Plans to launch a new media empire called the Central European Press and Media Foundation (abbreviated as KESMA in Hungarian) would result in an unprecedented concentration of media outlets in Hungary. The Competition Authority has been prevented from investigating the merger by a government decree, which states that the deal has “national strategic importance for public interest”. Since there are major doubts about the constitutionality of the merger, HCLU has turned to the courts.

Hungarian Government takes unprecedented steps to consolidate media power

On 28 November the KESMA merger was announced to the Competition Authority, revealing the launch of a long rumoured pro-government media conglomerate.

According to the announcement, KESMA has acquired 100% of shares in Opus Press Ltd., Echo Hungária TV Ltd., Magyar Idők Publishing Company LLC., and New Wave Media Group for Communication and Service Providing LLC. According to an analysis by the investigative portal Átlátszó, 476 media outlets have merged as a result, which, as stated in the announcement, generated a revenue of roughly 60 billion Hungarian forints (190 million euros) in 2017. Átlátszó infographics illustrate the situation well.

According to information found in the Competition Authority’s KESMA file, a competition law procedure was initiated by the Mergers Office, and later the Competition Council agreed to start a competition inspection. However, Government Decree 229/2018, which was issued on 5 December, blocked this audit by stating that the merger was of national strategic importance and that this was in the “public interest”. This single legal provision was provided as the only reason why the merger was exempt from being examined under competition law.

On the next day the Competition Authority closed the procedure as it lacked jurisdiction over the issue.

The merger makes fair competition impossible

There are several substantial, procedural and constitutional problems with this merger. The Government’s decree, and the fact that the Competition Authority was blocked from examining the issue are also major concerns. Here we focus on two of these problems. We also publish our court petition against the Competition Authority’s decision.

The media market and plurality are seriously distorted by the concentration that KESMA creates, and under these circumstances fair economic competition is impossible. According to Kreatív Online, more than half of the revenue generated by print newspapers would go to KESMA.

Most local newspapers already belong to businessmen with strong connections to the Government and have strongly supported the governing parties, essentially making them propaganda outlets.

For example, before the 2018 general elections, all these local papers published the same cover story featuring a picture of Viktor Orbán under the title “Both votes to Fidesz!” The launch of KESMA means that even more local papers will come under governmental influence, including Új Dunántúli Napló and its online edition, as well as bama.hu in Baranya county, the political weekly Szabad Föld, and an advertising paper called Szuperinfo that has a local Pécs edition.

Any appeal must come from a KESMA competitor

Only one of KESMA’s competitors can appeal the decision in court. Our client, the plaintiff in the legal procedure, is Szabad Pécs, an independent political online news site for Baranya County and Pécs. The site runs on ad revenue and could find itself in a majorly disadvantaged position after the merger goes through.

We also argue that both the government 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 from a competition law inspection. The government decree is unconstitutional because it abuses the law by using only two words of reasoning (public interest). We have also requested that the judge turn to the Constitutional Court for further examination.

The merger should either be blocked or a competition audit should be conducted

We requested the judicial supervision of the Competition Authority decision. We asked the court to change the decision of the Competition Authority and block the merger, or oblige the Competition Authority to carry out a full competition law inspection.