislation in November 2020. The legislation – Bill C-10 – was framed as a long-needed update to rules that had not been updated in decades and failed to account for the emergence of Internet streaming services such as Netflix and Disney+ that had become enormously popular with Canadian subscribers. The bill emerged as one of the most controversial political issues in Canada, highlighting the challenges of regulating Internet services. While the public is broadly supportive of new regulations to address concerns about powerful Internet companies, the Canadian experience suggests there are concerns about the implications for freedom of expression, over-broad regulation, competition, and consumer costs.

**Keywords**: Broadcasting, Internet, Internet streaming, freedom of expression, culture, Netflix, Canada, Bill C-10, Social Media

#### *Introduction Chapter 1.*

The Canadian government introduced much-anticipated reforms to Canada's national broadcasting legislation in November 2020.1 The legislation – Bill C-10 – was framed as a long-needed update to rules that had not been updated in decades and failed to account for the emergence of Internet streaming services such as Netflix and Disney+ that had become enormously popular with Canadian subscribers. The initial response to the bill was largely positive, with support from Canadian creator groups and

1 House of Commons of Canada, *An Act to amend the Broadcasting Act and to make consequential amendments to other Acts*, Bill C-10, 2nd sess, introduced in House November 3, 2020, https://www.parl.ca/LegisInfo/BillDetails.aspx?Language=E&bil lId=10926636.

indifference from much of the Canadian public. Yet months later, the bill was among the most controversial political issues in Canada, with political parties devoting days to debate it in the House of Commons, thousands signing petitions to protest the bill, and the government resorting to rarely used parliamentary maneuvers in order to shepherd the bill toward a final vote.

The battle over Bill C-10 highlights the challenges of regulating Internet services. While the public is broadly supportive of new regulations to address concerns about powerful Internet companies,2 there are clearly concerns about the implications for freedom of expression, over-broad regulation, competition, and consumer costs. As a result, government proposals that enjoy support within the narrow confines of the cultural community may face noisy opposition from the broader public.

This chapter examines the Canadian legislative experience with crafting Internet rules that rely primarily on broadcasting reform. The chapter begins by highlighting the decades-long policy process that included an initial exemption for Internet services, the consistent demands that those early policies be revisited, and the foundation for Bill C-10. The chapter critiques many aspects of the bill, noting that many policy issues are more complex than simply pointing to the need for a "level playing field" or bringing Internet companies into a national regulatory framework. Indeed, the Canadian experience provides a cautionary tale on Internet regulation and points to the need to rethink whether conventional broadcast legislation is the optimal regulatory model.

#### *The Long Road to Internet Regulation Chapter 2.*

The Canadian legal community became one of the first to consider the transformative effects of the Internet when the Canadian Radio-Television and Telecommunications Commission ("CRTC"), the country's lead regulator on broadcast and telecommunications matters, launched its new media hearings in the summer of 1998.3 Although the Canadian legal

2 See, e.g, The Strategic Counsel*, A Report to CIRA* (Toronto, Ottawa, Calgary, Houston: The Strategic Counsel, 2021), https://www.cira.ca/sites/default/files/2021 -05/CIRA\_better-internet-report-2021.pdf.

3 Canadian Radio-television and Telecommunications Commission, Public Notice CRTC 1998-82 - New Media - Call for Comments (Ottawa: Canadian Radio-television and Telecommunications Commission, 1998), https://crtc.gc.ca/eng/archive/1 998/PB98-82.htm.

and media communities expressed concern that the CRTC would use the hearings to establish new regulations to police the Internet, the final report yielded the opposite approach.4 In fact, the CRTC heeded the barrage of submissions from organizations imploring it to refrain from establishing new regulations. At that time, it accepted arguments regarding the perceived futility of traditional regulatory approaches and the benefits of providing new media companies with the regulatory space to develop unhindered.

After reviewing current Internet activity and the definition of "broadcasting," the CRTC held that the majority of services then-available on the Internet consisted predominantly of alphanumeric text, and therefore fell outside the scope of the Broadcasting Act and outside the Commission's jurisdiction. Moreover, new media services where the potential for user customization was significant (as with end-users who create their own uniquely tailored content) was also deemed not to be transmission of programs for reception by the public, and therefore fell outside the scope of the Broadcasting Act.5

The CRTC did conclude that some new media services fall under the Broadcasting Act's definitions of "program" and "broadcasting", however. Included was Internet content that consists only of "audio, video, a combination of audio and video, or other visual images including still images that do not consist predominantly of alphanumeric text."6

Notwithstanding the application of the Broadcasting Act to certain forms of Internet broadcasting, the CRTC concluded that, for new media which falls under the definition of "broadcasting," regulation "will not contribute in a material manner to the implementation of the policy objectives set out in section 3(1) of the Act."7 Accordingly, pursuant to section 9(4) of the Broadcasting Act, an exemption order was proposed with respect to all new media undertakings that are providing broadcasting services over the Internet, in whole or in part, in Canada.8

4 Canadian Radio-television and Telecommunications Commission, "Public Notice CRTC 1999-84 - Report on New Media," 1999, https://crtc.gc.ca/eng/archive/1999/ PB99-84.htm.

5 Canadian Radio-television and Telecommunications Commission, "Public Notice".

6 Canadian Radio-television and Telecommunications Commission, "Public Notice".

7 Canadian Radio-television and Telecommunications Commission, "Public Notice".

8 *Broadcasting Act*, SC 1991, c 11, s 9(4).

