HUNGARY. Written by Péter Lakatos and Iván Sólyom, Lakatos, Köves and Partner. Media Regulation in Hungary: A Myth of Independence?

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1 HUNGARY Written by Péter Lakatos and Iván Sólyom, Lakatos, Köves and Partner Media regulation in has been and remains at the forefront of fierce international and domestic debates, and under constant surveilance by international watchdogs. Ever since the new regulatory body and framework was introduced experts question the independence of the new body and thus the entire regulatory framework. Péter Lakatos Iván Sólyom Media Regulation in : A Myth of Independence? The authors give their views on how the current media legislation was formulated, how the new media law is considered controversial by many observers and what its impact has been on the media market since its introduction in Regulatory Framework The independence of media regulatory bodies is a commonly accepted principle of law in the EU recognised, inter alia, by the Audiovisual Media Services Directive(1) which sets out that [Member States] are free to choose the appropriate instruments according to their legal traditions and established structures, and, in particular, the form of their competent independent regulatory bodies, in order to be able to carry out their work in implementing this Directive impartially and transparently. In, the first media regulatory body was set up following the end of the state monopoly as a result of the adoption of Act I of 1996 on Radio and Television Broadcasting(2) (Old Media Act). The Old Media Act required that the media regulatory body, named National Radio 111

2 and Television Board (commonly known by its Hungarian acronym, ORTT), be elected directly by the Hungarian Parliament by more than half of the votes of its members, for a term of four years(3). The Chairman of ORTT was nominated jointly by the President of the Republic and the Prime Minister while the other members of ORTT were nominated by the Parliament parties. Each party was entitled to nominate one member unless there was only one faction on the governing side or the opposition side in which case they were allowed to nominate two members. Such regulatory framework allowed for the representation of all political factions in the ORTT, and therefore a relative independence of the ORTT, but also resulted in practical problems during the election of certain nominees, thus stalling the operation of ORTT. After the general elections of 2010, the new Hungarian government aimed to achieve fundamental changes in the regulation of media and communications, and centralisation in the management and supervision of public service media sector with the adoption of the so called Media Constitution. The Media Constitution was introduced to the Hungarian Parliament in two bills, the vote on the first part of the legislative package (Act LXXXII of 2010 on the Modification of Certain Acts Regulating the Media and Electronic Communications (Media Structure Act) was passed on 22 July 2010, effective from 06 September That Act introduced a new structure of the Hungarian media governance. The vote on the other package (Act CLXXXV of 2010 on Media Services and Mass Media (New Media Act), related to the regulation of media content and the internet was passed on 21 December 2010, effective from 01 January The Media Structure Act established the new main regulatory agency, the National Media and Communications Authority (MCA) and its Media Council. The NMCA is the sole, centralised regulatory agency, resulting from the merger of the two former media regulators of the electronic communications and program provision sector, the National Communications Authority and ORTT. The NMCA is an autonomous administrative body under the supervision of the Hungarian Parliament, headed by its President, appointed by the Prime Minister for a renewable term of nine years. The NMCA and its President are assisted by a Bureau, headed by the Director General, appointed by the President of the NMCA. The Media Council is a separate, autonomous entity within NMCA, assuming the role and powers of ORTT and either the Media Council or its chairman are entitled to nominate or appoint several of the key officials within the frame of the new media governance structure. The Chairman and the four other members of the Media Council are elected by the Hungarian Parliament, with a two-thirds majority, for a renewable term of nine years. The President of the NMCA is by law also chairman of the Media Council. The other four members of the Media Council are nominated unanimously for election by the Parliament s ad-hoc Nominating Committee. However, if the 112

