The Argentine Supreme Court Declared the Constitutionality of the Media Law

1. Background

On October 10, 2009 the Federal Government passed the Media Law by Decree No. 1467/2009. Through this law a new legal framework was established for the broadcasting industry, over-the-air television and by subscription television (whether by a physical link or use of the radio electric spectrum).

In particular, the Media Law established a system of limitations to license holders that would be applicable not only to the holders of new licenses to be granted under its regime but also to the holders of licenses in force at date of the its promulgation. In addition, in relation with the obligation of adjustment to the Media Law’s new license regime, Section 161 of the Media Law sets a term within which the holders of licenses in force must adjust.

Under such limitation system it is worth highlighting the following:

1. Section 41 establishes prohibitions to authorizations and licenses transfers;
2. Section 45 establishes a multiple licensing regime including a system of crossed limitations regarding the number and type of licenses that a person can hold both nationally and locally, incompatibilities between the types of licenses and a percentage limitation of the capacity of a licensee to provide a certain service. For example, the Media Law establishes a maximum number of 24 subscription television licenses; it is established that a person cannot hold an over-the-air television license and a subscription television license in the same area of service and a limitation to provide such services up to 35% of the total amount of national inhabitants or of the subscribers to the services that the licenses refers to.
3. Section 48 states limitations to wrongful concentration practices and establishes that the multiple licensing regime set by the Media Law cannot be alleged as an acquired rights vis-à-vis the general licenses that, in matters of deregulation, de-monopolization or antitrust, are settled by Media Law or may be settled in the future.

On December 7, 2009 Grupo Clarín obtained a precautionary measure, suspending the application of Sections 41 (prohibition of transferring licenses) and 161 (adequacy obligation) of the Media Law (File No. 8836/09 “Grupo Clarín S.A. and others on Precautionary Measures” - Federal Civil and Commercial Court No. 1, of the City of Buenos Aires), a measure that was subsequently confirmed only regarding the application of the Section 161 and revoked with respect to Section 41 in different legal appeals resolved by the Federal Civil and Commercial Court of Appeals of the City of Buenos Aires, Tribunal I, and the Argentine Supreme Court (“Supreme Court”).

Simultaneously, Grupo Clarín filed a legal claim requesting the declaration of the unconstitutionality of Sections 41, 45, 48 (second paragraph) and 161 of the Media Law. This claim resulted in different outcomes in the first and second Instance Courts and subsequently reached the Supreme Court by extraordinary appeals lodged by the Federal Government, the Audiovisual Communication Services Federal Authority (“AFSCA”), Cablevisión S.A. and Grupo Clarín.

2. The Supreme Court’s Ruling

As we already mentioned, the Supreme Court declared the constitutionality of all the Sections of the Media Law submitted under the judicial discussion.

The majority of the Supreme Court was comprised of the vote of Mr. Lorenzetti and Ms. Highton (in a joint vote), Mr. Petracchi and Mr. Zaffaroni (single vote) and Ms. Argibay and Mr. Maqueda (in partial dissidence). Mr. Fayt, however, voted in dissidence.

As follows we highlight some of the considerations that were mentioned by the members of the Supreme Court who voted in favor of the constitutionality:

Given that it was not legally proven that the adjustment of Grupo Clarín to the new license regime jeopardizes the existence of the group or any of its companies from an economic or financial point of view, the right to freedom of expression is not affected, even when it could lead to a reduction of its benefits or profitability. In conclusion “sustainability” cannot be compared to “profitability” and thus, a deconcentration process may imply a reduction in the business profit margin.

Given that the objectives of the limitations set by Section 45 of the Media Law were to promote freedom of expression as a collective right and to preserve the right to information, such limitations are suitable to pursue such objectives.

When the concentration is produced in the “information market,” that concentration can restrict the freedom of expression and the public’s right to information. The purpose of the restrictions is to generate the most diverse and plural number of voices in a regional market.

The suitability and proportionality requirements necessary to confirm constitutionality are fulfilled by each one of the limitations established in Section 45 of the Media Law.

The adjustment obligation of the licensees to the standards of the Media Law (that, among other cases, in Grupo Clarín’s case could imply the obligation to sell certain assets) does not constitute an expropriation, or an injury of acquired rights, or the revocation of administrative acts on grounds of opportunity, merit or convenience.