In 2009, 10 years after issuing its original exemption order, the Commission revisited the issue.9 After days of hearings and thousands of pages of submissions, the Commission again side-stepped the pressure to "do something," by maintaining its hands-off approach. It concluded that regulatory intervention would impede innovation. Indeed, the decision noted that "the Commission is of the view that parties advocating repeal of the exemption orders did not establish that licensing undertakings in the new media environment would contribute in a material manner to the implementation of the broadcasting policy set out in the Act."10

There was at least one very noteworthy change to the new media exemption, however. The CRTC was clearly troubled by allegations of undue preferences being granted by wireless providers and proposed amendments prohibiting such practices.11 Looking into the future, the Commission planned to review the decision within five years, initiate a reference at the Federal Court to sort out the status of ISPs within the Broadcasting Act, and extend the scope of new media monitoring by requiring "new media broadcasting undertakings to report details of their new media broadcasting activities, which may include broadcasting content usage and offerings, revenues and expenditures, at such time and in such form, as requested by the Commission."12

At the time, Commissioner Tim Denton raised concerns about the content provisions of the Broadcasting Act in a powerful concurring opinion, concluding "the rights of Canadians to talk and communicate across the Internet are vastly too important to be subjected to a scheme of

9 Canadian Radio-television and Telecommunications Commission, *Broadcasting Regulatory Policy CRTC 2009-329* (Ottawa: Canadian Radio-television and Telecommunications Commission, 2009), https://crtc.gc.ca/eng/archive/2009/2 009-329.pdf.

10 *Ibid*, para 23.

11 *Ibid. See, e.g.,* "The Commission proposes amendments to the New Media Exemption Order, prohibiting new media broadcasting undertakings from conferring an undue preference on themselves or another person, or subjecting any person to undue disadvantage. To provide guidance on the type of situation that could give rise to an undue preference in the new media environment, the Commission offers the example of a new media broadcasting undertaking engaged in programming distribution that acquires content from an affiliated programming undertaking either to the exclusion of non-affiliated programming undertakings or on more favourable terms or conditions than those applicable to non-affiliated programming undertakings."

12 Canadian Radio-television and Telecommunications Commission, *Broadcasting Regulatory Policy.*

government licensing."13 Denton's comments foreshadowed much of the controversy over Bill C-10, which focused on the free speech implications of the bill.

In the years following, the rise of over-the-top (OTT) video providers such as Netflix was the cause of much consternation in the legacy broadcasting community. In 2011, a coalition of broadcasters, broadcast distributors (cable and satellite companies), and creators groups wrote to the CRTC to ask for a public consultation on foreign over-the-top services operating in Canada.14

The battle had been brewing for some time and what was particularly striking was how badly Canadian broadcasters and broadcast distributors understood the future impact of the Internet on their businesses. The prospect of the Internet becoming a substitute for conventional broadcast was not exactly a secret at the new media hearing in 2009. Yet, at the time, a representative from Shaw, a leading Canadian cable company, told the CRTC that the Internet was primarily for "self-generated content" and that it posed little threat to traditional cable broadcasters.15 Similarly, in 2009 Bell Media, Canada's largest communications company, told the Commission that OTT providers "*may never become a substitute"* to cable offerings.16 Despite their views that the Internet was no threat to smart business operators, Canadian broadcasters and broadcast distributors unanimously adopted the position that the CRTC should not establish new regulations for Internet-based broadcasting.17

13 Canadian Radio-television and Telecommunications Commission, *Broadcasting Regulatory Policy*, 12.

14 Canadian Radio-television and Telecommunications Commission, *Broadcasting and Telecom Notice of Consultation CRTC 2011-344* (Ottawa: Canadian Radio-television and Telecommunications Commission, 2011), https://crtc.gc.ca/eng/archiv e/2011/2011-344.pdf.

15 *Ibid.*

16 Mirko Bibic, *Transcript of Proceedings* (Quebec: Canadian Radio-Television and Telecommunications Commission, 2009), https://crtc.gc.ca/eng/transcripts/2009/t b0311.html.

17 Canadian Radio-Television and Telecommunications Commission, *Transcript of Proceedings*, (Quebec, Canadian Radio-Television and Telecommunications Commission, February 26, 2009), https://crtc.gc.ca/eng/transcripts/2009/tb0226.ht m; *Transcript of Proceedings* (Quebec: Canadian Radio-Television and Telecommunications Commission, March 10, 2009), https://crtc.gc.ca/eng/transcripts/2009 /tb0310.html; *Transcript of Proceedings* (Quebec: Canadian Radio-Television and Telecommunications Commission, March 11, 2009), https://crtc.gc.ca/eng/transcr ipts/2009/tb0311.html.

### *Michael Geist*

A mere two years later, the perspective of the broadcasters shifted enormously. At a 2011 CRTC hearing, a representative from Bell Media called OTT providers "formidable competitors", and warned that Netflix would soon be able to "outbid Canadian broadcasters for exclusive program rights, both online and on television."18 For its part, Shaw testified at a 2011 hearing, revising its 2009 assessment of the threat posed by OTT providers calling it "alarming" and the result of "major structural shifts in technology and rights exploitation that are permanently reshaping the global broadcast landscape".19 In the span of two years, legacy broadcasters had gone from the position of minimizing the potential effects of OTT providers on their businesses and calling on the Commission to refrain from regulating Internet broadcasting, to demanding immediate action on Netflix.