3 Nominating Committee fails to reach unanimity, a two-thirds majority of the Parliament is sufficient for nomination. On 11 October 2010 the Hungarian Parliament approved the Chairman and the four members of the Media Council. As a result of the above rules all persons were nominated by the governing party, ie. Fidesz and KDNP, based on its twothirds majority. The autonomy and independence of both the NMCA and the Media Council are formally guaranteed in the New Media Act as it prescribes that the NMCA and Media Council members can only be dismissed in case of a member s resignation or death, and for breaches of conflict of interest rules. The mandates of the Vice President and Director General of the NMCA can only be terminated by the President of the NMCA in case of their resignation or death, or if such person fails to resolve a breach of the conflict of interest rules. The President of NMCA also has the right to recall (without justification) and dismiss the Vice President and Director General. The mandate of the President can be terminated in the case of the President s resignation or death. The President can also be dismissed by the Prime Minister if the President fails to resolve a breach of the conflict of interest rules, is found guilty of a criminal investigation, and for other grounds specified in the New Media Act. According to an amended provision of the New Media Act in effect from 03 August 2011(4), the mandate of the President and members of the Media Council lasts until new members are elected by a two-thirds parliamentary majority. If the Parliament fails to elect a new chairperson and members at the end of their nine-year terms, the current president and Media Council members retain their positions, indefinitely, until new members are elected. In addition to the above, the Media Structure Act introduced a new system of governance for public service programme providers. The previously separate public foundations, managing the assets of public television, radio and national news agency merged into a single entity, the Public Service Public Foundation (Foundation) while the Media Structure Act also transformed the former Programme Providers Fund into the Programme Providing Support and Assets Management Fund (Fund). The Foundation is managed by a board, whose six members are elected by the Parliament for a term of nine years, and the Chairman of the Media Council is entitled to nominate one member and the chairperson of such board. The Foundation became the new owner of the public service programme providers, Magyar Televízió Zrt., Magyar Rádió Zrt., Duna Televízió Zrt. and MTI Zrt. The Media Structure Act has also resulted in a change in the leadership of these public service programme providers(5). The chairman of the Media Council, pursuant to Section 102 (2) a) of the New Media Act, is entitled to nominate two candidates to each company, out of whom the Foundation should appoint the new CEOs. The reformed structure establishes only one common Supervisory Board to control the operation of the companies. The Fund is responsible 113

4 for the management and operation of the assets of the Foundation on a non profit basis, to promote the national public service programme providers and news agencies and to preserve and enrich the national culture, diversity and plurality. The Fund is headed by its Director General and pursuant to Section 136 (10) of the New Media Act, the full range of employer s rights vis-à-vis the Fund s Director General - including his appointment, determining his salary and allowances, and termination of his employment by the employer - shall be exercised by the Chairman of the Media Council. 2. Criticism The Media Constitution and in particular the New Media Act immediately met serious criticism from national and international organisations, raising concerns about specific provisions that curb the independence of the new regulatory body, such as appointment procedures, the term in office and entrusted responsibilities. Moreover, the new media structure was also heavily criticised as it attributes to NMCA all (i) legislative powers, (ii) regulatory powers, (iii) the powers of law enforcement, (iv) powers of dispute resolution and (v) ownership rights, which is contrary to the Montesquieu separation of powers theory. Opponents have raised a number of concerns over the NMCA s and Media Council s independence. Critics say the system of dual appointments to the positions of NMCA President and Media Council chairperson gives the Government de facto control over the Media Council(6). According to an analysis conducted for the Organization of Security and Cooperation in Europe (OSCE), although the practice of government-appointed directors to telecommunications agencies is not unusual, the manner of appointment of the Media Council Chairperson amounts to nothing less than government capture of s media governance authorities, because Parliament is left no choice but to vote for the Prime Minister s candidate. If it fails to do so, the position will remain vacant, and the Prime Minister s candidate is still authorised to chair Media Council meetings until nominated by Parliament as chairperson, according to this analysis. Another legal review conducted by the Washington D.C.-based Centre for Democracy and Technology concluded that because the law grants the Prime Minister de facto power to select its chairperson, the Media Council is susceptible to political influence(7). As a result, the interpretation of the Acts, and thus the determination of the extent of the constitutional rights of free expression and public information, are subject to political control, according to this analysis. This study also concludes that the New Media Act provides inadequate mechanisms for the Parliament to elect any candidate for the Media Council chairperson other than the Prime Minister s appointee for the President of the NMCA. The OSCE has urged the Government to amend the appointment procedures to ensure that regardless of whether there is a majority or minority government... political plurality is guaranteed in the 114

