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Reserve market of pay-TV advertising ruled unconstitutional

Wednesday, November 08, 2017

The Plenary of the Brazilian Federal Supreme Court (STF), in the extraordinary session on Wednesday morning (8), ruled unconstitutional Article 25 of Act n. 12.485/2011, which regulates subscription television (pay TVs). The act forbids channels from broadcasting commercial advertising directed to Brazilians if hired abroad by a foreign advertising agency.

The decision was taken in the joint judgment of the Direct Actions of Unconstitutionality n. 4679, 4747, 4756 and 4923, which questioned several parts of Act n. 12.485/2011. The Justices unanimously rejected the Actions for the Declaration of Unconstitutionality (ADIs) 4747, 4756 and 4923. The majority ruled ADI 4679 partially valid, only declaring the unconstitutionality of article 25. Justice Edson Fachin dissented by dismissing the lawsuit.

The trial was resumed today with Justice Dias Toffoli's opinion, who fully agreed with the rapporteur, Jutice Luiz Fux. In his view, Article 25 violates the principles of isonomy and reasonableness. "The act gives favors national advertising agencies, creating a reserve market for such companies in the pay TV sector," he said.

According to Justice Dias Toffoli, there is no reason to treat national advertising agencies favorably, as they are among the largest and most awarded in the world. "There was not even a public debate about the reasons for the issuanuce of this provision," he said. He also stressed that the provision does not set a deadline for the end of the reserve market.

Quota

The Justice also pointed out that it is not possible to parallel a reservation of advertising content with the quotas of national content and independent in pay-TV, provided for in Act 12.485/2011 and article 221, item II, of the Federal Constitution. "The quotas are based mainly on the factual circumstance that independent national producers of audiovisual content act in the pay-TV market in a situation of profound disadvantage in relation to foreign productions," he said.

In his view, national producers of audiovisual content compete with large foreign producers, who already have a large market in their country of origin and in other countries where they have branches. "In this way, the costs of foreign productions end up being fully absorbed. Such works are acquired in Brazil at very low prices, being much more competitive than the national works, which only have the Brazilian market from which to drain the production and cover its costs," he said.

Thus, in his analysis, the privileged treatment given to domestic production is based on the need to create a minimum potential demand for these products with the objective of enabling the development of domestic production, especially that of independent producers.

Justice Marco Aurélio also agreed with the rapporteur, pointing out that the market reserve contradicts the principle of free competition. The Chief Justice of the STF, Justice Carmen Lúcia, also agreed with the rapporteur, stressing that the quota for national audiovisual production is important for the preservation of Brazilian culture, but this does not apply to advertising contente.

In previous sessions, Justices Luis Roberto Barroso, Teori Zavascki (deceased) and Rosa Weber had already seconded the rapporteur.

ADIs 4679, 4747, 4756 and 4923 were filed by the Democrats Party(DEM), the NEOTV Association, the Brazilian Association of Broadcasters (Abra) and the Brazilian Association of Pay-Television in UHF (ABTVU), respectively.

Before bringing the case to trial, Justice Luiz Fux called a public hearing, held in February 2013, to discuss the matter. Videos of the hearing are available in the STF's YouTube channel (www.youtube.com/stf).

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