#### *Change in Government, Change in Policy Chapter 3.*

A change in governments in 2015 heralded a different approach to digital policy under the Liberal government. In September 2016, newly-appointed Canadian Heritage Minister Mélanie Joly launched a consultation on supporting Canadian content in a digital world. In the "pre-consultation" phase – an online poll of the public and stakeholders – there were hints at the policy challenges that would be faced by the new government. The poll received more than 10,000 responses with participants asked to identify the major barriers and challenges for Canadian content. The perspective of the public and industry stakeholders were strikingly different, with the public citing the challenges in finding and promoting content and the stakeholders seeking more money.20

Once the consultation started in earnest, it sparked renewed demands from industry stakeholders for more money from two main sources: unregulated Internet companies such as Netflix and the government. As

18 Kevin Crull, *Transcript of Proceedings* (Quebec: Canadian Radio-Television and Telecommunications Commission, April 4, 2011), https://crtc.gc.ca/eng/transcript s/2011/tb0404.html, para 136.

19 Paul Robertson, *Transcript of Proceedings* (Quebec: Canadian Radio-Television and Telecommunications Commission, April 6, 2011), https://crtc.gc.ca/eng/transcript s/2011/tb0604.html, para 2543.

20 Ipsos, *What we heard across Canada: Canadian Culture in a Digital World,* (Ottawa: Ipsos Public Affairs, 2017), https://qcgn.ca/wp-content/uploads/2017/03/PCH-DigiCanCon-Consultation\_Report-EN\_low.pdf

a starting position, the new consultation paper made it clear that not everything would be on the table. In fact, the consultation adopted several notable policies and sent some signals about future funding sources. First, it left little doubt that the government opposed new regulations for online video providers.21 Strong support for net neutrality and the avoidance of Internet regulation meant that proposals to exempt Canadian content from data caps or mandate certain rules for online providers were non-starters. Second, the government used the consultation to suggest where more money may come from and it was not Canadian tax dollars.22 By framing the consultation as an initiative that sat alongside already-announced funding, it seemed unlikely that more funding would be viewed as the answer. Indeed, the government was pretty clear about where it thought the money would come from: foreign markets.

Despite the direction provided in the consultation document, the government was less than clear in its communication on the issue of new taxes and regulations for online video providers. Joly appeared on a national television program after the policy launch and though she started by clearly stating that "there will be no new Netflix tax", the remainder of the interview was spent making the case for one.23 From the interview, it seemed that Joly subscribed to the view that there was a parallel between conventional broadcast and the Internet that invited a similar regulatory approach. Part of the rationale for broadcast regulation is that broadcast spectrum is scarce, therefore requiring licensing and regulation. By indicating that Internet services used a "large part of our spectrum", Joly made the case for treating Internet services as equivalent to broadcast.24

Following the completion of the consultation, the government announced in its 2017 budget that it planned to "review and modernize"

21 Canada, Department of Canadian Heritage, *Canadian Content in a Digital World: Focusing the Conversation,* (Ottawa: Department of Canadian Heritage, 2016), 7. *"To respect how Canadians want to consume and interact with digital content, we are committed to net neutrality – the idea that a public information network like the internet is most useful if all content, sites, and platforms are treated equally. The way forward is not attempting to regulate content on the Internet, but focusing on how to best support Canada's creators and cultural entrepreneurs in creating great content and in competing globally for both Canadian and international audiences."*

22 Ibid, 4.

23 "GST on Netflix still a possibility as Liberals review cultural production," *CTV News*, October 16, 2016, https://www.ctvnews.ca/politics/gst-on-netflix-still-a-possi bility-as-liberals-review-cultural-production-1.3115996.

24 Ibid.

the Broadcasting Act and Telecommunications Act.25 The consultation had revealed there was a strong appetite within the traditional Canadian culture lobby for bringing policies such as cultural taxes and mandated Canadian content requirements to the Internet, with groups claiming the Internet was rapidly replacing the conventional broadcast system as a means of distributing cultural content and that the longstanding analog rules should be shifted into the digital environment. Revisiting Canada's twin communications laws was regarded by the cultural lobby as the opening to treat telecommunications regulation as a matter of cultural policy in what would amount to the Broadcasting Act taking over the Telecommunications Act.

In order to support the upcoming review of the Broadcasting Act and Telecommunications Act, the government asked the CRTC to become involved in developing policy. Through an Order-in-Council the government requested that the CRTC conduct a study on programming distribution models and their impact on maintaining a "vibrant domestic market."26 The Commission was asked to address three main issues in its report: (1) the distribution model or models of programming that were likely to exist in the future; (2) how and through whom Canadians would access that programming and (3) the extent to which those models would ensure a vibrant domestic market capable of supporting the continued creation, production and distribution of Canadian programming, in both official languages, including original entertainment and information programming*.*

Joly formally unveiled her digital Canadian content strategy in September 2017, delivering a wide ranging plan that included a commitment from Netflix to spend \$500 million over five years on production in Canada.27 The Netflix commitment was the headline of the day, and represented a major long-term commitment to the Canadian market. However, since Canada was already one of the company's top three countries for pro-

25 Michael Geist, "Budget 2017: Why Canada's Digital Policy Future Is Up For Grabs," *Michael Geist* (blog), March 22, 2017, https://www.michaelgeist.ca/2017/0 3/budget-2017-canadas-digital-policy-future-grabs/.

26 Canadian Radio-television and Telecommunications Commission, *Broadcasting Notice of Consultation CRTC 2017-359,* (Ottawa: Canadian Radio-television and Telecommunications Commission, 2017), https://crtc.gc.ca/eng/archive/2017/201 7-359.htm.

27 Canadian Heritage, *Minister Joly Announces Creative Canada: A Vision for Canada's Creative Industries in the Digital Age* (Ottawa: Canadian Heritage, 2017), https://ww w.canada.ca/en/canadian-heritage/news/2017/09/minister\_joly\_announcescreative canadaavisionforcanadascreativein.html.

duction, it was unlikely the announcement would result in a significant increase in funding.