5 appointment process of communication regulatory organs. (8) According to a review by the Council of Europe s Commissioner for Human Rights, the appointment procedures for s Media Council fail to meet Council of Europe standards for safeguarding media independence and pluralism(9): The provisions regarding appointment, composition and tenure of [ s] existing media regulatory bodies demand amendment not least because they lack the appearance of independence and impartiality, quite apart from a de facto freedom from political pressure or control. The Commissioner urged the Hungarian Government to adopt the Council of Europe s recommendations for ensuring the independence of media regulatory bodies(10). As a partial result of the above criticism the Government promulgated and had the Parliament accept Act XXXIII of 2013 which amended certain provisions of the New Media Act. Accordingly, from 05 April 2013 the President of the NMCA is to be appointed or its mandate is to be terminated by the President of the Republic upon recommendation of the Prime Minister and neither the President nor the members of the Media Council are re-electable after the expiry of their original term. In addition, when recommending a person as President of the NMCA, the Prime Minister will have to first receive non-binding recommendations from civil organisations active in the field of media and communications. Following the sudden death of the first President of the NMCA, the Prime Minister - disregarding the recommendations of the civil organisations - nominated his candidate as President of the NMCA and the President of the Republic - who was a former politician of the governing party and was elected by the Government s representatives in the Parliament - appointed the new President of NMCA for a nine-year term. Further criticism was expressed in relation to the independence of public media. Critics of the current government have raised numerous concerns over the independence of s public media, claiming that the changes brought all areas of s public media - from appointing public media directors to managing its funding - under the Media Council s control. Critics warned that the Media Council s partisan composition has, in effect, brought s public media under the Government s control. A resolution adopted by the European Parliament in March 2011 warned that the legislation contravenes OSCE and international standards by doing away with the political and financial independence of public-service media. (11) s New Media Act now requires that news content for all public media stations is produced centrally by s national news service, MTI Zrt., which is headed by a new director nominated by the Media Council chairperson (the President of the NMCA). Opponents claim the measures have eliminated the independence of s public service media, bringing all aspects - from programming to funding to regulatory supervision - under the Media Council s control. According to an analysis by the Budapest-based political think tank Political Capital Policy Research & Consult- 115

6 ing Institute(12), this system could create a unitary approach among state-owned broadcasters, endangering the diversity of opinions and information that is available. Recent studies have confirmed that the Government s, or the governing party s, representation in the public media is significantly higher (sometimes almost four times higher) than that of the opposition(13). Critics also challenged in particular the Media Council s role in tendering and awarding broadcasting licences, including its powers to award licences without a tender. Critics raised objections to the Media Authority s general decision-making powers over all aspects of the tendering and licensing process, and warned that these powers give the NMCA extensive control over s media landscape. This issue sparked controversy after the Media Council in July 2011 issued a tender for the frequency used by Klubrádió, a popular liberal political news and talk radio station, as the station s licence was up for renewal. The tender call was made for an all-music radio station, effectively eliminating Klubrádió from the competition. In December 2011, the Media Council awarded the frequency to an unknown company, Autoradio, stirring outrage from domestic and international critics who claimed the decision was a politically motivated effort by the Media Council to remove an important source of independent political analysis and opinion. This, together with the fact that in the meantime various frequencies were awarded to other radio stations allegedly close to the Government, confirmed the initial criticisms. 3. Trends it is difficult to separate general market trends from the effects of the lack of independence of the NMCA on the media market. Therefore, it is difficult to say what effectively drives the consolidation that took place on the media market. The major transactions/trends that recently reshaped the Hungarian media market are the following: 1. the acquisition of the Metropol free newspaper; 2. the acquisition of TV2, second largest Hungarian commercial television channel, by its management with third party support(14); 3. the disappearance of NEO FM, the second largest Hungarian commercial radio station(15); 4. the merger between Ringier and Axel Springer, which publish various newspapers in, was cleared subject to the divestment of the two of the major liberal news and economic news newspapers (Népszabadság and Világgazdaság) to a third party buyer; 5. the advertisement spending of stateowned companies or companies close to the Government is directed almost exclusively to media operators directly or indirectly controlled by the Government. In our view the above regulatory regime and consolidation brought about a media market where the NMCA and the Media Council cannot be considered to be in essence independent from the Government and views of the governing party are over-represented as compared 116

