HCLU Turns to Court to Prevent Unconstitutional Founding of Pro-Government Media Empire

Plans to launch a new media empire called Central European Press and Media Foundation, KESMA (Hungarian abbreviation) would result in an unprecedented concentration of media outlets in Hungary. The Competition Authority (CA) was prevented from investigating the fusion by a decree of the Government declaring the deal of “national strategic importance in the public interest”. Since the fusion raises several doubts concerning its constitutionality, the HCLU turned to court.

What happened?

KESMA announced the fusion to the CA on November 28, revealing the launch of the long rumoured pro-government media conglomeratum.

According to the announcement, KESMA acquired 100% of the shares of Opus Press Zrt., Echo Hungária TV Zrt., a Magyar Idők Kiadó Kft., and New Wave Media Group Kommunikációs és Szolgáltató Kft. According to an analysis by investigative portal Átlátszó, the fusion merged 476 mediaoutlets, which according to the announcement generated roughly 60 million HUF revenue in 2017. For the whole picture it is worth consulting the infographics produced by Átlátszó.

According to information found in the file of KESMA at the CA, a competition law procedure was initiated by the Fusion Office, and later the Competition Council agreed to launch a procedure called competition inspection. This procedure of the CA was prevented by Government Decree 229/2018. released on December 5, that declared the fusion of national strategic importance. The reasoning of the decision is easy to quote because of its brevity: the Government based its decision on the “public interest”. The repetition of this one provision of the law was the mere reason for the fusion being exempt from competition law examination.

On the next day the CA closed the procedure because of lack of competence in the issue.

Why is the fusion unlawful?

There are several substantial, procedural and constitutional problems concerning the fusion, the lack of the competition inspection and the governmental decree. Here we focus on two of these problems, but also publish our petition to the court against the decision of the CA.

As mentioned earlier, the launch of KESMA means an unprecedented concentration on the Hungarian media market, while the new entity further contains significant printing, distribution and publishing capacities. The media market and plurality are seriously distorted by such concentration, and under these circumstances a fair economic competition is impossible. According to Kreatív Online, more than half of the revenue generated on the market of print newspapers would be under the control of KESMA.

The decision of the CA can only be appealed before court by a competitor of KESMA. Our client, plaintiff in the legal procedure is Szabad Pécs, an independent political online news site for Baranya county and Pécs. The site runs ads, and under the new circumstances can find itself in a disadvantaged position. Most of the local newspapers have already belonged to businessmen with strong connection to the Government and operated with the purpose to support the governing parties, making them propaganda outlets. For example before the 2018 general elections, all these papers were published with the same cover story with Viktor Orbán and the title “Both votes to Fidesz!”. The launch of KESMA means that further local papers will be under governmental influence: Új Dunántúli Napló and its online edition, bama.hu, also targeting Baranya county audiences; political weekly Szabad Föld; and advertising leaflet Szuperinfo that has a local Pécs edition.

We further argue that both the governmental decree and the Act of Parliament it is based on are unconstitutional. The Act is unconstitutional because it fails to specify the conditions under which certain transactions can be exempt of a competition law inspection. The governmental decree is unconstitutional because it abused the law when it used a two words reasoning (public interest). We also requested that the judge would turn to the Constitutional Court for further examination.

What is the aim of the procedure?

We requested the judicial supervision of the CA decision. We asked the court to change the decision of the CA, prohibit the fusion, or oblige the CA to carry out a full competition law inspection.

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