Bell Canada v Canada (Attorney General) : FCA Ruling Preserves the Right of Canadians to Watch American Super Bowl Ads

Screen Shot 2018-02-01 at 11.12.39 AM

On Sunday, February 4th, the New England Patriots and the Philadelphia Eagles will square off in the annual sports spectacle known as the Super Bowl. The National Football League’s (“NFL”) championship game is one of the largest televised events in the world, watched by over 160 million around the world and over 8 million in Canada. With such incredible viewership, companies pay up to USD $5 million for a 30-second television spot.

In Canada, local broadcasters have traditionally been allowed to substitute US television commercials with Canadian advertising content. Through a process know as simultaneous substitution (or “simsub”), broadcasters are allowed to temporarily replace the signal of a US channel with that of a Canadian one, ensuring that advertisers in Canada are able to reach Canadian audiences.

In 2016, the Canadian Radio-television and Telecommunications Commission (“CRTC”) ordered Canadian Super Bowl broadcasters to stop the practice of simsub. The CRTC’s decision was upheld at the Federal Court of Appeal (“FCA”) in Bell Canada v Canada (Attorney General), 2017 FCA 249 [Bell]. An application made to the Supreme Court of Canada to stay the CRTC decision was denied in January of 2018. A request to deal with the application for leave to appeal on an expedited basis (and to expedite the hearing if leave is granted) was granted by Justice Russell Brown (Bell Canada et al v Attorney General of Canada, Docket No. 37896 (SCC)).

This post discusses the legal arguments underpinning the case, its effects on Canadian broadcasters and advertisers, and why I think this case is an instance of good law leading to unfavourable real-world results.

The CRTC Responds to Consumer Complaints

The CRTC is the regulatory agency responsible for the oversight of broadcasting and telecommunications in Canada. Granted authority through the Broadcasting Act, SC 1991, c. 11 [Broadcasting Act], the CRTC has a mandate to, amongst other things, ensure that programming is predominantly Canadian, reflects Canada and its regions to national and regional audiences, contributes to the flow and exchange of cultural expression, contributes to a national consciousness, and ensure that resources are made available throughout Canada by the most appropriate and efficient means (Broadcasting Act, s 3(1)).

Where there is any conflict or competing interests, the CRTC has broad mandate to resolve the conflict in the public interest (Broadcasting Act, s 3(1)(n)). Moreover, section 9(1)(h) of the Broadcasting Act grants the CRTC power to require “any licensee who is authorized to carry on a distribution undertaking to carry, on such terms and conditions as the Commission deems appropriate, programming services specified by the Commission”.

Through public consultations beginning in 2013, the CRTC learned that Canadian viewers were dissatisfied over not being able to watch US advertisements during the Super Bowl. The rising social and cultural popularity of such commercials prompted this reaction, with American advertisers increasingly relying on controversial, outrageous or unique advertising techniques in an attempt to create “viral” and iconic content.

Due to the results of its public consultation, the CRTC issued an order under section 9(1)(h) of the Broadcasting Act that banned simultaneous substitution during the Super Bowl effective January 1, 2017 (the “Final Order”). Specifically, the prohibition on simsub was reserved only for Super Bowl broadcasting, leaving other broadcasts untouched.

The order was subsequently appealed to the FCA by the NFL and Bell Canada (who holds the Super Bowl’s Canadian broadcasting rights), with interveners including the Association of Canadian Advertisers and the Alliance of Canadian Cinema, Television and Radio Artists.

The FCA Affirms the CRTC’s Jurisdiction

At the FCA, the court considered three legal issues [Bell, para 8):

  1. Was the Final Order issued under section 9(1)(h) of the Broadcasting Act within the CRTC’s jurisdiction?
  2. Was it reasonable for the CRTC to determine that its Final Order is not retrospective and does not interfere with (Bell and the NFL’s) vested rights?
  3. Was it correct for the CRTC to determine that its Final Order did not interfere with the Copyright Act, RSC, 1985, c C-42 [Copyright Act]?

I will discuss the court’s analysis of each issue below.

Was the Final Order issued under section 9(1)(h) of the Broadcasting Act within the CRTC’s jurisdiction?

The appellants’ first line of argument was that the CRTC lacked the jurisdiction to make its Final Order. The first prong of this argument was raised on a matter of statutory interpretation. Bell Canada argued that because section 9(1)(h) of the Broadcasting Act refers to the CRTC’s powers only in terms of “programming services,” the agency did not have the jurisdiction to single out an individual “program” or “single show” such as the Super Bowl. The court rejected this argument, highlighting the fact that neither legislators nor the court have suggested such a narrow definition (Bell, para 18).

