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The federal government, guarantor of the Canadian democratic institutions

With the rise of web giants like Google and Facebook, the surviving Canadian newspapers are also threatened with extinction as the advertising revenues, which largely fund their newsrooms, are dramatically lost. According to News Media Canada, Google and Facebook alone manage to generate around 80% of sales with digital advertising in Canada.

This situation differs from the classic economic models from the 18th century. The forces of supply and demand could then determine prices as many manufacturers competed to attract consumers by offering their products at the lowest possible price. In Adam Smith’s theoretical model, an “invisible hand” ensured that competition would bring products to consumers at the lowest possible cost. The problem with Google and Facebook today, however, is that they have become so efficient that healthy competition is no longer possible. High start-up costs and strong economies of scale make them a natural monopoly that practically enables economists to be the only providers of their services.

Canada offers many examples of natural monopolies, particularly in sectors such as energy, transport, and communications. Governments have already acted to curtail their power. In the case of Manitoba, for example, Manitoba Hydro until recently had to defend its rate increases before the Public Utilities Board, which examined the Crown Corporation’s proposals and set the tariffs that customers could charge.

Australia has decided to counteract the huge monopoly power of the web giants by introducing its own regulatory regime. News Media Canada, the organization that represents hundreds of newspapers across the country, relied on this regime in formulating its proposals. Newspapers across the country would band together to negotiate compensation for the use of their content. A federal digital media regulator would oversee digital platforms that would be required to negotiate licenses for this content. And if the negotiations fail, the agency would summon the parties for binding arbitration.

News Media Canada’s proposals have the advantage of eliminating the need for direct government subsidies that would lead to additional public spending and could also cause some to question newspaper independence.

In the cases of Google and Facebook, of course, the problems go well beyond consumer protection and corporate needs, as the example of Manitoba Hydro shows. As the reader is encouraged to act as a citizen, that citizen must have access to reliable sources of information on local, national and international news, especially in times of disinformation and fake news.

For this reason, given this central issue, the federal government would be well advised to implement the proposals put forward by News Media Canada to counter the weight of the web giants. Because in order to remain legitimate, it is up to the federal government to ensure the proper functioning of Canada’s democratic institutions.

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