Does Bill C-10 give the CRTC too much power?

Law professors Michael Geist and Emily Laidlaw, both holders of Canada Research Chair positions, have been outspoken about the government’s effort to change the Broadcasting Act with Bill C-10. In his scathing assessment of the Department of Justice’s updated Charter statement on C-10, Geist cites Laidlaw, who argues:

The government does not propose to regulate users directly. But it does propose to regulate the platforms that then must regulate users. Indirectly, UGC is regulated. It’s actually worse, because the state does not set any rules on how the platforms do this that is proportionate and minimally impairing.

This argument is two part: first, that the Broadcasting Act would be ‘deputizing’ social media services, forcing them to do the work of implementing government policy, and second, that this is made ‘worse’ by virtue of the Act not setting any rules about how this should happen.

Setting aside qualitative judgement for the moment of whether or not this is ‘actually worse,’ Laidlaw is completely correct on the facts — this is exactly how the Canadian broadcasting system functions, as it basically has since 1957 when the Diefenbaker government established the Board of Broadcast Governors as an arms-length agency. The Broadcasting Act intentionally separates broadcasting policy from political decision-makers by empowering the CRTC to make and enforce the rules it deems necessary to achieve the goals of the Act, which Bill C-10 does not change. This high degree of independence is a prerequisite condition for credible broadcast policy, as market participants can trust the regulator is legitimately focused on achieving the goals of the Act, rather than the political whims of parliament.

As Geist previously explained to the Globe & Mail, “an incredible amount of power is being vested in the regulator. The shape of what internet broadcasting services will look like — in many ways, what the internet will look like in Canada — will be determined by unelected regulators at the CRTC with very little guidance coming from Parliament or the government.”

The implicit critique from Geist and by extension Laidlaw is that the CRTC, as an independent public authority combining rule-making, enforcement and adjudication, lacks democratic legitimacy and will therefore result in worse public policy than alternative options. Similar concerns are raised frequently, not only in the context of the Broadcasting Act, but by critics of independent regulatory agencies in general. Although this argument does seem logical, a review of the academic literature on the subject reveals that the evidence does not support its hypothesis.

Beginning in the 1970s, roughly the time that the CRTC first established the Canadian Content system for radio broadcasters, governments around the world in increasing number began to delegate specific areas of public policy to independent regulatory agencies that employed appointed leadership, and were therefore insulated from electoral pressure (e.g., Majone, 1997; Gilardi, 2005; Jordana et al., 2011).

Delegating policy to such independent agencies is usually justified by their “superior performance […] relative to the result that would be likely if elected politicians were to perform the functions themselves” (Thatcher and Stone Sweet, 2002). Beyond this performance rationale, governments have two other main reasons for employing these independent regulatory agencies. First, it is argued that independent agencies are able to make more efficient and effective policy decisions than politicians or government departments because they can develop superior expertise and skills; and second, that independent agencies bypass any biases or deficiencies held by democratically elected officials (Majone 1999; Gilardi 2002).

Elected officials realize several further advantages by delegating specific competencies to independent agencies, including reducing the costs of decision-making by allowing legislators to save time and effort in both reaching agreement and refining policy specifics (McCubbins and Page 1987) and reducing the political costs of making more specific decisions themselves (Fiorina 1982). In addition to these advantages, perhaps the most compelling logic for delegating policy to independent regulators is the need to achieve credible policy commitments, an idea developed by Giandomenico Majone:

Under the expectation of alternation, democratic politicians have few incentives to develop policies whose success, if at all, will come after the next election. Moreover, because a legislature or a majority coalition cannot bind a subsequent legislature or another coalition, public policies are always vulnerable to reneging and hence lack credibility (Majone 1998).

In the context of Canadian broadcast policy, it is also worth considering that were parliament to directly regulate the industry, this credibility gap would be amplified by the extreme conflict of interest it would create: the Minister of Canadian Heritage would be directly responsible for both broadcast regulation and the Canadian Broadcasting Corporation, which is funded from tax revenues and competes directly in the radio, television and internet streaming businesses. CBC also has a history of experimenting in the user generated content space (remember ZeD?), and could conceivably re-enter this business in the future. The policy problem created by this conflict of interest is precisely the scenario John Diefenbaker’s government sought to remedy by establishing the Broadcast Board of Governors, following the 1957 Report of the Royal Commission on Broadcasting.