The second prong of this argument was based on the policy objectives of the Broadcasting Act. In particular, the appellants argued that the Final Order was inconsistent with the policy objectives of the Broadcast Act in that it did not privilege Canadian content. This prompted the court to produce, in my opinion, its most memorable excerpt from the decision:

The appellants argue, and I agree, that there is a certain irony that legislation that has the protection of the Canadian broadcasting industry and its employees as one of its important objectives is being used to allow for the broadcasting of American ads during the Super Bowl to the apparent detriment of the Canadian industry and its employees. But there are numerous disparate objectives set out in the Broadcasting Act and Parliament intended that the CRTC decide how best to balance competing policy objectives related to broadcasting in Canada. (Bell, para 24) [emphasis added]

Despite recognizing the irony of the outcome, the court showed deference to the CRTC and upheld the agency’s wide decision-making latitude in disposing of this argument.

Was it reasonable for the CRTC to determine that its Final Order is not retrospective and does not interfere with (Bell and the NFL’s) vested rights?

The appellants’ next line of argument was that the CRTC’s Final Order retroactively interfered with its “vested rights.” Put more simply, the appellants argued that the CRTC order would retroactively cause Bell Canada to lose the vast majority of the benefits associated with broadcasting the Super Bowl which it had previously negotiated with the NFL. In disposing this argument, the court emphasized that the Broadcasting Act confers benefits—not inalienable rights.

As the court elaborates:

There are no guarantees that the law will not change. Indeed, legislators often make legislation and regulations that interfere with expectations. The CRTC’s powers to make orders and regulations cannot be limited by a contract made between private parties (Bell, para 32).

As such, the court found that Bell’s vested rights were between it and the NFL through its private contract. There is no vested right in the continuance of a regulatory regime as it exists at any given moment.

Was it correct for the CRTC to determine that its Final Order did not interfere with the Copyright Act?

Lastly, the appellants argued that the CRTC Final Order infringed on its rights under both the Copyright Act as well as the Canada-United States Free Trade Agreement, 2 January 1988, Can TS 1989 No 3 [CUSFTA].

In particular, the NFL argued that section 3(1)(f) of the Copyright Act upholds the right of copyright holders to reproduce work. Additionally, the NFL also referred to article 2006(1) of the Canada-United States Free Trade Agreement, which stipulates that any retransmission of a copyright holder’s program must provide the copyright holder with remuneration.

Taken together, the NFL argued that the its rights under the Copyright Act had been infringed as the legislature could not possibly have drafted the Act such that it would contradict the remuneration principles outlined in the Canada-United States Free Trade Agreement.

The court did not find this line of argument persuasive. Near JA writing for the unanimous panel distinguished “retransmission” of copyright versus the “simultaneous substitution” of commercials and added:

In my view, the NFL is trying to elevate a principle limited to a small section in article 2006(1) of the CUSFTA pertaining to the remuneration for retransmission to a principle of general application across the Copyright Act. I see no conflict between the Final Order and the purpose of the Copyright Act” (Bell, para 46).

The appeal was dismissed with costs (Bell, para 51).

Real World Effects and Final Thoughts

This ruling has had (and will continue to have) a very real-world impact on Canadian broadcasters and advertisers. For the 2017 Super Bowl, Bell Canada claims to have lost 40% of its audience, totalling a loss of $11 million worth of advertising revenue.

While it may be hard to find sympathy for a corporate conglomerate such as Bell, the negative repercussions of the ruling extend beyond the broadcaster in two ways. First, a company such as Bell is an important conduit for Canada’s domestic television market. For 2017/18, Bell has announced 39 new and returning original Canadian series and productions. The inability to promote these series during the Super Bowl has a material impact on such productions and detracts from home-grown content creation and employment in technical and creative fields.

Second, for Canadian advertisers, few opportunities allow them to reach as large an audience as the Super Bowl permits. While many would-be advertisers are corporations with deep pockets, many smaller and medium-sized companies rely on the Super Bowl to make an outsized impression on a national stage. Indeed, Super Bowl advertisements are sometimes the only advertisements that a smaller company will do for the year.

Canadian advertising ensures that Canadian advertising dollars remain in Canada, for Canadian companies, and for the benefit of Canadians. One would assume that the CRTC would appreciate this. And for a deferential FCA that recognizes the irony of its ruling, one would assume the same.

 

Scott Lin

Scott Lin

Scott is currently a JD/MBA student at Osgoode Hall Law School and the Schulich School of Business. Prior to law school, he worked a lecturer at the University of Western Ontario, where he taught business. He will be completing his articles at a firm in Toronto, with interests in the areas of corporate/commercial and competition law.

Join the conversation

Loading Facebook Comments ...