While the Netflix commitment attracted attention, the more important story was that the government had rejected pressures to levy new Internet or Netflix taxes, impose regulatory requirements on Internet services, or depart from its commitment to net neutrality. Indeed, Joly's comments on the importance of affordable Internet access and support for net neutrality effectively slammed the door shut on those proposals. Joly started the consultation by indicating that everything was on the table, which many cultural lobby groups hoped would lead to new Internet taxes and regulation. The decision to reject those proposals confirmed that the government's digital focus emphasized competition, a strong domestic market, as well as export and promotion of Canadian content.

#### *A Shift in Approach: Harnessing Change Chapter 4.*

The government's approach to regulating online video providers began to change after the release of the CRTC's report on programming distribution. In June 2018, the Commission released "Harnessing Change: The Future of Programming Distribution in Canada",28 in which it jumped into the Internet regulation and taxation game with both feet. Work that had preceded the Commission's report, including Joly's Digital Cancon strategy29 as well as the Commission's own Let's Talk TV report30 had emphasized the benefits of the Internet and sided primarily with an exportoriented, competition focused strategy in which Canadian content and broadcasters would succeed based on the quality of their programming, not regulatory schemes designed to provide millions of dollars in support.

In *Harnessing Change*, the CRTC reversed that approach with a regulation-first strategy that envisioned new fees attached to virtually anything

28 Canadian Radio-television and Telecommunications Commission, *Harnessing Change: The Future of Programming Distribution in Canada* (Ottawa: Canadian Radio-television and Telecommunications Commission, 2018), https://crtc.gc.ca/e ng/publications/s15/.

29 Daniel Leblanc, "Everything's on the table," *Globe and Mail*, April 23, 2016, https://www.theglobeandmail.com/news/national/exclusive-canadian-heritage-ann ounces-sweeping-canconreview/article29722581/.

30 Canada Radio-television and Telecommunications Commission, *Let's Talk TV: A Conversation with Canadians* (Ottawa: Canadian-Radio-television and Telecommunications Commission, 2018), https://crtc.gc.ca/eng/talktv-parlonstele.htm.

### *Michael Geist*

related to the Internet: Internet service providers, Internet video services, and Internet audio services (wherever located) to name a few. The CRTC's report was provided to the government, but was accompanied by the feeling of theatre, with a review of telecom and broadcast legislation set to get underway that was to be led by a panel that included several proponents of an Internet regulation strategy.

Following the CRTC's report, the Minister of Innovation, Science and Economic Development tasked the Broadcasting and Telecommunications Legislative Review (BTLR) panel with a review of Canada's communications legislative framework.31 In September 2018, the panel opened a call for comments, through which industry stakeholders, civil society, academics and individuals provided their perspectives on the future of Canada's Broadcasting and Telecommunications acts. When the consultation closed in January 2019 thousands of submissions had been made.32 In June 2019, when the interim report was released alongside the written submissions, it began to look increasingly likely that the government had already decided what direction it intended to take.33

Canadian Heritage Minister Pablo Rodriguez, who had taken over the file from Joly, signalled that the government's position on the major broadcasting and Canadian cultural issue was already set. For months, government officials had been arguing that large Internet companies needed to contribute to Canadian content creation, though it had avoided specifying precisely how. With an election weeks away, the government position seemed to be shifting. Soon after the release of the BTLR interim report, Rodriguez tweeted that the government was ready to legislate once receiving the panel's final recommendations, but followed the statement by saying that "[e]veryone has to contribute to our culture. That's why

31 Innovation, Science and Economic Development Canada and Canadian Heritage, *Government of Canada launches review of Telecommunications and Broadcasting Acts* (Ottawa: Canadian Heritage, 2018), https://www.canada.ca/en/canadian-heritage/ news/2018/06/government-of-canada-launches-review-of-telecommunications-and -broadcasting-acts.html.

32 Michael Geist, "Sunlight on the Submissions: Why the Broadcasting and Telecommunications Legislative Review Panel Should Reverse Its Secretive Approach," *Michael Geist* (blog), January 18, 2019, https://www.michaelgeist.ca/2019 /01/sunlight-on-the-submissions-why-the-btlr-should-reverse-its-secretive-approach /.

33 Innovation, Science and Economic Development Canada, *What we Heard Report* (Ottawa: Canada-Radio-television and Telecommunications Commission, 2019), http://www.ic.gc.ca/eic/site/110.nsf/eng/00011.html#s8

we'll require web giants to create Canadian content and promote it on their platforms."34

By suggesting that the Liberals were ready to commit to legislative reform that would require Internet companies to create and promote Canadian content, the government had seemingly shifted its policy approach well ahead of the final BTLR report.

#### *BTLR report Chapter 5.*

In January 2020, the Broadcast and Telecommunications Legislative Review Panel released its much anticipated report with a vision of a highly regulated Internet in which an expanded CRTC (or a renamed Canadian Communications Commission) would aggressively assert its jurisdictional power over Internet sites and services worldwide with the power to levy penalties for failure to comply with its regulatory edicts.35

The foundation of the content section of the report was the decision to regulate all media content, which includes audio, audiovisual, and news content delivered by telecom. In doing so, the report envisioned unprecedented government and regulatory intervention into the delivery of news services. It argued that there are three types of services that provide this content that require regulation where they access the Canadian market:

The panel recommended that all of these kinds of companies be regulated (either by way of licence or registration), be required to contribute to Canadian content through spending percentages or levies, and comply

34 Pablo Rodriguez (@pablorodriguez), "Thanks to @JanetYale1 & panel for their work. We will be ready to legislate once we receive their recommendations," Twitter, June 26, 2019, 11:38 a.m., https://twitter.com/pablorodriguez/status/1143<PHONE_NUMBER>20928.

