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Hungarian Constitutional Court approves exempting pro-government media from antitrust regulation

D  KB20130215004
2020.06.26. 21:15

According to the decision published on Thursday, the Hungarian Constitutional Court found nothing wrong with the government decree that prevented the Competition Authority from even examining the legality of the merger that created the pro-government media conglomerate KESMA, which incorporates nearly 500 media outlets under a centralised structure. The decision may have far-reaching consequences beyond the media as well, as it basically establishes that the government can exempt mergers from antitrust procedures at will.

The Central European Press and Media Foundation, more commonly known for its Hungarian abbreviation KESMA, was created in November 2018 when oligarchs close to governing party Fidesz donated all their media interests to the newly registered foundation over a single afternoon. Soon afterwards, a government decree signed by Prime Minister Viktor Orbán qualified this rather unique business transaction as a "merger of strategic importance at a national level," thus exempting it from any review by the National Competition Authority. The reason for this, as the decree curtly states, is that it's a "public interest," but provided no further explanation as to why.

Today, the conglomerate incorporates the second largest online news site (amongst many others), several dailies, tabloids, sports magazines, every single regional newspaper, a 24-hour news channel, several radio stations (including the only nationwide commercial radio station), and many others. Besides the concentration of ownership, the uneven distribution of state advertising further distorts the market: Pro-government outlets (mostly belonging to KESMA, excluding public media) were the recipients of sometimes as much as 76% of the state's monthly advertisement spending according to the latest available data from December 2018. This covers everything from the government's "information campaigns" to ads placed by companies like electricity provider MVM Zrt. and lottery organiser Szerencsejáték Zrt. 

The procedure of the Constitutional Court was initiated by a quarter of the Members of Parliament who complained that the decree was unconstitutional because in their opinion,

  • The government decree exempting KESMA from the Competition Authority's procedure goes against Hungarian antitrust legislation,
  • The government's claim of the merger being a public interest is completely unfounded, therefore, the merger did not satisfy the legal criteria to be "of strategic importance at a national level," and
  • The decree violates the constitutional provisions regarding the diversity of the press.

Weighing the "public interest against the constitutional interest for a plural media system," the Constitutional Court rejected the complaints.

Merger of.... Exactly what?

Under Hungarian law, mergers between companies above a certain revenue limit need prior approval from the Competition Authority to go into completion, and in case of media companies, the National Media and Infocommunications Authority are also contributors in the procedure. On paper, their task is to examine whether or not the merger would create such a concentration of opinions on the media landscape of the country that could possibly jeopardize the democratic public discourse. This is what the pro-government media conglomerate did not have to undergo pursuant to Orbán's decree.

What made this possible is an amendment to antitrust provisions adopted by Fidesz's supermajority in 2013, which introduced the concept of "mergers of strategic importance at a national level," allowing the government to exempt certain fusions from having to go through the procedure described above if that serves "public interest - especially the interest of job security or the stability of service," as the law states in Section 24/A.

Consequently, The key question here is the definition of this so-called "public interest," as that is the only check on this powerful tool for the government to intervene in the structure of the economy.

Constitutional Court: Public interest is whatever the government says it is

Besides requesting opinions from the Competition Authority and the Media Authority, the Constitutional Court also reached out to Minister of Justice Judit Varga, who, as cited by the Court, stated that "public interest" is not a static concept but the result of value judgements, and as such, it is in constant flux, therefore determining its nature is the competence of legislators, and in case of economic policies, the government. She went on to proclaim:

"The government cannot even share its responsibility for economic policies with constitutional bodies; checks over such decisions cannot result in the complete or partial reduction of government powers."

The Constitutional Court had completely adopted the Minister's line of thinking, stating that shaping the national strategy is a government matter, economic policies are important aspects of the national strategy, and the government's responsibility for economic policies and the national strategy is primarily political,

therefore, only the government can determine what the interest of the public is, and the Constitutional Court has neither the power nor the tools to review that. 

The Court also rejected the notion that the decree does not specify the nature of the underlying public interest behind the decision. As the Court writes, the decree has the following grammatical structure: Out of public interest, the government qualifies the merger constituted by the acquisition of the companies in question by KESMA as a merger of strategic importance at a national level. The Court says that semantically speaking, the repetition of the word "merger" is unnecessary, but since

"according to Article 28 of the Fundamental Law, legal regulations and the Fundamental Law shall be interpreted under the presumption that they serve ethical and economical purposes which are in accordance with common sense and the public good,"

the court must presume that the repetition has significance, and it must mean that the underlying public interest is the merger itself.

To sum it up, the Hungarian Constitutional Court ruled that:

  • The government could only have exempted the merger establishing the pro-government media conglomerate from antitrust laws if that served the interest of the public.
  • The merger must be serving the interest of the public, since only the government has the power to determine what serves the interest of the public, and they decided that it does.
  • The specific underlying public interest served by the establishment of the pro-government media conglomerate is the establishment of a pro-government media conglomerate.

So, according to the ruling, there is a public interest, therefore the government decree does not go against antitrust legislation and the state's obligation to ensure fair market competition. Two complaints down, one to go.

What about media pluralism?

It's an important question because competition law aside, the Constitutional Court could still have ruled the decree unconstitutional if they found it violated the provision of the Fundamental Law protecting the plurality of the media, namely this one:

Hungary shall recognise and protect the freedom and diversity of the press, and shall ensure the conditions for free dissemination of information necessary for the formation of democratic public opinion.

The Constitutional Court points out that this does not mean an absolute ban on changes affecting the plurality of the media, the state only has to intervene (in the form of a disapproval from the Competition Authority) if the changing circumstances no longer ensure the conditions for the free dissemination of information necessary for the formation of democratic public opinion. The Court assessed:

"The present situation is the polar opposite of that. The government decided that the merger in which a foundation acquired several privately-owned media firms is a public interest."

Furthermore, the Court stated that in itself, the fact that media companies merge does not necessarily mean that media pluralism is under threat, arguing that:

"Keeping their best economic self-interest in mind, the owner could decide that they want their media portfolio to serve the demands of the widest possible audience, thus allowing the dissemination of information necessary for the formation of democratic public opinion."

The ruling concludes by stating that the conditions necessary for a diverse media landscape in Hungary are otherwise in place, and since the complaint mentions no other factors that would jeopardise them, the government decree means no harm to media freedom, and the decree does not unlawfully discriminate against other media firms on the market either; the merger's classification as strategically important provides sufficient legal grounds for the unequal treatment.

(Cover: Kallos Bea / MTI)

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