Direction Amending the Direction to the Canadian Radio-television and Telecommunications Commission Respecting the Implementation of the Canada–United States–Mexico Agreement: SOR/2023-181

Canada Gazette, Part II, Volume 157, Number 17

Registration
SOR/2023-181 August 4, 2023

BROADCASTING ACT

P.C. 2023-802 August 4, 2023

Whereas the Minister of Canadian Heritage has, in accordance with subsection 27(2)footnote a of the Broadcasting Act footnote b, consulted with the Canadian Radio-television and Telecommunications Commission;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Canadian Heritage, makes the annexed Direction Amending the Direction to the Canadian Radio-television and Telecommunications Commission Respecting the Implementation of the Canada–United States–Mexico Agreement under paragraph 27(1)(a)footnote a of the Broadcasting Act footnote b.

Direction Amending the Direction to the Canadian Radio-television and Telecommunications Commission Respecting the Implementation of the Canada–United States–Mexico Agreement

Amendment

1 Section 2 of the Direction to the Canadian Radio-television and Telecommunications Commission Respecting the Implementation of the Canada–United States–Mexico Agreement footnote 1 is renumbered as subsection 2(1) and is amended by adding the following:

Direction — home shopping television programming services

(2) To implement paragraph 4 of Annex 15-D of the Agreement, the Commission is directed to place United States home shopping television programming services based in the United States, including modified versions of those programming services for the Canadian market, on the List of non-Canadian programming services and stations authorized for distribution and to ensure that those programming services may negotiate affiliation agreements with distribution undertakings.

Coming into Force

2 This Direction comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Direction.)

Issues

The Canada–United States–Mexico Agreement (CUSMA) entered into force on July 1, 2020. In paragraph 4 of Annex 15-D of CUSMA (Annex 15-D.4), Canada agreed to “… ensure that U.S. programming services specializing in home shopping, including modified versions of these U.S. programming services for the Canadian market, are authorized for distribution in Canada and may negotiate affiliation agreements with Canadian cable, satellite, and IPTV distributors.”

The Governor in Council issued a direction to the Canadian Radio-television Telecommunications Commission (CRTC) in 2020 (SOR/2020-77) to implement this obligation “by appropriate means.”

In Broadcasting Decision CRTC 2020-191, the CRTC concluded that the addition of an unmodified non-Canadian teleshopping service would not be appropriate under its policy governing the addition of non-Canadian programming services to the List of non-Canadian programming services and stations authorized for distribution (the List). However, the CRTC authorized the distribution of unmodified United States (U.S.) home shopping services by adding them to the List “in light of the Direction to the Commission issued by the Governor in Council.”

With respect to modified home shopping services, the CRTC explained that “if a foreign service is modified for the Canadian market … , it is ineligible for addition to the List and requires a licence or other authority pursuant to an exemption.”footnote 2 and consequentially did not allow modified teleshopping services on the List. The CRTC noted that Canadian home shopping programming undertakings operate under the Exemption Order Respecting Teleshopping Programming Service Undertakings (the Exemption Order). It amended the Exemption Order to allow modified U.S. home shopping services to be broadcast in Canada without a licence (Broadcasting Regulatory Policy CRTC 2020-192 and Broadcasting Order CRTC 2020-193). The Exemption Order comprises several conditions, including that these exempt services originate their programming in Canada, and make predominant use of Canadian creative and other resources in the creation and presentation of its programming. The conditions applied to Canada, and now also to U.S. home shopping services modified for the Canadian market.

The U.S. has expressed its dissatisfaction with Canada’s implementation of Annex 15-D.4 commitments, including these conditions, which the U.S. alleges are inconsistent with the obligation. The U.S. has raised Canada’s implementation of CUSMA Annex 15-D.4 repeatedly at the Ministerial level and in meetings between senior trade officials since the issuance of the 2020 Direction. Should the U.S. decide to increase pressure on Canada to address its concerns, it may decide to pursue two avenues: (1) formal dispute settlement procedure; or (2) unilateral retaliation under the terms of the cultural industries exception.

Background

CRTC’s authorization of Canadian television services

The CRTC is an independent administrative tribunal whose mandate is to regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the policy objectives established in the Broadcasting Act (the Act).footnote 3 The CRTC can authorize Canadian owned and controlled entities to broadcast conventional TV stations or discretionary programming services such as The Sports Network and Réseau des sports by issuing them a broadcasting licence or by exempting them from licensing.

Licensing

The CRTC grants licences exclusively to Canadian broadcasters, pursuant to the Direction to the CRTC (Ineligibility of non-Canadians) [SOR/97-192]. Broadcast licensees are required to contribute to the implementation of the broadcasting policy set out in subsection 3(1) of the Act and to adhere to CRTC regulations established under the Act.

