As a Budapest-based public fund watchdog, K-Monitor has been monitoring the use of public funds, including political advertising, in Hungary for seventeen years. In the context of project ‘Making political finance and advertisement in the Visegrad region more transparent,’ K-Monitor together with TI Slovakia, Fundacja Odpowiedzialna Polityka and KohoVolit.eu assesses the proposed EU Regulation on the transparency and targeting of political advertising.

Situation in Hungary

Transparency and accountability in the financing of political advertising has long been an unresolved problem in Hungary. National legislation fails to make the spendings of the government and other political actors in the advertising market transparent, leading to distortions of political competition. Even though the law on elections provides some rules on political advertising, the only remedy providing speedy recourse during elections cannot be triggered in cases when public funds are misused. Third parties’ such as GONGOs’ and influencers’ activities also fall out of the scope of the Hungarian election law. It is the State Audit Office’s duty to examine the incomes and expenditures of political actors, however, it has narrowed its own mandate when it limited the notion of political advertisement and practically excluded online ads from its horizon. A similar deficiency is insufficient control of reported expenditures, as there are no checks performed to compare reported campaign costs and real expenditures. Finally the lack of sanctions other than fines that cannot be challenged by the parties, also incentivises party leaders to circumvent campaign finance rules.

PM Viktor Orbán's page on Facebook

The EU regulation could have a positive effect on political advertising in Hungary as it addresses some of the mentioned issues, by improving the levels of transparency and broadening the scope of information that falls under political advertisement. In this position paper, K-Monitor assesses the promising and less promising provisions of the Regulation currently under deliberation between the Commission, the Parliament and the Council.

Our assessment is made primarily from the perspective of the transparency of political and campaign financing. Access to information on public expenditures and political competition forms part of freedom of information and therefore freedom of expression enshrined not only in Article 10 of the ECHR but in Article 11 of the EU Charter of Fundamental Rights.

Developments to Welcome

The above-mentioned CSOs welcome that the Commission has shown willingness to regulate political advertisement and targeting and drafted a proposal in November 2021 with the purpose to establish a single market for political advertising in the Union.

Broad Term of Political Actors

We also consider it a positive development that the Proposal defines the concept of ‘political actor’ broadly, so that elected and non-elected government officials can fall within the scope of the Regulation, as well as those who act on their behalf or in their interest. This could tackle those situations where incumbents use their official resources to campaign in an undeclared and unlimited way. Similarly, government affiliated third parties may also fall within the scope of transparency requirements.

More Transparent Spendings

Not only very large platforms like Facebook but every provider of political advertising services will be obliged to report regularly on the amounts or the value of other benefits received to the national authorities in charge. This will allow for greater scrutiny as costs reported by political actors under national political finance rules and reports by ads providers can be checked against each other.

Speedy Rules in Election Period 

We believe that the Proposal is correct to apply a two-fold approach for periods related to elections and referendums and for ads outside these periods. In the former case, the platforms will have to handle notifications and respond to requests for data from national authorities within shorter deadlines. Speedy remedies proposed by the European Parliament might recourse problems more efficiently. A new remedy might be of particular importance in member states where no speedy remedy is provided by current legislation for misuses of campaign spendings.

Legal Representatives to Be Crucial for Enforcement

In line with the DSA, the Proposal also requires service providers who are not established in the EU to ensure that a legal representative is to be designated in the EU. The rule is intended not only to ensure compliance with the Regulation but also to resolve jurisdictional problems stemming from huge platforms' reluctance to comply with national jurisdictions. Although the mandatory establishment of legal representation may make it easier to sue platforms, not only on issues related to the financing of advertising, but also on other matterns. However, it is still up to the national laws governing litigation to enable citizens to sue a company only represented in another member state in a domestic court.

European Repository for Online Political Advertisements

The Parliament's amendment to oblige the Commission to set up and operate a publicly accessible repository at European level is welcome. In a unified online repository to which the very large online platforms’ repositories are connected, the operation of online service providers that are not very large online platforms could also become accessible and more transparent. A connected repository might increase transparency, since fragmented and not fully standardized collections of data would make it difficult to compare and research information on ads.