7 to the views of the opposition in public and private media. This clearly restricts the diversity of opinion and information available to the public. Further measures are necessary to ensure that the NMCA and the Media Council are effectively independent and public and private media serve as real channels of communication of all the diverse views present in the political arena and beyond. (1) DIRECTIVE 2010/13/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (AVMS). (2) Promulgated on 15 January (3) See Resolution No. 13/1996 (III. 1.) OGY and Resolution No. 13/2000 (III. 3.) OGY. (4) Article 216(8) of the New Media Act (5) Section 40 of the Media Structure Act introduced, among others a new Section 149/G of the Old Media Act. (6) Analysis and assessment of a package of Hungarian Legislation and draft legislation On media and telecommunications, Prepared by Dr Karol Jakubowicz, Commissioned by the Office of the OSCE Representative on Freedom of the Media. Warsaw, Poland, September 2010 (7) Legal Analysis of the 2010 Hungarian Media Laws, Center for Democracy and Technology, Washington D.C., February 9, 2011 (8) Analysis of the Hungarian Media Legislation, Prepared by Dr. Katrin Nyman-Metcalf, Professor and Chair of Law and Technology, Tallinn University for the Organization for Security and Co-operation in Europe (OSCE), Office of the Representative on Freedom of the Media. February See Section on The Media Regulator, pp (9) Opinion of the Commissioner for Human Rights on s media legislation in light of Council of Europe standards on freedom of the media, CommDH(2011)10, Council of Europe Commissioner for Human Rights, February 2011 (10) Rec(2000)23 of the Committee of Ministers to member states on the independence and functions of regulatory authorities for the broadcasting sector, Adopted by the Committee of Ministers on 20 December 2000, 735th meeting of the Ministers Deputies (11) European Parliament resolution of 10 March 2011 on media law in, Resolution P7_ TA(2011)0094 (12) The New Hungarian Media Law: Evaluation and Summary, Political Capital Policy Research & Consulting Institute, 22 January 2011 (13) See the quick report of the NMCA of June 2013 on the media usage of political players in news programs: gyorsjel_pol_mediamegj_2013_junius.pdf (14) The third party are said to be also related to the governing party. Such transaction and the company valuation was probably heavily influenced by the announcements of the Government at the time of the transaction to introduce a tax on advertisements which would have affected mostly TV2 and RTL Klub (the largest commercial television channel) and which tax has not been introduced to date. (15) Allegedly related to the opposition. BIOGRAPHIES Péter Lakatos LL.M. is the Managing Partner and Head of the Telecommunication, Media and Technology group of Lakatos, Köves and Partners. He specializes in Hungarian corporate finance and telecommunications related work, advising telecom operators, regulatory bodies as well as major companies in the IT and media sectors. He has developed special expertise in the area of EU-Competition law matters and has been involved in major litigation cases representing multinational clients in. Iván Sólyom is a competition law and communications law expert at Lakatos, Köves and Partners. As counsel, he advises telecom operators and international companies active in the Hungarian media sector. He advises clients in antitrust, merger control and state aid cases. He works on corporate matters and major cross-border M&A transactions. He also advises clients on litigation, non-contentious and arbitration matters. Besides English, he speaks fluent Italian and obtained a law degree at the Universita Cattolica Del Sacro Cuore in Italy. 117