Exemptions

The Act allows the CRTC to exempt classes or types of broadcasting services that do not contribute in a material manner to the implementation of broadcasting policy objectives. Exempt services are not required to hold a licence and are exempt from the requirements of Part II of the Act and regulations made by the CRTC under that Part.

Generally, the CRTC’s policy is to exempt programming undertakings where it considers that they would not “significantly contribute” to the Canadian broadcasting system and would not hinder the ability of licensed broadcasters to meet regulatory requirements.footnote 4

CRTC’s authorization of foreign television services

The CRTC cannot issue licences to foreign television services. Instead, the CRTC may authorize the distribution of foreign TV stations and discretionary programming services in Canada by placing them on its List. According to its policy in the matter, the CRTC generally is only predisposed to add non-Canadian services to the List if it is satisfied that the services will not compete with a comparable Canadian programming service. The services must also provide the same signal to Canada that they provide in their home market.footnote 5

Foreign services apply to the CRTC for placement on the List through a Canadian entity, called a sponsor. The sponsor is usually a cable, Internet Protocol Television (IPTV) or satellite distributor who wishes to distribute the foreign programming service.

Exemption Order Respecting Teleshopping Programming Service Undertakings

Home shopping services (also called teleshopping services) are television programming services that are intended to sell or promote goods and services. In January 1995, the CRTC issued the Exemption Order which exempted Canadian home shopping television programming services from licensing requirements (Public Notice CRTC 1995-14, January 26, 1995). The CRTC did so because it was of the view that teleshopping services would not compete with other Canadian programming services for viewing, and therefore they should not be required to make a direct contribution to the broadcasting system which would have been required for a licence holder.

Today’s Shopping Channel (TSC) is the only Canadian home shopping programming service operating under the Exemption Order. Rogers Communications Inc. (Rogers) has owned and operated TSC for over 30 years.

Direction to the CRTC to implement the CUSMA U.S. home shopping commitment

The Act provides the Governor in Council the power to issue binding directions to the CRTC to implement obligations contained in CUSMA.

In April 2020, the Governor in Council, on the recommendation of the Minister of Canadian Heritage, directed the CRTC “to implement, by appropriate means, [paragraph] 4 of Annex 15-D of the Agreement.” The CRTC did so in June 2020 in two different ways:

The CRTC authorized the broadcasting of modified U.S. home shopping services by way of the Exemption Order that, as previously noted, contains conditions which require exempt services to originate their programming in Canada, and to make predominant use of Canadian creative and other resources in the creation and presentation of its programming. To be distributed in Canada, modified U.S. home shopping programming services would have to abide by this condition, among others (Regulatory Policy CRTC 2020-192 and Broadcasting Order CRTC 2020-193). Until its implementation of Annex 15-D.4, the CRTC had never before used an exemption order to authorize the distribution in Canada of any class of foreign conventional television service (i.e. discretionary programming services or TV stations).footnote 6

The U.S. maintains that the CRTC’s implementation of the CUSMA commitment with respect to home shopping represents a barrier to access. Since CUSMA came into effect, U.S. officials have raised the issue with Canadian officials on several occasions.

At the ministerial level, in July 2021, the U.S. Trade Representative met with Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development and “stressed the importance of Canada fully meeting its home shopping commitments under the USMCA.”footnote 7

In January 2022, the Chair and Ranking Member of the Senate Committee on Finance wrote to the U.S. Trade Representative with a list of trade concerns, including that “Canada continues to deny authorization to U.S. programming services for home shopping, despite making explicit commitments to do so.”footnote 8

The U.S. has also flagged the issue in three successive annual editions of the USTR National Trade Estimate Report on Foreign Trade Barriers. The 2023 report (PDF) noted that “the United States continues to raise concerns with Canada about its implementation of USMCA commitments to allow for the cross-border supply of U.S. home-shopping programming.”

Quality Value Convenience

Prior to CUSMA coming into force, the only U.S. service that had expressed an interest in providing an unmodified service to Canada was Quality Value Convenience (QVC), owned by Qurate Retail Inc. It applied to the CRTC through its Canadian sponsor, VMedia Inc., in September 2015 to be added to the List to enable its unmodified U.S. service to be distributed in Canada. The CRTC denied the application in April 2016 (Broadcasting Decision CRTC 2016-122).

VMedia Inc. successfully appealed the denial to the Federal Court of Appeal. The Court referred the matter back to the CRTC in September 2017 for reconsideration. In June 2020, the CRTC confirmed, with additional reasons, its previous denial of QVC/VMedia’s application. Yet, because of the 2020 Direction to the CRTC that was recently issued at the time, it ultimately authorized the distribution of QVC (the unmodified version) by placing it on the List (Broadcasting Decision CRTC 2020-191).

Objective

The objective of the amended Direction is to make certain that the CRTC will authorize both unmodified and modified U.S. home shopping programming services based in the U.S. for distribution in Canada and make certain that they may negotiate affiliation agreements with Canadian cable, satellite, and IPTV service distributors. U.S. home shopping services modified for the Canadian market would not be required to originate in Canada or use Canadian creative and other resources in the presentation of its programming. The CRTC would not be able to impose any content or operational requirements. The CRTC’s Exemption Order would no longer have an effect on these services.