35 Canada, Broadcasting and Telecommunications Legislative Review, *Canada's Communications Future: Time to Act* (Ottawa: Innovation, Science and Economic Development Canada, 2020), https://www.ic.gc.ca/eic/site/110.nsf/vwapj/BTLR\_E ng-V3.pdf/\$file/BTLR\_Eng-V3.pdf.

with CRTC regulations on discoverability that would include regulatory rules on how prominently Canadian content is displayed within the service. The CRTC would be empowered to decide whether to exempt services from regulation with the power to levy penalties for failure to comply with its decisions (penalties described as "high enough to create a deterrent foreign undertakings").

Services would also be required to disclose consumption data to the CRTC, so that the regulator would know what Canadians are watching or reading online. The regulator would be entitled to establish binding codes of conduct that cover resolution mechanisms, transparency, privacy and accessibility. It would also govern the commercial relationship between services and content producers, with the panel noting "it is essential that the CRTC be given the explicit jurisdiction to regulate the economic relationships between media content undertakings and content producers, as well as between media content undertakings."36

The basis for the most sweeping reforms were framed as a matter of cultural sovereignty, with the panel arguing for the need for Canada "to continue to assert its cultural sovereignty and for Canadians to continue to express their identity and culture through content."37 However, at a press conference following the report's release, both chair Janet Yale and panelist Monique Simard instead emphasized the need to support Canadian jobs when asked to reconcile the industry data that confirms record amounts of film and television production in Canada.38

Alternatively, the panel argued that it was simply a matter of those that benefit from the "system", being required to contribute to it.39 However, broadcasters and broadcast distributors already enjoyed a wide range of regulatory benefits in the system and their contributions were essentially a regulatory quid pro quo.

With respect to Canadian content, the panel acknowledged that "Canadians create and consume more types of content than ever before," indicat-

36 Broadcasting and Telecommunications Legislative Review, *Canada's Communications*, 144.

37 Ibid*.* at 117.

38 Headline Politics, "Broadcasting & Telecommunications Legislative Review Panel Releases Final Report," *CPAC*, January 29, 2020, https://www.youtube.com/watch ?v=pYNpa04S4C0

39 Tony Wong, "Netflix should pay sales taxes, CBC should be ad free, communications panel recommends," *Toronto Star*, January 30, 2020, thestar.com/entertainm ent/2020/01/29/netflix-and-other-online-streaming-sites-must-contribute-to-canadi an-culture-and-content-says-legislative-review-panel.html.

ing that its recommendations weren't about incentivizing the creation of Canadian content.40 Rather, the report seemed focused on certain professions creating content and imposing a massive regulatory infrastructure in order to support that policy goal. The problem with this approach was that ticking the right boxes to ensure Canadians represent "key creative personnel" had little to do with Canadian cultural sovereignty, much less ensuring access to Canadian stories. Yet while the panel emphasized "the importance of story", when confronted with the question of whether current Canadian content rules achieve that objective, it stated "it is time to review the model for supporting Canadian content, but not the definition of Canadian content."41 The panel was prepared to overhaul the regulatory rules for creating and delivering Canadian content, but not consider the rules that determine what qualifies as Canadian content.

#### *The Government Responds to the Yale Report: Bill C-10 Chapter 6.*

Taking up the recommendations from the BTLR panel report, in November 2020 Canadian Heritage Minister Steven Guilbeault tabled an Internet regulation bill with the express aim to "get money from web giants".42 As expected, Bill C-10 handed massive new powers to the CRTC to regulate online streaming services and opens the door to mandated Canadian content payments, discoverability requirements, and confidential information disclosures all backed by new fining powers. Given that many of the details will be sorted out by the CRTC, the specifics would have taken years to unfold had the bill become law.

#### *Responding to a fictional content crisis Chapter 7.*

In part, Bill C-10 responded to a fictional Canadian content "crisis." Canadian cultural lobby groups regularly claim that the sector is at risk.43 Yet

40 Canada, Broadcasting and Telecommunications Legislative Review, *Canada's Communications Future,* 117.

41 Ibid.

42 As of August 2021, the bill had been passed by the House of Commons, but was subject to review within the Canadian Senate. With a national election call, the bill died on the order paper and may only be re-introduced by a new government.

43 "Bill on Broadcasting Act: CDCE welcomes the decisive changes for our cultural sovereignty," *CDCE*, November 3, 2020, https://cdec-cdce.org/en/publications/r

the reality is that spending on film and television production in Canada was at record highs. This included both certified Canadian content and so-called foreign location and service production in which the production takes place in Canada (thereby facilitating significant economic benefits) but does not meet the narrow criteria to qualify as "Canadian." The overall financing picture showed an industry that had record amounts of investment in film and television production with the total amount nearly doubling over the prior decade. Further, certified Cancon had also grown in recent years, with the top two years for certified Cancon television production occurring over the prior three years. In fact, 2019 was the biggest year for the production of French language Cancon over the prior decade.44

The data at the provincial level provided further confirmation of recordsetting production. In February 2020, Ontario Creates, the Government of Ontario's agency for cultural creation, touted a "record breaking year" for Ontario's film and television production sector, citing more than \$2 billion in production spending for 343 productions.45 Of the \$2.1 billion, there was a near-even split between domestic and foreign production: \$1.1 billion in foreign production and \$1 billion on domestic productions. In further support, Carleton professor Dwayne Winseck's 2020 review of the state of the network economy in Canada also found that film and television production investment in Canada had continuously increased for two decades, most recently "driven by massive investments from streaming services such as Netflix and Amazon Prime."46 Politicians and regulators knew this to be the case. In fact, CRTC chair Ian Scott described Netflix as "probably the biggest single contributor to the [Canadian] production

elease-bill-on-broadcasting-act/; Maxime-Pierre Gazeau, "Bill C-10 to Extend the Broadcasting Act to Webcasters," *Artisti*, November 11, 2020, https://www.artisti.c a/en/bill-c-10-to-extend-the-broadcasting-act-to-webcasters/.

