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CRTC cannot make cablecos pay for local TV signals, SCC says

Cable and satellite television companies won an important victory when the Supreme Court of Canada ruled on December 13, 2012, that the has no jurisdiction to force them to pay to redistribute local television broadcasts to their audiences.

This decision may herald a trend to confining subordinate bodies like the CRTC more narrowly to the areas of jurisdiction granted to them by Parliament.

CRTC proposes “value for signal” regime

Currently, cable and satellite TV companies (known as “broadcast distribution undertakings”, or “BDUs”) do not pay television broadcasters to distribute over-the-air television signals to local audiences. The Copyright Act expressly says that they do not have to pay to retransmit such signals to local audiences. BDUs are subject to mandatory carriage rules that force them to carry certain TV stations (including local TV stations), and they contribute to local programming improvement funds that are accessible by certain local television stations.

Local television stations have been hurt by falling advertising revenues, while BDUs’ revenues have been increasing. This led Canada’s broadcast regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), to conclude that the current model is broken. The CRTC proposed a “value for signal regime” that would replace free mandatory carriage by BDUs with market-based negotiations between broadcasters and BDUs. BDUs would have to pay to carry local signals, but they could negotiate prices with broadcasters, and they would not be obliged to carry the signal if no deal was reached.

The BDUs objected that the CRTC had no jurisdiction to impose this new regime. The CRTC referred the matter to the Federal Court of Appeal, which ruled in the CRTC’s favour. The BDUs appealed to the Supreme Court of Canada.

No express power to implement value for signal

By a five-to-four majority, the Supreme Court held that the CRTC does not have jurisdiction to implement the value for signals regime.

The value for signal regime would regulate the economic relationship between BDUs and broadcasters, giving the broadcasters leverage to require compensation from BDUs, Rothstein J. noted in the majority reasons:

In substance, the value for signal regime would regulate the economic relationships between BDUs and broadcasters. The salient feature is that the CRTC would grant individual broadcasters an exclusive right to require deletion of the programming to which they hold exhibition rights from all signals transmitted by the BDU. This program deletion right is intended to give the broadcasters the necessary leverage to require compensation from the BDUs.

There is no express grant of power to the CRTC to implement the value for signal regime in the Broadcasting Act. He rejected the broadcasters’ contention that the CRTC’s powers to attach conditions to licences (s. 9), as well as its “basket clause” power to make “respecting such other matters as it deems necessary for the furtherance of its objects” (s. 10(k)), give the CRTC the power to make rules that promote the policy objectives in the Broadcasting Act (s. 3).

Policy statements do not confer or extend jurisdiction of subordinate bodies like the CRTC, Rothstein J. held; indeed, they circumscribe it.

Nor can the basket clause be interpreted as giving the CRTC the jurisdiction to enact any rules that it thinks will promote the Broadcasting Act’s policy objectives. Rothstein J. distinguished between jurisdiction granting provisions and regulation making and licensing authority. The authority to make regulations and issue licences must be interpreted within the confines of the jurisdiction granted to the body, he held:

[27] This broad, express grant of jurisdiction authorized the CRTC to create and use the deferral accounts at issue in that case. This stands in marked contrast to the provisions on which the broadcasters seek to rely in this case, which consist of a general power to make regulations under s. 10(1)(k) and a broad licensing power under s. 9(1)(b)(i). Jurisdiction-granting provisions are not analogous to general regulation making or licensing authority because the former are express grants of specific authority from Parliament while the latter must be interpreted so as not to confer unfettered discretion not contemplated by the jurisdiction-granting provisions of the legislation.

[28] That is the fundamental point. Were the only constraint on the CRTC’s powers under s. 10(1) to be found in whether the enacted regulation goes towards a policy objective in s. 3(1), the only limit to the CRTC’s regulatory power would be its own discretionary determination of the wisdom of its proposed regulation in light of any policy objective in s. 3(1). This would be akin to unfettered discretion. Rather,

. . . discretion is to be exercised within the confines of the statutory regime and principles generally applicable to regulatory matters, for which the legislature is assumed to have had regard in passing that legislation. (ATCO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140, at para. 50, per Bastarache J.)

“Value for signal” conflicts with the Copyright Act

The CRTC’s proposed scheme also conflicted with provisions of the Copyright Act that expressly allow BDUs to retransmit local signals without authorization, for free. These provisions of the Copyright Act represent a careful balance between broadcasters and BDUs chosen by Parliament after years of study. Because the CRTC’s value for signal regime would disrupt this balance, it is outside the jurisdiction of the CRTC.

Rothstein J. also rejected the argument that a requirement in the Copyright Act that the retransmission of local signals must be “lawful under the Broadcasting Act” founded jurisdiction in the CRTC to implement the value for signal regime. This provision is not a so-called “Henry VIII clause” (a clause that allows regulations to prevail over statutes), Rothstein J. said. In other words, nothing in the provision suggests that the CRTC could overturn the balance set by the Copyright Act:

Absent specific indication, Parliament cannot have intended by s. 31(2)(b) to empower a subordinate regulatory body to disturb the balance struck following years of studies. […] A general reference to “lawful under the Broadcasting Act” cannot authorize the CRTC, acting under open-ended jurisdiction-conferring provisions, to displace the specific direction of Parliament in the Copyright Act.

The dissent

Four judges dissented, with Abella and Cromwell JJ. writing the dissenting reasons.

They pointed to the broad powers granted to the CRTC’s under the Broadcasting Act, and noted that BDUs only have the right to retransmit signals pursuant to licences granted under the Broadcasting Act.

Nor is there any conflict between the value for signal regime and the Copyright Act, they argued. The Copyright Act does not purport to immunize BDUs from licensing requirements imposed by the CRTC, requirements that BDUs are obliged to comply with as a condition of retransmitting signals.

Implications

This decision raises the important issue of the interplay between law making by Parliament and subordinate bodies like the CRTC. There are few, if any, constraints on the ability of Parliament to delegate regulation making powers to subordinate bodies. In drafting statutes, governments tend to insert extremely wide regulation making powers into statutes. Used wisely, such powers allow the executive branch of government and sectoral regulators to fine tune rules and deal with technical issues. But where a government or regulator attempts to use its rule making powers to create regulatory schemes that go beyond what Parliament envisioned, the role of Parliament is usurped and democracy is weakened.

The majority’s decision therefore represents a welcome brake on the tendency of regulators such as the CRTC to assume jurisdiction beyond that granted by Parliament.

It may be that the CRTC is right, that there is a crisis building in television. But the appropriate forum for dealing with this crisis is our democratically elected Parliament, not government-appointed regulators.

Read the SCC decision.

 

 

W. Michael G. Osborne
Affleck Greene McMurtry LLP

W. Michael G. Osborne

Michael is a respected and practised litigator who acts for and advises parties in a wide range of competition matters, a variety of commercial disputes, including contractual disputes, shareholders’ disputes, commercial fraud, and employment matters, and also in administrative law and constitutional issues.

Michael has been admitted as a Fellow of the Chartered Institute of Arbitrators (UK).
Michael is a frequent contributor to newsletters published by the ABA’s Anti-trust Section, The Litigator and often quoted by The Financial Post, The Lawyer’s Weekly, Lexpert Magazine and other publications of interest to the legal community.

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