On July 20, 2010, the Department of Canadian Heritage announced that it would undertake a review of its Revised Foreign Investment Policy in Book Publishing and Distribution (the Book Policy). The Book Policy, which governs foreign investment in the Canadian book industry, was introduced in 1985 and last revised in 1992. The review specifically seeks to determine whether the Book Policy continues:
- to provide opportunity for healthy competition in the book publishing, distribution and retail industries; and
- to contribute to the broader government objective of ensuring that Canadian cultural content is created and accessible in Canada and abroad.
To initiate the review process, the Department of Canadian Heritage released a discussion paper in July entitled Investing in the Future of Canadian Books. The paper outlined the motivations for the review, described the structure of the Canadian book industry and discussed the impact of existing foreign investment policies on a variety of cultural industries. The Department accepted responses to a questionnaire included in the discussion paper until mid-September 2010, and these submissions will be posted on the Canadian Heritage website for public comment throughout the month of October. The final consultation phase will involve roundtable discussions to be held in late 2010.
The Book Policy Framework
The three main sectors of the Canadian book industry affected by the Book Policy involve publishing, distribution and wholesale, and retail. In order to promote the creation of diverse Canadian cultural products in both official languages, the Government has created a federal policy framework composed of complementary programs, regulations and policies designed to support the Canadian-owned book publishing industry. Any changes to the current Book Policy will also have to maintain compatibility with a variety of other instruments, including the Competition Act, the Copyright Act and a number of international trade agreements.
The cultural provisions of the Investment Canada Act apply to transactions in which foreign investors wish to establish or acquire control of cultural businesses. Under the ICA, monetary thresholds trigger the automatic review of foreign acquisitions. For all other investments, non-Canadians must comply with statutory notification requirements. Upon review, investments are subject to the net benefit test, which evaluates the compatibility of an investment with national and provincial policies, including cultural policies, and may require an investor to agree to undertakings furthering cultural and economic objectives.
Under the current policy framework, the book industry has remained primarily Canadian-owned and undertakings negotiated with foreign investors under the ICA’s net benefit test have helped to promote Canadian authors at home and abroad, support distribution infrastructure, implement new technologies in Canada and secure contributions to education and research.
Motivations for Review
Since the last revision of the Book Policy, the book industry has evolved significantly in response to technological change, consolidation of ownership and globalization. In addition, as part of an effort to increase foreign investment in Canada while retaining the ability to protect national interests, the Government created the Competition Policy Review Panel under its 2006 Advantage Canada plan and made a commitment to act on the Panel’s recommendations. The independent Panel, which was mandated to review Canada’s competition and foreign investment policies in order to improve productivity and competitiveness, ultimately focused on foreign ownership restrictions and the net benefit test under the Investment Canada Act. With respect to cultural businesses, it found that while current policies have played a significant role in protecting and nurturing Canadian culture, the policy framework should be updated to reflect advances in technology and to better facilitate opportunities for Canadian businesses in international markets.
As such the review process should allow the Department of Canadian Heritage to evaluate the effectiveness of its Book Policy in light of the new challenges and opportunities arising in the Canadian book industry.