The fall of one of Hungary's last major independent media outlets has exposed how Brussels lacks both the political will and the legal tools to help preserve a vibrant free press in EU member countries.
The vast majority of reporters and editors at Hungary's largest news site, Index, quit their jobs in July, following the dismissal of their editor-in-chief, who had warned that the publication was at risk of losing its independence. The demise of Index comes two years after some 400 media were consolidated into a conglomerate that increasingly dominates the media landscape with coverage sympathetic to Prime Minister Viktor Orbán's ruling party.
European Commission Vice President for Values and Transparency Věra Jourová has voiced concern about both cases but the EU is increasingly finding that it is ill-equipped to take action.
The European Parliament has triggered an Article 7 procedure over concerns about democratic backsliding in Hungary. While this could theoretically lead to sanctions, the process is stuck in limbo because it can be blocked by any other EU member country with its own rule of law problems. Efforts to link EU funding to rule-of-law criteria resulted in a political fudge at the last European Council, and it remains unclear whether such measures can be enforced.
Given these limitations in tackling Hungary head-on in the arena of democratic values, some have pinned their hopes on a more technical power at the EU's disposal: Competition law, which is intended to stop unfair business concentrations and prevent governments from pouring state cash into favored businesses.
But efforts to use merger and state subsidy rules in the Hungarian media cases have hit numerous obstacles, and Jourová acknowledged it was far from obvious that they were a suitable weapon. "We will review the competition rules and I cannot tell you now that we will be able to address the situation by EU competition rules, but we have to look into the mergers which might be dangerous not only for the single market but also for democracy and the freedom of speech."
More fundamentally, however, Brussels has traditionally preferred to regard media as an issue best left to national capitals.
"The Commission has been rather reluctant to put their hands in media," said Pablo Ibáñez Colomo, a professor of law at the London School of Economics.
Magyar merger
Hungary's media consolidation in 2018 certainly triggered an interest in EU merger rules among Orbán's opponents. More than 400 pro-government outlets were merged into a nonprofit media conglomerate known as KESMA — the Hungarian acronym for Central European Press and Media Foundation.
In a report published on July 23, the Centre for Media Pluralism and Media Freedom found that the creation of KESMA “represents a huge and unprecedented concentration of media in the hands of oligarchs who are friendly to the ruling party.”
What's more, Budapest excluded the creation of KESMA from scrutiny from the Hungarian competition authority via a decree in which it declared its “national strategic importance in the public interest" — a move that the country's Constitutional Court this year ruled legal.
A Commission spokesperson said that “the creation of KESMA itself, as well as the concentration of the media outlets, fall outside the Commission's jurisdiction under the EU merger regulation." EU merger rules have very high financial thresholds to qualify for oversight from Brussels, in the hundreds of millions and billions of euros. The tie-ups should also have a cross-border dimension in the European single market to merit a look by Brussels.
“With competition law tools it’s very hard to address the Hungarian situation,” said one Commission official.
As Jourová noted, EU merger rules are under review but she was right to remain cautious over whether the law would be revised to integrate media plurality as a criterion. Countries do have a right to block mergers under EU law to preserve media diversity, but it would be difficult for Brussels to incorporate such openly political factors into its own merger reviews, which are supposed to be more objectively technical, based on squarely economic questions of market dominance.
When asked about the KESMA case, a Commission spokesperson sought to put clear water between the sphere of merger reviews and the political question of media freedoms.
"Media freedom and pluralism raise many important issues that go beyond the remit of EU competition law. It is for member states to ensure that their national media ownership and plurality rules are up-to-date and properly enforced," the spokesperson said.
Dole outs on the Danube
Subsidies are a hot topic in discussions of the transformation of Hungarian media. Over the past few years, Hungarian journalists and media experts have raised concerns over vast sums of state funding being channeled to pro-government outlets.
The Commission received two complaints in 2016 and 2019 about alleged illegal state aid by the Hungarian government in the media sector. The 2019 complaint argued that Orbán has been granting cash illegally to favored media outlets in the form of public advertisements.
“The EU is looking for effective new tools for defending democracy and rule of law. However, it has really effective existing tools in its hand,” said Gábor Polyák, an academic and leader of think tank Mérték Media Monitor, one of the signatories of the complaints.
The 2019 complaint, seen by POLITICO, cites data from Kantar Media showing, for example, that one pro-government KESMA entity, the magazine Figyelő, received 74.1 percent of its total advertising revenue in 2018 from state advertising, whereas state ads made up only 3.5 percent of the advertising revenue at independent magazine HVG that year.
In one instance, in its 2017 “Let’s stop Brussels” campaign, the Hungarian state spent approximately €10.3 million in the print market (in 2019 prices), according to the complaint, which cites government data obtained by investigative website Átlátszó through a freedom of information request. The Mediaworks company — which is now part of KESMA — received €4.3 million.
The Hungarian government, KESMA and Mediaworks did not respond to requests for comment on the high share of state advertising.
State aid enforcement is a complex tool, however, as the Commission looks for ways to prove the aid is "selective" and could distort trade between EU member countries by, for example, offering a local company a perk that makes a foreign investor unable to compete.
The 2019 complaint seeks to build a case for selectivity.
The Hungarian government’s advertising is “selective and discriminative, in fact it is not based on any economic rationale, since its practice is not even remotely related to the audience measurement data of the market players,” the complaint said, noting that according to Kantar Media data one of the country’s most popular TV channels, RTL Klub, received 3 percent of the total amount of state television advertising in 2018 when measured in seconds, while its competitor — the pro-government TV2 — received 43 percent of the total.
“The advantage of state aid is that you can tackle something which can have broader implications on the base of technical criteria … Whether the Commission may want to go there is a different case,” said Ibáñez Colomo from the LSE.
The state aid complaint comes at an unfortunate time politically for the complainants, however, as the EU's state aid enforcers have faced a run of defeats over their methodology in the Court of Justice of the European Union. Brussels is still reeling from a recent court decision that shot down its attempt to tackle Apple's tax affairs in Ireland as a state aid issue.
Repackaging the political grenade of Hungary's media landscape as a state aid matter could also prove unappetizing.
Indeed, the Commission is highly cautious on whether it sees any case after receiving the first complaint back in 2016. Brussels “has been in continuous contact with Hungarian authorities,” said a Commission spokesperson, adding that “these contacts are ongoing.”
That foot-dragging has fueled frustration.
"They see the problem, that’s why they can’t close it," said Benedek Jávor, a former Hungarian member of the European Parliament and one of the signatories of the complaints. "But they’re not courageous enough to jump into the conflict."
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