Description

The amended Direction directs the CRTC to place both unmodified and modified U.S. home shopping programming services based in the U.S. on the List. The amended Direction includes both “modified” and “unmodified” signals to clarify that any unmodified signal of U.S. home shopping programming services would remain on the List or, on application to the CRTC, be added to the List.

Regulatory development

Consultation

The CRTC was consulted on the amended Direction and is prepared to implement it when it comes into force.

Rogers Communications Inc. is the primary stakeholder affected by the amended Direction. Rogers was the only broadcasting and cultural industries stakeholder to intervene during the two QVC application processes to be added to the List. It opposed the application noting that the List is not the appropriate mechanism to authorize the distribution of a foreign home shopping programming service. Rogers stated that the 2003 Exemption Order was the more appropriate means to allow QVC to enter Canada.

During the CRTC public processes in 2016 and 2018 considering the QVC application, no comments were expressed by broadcasting, creative, program production, or other cultural stakeholders, other than Rogers. Cultural stakeholders know that contributions to the broadcasting system is neither required nor can be required of foreign conventional television services (i.e. TV stations and discretionary programming services).

Modern treaty obligations and Indigenous engagement and consultation

No implications have been identified.

Instrument choice

No action/continued engagement with the U.S.

If Canada took no action, the CRTC would continue to use the Exemption Order as the means to authorize U.S. modified home shopping services. However, since CUSMA was implemented, the U.S. has maintained that the CRTC’s implementation of the home shopping represents a barrier to access. The U.S. has raised the issue repeatedly with Canadian trade officials without resolution. Should the U.S. decide to increase pressure on Canada to address its concerns, it may decide to pursue two avenues: (1) formal dispute settlement procedure; or (2) unilateral retaliation under the terms of the cultural industries exception. Either avenue could have economic consequences for Canada.

CRTC changing its authorization voluntarily

The CRTC has indicated that changing the way it implemented the Governor in Council’s June 2020 Direction would need to be undertaken through an open, public and transparent manner by making a ruling on an application or by being directed to do so by the Governor in Council. No U.S. home shopping programming service has applied to the CRTC for authorization to provide a modified service nor is one expected to apply because of lack of interest or because of the conditions presently required in the Exemption Order.

Amending the Direction to the CRTC was determined to be the optimal means to achieve the objective. It ensures that both unmodified and modified U.S. home shopping programming services are placed on the List in a timely, certain, and direct manner, thus enabling these services to negotiate affiliation agreements with Canadian cable, satellite, and IPTV distributors.

Regulatory analysis

Benefits and costs

Benefits

The amended Direction is expected to address U.S. concerns with Canada’s implementation of one of its trade commitments and mitigate the economic risk associated with a potential U.S. challenge under CUSMA’s dispute settlement provisions or other unilateral retaliatory action.

Canadian consumers may benefit from additional access to consumer goods offered by a U.S. home shopping programming service entering the Canadian market. Increased competition in the Canadian market may also lead to lower prices for Canadian consumers.

Costs

The cost to the CRTC to implement the amended Direction will be less than $1 million per year as only a single U.S. home programming service has expressed interest in providing a modified service for Canada. The cost will be covered by the CRTC and will not differ significantly from normal operations or impose operational limitations.

Small business lens

Analysis under the small business lens concluded that the amended Direction will not materially impact Canadian small businesses. Some small businesses may sell similar products as those offered by QVC, but this would not be a direct outcome of the amended Direction.

One-for-one rule

The one-for-one rule does not apply as the amended Direction does not impose or change any administrative costs to businesses, and no regulatory titles are being repealed.

Regulatory cooperation and alignment

The amended Direction is unrelated to a work plan or commitment under a formal regulatory cooperation forum to which Canada is subject. The amended Direction is the means to implement Canada’s commitment in Annex 15-D.4 of CUSMA regarding the authorization of U.S. home shopping programming services.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan or Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for the amended Direction.

Implementation, compliance and enforcement, and service standards

Implementation

The amended Direction would come into force upon registration. The CRTC is aware of Canada’s commitments in the CUSMA to provide U.S. home shopping services, including modified versions of those services, access to the Canadian market. The CRTC has been consulted on the amended Direction and is prepared to implement it.

Compliance and enforcement

The amended Direction is binding. The CRTC’s compliance with the amended Direction will be assessed through Canadian Heritage’s ongoing monitoring of the CRTC’s operations.

Contact

Amy Awad
Director General
Digital and Creative Marketplace Frameworks (DCMF)
Department of Canadian Heritage
25 Eddy Street
Gatineau, Quebec
K1A 0M5
Email: amy.awad@pch.gc.ca