44 CMPA, *Profile 2019: Economic Report on the Screen-Based Media Production Industry in Canada*, (Ottawa: CMPA, 2019), Exhibit 1-1, Pg. 7, https://cmpa.ca/wp-content/ uploads/2020/04/CMPA\_2019\_E\_FINAL.pdf.

45 Michael Geist, "Ontario's Record Breaking, Multi-Billion Dollar Film Production Year: 'A Healthy Balance Between Domestic and Foreign Production'," *Michael Geist* (blog), March 4, 2020, https://www.michaelgeist.ca/2020/03/ontarios-record -breaking-multi-billion-dollar-film-production-year-a-healthy-balance-between-do mestic-and-foreign-production/.

46 Winseck, Dwayne, *Growth and Upheaval in the Network Media Economy in Canada, 1984-2019,* (Ottawa, Canadian Media Concentration Research Project, Carleton University, 2020), 45, http://www.cmcrp.org/wp-content/uploads/2020/11/Growt h-Report-2020-11162020v2.pdf.

sector today."47 Further, at the press conference introducing the bill, Guilbeault acknowledged that the Internet companies are already investing in Canada, but argued that the bill was needed to ensure those investments were not voluntary.48

#### *The myth of the level playing field Chapter 8.*

A central part of Guilbeault's argument for Bill C-10 was that it levels the playing field between traditional and online broadcasters. It is true that conventional broadcasters and broadcast distributors face mandated payments to support Canadian content as part of their licensing requirements. Leaving aside the fact that broadcasters were seeking reductions in payments at the CRTC,49 the notion that the only regulatory burden or benefit is mandated Cancon contributions misreads the law. The reality is that broadcasters receive benefits worth hundreds of millions of dollars in return for those payments as part of what amounts to a regulatory quid pro quo. None of those benefits are available to Internet streaming services, yet the "level the playing field" discussion focused exclusively on equivalent payment requirements.

Some of the regulatory and policy benefits enjoyed by traditional broadcasters and broadcast distributors not available to Internet streaming services included:

1. **Simultaneous Substitution Policies**, which allow Canadian broadcasters to replace foreign signals with their own. The industry says this policy alone generates hundreds of millions of dollars in revenues for

47 Terry Pedwell, "Streaming companies like Netflix will have to fund Canadian content: CRTC chair," *National Post*, January 8, 2020, https://nationalpost.com/p mn/news-pmn/canada-news-pmn/streaming-companies-like-netflix-will-have-to-fu nd-canadian-content-crtc-chair.

48 "Heritage minister discusses bill to update Broadcasting Act – November 3, 2020," *CPAC*, 2020, YouTube Video, https://www.youtube.com/watch?v=qkV 1Wp4JduU.

49 Canadian Radio-television and Telecommunications Commission, *Broadcasting Notice of Consultation CRTC 2020-336* (Ottawa: Canadian Radio-television and Telecommunications Commission, 2020), https://crtc.gc.ca/eng/archive/2020/202 0-336.htm.

Canadian broadcasters.50 There is no equivalent to the hundreds of millions generated by this policy for Internet streaming services.

50 Christine Dobby, "Bell launches new appeal of CRTC's Super Bowl ad policy," *The Globe and Mail,* December 28, 2016, https://www.theglobeandmail.com/repor t-on-business/nfl-hopes-trudeau-government-will-overturn-crtc-super-bowl-ad-ruli ng/article33442315/.

51 Michael Geist, "The Broadcasting Act Blunder, Day 2: What the Government Doesn't Say About Creating a 'Level Playing Field'," *Michael Geist* (blog), November 20, 2020, https://www.michaelgeist.ca/2020/11/the-broadcasting-act-blunder-d ay-two-what-the-government-doesnt-say-about-creating-a-level-playing-field/#:~:tex t=Simultaneous%20Substitution%20policies%2C%20which%20allows%20Canadi an%20broadcasters%20to,millions%20of%20dollars%20in%20revenues%20for%2 0Canadian%20broadcasters.

52 Ibid.

53 Ibid.

54 Ibid.

#### *Missing economic thresholds Chapter 9.*

Guilbeault also tried to assure the House of Commons that the bill featured several "guardrails" against over-broad regulation. In particular, he stated that online entities would need to reach an economic threshold before being subject to any regulation.58 However, there was no specific economic threshold established by the bill. The starting point was that all Internet streaming services carried on in whole or in part within Canada are subject to Canadian regulation.

Guilbeault was presumably referring to the fact that section 6(4) of the bill gave the CRTC the power to exempt services from regulation.59

55 Ibid.

56 Ibid.

57 Ibid.

58 Guilbeault, Steven, *House of Commons Debates Canada* (Ottawa: House of Commons*,* 2020), https://www.ourcommons.ca/DocumentViewer/en/43-2/house/sittin g-31/hansard, Para 1640.

59 House of Commons of Canada, *An Act to amend the Broadcasting Act and to make consequential amendments to other Acts*, Bill C-10, 2nd sess, introduced in House November 3, 2020, https://www.parl.ca/LegisInfo/BillDetails.aspx?Language=E&b illId=10926636.

