Libel is when one person, a publisher, damages the reputation of another person, the complainant, in a newspaper or a "broadcast". Broadcasts include television, radio and Internet.
This is an important stage in any claim for libel, because it gives both parties a chance to come to a settlement. Once a publisher receives a libel notice, that person can immediately publish a retraction. Online, the publisher can even amend the original comment or delete it all together. This helps both parties, because it minimizes the damage to the complainant's reputation and minimizes the damages that the publisher might have to pay if the complaint is valid.
The libel notice also gives some advantage to the publisher. If the publisher is convinced that there was no libel, then the publisher can report on the threat of a lawsuit. In some cases, this can make the complainant seem like he or she has something to hide. In other cases, the increased rhetoric may force the complainant to drop the matter so that the libel lawsuit does not spread the story even further.
In Stephen Harper's case, it probably made sense to send libel notice immediately if he truly believes that he was libelled. This is because the attacks of the Official Opposition are unlikely to go unreported. Mr. Harper had to attempt to protect his reputation as soon as possible.
However, in many cases people believe that they have been libelled by bloggers. If nobody has read the blogger's website, then it might not be worth sending a libel notice. As soon as the blogger publishes the notice, it becomes much more likely for media to pick up on the story. In such cases, the complainant must consider very carefully whether it is worth the risk of sending a libel notice. Normally, it will make more sense to phone the person first and ask for a retraction before sending anything official.If it were not for libel notices, then there would be far more libel cases in court. The costs would be much higher and the damages could become excessive. However, without libel notices the complainant would have an advantage over the publisher. Since libel is, at its heart, about punishing people for writing their opinions, that publisher's advantage probably makes sense.