To consider that a new license regime cannot affect the licenses that were granted under a previous regime that has not yet expired would imply prevailing private interest over collective interest.

Broadcasting licenses comprise a property right in constitutional terms and therefore require constitutional protection but the Media Law includes a mechanism to compensate for limitations on property rights since it allows the license holders to transfer those licenses exceeding the limits established by the Media Law, obtaining a price in exchange.

With grounds on the State’s responsibility principles for its legal activity, the licensee is entitled to claim damages for the consequences of the adjustment obligation process.

Licensees do not have an acquired right to hold licenses against general laws that, in deregulation, de-monopolization or antitrust matters, may modify the existing regime.

Audiovisual communication is considered a public interest social activity, and therefore the prohibition of transferring is based on the intuitu personae nature of the license holder and constitutes an appropriate means to achieve the social purpose that the Media Law pursues.

There are no arguments in the file to sustain or justify that the one-year term established in Section 161 for the adjustment process is unreasonable and therefore unconstitutional.

The one-year term established in the Media Law expired on December 28, 2011. Therefore, considering that almost two years have passed since its expiry, it is reasonable to sustain that Section 161 is fully enforceable for Grupo Clarín.

Subsequently, some members of the Supreme Court who compose the majority of the vote recognized in their votes certain matters that are crucial to exercise the right to expression that were not subject to their consideration by the plaintiff, among others are the following:

- Everything that was said about the Media Law and its purpose of achieving plurality and diversity in the media would fail without the existence of transparent policies regarding official advertising matters.

- The State’s role of guarantor of freedom of expression would be distorted if, through subsidies, official advertising or other benefits, media are turned in instruments for certain political parties or into mechanisms to eliminate the opposition and the plural debate of ideas.

- The compliance of the purposes of the Media Law cannot be ensured if the entity in charge of its compliance is not technically trained and independent, protected against improper intrusions from the government and other lobbying groups.

Moreover, the vote of Mr. Lorenzetti and Ms. Highton finalizes with a reference that seems to anticipate new conflicts by stating that possible damages that the Media Law could cause to third parties –such as users and consumers- who might exercise their rights, were not analyzed in the arguments given in the ruling.

3. Consequences of the Supreme Court’s Ruling

This ruling brings an end to the judicial discussion about the validity and constitutionality of the Media Law establishing its full application, regarding Grupo Clarín, at least on a jurisdictional level in the Argentine Republic.

Grupo Clarín must adjust to a multiple licensing regime and will have to sell certain assets, since for example, it can neither hold an over-the-air television license and a subscription television in the same jurisdiction, or have more than 24 subscription television licenses in the whole country, or provide services to more than 35% of the total national inhabitants or subscribers of certain services.

In this context we must remember that, according to Section 161, in order to adjust licensees that do not fulfill the requirements established in the Media Law, or have a different corporate structure to the one allowed or a greater amount of licenses, the Regulatory Decree of Media Law No. 1225/2010 established the following transition mechanisms:

1. Voluntary Adjustment: adjustment procedure initiated by the licensee by an affidavit proposing the regularization of their situation.
2. Verification ex officio: procedure to be initiated ex officio by the AFSCA to verify the effective adjustment to the provisions of Section 161 of the Media Law.
3. Adjustment by transfer of licenses. a) Voluntary Transfer: the licensees may transfer the licenses to a third party that complies with the legal requirements, or grant such power to the AFSCA for the respective tender. b) Transfer ex officio: The AFSCA will order the transfer of the licenses for the purposes of adjustment in the event that the holders do not comply with the adjustment in the terms of Section 161 of the Media Law.

The term established in Section 161 has already expired as stated in the Supreme Court ruling dated December 27, 2012 in which the extension of the precautionary measure in favor of Grupo Clarín was confirmed. Therefore, considering that Grupo Clarín was protected by a precautionary measure which prevented the application of Section 161 until the ruling analyzed herein was passed, it is uncertain whether the AFSCA will proceed to initiate a process of ex officio verification of the infringement of the Media Law in terms of the AFSCA Resolution 297/2010 Annex I, Chapter II and request Grupo Clarín a voluntary adjustment plan or, on the contrary, will initiate the valuation process for the transfers ex officio in terms of Chapter III (b) of the referred AFSCA resolution.