While the CRTC could certainly establish some thresholds for regulation following the enactment of the bill, the approval of a policy directive, and a full hearing on the implementation issues, the possibility that the CRTC could create thresholds is not the same as claiming that the law contains significant economic thresholds. In fact, it is likely that the CRTC would not limit the regulatory model to "companies that generate large revenues in Canada", whatever that means. In order for the CRTC to determine who might be exempt, it was likely to require even smaller foreign services to register with the regulator and to provide it with confidential subscriber and revenue data.

The uncertainty of who is caught by the regulation was sure to have an impact on the market. Internet streaming services thinking about the Canadian market might put those plans on hold until they have some visibility over what they face from a regulatory perspective, leading to less competition and less choice for Canadians. Should the CRTC establish an economic threshold, that too could have an unexpected impact. If it set a high threshold that is limited to a handful of large, U.S.-based streaming services, it invited the possibility of a trade challenge. If a low threshold becomes the standard, foreign services may avoid the Canadian market altogether given the regulatory costs.

#### *Removing Canadian ownership requirements Chapter 10.*

One of the more controversial aspects of Bill C-10 proved to be the decision to remove the very first policy declaration in the Broadcasting Act as found in Section 3(1)(a): "the Canadian broadcasting system shall be effectively owned and controlled by Canadians." For years, Canada has prioritized a Canadian broadcast system with Canadian ownership requirements and Canadian content rules. With Bill C-10, the government signalled that it believed the benefits that come from mandatory contributions from foreign companies (bearing in mind that the companies voluntarily invest in the market) were worth sacrificing the longstanding policy of keeping the Canadian system Canadian.

*(4) The Commission shall, by order, on the terms and conditions that it considers appropriate, exempt persons who carry on broadcasting undertakings of any class specified in the order from any or all of the requirements of this Part, of an order made under section 9.1 or of a regulation made under this Part if the Commission is satisfied that compliance with those requirements will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1).*

Guilbeault was asked about the ownership during the first day of House of Commons debate on the bill. He responded that the amendment to section 3(1) was necessary in order to allow the government to collect money from "web giants".60 Guilbeault was right that Canada cannot have it both ways. It cannot argue that foreign companies must be part of – and contribute to – the Canadian system and then also argue that the system must be owned and controlled by Canadians. Either foreign companies are part of the system or they are not.

Guilbeault' proposed solution was to remove the policy of Canadian ownership and control, but use licensing to ensure that Canadian companies retain that same control. Indeed, many countries have removed foreign ownership requirements given the lack of a link between domestic content requirements and domestic ownership. Guilbeault therefore said the removal of Section 3(1)(a) was immaterial since licensing requirements would still apply to broadcasters and could be used to ensure that they remain in Canadian hands. Yet the obvious trajectory of the new Canadian system is to shift away from that licensing system. The government claimed it is creating a level playing field, but broadcasters in the licensed world would increasingly look at the unlicensed Internet world that is free from foreign investment restrictions and conclude that they prefer the unlicensed system.

The issue could become particularly acute if Canadian broadcasters are forced to compete with companies like Netflix and Disney for Canadian content as all participants race to meet their regulatory Cancon requirements. The disadvantages of remaining Canadian-owned would become increasingly apparent as more broadcasters surrender their licences in favour of switching to streaming-only services that remain unlicensed and have the advantage of no foreign ownership limitations. The Canadian market would feature an increasingly prominent foreign ownership presence, not only in the form of foreign streamers but also Canadian-originated streamers that become foreign-controlled through new investment.

#### *Discoverability requirements Chapter 11.*

Among the issues that Bill C-10 was intended to remedy, Guilbeault cited the need to improve the "discoverability" of Canadian content. Under section 9.1(1) the Bill permits the CRTC to make orders, including those

60 Canada, *House of Commons Debates,* Para 1645.

with respect to program presentation and discoverability. The term "discoverability" does not appear elsewhere in the bill and is not defined. It would therefore fall to the CRTC to decide what it means and what conditions are imposed on Internet services as a result. Based on the Canadian cultural debate of the past few years, it would be expected that the CRTC would be urged to require services such as Netflix or Disney+ to override their algorithms that identify what subscribers are likely to want to see by actively promoting Canadian content regardless of their preferred content.

The BTLR panel, which recommended discoverability regulations, went looking for evidence of a discoverability problem and found very little. That report identified just two sources: a 2017 PriceWaterhouseCoopers report61 and a 2016 report from Telefilm Canada.62 The PriceWaterhouse-Coopers report involved a survey of 1,000 U.S. residents, had nothing to do with Canada, and said absolutely nothing about the ability to find or recognize Canadian content. The Telefilm Canada report was focused on Canada but did not find that Canadians have trouble finding Canadian content. Rather, it found a range of experiences and emphasized that "word-of-mouth is Canadians' main discoverability method." Two reports – one from the U.S. and the other four years old – do not make the case for new regulations requiring the CRTC to regulate the way online services make their content available to subscribers in Canada.