The Broadcasting Act, and the proposed changes to it, define the legal authority and objectives of the CRTC, while the Canadian Heritage Act grants the Minister of Heritage jurisdiction over all aspects of broadcasting, except for spectrum management and technical matters. Accountability of the CRTC is accomplished primarily by the principle-agent relationship formed by these two pieces of legislation wherein the CRTC reports directly to the Department of Heritage. An in-depth examination of this agency relationship is warranted within the context of democratic accountability, but is beyond the scope of this article (this is, after all, a literature review and not an original research project). As noted by Majone, “it is up to the political principals to structure relationships with their agents so that the outcomes produced through the agents’ efforts are compatible with basic requirements of democratic accountability, given the choice to delegate in the first place” (Majone 1998).

Returning to Laidlaw’s argument that C-10’s potential regulation of social media platforms and its impact on users is made “worse, because the state does not set any rules on how the platforms do this that is proportionate and minimally impairing,” it is worth bearing in mind that the state clearly will be setting rules in accordance with the established broadcasting framework. That is to say, the rules will be determined, enforced and adjudicated by its agent, the broadcast regulator, rather than by parliament.

But is this ‘actually worse’?

Given the 50-year trend of governments establishing independent regulators, the literature on ‘regulatory quality’ is unsurprisingly very extensive (e.g. Farrow and Copeland 2003; Hahn et al 2000; Harrington, Morgenstern and Nelson 2000; Harrington and Morgenstern 2003; Mihlar 1997; Sunstein 2003). Although the notion of ‘quality’ seems vague and elusive in any context, there is striking international consensus in the context of government. High-quality regulatory work is broadly understood to be efficient, proportionate, legitimate, consistent, not unduly prescriptive, and enforceable (Hanretty and Koop 2018; Radaelli 2004).

Following a global trend towards deregulation in the 90s, Radaelli notes that internationally, government agendas are now about “how to deliver high quality regulation, not to suppress regulation” (Radaelli 2004). Both the EU and the OECD have made regulatory quality a key component of governance, and virtually all countries in the EU and OECD are now committed to the regulatory impact analysis (RIA) system of evaluating regulatory policy. In Canada, new federal regulations are required to have a regulatory impact analysis statement (RIAS), which is published in the Canada Gazette along with the proposed regulation.

The literature identifies three approaches to systematically measuring and evaluating regulatory quality: those focusing on process, activity and real-world outcomes (Radaelli, 2004). As summarized by Hanretty and Koop:

Process-based approaches conceive of regulatory quality as a characteristic of the work of regulators such that the procedures, investigations, analyses, and intermediate outputs are of good quality, judged according to standards internal to the kind of work. Thus, high-quality work may refer to well-targeted investigations, clear and well-informed legal analyses, and state-of-the-art econometric analyses. Activity-based approaches, on the other hand, understand quality as a characteristic of regulatory work such that regulators doing more work (e.g, more cartel investigations, more sectoral inquiries) are of better quality. Finally, outcome-based approaches take quality to mean regulatory work that promotes those outcomes that regulators are meant to promote (Hanretty and Koop 2018).

To investigate the issue of regulatory quality and independent regulatory agencies, Hanretty and Koop took a process-based approach, and investigated 46 independent competition regulators across 30 OECD countries over the period of 2005–2014. Their study operationalized variables related to each agency’s statutory design, degrees of independence and political accountability, and controlled for factors such as number of staff, experience of staff, powers of the agency, and government effectiveness. Their findings suggest a very strong correlation between independence and the quality of regulatory policy-making; interestingly, however, they found only a weak correlation between accountability and quality, which was not significant enough to mediate the effects of independence (Hanretty and Koop 2018). In other words, they found that regulatory agencies with a higher degree of independence provide higher quality public policy than less independent agencies, whereas regulatory agencies with a higher degree of accountability only provide marginally higher-quality public policy.

It is clear that the academic literature does not support the hypothesis that ‘unelected regulators’ result in worse public policy. Embedding the rules of any regulation directly in legislation would completely undermine the credibility of the very public policy such rules were designed to enact, which is one of the main reasons OECD countries employ independent regulatory agencies. This insight was recognized by Diefenbaker’s Progressive Conservative government in 1957, which is how the Canadian broadcasting system became what it is today. Geist and Laidlaw may indeed have very valid concerns around the policy goals of Bill C-10, or whether using the existing broadcasting framework as a vehicle for these goals is the right approach; however, their arguments that public policy will suffer because it “will be determined by unelected regulators at the CRTC with very little guidance coming from Parliament or the government” since “the state does not set any rules” do not stand up to scrutiny.


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