EU Watch

Orbán's Media Empire Unlawfully Given Green Light

An unlawful decision of the Hungarian Competition Authority allowed for the creation of Fidesz's media empire, stated the court.

by Gábor Medvegy

A significant part of the Hungarian pro-government media was swept into the Central European Press and Media Foundation (abbreviated as KESMA in Hungarian) in the course of a single day in late 2018. On 28 November 2018, 476 media outlets were offered simultaneously, without any payment, by their owners - all Fidesz-friendly businessmen - to KESMA, which had been formed only a few months before.

Thus, KESMA now includes Retro Radio, the only national commercial radio station; Origo, a news portal with wide reach; Lokál, a daily distributed in Budapest free of charge; and all of the regional newspapers. Furthermore, the foundation took control of radio and television channels with large public profiles as well as economic, sport, tabloid and political newspapers and magazines. As a result, 40 percent of the turnover from the news and public life segment of the Hungarian media market is now concentrated in KESMA, whose media outlets serve as mouthpieces for government propaganda.

"This degree of concentration causes severe distortion to the media market, undermining the plurality of the press and threatening fair economic competition," said Dalma Dojcsák, director of the political freedoms project at HCLU.

Dubious 'public interest' claim

Such a large cluster needed approval by the Hungarian Competition Authority (HCA). However, the Hungarian government intervened, issuing an order only a week after the announcement of the fusion, according to which the acquisition of ownership by KESMA was designated as a matter of national strategic importance and thus exempted from competition review and possible investigation. After this, claiming the lack of competence, the Competition Authority closed its review procedure and issued a statutory certificate allowing the registration of the transaction at the Commercial Court.

Subsequently, Szabad Pécs, a local news portal represented by Liberties member the Hungarian Civil Liberties Union (HCLU), turned to the court as a company competing with KESMA, demanding the annulment of HCA's decision and the ordering of the authority to conduct the competition review procedure. It also asked the court to consult the Constitutional Court, saying the exempting government order and the law it relied on are in breach of the Hungarian Fundamental Law, the country's Constitution. The law allows the Hungarian government to exempt any kind of business transaction from competition investigation. In addition, the government order implemented the law in an abusive way, justifying its decision with two words only, namely, by reference to the "public interest."

The Budapest-Capital Regional Court affirmed that HCA did not conduct any substantive investigations, even failing to refer to the government order designating the merger as a matter of national strategic importance, and therefore it acted unlawfully when issuing the statutory certificate. Moreover, the court found that HCA claimed a lack of authority, meaning it had no authority to issue the statutory certificate.

Court orders second review

Besides registering the acquisition of ownership by KESMA at the Commercial Court, the statutory certificate was also necessary for the merger of companies owned by KESMA. For instance, in September 2019, 11 companies were fused into the Mediaworks Zrt., the flagship of the KESMA corporate empire. Since the court annulled the statutory certificate, the legality of these transactions is also ambiguous.

The court ordered HCA to conduct the procedure again, ruling that it had the legal authority to do so, and to close the investigation with a corresponding decision that has an appropriate justification.

HCLU and Szabad Pécs announced that they will inform the Commercial Court about the potential lack of the legal condition of mergers and fusions within KESMA on account of the recent court decision. Furthermore, they said they will keep track of HCA's decisions and challenge them in case the new procedure will close with another unlawful decision.

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