#### *Downgrading the Role of Canadians in their Own Programming Chapter 12.*

One of the benefits of Bill C-10 touted by Guilbeault was that it was a big win for Canadian creators. Section 3(1)(f) of the current Broadcasting Act features the policy on use of Canadian creative talent, saying that "each broadcasting undertaking shall make *maximum use, and in no case less than predominant use*, of Canadian creative and other resources in the creation

61 Mark McCaffrey, Paige Hayes and Jason Wagner, *Can you find that show I didn't know I wanted to watch?: How tech will transform content discovery,* (London: Price-WaterhouseCoopers, 2017) https://gsma.force.com/mwcoem/servlet/servlet.FileD ownload?file=00P1r00001kQ5tHEAS

62 The Telefilm Canada report is incorrectly cited as a 2018 report but actually dates to 2016:

Telefilm Canada, *Discoverability: Toward a Common Frame of Reference: Part 2: The Audience Journey,* (Montreal: Telefilm Canada, 2016) https://telefilm.ca/en/studies/ discoverability-toward-common-frame-reference-part-2-audience-journey.

and presentation of programming". Bill C-10 dropped the expectation of maximum or predominant use. The policy provision instead would state:

*each broadcasting undertaking shall make use of Canadian creative and other resources in the creation and presentation of programming to the extent that is appropriate for the nature of the undertaking*

No one knew what that means since it would fall to the CRTC to determine what is "appropriate given the nature of the undertaking". Presumably the change was needed given the expansive regulatory approach taken by Bill C-10. Since the bill effectively captured foreign streaming sites both big and small, news sites, and podcasters, the government apparently felt that it could no longer require predominantly Canadian creative talent or even meet "the greatest practicable use of those resources" standard.

#### *The "Regulate Everything" Approach Chapter 13.*

The government was careful to note that it was not creating a new licensing system for Internet services with Bill C-10. For example, the Canadian Heritage FAQ stated "Canadians will still be able to watch all of their favourite programs and access their preferred services. This Bill in no way prevents online streaming services from operating in Canada, or *requires them to be licensed*."63

Bill C-10 was clear that in contrast to conventional broadcasters, online undertakings such as Internet streaming services would not require a licence to operate in Canada. While conventional broadcast undertakings (ie. programming undertakings) require either a licence or an exemption from the CRTC, online undertakings do not require either. Yet given the regulatory requirements, the absence of a licence would mean little for services operating in Canada, thinking about operating in Canada, or simply having Canadian users. For them, Bill C-10 provided a whole new regime that replaced licensing or exemption with "registration" subject to "conditions".

Bill C-10 created this new regime through amendments to sections 9, 10 and 11 of the Act. These new powers would allow the CRTC to:

63 Government of Canada, *Frequently asked questions – Modernizing the Broadcasting Act for the Digital Age* (Ottawa: Government of Canada, 2021), https://www.canad a.ca/en/canadian-heritage/services/modernization-broadcasting-act/faq.html.

Section 10(1)(i) gave the CRTC the power to establish regulations that could require all broadcasting undertakings – including online undertakings – to register with the Commission. Given how broadly the bill defined the jurisdictional scope, this included smaller streaming services, video news sites, podcasters, or even user generated content sites that include anything other than user generated content. Unless the CRTC decided to establish new thresholds or exemptions, all of these sites and services were caught by the bill and subject to Canada's new registration requirement.

The regulatory power extended beyond registration requirements, however. The CRTC could establish registration fees (the bill limited the fees to the costs incurred by the Commission) as well as regulations on Canadian programming, advertising rules, and audit rules that would have allowed the CRTC to examine records and books of any registered entity. These were all regulations that specifically could have been targeted at online undertakings such as Internet-based services. To be clear, failure to comply with these regulations carried the possibility of stiff penalties.64

Further, Section 34.4 established the possibility of administrative monetary penalties (AMPs) for contravening these regulations that ran into the millions of dollars. So while the government argued that it was not licensing Internet services, it created a regulation system that included registration, mandated audits, and Cancon conditions all backed by millions in potential penalties for failure to comply.

But Bill C-10 went beyond those regulatory requirements. Section 9.1 (1) featured numerous conditions that could have been imposed on any broadcast undertaking – including online undertakings. In addition the aforementioned discoverability conditions, the CRTC could have imposed conditions related to:

64 House of Commons of Canada, *An Act to amend the Broadcasting Act,* s.33. Section 33 provides: *Every person who contravenes any regulation or order made under this Part is guilty of an offence punishable on summary conviction and is liable (a) in the case of an individual, to a fine of not more than \$25,000 for a first offence and of not more than \$50,000 for each subsequent offence; or (b) in the case of a corporation, to a fine of not more than \$250,000 for a first offence and of not more than \$500,000 for each subsequent offence.*

While these provisions may fit within a licensed, Canadian-only environment, the conditions could have been applied by the CRTC to foreign online services with no presence in Canada. In fact, without any economic thresholds in the bill, the starting point was that all services around the world were potentially covered by these conditions so long as they have some Canadian subscribers. The CRTC may have ultimately limited the reach of the rules following extensive hearings, but for services thinking about the Canadian market, the regulatory environment might well have been reason to block Canadian subscribers. Guilbeault claimed that Bill C-10 would not result in less consumer choice, yet the more likely outcome was a Canadian regulatory firewall that had new entrant streaming services thinking twice before entering the market.

While the CRTC would have been tasked with establishing the specifics, the bill was also notable in that it granted the Commission the power to target individual services or companies with unique or individualized requirements. In other words, rather than establishing a "level playing field", Guilbeault opened the door to multiple fields with individual companies potentially each facing their own specific requirements and conditions to operate in Canada.

The source of this targeted approach was Section 9.1 (2), which provides:

*(2) An order made under this section may be made applicable to all persons carrying on broadcasting undertakings, to all persons carrying on broadcasting undertakings of any class established by the Commission in the order or to a particular person carrying on a broadcasting undertaking.*65

65 House of Commons of Canada, *An Act to amend the Broadcasting Act,* s. 9.1 (2).

### *Michael Geist*

The regulatory ability to single out individual services for specific conditions (as opposed to common rules for all) created significant regulatory uncertainty, invited the possibility of a trade challenge, could have sparked allegations of unfair treatment, and raised further doubts for potential entrants into the Canadian market. The government claimed that consumer choice would not be affected by Bill C-10, but the likely repercussions of its legislative proposal strongly suggested otherwise.