Netflix Inc (NASDAQ:NFLX), Walt Disney Co (NYSE:DIS), and other major U.S. streaming companies have reportedly filed a court motion in Canada to challenge a new regulation.

The Canadian Radio-television and Telecommunications Commission (CRTC) has mandated these companies to contribute 5% of their sales in the country to support local broadcast news and other domestic content.

The Motion Picture Association-Canada argued that the CRTC's order surpassed its regulatory authority and failed to acknowledge the substantial investments these companies already make in Canada annually, reported The Wall Street Journal.

Wendy Noss, the association's president, emphasized that the streaming services do not produce local news and do not receive the legal privileges and protections that Canadian broadcasters enjoy for providing such news.

The industry's reaction included warnings that the levy could result in increased subscription prices for Canadian consumers.

Additionally, some fear that the streaming giants might reconsider their operations in Canada. The CRTC has proposed that these contributions will address concerns about the potential decline in the availability and production of local content, due to insufficient market-driven funding.

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In their legal filing, the streaming companies' lawyers argued that the CRTC failed to provide a valid basis for compelling foreign streamers to fund local news production.

The broadcasters contend that the regulator's decision lacks evidence and is unreasonable. The CRTC had previously stated that these payments would begin in the 2024-25 broadcast year, contributing an estimated C$200 million (approximately $147 million) annually to the broadcasting system.

Michael Geist, an internet law professor at the University of Ottawa, commented that the streaming companies' legal challenge hinges on the absence of a rational connection between their services and Canadian news broadcasts.

Geist also pointed out that domestic competitors are not subject to this levy, raising further questions about the fairness and rationale behind the regulation.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Proxima Studio via Shutterstock

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