Lazy National Authorities May Face Pressure From Peer Authorities

The Proposal provides for close cooperation between national authorities and annual reporting to the Commission. Within two years after elections to the EP, the Commission is also called upon to report on the enforcement to the EP and the Council. Cooperation and reporting  may put peer pressure on member states where political finance is not sufficiently scrutinized. However, the setting up of an agency at European level to coordinate and supervise the work of national authorities in order to ensure uniform enforcement should be considered.

Disappointing Elements

Public Access is Still Restricted

Although it is a big step forward to have a transparency notice with a broad range of information on advertisements, this is all that will be available to the public by law. Only so-called interested entities (vetted researchers, some CSOs, journalists) will be able to request further data on the advertisements. In addition, the platforms might respond to information requests relatively slowly, within a month, and in some cases only in exchange for reimbursement. There is no reason that could justify why only privileged groups of professions and not any citizen would be entitled to know how financing and targeting of political advertisement is made. When considering the protection of business interests in the field of politics, platforms’ commercial interest must be balanced against the interest of transparency in political competition. Public interest (fair elections, transparent competition) should eventually override particular business interests.

Current Ad Library Practice Sanctified 

Unfortunately, the Parliament did not change the provision in the Proposal that protects platforms’ commercial interest when responding to interested entities’ information requests. Platforms may aggregate the relevant amounts they invoiced for the service or place them in a range, to the extent necessary to protect its commercial legitimate interests. This rule is essentially the same as Facebook's and Google's current self-regulatory practices, so it does not mean a step forward. The lack of detailed data may prevent interested parties (and the public) from getting a complete and accurate overview of the political advertising market and thus of the dynamics of political competition. In its current form, ads expenditures, which in many cases come directly or indirectly from the state (public funds!) to the platforms, are impossible to track systematically. 

Questions To Be Clarified

Bodies Under Public Law As Political Actors

Although the Proposal defines a broad concept of a political actor, listing for example members of government at EU, national or local level, it is still not clear whether bodies under public law such as national governments fall within the scope of the Regulation. It would be important to clarify the personal scope of the Regulation because often the advertisements are not commissioned by individual politicians but by public bodies.

Unpaid Content

The Proposal requires not only paid content, but all content of a political nature in general, to be declared whether or not it is provided as part of a service. However, the Regulation does not specify exactly what platforms can do to ensure that all content is properly declared. So there is still considerable leeway for platforms to self-regulate themselves, which could even reinforce practices that simply ban individuals’ political expressions or organic content.

However, it is welcome that the concept of political advertising is broader than in common terms, as this improves the transparency of social media content generation and publication in general. In addition, this broad concept of political advertisement makes banning political ads by platforms risky and even costly for them: if all content was banned by platforms that fall under political advertisement, platforms would lose a significant share of its own users. A narrow definition of political ads would make it easy for platforms to give up publishing political advertisements to avoid compliance with the regulation.

A common denominator for free speech advocates and transparency campaigners could be found if the political advertising was not only defined purely in terms of the type of content or advertiser but also linked to other considerations such as certain reach in users. Also greater transparency of amplification techniques and algorithms used by platforms could help counter manipulation and disinformation.

Will the Regulation threaten free speech?

Even though the Proposal provides in principle that  political views and opinions and editorial content would not be considered political advertising, several CSOs have warned that the Regulation’s broad material scope covering unpaid content might harm democracy and undermine free speech. Critics say the scope of the Regulation cannot be justified by the public interest to tackle abuses of political advertising (disinformation campaigns, paid trolls, GONGOs). They highlighted that Regulation may restrict individuals' right to freedom of expression in violation of the proportionality principle set by the European Court of Human Rights. In addition, the new law might be used against CSOs in member states where rule of law and independence of state bodies are not safeguarded.